The FINANCIAL - Mziuri Demands Protection of Distributors on a Legislative Level

Mziuri Demands Protection of Distributors on a Legislative Level

Mziuri Demands Protection of Distributors on a Legislative Level

The FINANCIAL -- During recent years the bankruptcy of large supermarket chains as well as small ones has had a huge negative impact on distribution companies. The total debt of obligations amounts to hundreds of thousands. Mziuri Ltd, one of the leading trading and distribution companies in Georgia,demands greatercontrolfor meeting obligations by retailers. Due to its good management Mziuri ended the year 2013 with 10-15% growth. However, the unexpected drop inthe GEL in November 2013 was an additional reason for the difficulties encountered by importers in Georgia, with Mziuri being no exception.

Mziuri Ltd was established in 2004. To-date the company has succeeded in becoming one of the most well-established trading and distribution companies in Georgia. At the moment, the company cooperates with, and is an exclusive distributor of, the following well-known brands in Eastern Europe: Oleina and Razumnitsa - sunflower oils from Ukraine, pasta by the brand names Makfa and Smak - from Russia, chocolate from Switzerland’s Lindt, coffees from Finland’s Paulig, Cofi-Cofi from Malaysia, as well as other consumer products.

Mziuri Ltd employs a total of 140 workers.

The popular sunflower oil Oleina, which has been on the Georgian market for 15 years already,was awarded the Golden Brand status by Georgian consumers this year.

In an exclusive interview with The FINANCIAL, Akaki Akhvlediani, founder of Mziuri Ltd, talked about the main problems that the company has faced due to the unrest in Ukraine, and underlined the issues that need resolving in the Georgian trade sector.

“Any event has an impact on our business. Stability is the most appreciated aspect for any business. When in November-December 2013, the exchange rate of GEL towards USD dropped significantly (from 1.65 to 1.78) it was a big hit for our business. We had 8% inflation whichhad a huge negative impact on importers. The margin on consumer products is quite low and therefore is very sensitive to such fluctuations,” said Akhvlediani.

Akhvlediani expressed huge concern regarding the lack of protection for importers on a legislative level in the Georgian trade sector. “When large or small-sized stores go bankrupt they should not have the right to appropriate another’s property. This problem is more acute with small-sized shops. Suing is the only thing that a supplier can doto protect their rights. However, sometimes the fee for suing is higher than the debt of just one store. So, in such cases it becomes pointless to proceed down that path. In total the financial obligations of small shops are too high. The situation regarding small stores has worsened recently as the huge chains are running aggressive campaigns and beatingthem in the competition stakes.”

“We have observed the owners of some stores claiming bankruptcy to avoid paying back their debt to distributors,then later on openingup a new store inanother location. There should be some kind of black list for such people, like there is in the banking sector,” he added.

The debt of Goodwill towards Mziuri Ltd is GEL 170,000. “They were restructured to pay back their debt over a 5-10 year term. We all know, however, that with inflation this sum will just be defaulted,” said Akhvlediani.

In 2013 the company added a new assortment of products. The company started importing goods from Poland, Turkey and Russia. As a result Mziuri Ltd experienced 10-15% growth.

“Oil Oleina has been present on the Georgian market for fifteen years. Mziuri has been its exclusive distributor for ten of those years. Oleina makes up 20% of our sales. It is the highest quality oil. Quality has always been the main priority for the company Bunge, the producer of Oleina. Oleina is not in the segment of the lowest-priced oil products. However, it is leading in the quality segment. Oleina is well established on the market and already has its own niche. Forthe past five years its sales have been stable. We might have sales changes of around 5-10%, but they are insignificant,” said Akhvlediani.

The average realization of Oleina is 400 tonnes per month.

Georgia consumes over 3000 tonnes of sunflower oil monthly. Sales of oil vary depending onthe different seasons. In summer oil sales growby approximately 15%. The market share of Oleina is 12-15%.

Georgian consumers havedemonstrated their positive attitude towards this brand with the Golden Brand award.” Its constant high quality and attractive price enable the brand to win the confidence of consumers and gain many awards all over the world,” Akhvlediani said.

In his words, refining is the most important thing in the production of cooking oil. Oleina has seven levelrefining. During the process the product is fully cleansed from all harmful substances.

Bunge is the production company of the sunflower oils Oleina and Razumnitsa. Georgia is one of the leading consumers out of all of Bunge’s export countries. Sales of Razumnitsa in Georgia are twice as high as those of Oleina. It is from a lower price segment. The total market share of Bunge in Georgia is more than 20%.

From December we added new sized bottles of Oleina - in 0.5 and 2 litre volumes. Now consumers are offered the choice of a wide range of Oleina bottle sizes: 0.5, 1, 2, 3 and 5 litres.

Besides Ukraine, Bunge also has production in Russia. Due to the political unrest in Ukraine Mziuri Ltd has shifted to the Russian market.

“The Ukrainian unrest caused logistical problems for our company. At first we were importing products by train. Later we moved to containers and finally, when transportation by containers became a problem, we were forced to import by road transportation. Importing goods from Ukraine to Georgia by road transportation has beenvery harmful for our company. The self cost of the product has significantly increased for us, meanwhilewe have not changed the price,” said Akhvlediani.

Trade is one of the most developed sectors in Georgia. According to Akhvlediani, the lack of development of local production is the reason behind the popularity of the trade sector in Georgia. “If we consider cooking oil as an example, we will see that there is only one oil-producing company operating in Georgia, in Batumi,which was founded four years ago. The situation is similar in other segments. There are some categories of foodstuffs that are produced locally and supply local demand, but the majority of them remain dependent on import,” he explained.

“We cooperate with the representatives of numerous countries. With each of them we have a different relationship. However, with the representatives of CIS member countries we have even more varied relations. It is more than a business partnership. Personal relations in this business are important,” said Akhvlediani.

Before deciding which product to importthe company conducts market research. Participation at various exhibitions is also important for analyzing consumer demands.

Akhvlediani distinguished the year 2010 as being the most active for his company. “We had a large increase in our product portfolio and the majority of them were successful. In 2009 we started importing the oil Razumnitsa at the beginning of the year and by the end of year 2010 we had a realization figure of 5000 tonnes. This was quite a good result for a new brand. Razumnitsa was a successful project overall,” he said.

“Two years ago we started cooperation with Kimberly- Clark Inc. It brought us good sales. We had 60% growth in just one year, which is a really good result,” Akhvlediani added.

Mziuri has its bases in Kutaisi, Batumi and Akhaltsikhe. 70% of Oleina’s sales are made up by Tbilisi. “Whencomparing the whole sales portfolio, there is 40-60% diversification in the regions and Tbilisi is in accordance with that. The Adjara region can be distinguished as the most active and subtle, in terms of meeting obligations, for our company,” Akhvlediani told The FINANCIAL.