Kazakhstan 2017 | INDUSTRY | VIP INTERVIEW

TBY talks to Omer Ogun, Managing Director of Efes Kazakhstan, on setting up in Central Asia, setting trends, and overcoming tax burdens and advertising bans.

Why did you choose Kazakhstan to build the first factory outside of Turkey?

Kazakhstan was the first country chosen by Efes because of the opportunities it offered given its proximity to Europe and Turkey. Our Brewery in Karaganda was the first investment of Anadolu Group in 1997. The total investment of Anadolu Group in Kazakhstan stands at around USD650 million, with the part invested through Efes Kazakhstan above USD250 million for the three breweries we have, namely one in Karaganda and two in Almaty.

What have been Efes' main achievements in Kazakhstan?

Our main achievement has been to become the absolute market leader. In 2008 our market share was 25%, and within three years we increased that to 55%. We brought many innovations to the market such as the new concept of fresh beer in the bottle. Typically the shelf life of beer is nine to 12 months, while the shelf life of the new concept created by us is four months. In addition to this new types of beer have been launched, namely easy-drinking lager (mild beer under Kruzhka Svezhego brand), and unfiltered beer.

What is your strategy for becoming a trendsetter in the market?

First of all a company needs to feel the market. It should take some lessons from the past but it does not mean the same pattern should be repeated in the future. Companies should understand where the market is going. Nowadays beer markets in CIS region are either declining or flat, due to many reasons like regulatory constraints and purchasing power decreases. Particularly in Kazakhstan, the beer market has shrunk by around 20% over the past five years. We are continuing to invest in innovations to develop the category, and last summer we introduced a new category, unpasteurized beer in a bottle called “three weeks” (“3 Недели”). Secondly, we aim to pursue our goal to serve our consumers with products brewed from 100% natural raw materials like malt and hop, ensuring world class quality and the best taste created in breweries equipped with the latest technologies.

What strategy will you adopt to achieve your goal of doubling business by 2020?

One of the strategies is investing not only in equipment, but also in people. In order to be successful a company needs good employees generating smart ideas. Generally in our industry, the turnover for employees is around 15%. In our company it is 2.5%, because we invest in employees. This year we provided 20,000 hours of training to our staff, or about 30 hours per person. Our employee engagement, which represents employee satisfaction, is 76%, compared to the country average of 62%. The second aspect is the portfolio of products. We continually emphasize the importance of innovation, because consumers are bored with purchasing the same product over five or 10 years, and so companies should give them something new.

What will be your main focus for 2017?

We already have three breweries but each year we make investments of more than USD10 million into Kazakhstan's market. We will continue to be innovative by launching new brands and creating new trends, to try to expand the market and meet consumer expectations.

What trends do you see in the consumption of alcoholic beverages in Kazakhstan?

The market is not growing steadily, mostly due to the ban on advertising. Now there are some initiatives in the mass media sector to lift this ban. Removal of the ban will help the beer market to grow. Selling draught beer in plastic bottles is an area that has been growing. The share of key accounts in beer sales in Kazakhstan is growing and there is room for that channel to grow in the future.

The government seeks to introduce duty on alcoholic beverages. How will this affect Efes?

Currently we pay an excise tax per liter of beer. It was KZT26 per liter but in 2017 it will be raised by 50%. This is of course negative for us, as it limits market growth. Also in 2016 additional tax introduced for underground water usage. To overcome the increase in tax burden we should be more efficient, and become more dynamic each and every day.

What are your expectations for 2017?

The market didn't grow in 2016, and in 2017 we expect a decline due to an increase in the tax burden on companies. But we are the locomotive of the beer industry and locomotives never stop. We pull others behind us and will not stop because we know what to do and how to react to the market and we will continue in that manner. In 2017 although the market will decline but we will have positive growth. We still have good expectations from the market and we believe in Kazakhstan, the economy, the future of the country, and the people. That is why we are here and we will continue working to make life more enjoyable for people.