The FINANCIAL — Georgian bakers, having increased the price of bread by 10 tetri (5,5 cents) over the last three weeks, have declared they intend to increase the price by another 5 tetri before the end of 2007. According to Ipkli, one of the leading bakers in Tbilisi, the situation on the market is very unstable.
According to the owners of small bakers such as Gobi, Kavkasioni and Megobroba, the price increases are directly hitting the budget of these producers. There is a great chance of closing down before the end of the year, as the companies are losing their customers and “are not able to compete with the big manufacturers.”
Shukri Bakuradze, the owner of Ipkli did not agree to an interview.
Lithuanian bread bakery has been occupying the Georgian market for two years now. Nikoloz Peradze, the Director of Lithuanian bread bakery says that 2007 happened to be a most difficult year for the bread baking business. Lithuanian bread bakery is a medium sized manufacturer, distributing bread in Tbilisi, Zugdidi and Batumi. Peradze says that necessary investment for the start up of a rye bread business in Georgia is EUR 200 000. Besides the technique the bakers need 11 ingredients which must be imported from abroad.
“Lithuanian bread bakery bread costs up to GEL 1. The company produces four kinds of brands and their prices vary. Bakers produces diet bread, traditional Lithuanian bread, bread with sunflower seeds and the bread Bododinuli. Lithuanian bread bakery has a Lthuanian baker and the technology is absolutely top quality. The company uses high quality German flour and imports its ingredients which is very costly, consequently causing price growth on the produced product,” Peradze says.
According to Peradze, flour imported from Ukraine costs 12% less compared to German flour.
“Lithuanian bread bakery is absolutely dependent on importing as Georgia doesn’t have its own rye. The price of flour on the world market has increased 2, 5 % compared to the previous year. This is supposedly caused by a bad harvest. Generally rye flour is more expensive than white flour, but because of the strange situation on the world market this year, white flour is more expensive than rye flour.”
“Price increases are directly hitting the budget of small bakers. There is a great chance of closing down before the end of the year, as the companies are losing their customers and “are not able to compete with the big manufacturers”
The price of white flour has grown by 85-90% this year.
Q. Who do you think is your business successful for today, aside from the problems mentioned above?
A. The idea of having a bread business is really good, but the company’s problem is that rye bread is less popular among Georgian customers compared to white bread and the company has not got great sales indexes. However Lithuanian bread bakery does have stable monthly sales. Lithuanian bread is acknowledged as prestigious bread among customers, this is due to the high quality of the product and technology. Bread selling is absolutely seasonal, in summer the dominate region by selling index is Adjara, and in winter- Tbilisi and winter resorts.
Q. Will Georgian bread bakers be offering price increases on their products in the upcoming future?
A. According to our partners prices will increase by the end of this year and by the beginning of 2008. Lithuanian bread bakery increased prices by 20% in the spring of 2007 and the company is now trying to keep prices stable for the upcoming two years.
Q. What are your future activities?
A. Lithuanian bread bakery’s future activity is to supply the strong hotel chains in Georgia with bread. The company is already cooperating with the Marriott Hotels and the Sheraton Metekhi Palace. The company also intends to be a partner of the Hyatt and Radisson Hotels in Georgia.
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