The FINANCIAL — There are companies in Georgia not afraid to put additional investments in to business even during a recession. Most Georgian food producing companies are keeping their aggressive strategies and plans for 2009. Shalva Alavidze, Marketing Manager of Eco-food, says that pro-activeness during a crisis can get more profit than in usual circumstances.
“Ioli is focused on keeping producing dynamics. We are taking into account the current economical situation and so offer products at lower prices, to make them accessible for customers of middle class. Products of Ioli are considered high class but we have reduced prices and so are shortening our own benefit margin. The margin was 12% and we reduced it to 8%,” Ilia Kantaria, director of Ioli Group, told The FINANCIAL.
“Food producing is one of the most stable businesses as high-quality food-products are always in demand. The vast majority of our customers have remained loyal to our products. We assume that some of our consumers have given up buying delicacy products, but it has not hindered the growing tendency of Nikora’s sales,” Mako Jaoshvili, Marketing Manager of JSC Nikora, says.
Nikora is one of the leading food processing companies in Georgia with estimated meat products market share of 55%. Annual turnover of Nikora in 2008 was GEL 82.1 billion which highly exceeds the data of the last year.
For 2009 Nikora plans to spend its reserves on improving manufacturing processes and expansion of the retail-distribution chain. Currently more than 80 Nikora special stores operate throughout Georgia. Starting from the recent year they are progressively switching to “self-service” style. Nowadays more than 14 shops offer such service insuring customers better comfort and convenience.
The management of the company hopes that this approach will almost certainly lead to 30% turnover growth.
Nikora Ltd was established in 1998 with private Georgian capital. The company quickly enlarged its business and soon became the local market leader in food production. Currently, it produces meat and dairy products, semi-finished food products, fish products, bread, non-alcoholic soft drinks and wine.
“Despite the economical crisis we did not change our plans and strategy,” Shalva Alavidze, Head of Marketing of Eco-food notes.
Annual turnover of the company Eco-Food in 2008 was GEL 8 billion and for 2009 it will be 11 billion. Eco-food is distributed in all cities and regions of Georgia. The company covers 47% of the total market.
“Eco-food works at high, middle and low-end segments. For example the company Georgian Eco, owner of the brand Eco-food, started the producing of special products focused on lower level customers under the new brand Akhali,” Alavidze says.
Milk processing company Eco-Food was founded in April 2004. During the existence of the enterprise its structure changed many times. From February 2006 the official name of the enterprise has been Georgian-eco, though management of the company didn’t change the name of the brand itself to Eco-Food, because it is easily recognizable and the moment it appeared it established itself at once.
In regards to our production scale, average prices according to brands vary. The average price of Nikora meat products per Kg for sausage is GEL 7-10; sausage cost is approximately GEL 5-12. Average price of Mzareuli semi-finished food products is GEL 5-7. Fish of the Ocean costs GEL 12-14 (sea delicacies and caviar not included). The average price for Shkhepi is GEL 1 and wine – GEL 5.
The average price of products of Ioli is GEL 11-12 (USD 7) per kg and maximum GEL 17 (USD 10).
“Demand for high priced products was reduced by 10%. From the very beginning when Ioli started working we were focused on high segment customers only and so offered the highest quality,” Kantaria, Ioli, declares.
Annual turnover of the company Ioli Group in 2008 was USD 11 billion. “We think that we will manage to keep these figures in 2009,” Kantaria mentions.
“All customers are oriented at high quality goods but the question is, what number of them are able to pay for them?” Kantaria notes.
Ioli covers 6% of the total market. As the director of the company notes, “This is a good result for a company which is on a market full of competitors”.
Most meat and milk producer companies face a reduction of sales during fasting. But most of them started producing Lenten food.
“Demand on our products does not seem to have changed and is still high. It is obvious that because of different seasons or holidays such as New Year, or during fasting periods, the sale of meat products fluctuates. Because of the wide variety on offer in our special shops customers are able to choose from many different types of products. This is why total sales during such periods remain stable and balanced,” Jaoshvili, Nikora, says.
“For rehabilitating sales reduction during fasting periods Eco-food produces special dried crust and mayonnaise,” Alavidze says.
“Currently Eco-food is working on producing cheese. “There is a huge interest in the address of cheese production but we can’t yet state the total price of it. It’s hard to compete with the low prices of home-made cheeses but we will solve this issue,” Alavidze declares.
“Sale of meat products reduces by 15% during fasting periods. For customers who are fasting we offer special fasting products to help fill the drop in sales during these periods,” Kantaria says.
“The company plans to develop export potential. It’s true that the main priority is given to the satisfaction of local market demands, although the company is also managing to work toward export. By discussing some interesting offers from neighbouring countries, first of all it is planned to export semi-finished products. At the next stage, we plan to export meat products, wine and Shkhepi,” Jaoshvili, Nikora, notes.
“It is the third year already that daughter company of Nikora Nafareuli Old Cellar has produced its wine Mtevani. Nikora made an investment of GEL 1.5 billion to this end and purchased its own vineyards in 2007,” Jaoshvili says.
“During a time of recession in every country food producing companies and banks are the last ones to be affected by the crisis. We are going to keep up with our competitors with the help of constant innovations. Our know-how helps us to stay competitive,” Kantaria, Ioli, declares.
Ioli Group which also produces ice cream plans to offer their customer’s ice cream with small amounts of alcohol, a direction which the team of the company has been working on for a year and a half with Austrian technologists.
Nikora has fluently assimilated the regions. Nikora’s special shops are spread throughout the whole of Georgia.
During the summer season, because of the high demand from tourists additional special shops are opened and the distribution of products is increased in external network shops. It has been 3 years already since the Poti regional production facility opened. It is equipped with modern machines and supplies all of the west of the country’s cities with our products.
“One of the main advantages of the Nikora brand is that it is easy to find its products. Demand on our products is high not only in our special shops but in 2,000 other shops as well in our external network,” Jaoshvili says.
The future plans of company Ioli include broadening of its branches and orientation at export.
“Ioli group exported its products first to Russia then to Baltic countries and currently the company is negotiating with other foreign partners,” Kantaria notes.
Ioli Group imports 70% of its pork from Argentina.
“We worked out a project for the production of cattle so as not to have to import it from foreign countries, and if we successfully attract investments we are hoping to implement it soon. Currently there are some small sized farms but they satisfy only 2% of total demand,” Kantari notes.
Kantaria says that cattle raising is a very profitable field for investments.
Written By Madona Gasanova
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