THIRSTY FOR MORE

Kazakhstan 2016 | ENERGY & INDUSTRY | INTERVIEW

TBY talks to Tursengali Alaguzov, Chairman of Galanz Bottlers, on the company's development, its global set of resources, and how it has persevered through the global economic downturn.

Tursengali Alaguzov
BIOGRAPHY
Tursengali Alaguzov was born September 17, 1969 in Almaty. He began his career in 1992 and was engaged in entrepreneurial activity through 1997. In 1998, he became a Founder and Chairman of the Board of Directors of the Galanz Bottlers. He is a Member of the Board of Trustees of the Public Foundation Ana Uyi, which is engaged in charitable activities and assists organizations that help rehabilitate people addicted to drugs.

What was the idea behind producing bottled water to start your operations in Kazakhstan?

It all began in 1998. At that time, I was 20 years old, fluent in Chinese, and had never been involved in manufacturing. I thought that bottling water was possibly the easiest thing to do. In 1998, we started producing bottled water in 19-liter plastic bottles, or what are known as office water containers. In 2004, we were the market leaders in the office water segment, and the company had about 400 employees. In 2003, we decided to start producing iced tea. We were the first to obtain the technology for producing iced tea in Kazakhstan, and until 2008 we had no competitors in the country. In 2011, our annual profit was approximately $40 million, and in 2012 it reached $80 million. Nestlé expressed interest in our business, and since 2013 we have been bottling for the company and we are responsible for distribution. From a quality standpoint, Nestlé has helped us reach international standards when it comes to our products. Thanks to government support, we managed to obtain a loan in tenge with a favorable interest rate. This allowed the domestic soft drinks industry to start exporting products to neighboring countries such as Russia and Kyrgyzstan.

Innovation and high-quality equipment are key aspects of Galanz's success. How are you maintaining such a high standard of quality?

There is a Franco-Italian company, Sidel, which has a factory in Parma producing equipment for the soft drinks industry. The factory provided us with equipment worth $8 million. Thanks to the new equipment, we were able to bottle soft drinks with fruit pulp. For example, there is a brand Aloe Vera, of which we are the only producers here in Kazakhstan and, perhaps, across the entire CIS. We bring raw materials from Vietnam, use Korean technology, and actually have some Korean employees. In fact, we also help to sell this drink to Afghanistan, Turkmenistan, and Russia. The next challenge is to sell large amounts of our products, and to do that you need a lot of refrigerators. Given that Kazakhstan recently joined the Customs Union, suppliers of refrigerators now have to pay higher taxes, which more than doubled from 10% to 25%. When you import a refrigerator from China, Turkey, or elsewhere, you have to spend a lot of money on taxes and logistics, almost doubling the price. We need a huge amount of such fridges, perhaps around 60,000, and at the same time we do not have sufficient resources for that. We also provide retail chains with refrigerators for free, so this year we built a factory to produce them locally.

How is the current economic downturn affecting your business?

Many of the effects are psychological. We expected devaluation but did not expect it to the extent that we have experienced. We were doing business in Russia, and it was the first country to go through devaluation shock. This is just part of the cycle, and there is no one to blame for it, but we need to work together to overcome it. The crisis has actually been a good opportunity to change our business for the better. It is important for the government and businesses to work hand in hand. Complaints will not help; therefore, we need to stay positive. We noticed a decline in production over 2015 compared to the previous year. The end of 2015 was particularly stressful in this sense. We understand that 2016 will be harder than 2015, and we are considering ways to cut down expenses without raising the prices of local brands. However, we expect that sales in 2016 will drop by 20%. As for exports, the share in total output stands at around 10%.