Croatian group eyes new meat processing plant, but EU support in jeopardy

19-Oct-2016 - Last updated on 20-Oct-2016 at 10:44 GMT

Žito Group's plans to build a new pork processing factory could be on the edge of collapse

Croatian food conglomerate Žito Group is planning to build three new meat processing facilities and a packaging plant in the north east of the country.

However, with the Croatian government deciding to cancel the allocation of funds obtained from the European Union, the planned investment could be in jeopardy.

“Briefly speaking, over the next four to five years, we aim to process 1.2 million pigs to make two million packs of prosciutto-style ham, 50,000 tonnes of salami and other processed meat products,” Marko Pipunić, founder of Žito Group, told local daily Jutarnji List.

Among other products, the three meat processing plants are to make ham, salami, bacon and sausage, according to the Croatian group.

Revenues to increase

Pipunić said the planned investments would also significantly increase the conglomerate’s slaughtering capacity, and allow Žito Group to raise its revenues in the country’s regions of Slavonia and Baranja from HRK18.5 billion (€248 million) to as much as HRK25bn (€335m) per year. Should the investments bring the expected results, this would represent a robust increase of 135%.

Žito Group is active in a number of food industry segments. This includes its pig and cattle breeding activities at the group’s farms in Ovčara, Forkuševci, Magadenovac, Lužani, Lipovača, Viškovci and Klisa, all located in northern Croatia, according to data from Žito Group.

Ministry cancels EU support

In total, the company’s meat processing projects are estimated to be worth more than HRK600m (€80.4m). To allow Salami Aurea and Copadio, the two companies which are part of the group, to open four facilities in Croatia’s Slavonia, an investment grant of about HRK77m (€10.3m) was to be provided. The funds, representing close to 13% of the total investment, were initially allocated to Salami Aurea and Copadio last April, enabling the group to apply for loans from local banks, which would allow it to cover the rest of the investment.

However, the Croatian Ministry of Agriculture eventually withdrew its favourable decision regarding two of the group’s three designed meat processing facilities in Čepin, in Croatia’s Slavonia. This forced Žito Group to seek alternative sources of funding, and raised doubts over the company’s capacity to implement the investments.

The latest announcement comes after Croatia’s pork meat production reported an increase last year to 73,000 tonnes (t). But, to put it into context, the 6.3% expansion followed the country’s lowest pig meat production of the past decade, at 68,700t in 2014, according to figures from Eurostat.

Established in 1994 and headquartered in Osijek, Croatia, Žito Group has a total workforce of 1,500. Čepin, where the four facilities are to be built, is located less than 250km from the country’s capital Zagreb.

In 2015, Forbes Magazine ranked Pipunić as Croatia’s 13th-richest person, with personal assets of some HRK163m (€21.9m).