The FINANCIAL — Gogi Topadze, President of Kazbegi JSC, one of the leading business groups involved in the hospitality, tobacco, alchohol and soft drink producing business says political situation in Georgia is the main challenge his company will face in 2010.
Topadze says his involvement in politics was harmful for the company’s development. But still he does not exclude the possibility of his return to political life “if the Government continues to hamper development of the manufacturing and agro business in Georgia”.
“I have no current plans concerning political activities. It depends on the development of the situation. If our officials continue to hamper development of the manufacturing and agro business I may become more active in politics,” says Topadze.
Kazbegi was founded by Gogi Topadze in 1994. The company purchased Tbilisi second brewery at auction and invested USD 16 million in its development. In 2006 Qartu Universal and company Zamex Print joined the Kazbegi family.
Company Kazbegi plans to starts producing four sorts of lemonade in Ukraine. The company has already agreed with one of the leading Ukrainian water producing companies, Regina. The main advantage of the recent cooperation is that from 2010 Georgian lemonade with brand name Kazbegi-Regina will be delivered to Russia.
Topadze says that recently demand for Ice Tea has decreased. However lemounade is still a popular product.
“We plan to widen our market share. We plan to start producing a new sort of Ice Tea. We also plan to start producing lemonade in Kazakhstan. We hope that the project will be launched by 2010,” Topadze says.
“Company Kazbegi has been exporting lemonade to Ukraine for a long time. Accordingly our Ukrainian partners started producing lemonade there. One of the main reasons for their decission is that transportation sharply increases the cost of products. Our Ukrainian partner company Regina is a various branched holding. We sent our experts to Kiev and equiped the factory. The total cost of this project is USD 12 million. We plan to launch a new line of lemonade under the brand name Kazbegi-Regina from November 2009. We supplied our Ukrainian partners with technical staff, let them use our brand and provided them with concentrates. The main capital of the project will be launched by the Ukrainian side. We will receive 50% of the total profit.
The most important outcome from this project is that lemonade will be delivered to Russia from the Ukrainian market. The lost of the Russian market was not profitable for any Georgian entrepreneur. It will be difficult for Georgians to export products to Europe. All the niches on the European market are already occupied. Every country is trying to protect its own entrepreneurs which is hampering the entrance of importers. Unfortunately the Georgian Government has not arrived at the conclusion to run the same policy and hamper the import of food products that can be successfully produced here.
Q. Your plans for the near future focus on entering the Russian market. How did you manage to reach this point?
A. Delivering products from Ukraine to Russia will not cause any problems. We have serious plans for the Russian market. According to our preliminary plans, in 2010, 10 million bottles of lemonade will be exported to Russia. There is no other way of entering the Russian market for Georgian exporters. Before the Russian embargo on Georgian products 25% of total exported products were delivered to Russia.
Q. Company Kazbegi exportes products to more than 20 countries. To which country do you export the largest number of your products?
A. The largest number of exported products goes to our neighbour countries Azerbaijan and Armenia, then Ukraine, Greece, USA, England and Germany.
Q. What amount of beer did you produce in 2008/2009?
A. About 4 million decalitres of beer was produced in 2008. During 2009 demand for beer has decreased by 50%. As for lemonade it holds a different niche and accordingly the reduction of demand was not so large.
Q. What share of the total soft drinks market do you occupy?
A. The largest transnational companies of soft drinks are aready present on the Georgian market: Coca-Cola, Pepsi, Shweppes. Despite this we still manage to occupy 20% of the local soft drink market. The main advantage of our products is that they are produced from natural ingredients. Perhaps in the case of commerce it is less benefitial but we are focused on keeping this niche.
Q. Kazbegi was occuping the lead position on the local market. However after the entrance of Turkish conglomerate Anadolu Group, which took over Natakhtari, the total forecast of the beer market has changed. How did all this affect your company?
A. Turkish Anadolu Group is a large scale company. It includes Efes. The Turks are usually characterized by aggressive policy. But it is welcome as it benefits the country’s economy. Turkey has one of the strongest economical strategies. Over 15 years they have managed to rebuild their economy and tourism and are now gaining tourists from leading tourist destinations Greece, France and Italy. You find many imported goods in Turkey. Turks export their products to Georgia and import our natural food products in their country. But we cannot blame them as every state is trying to save their economy by any means possible. Natakhtari entered the Georgian market aggressively; they had the support of officials, who had their own interests in this business.
Q. What kind of problems does the Georgian manufacturing business face?
A. Because of existing circumstances in Georgia currently the import of products in Georgia is cheaper than local production. This is caused by taxes, the cost of electricity, water and gas. All these factors determine the non evelopment of local manufacturing.
The main problem that local producers face in Georgia is that for 15 years our government has not implemented a joint economical strategy; encouraging the kind of products entrepreneurs need to produce to keep a level of competitiveness on the European and post soviet markets. The Government is chaotically pressing low. No one thinks that without the development of agriculture the country can not move forward. Officials frequently report different rates of our country’s success but I still see the poverty of our people as I regularly visit the regions. It is important to develop local manufacturing in the villages and regions and to employ local citizens who are currently moving en masse to the capital. The current Georgian Administration is fond of preparing and succeeding in elections and does not care about anything else. That’s why 25% of the Georgian population is comprised of emigrants and their families seeking jobs abroad.
Q. In 2005 you became President of the European Chamber of Commerce. Why did this organization stop working?
A. I could not see any function for this organization. The American Chamber of Commerce and Georgian Chamber of Commerce already existed and were running their policies successfully. So the European Chamber of Commerce became useless.
Q. How has your political career affected your business?
A. Maybe I would get better results in my business if I kept silent and had not spoken loudly about my dissatisfaction with our country’s officials. Kazbegi is a large-scale business group, it unites 18 manufactures and is overcoming the presssures of the crisis and political instability however.
Q. How did the Kazbegi coffee business develop?
A. We were collaborating with a company that produced coffee. We had franchise cooperation and they used our brand name but soon we found out that they did not satisfy our quality demand and so the deal was interrupted.
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