The FINANCIAL -- In 1998 a group of like-minded people gathered together over one idea: to create high-quality meat products for Georgian consumers. The volume of investments issued initially was scanty, so small as to be not worth mentioning. What is worth mentioning however - is GEL 190 million. This was the sales volume reached by JSC Nikora in 2014. There were only two sorts of sausage offered by Nikora 16 years ago. Currently, the holding incorporates sausages, semi-cooked products, fish, dairy products, ice cream, bakery and wine enterprises. For 2015, expected realization growth has slumped from the previously-targeted 40%, to 30%, due to the difficult economic conditions experienced recently. Meanwhile, the company will continue its development, as the modern understanding of the brand never allows for falling behind the times.
“Due to the economic conditions that have developed in the country, it is unlikely we will reach the previously-targeted growth rate of 40% in 2015. However, we hope that achieving 25-30% realization growth of the holding is quite realistic,” Irakli Bokolishvili, Director General at JSC Nikora, told The FINANCIAL.
The history of Nikora started in 1998. “There was no organized food product enterprise on the Georgian market at that time. The founders of the company aimed to found high-quality meat production. Since then they have remained loyal to their chosen path. Nikora has always been focused on quality. This is the main determinant of our success,” Bokolishvili said.
In his words, a constant quest for innovation and development is also very important. “The company is never completely satisfied with the results it achieves. Nikora started its operation with only two sorts of sausage: Rdziani (Milked) and Iveria. Currently we cover almost every direction of food products. The holding incorporates sausages, semi-cooked products, fish, dairy products, ice cream, bakery and wine enterprises. Nikora is an umbrella for the largest supermarket chains and two import companies. They are importing raw materials and spirits from Europe and the USA.”
“A wide range of high quality products, modern infrastructure, qualified staff, dialogue with consumers and constant striving for progress are the main factors that have contributed to Nikora’s positions of leadership on the market for the last 16 years,” said Bokolishvili.
JSC Nikora has been awarded Golden Brand status this year. In his interview with The FINANCIAL, Bokolishvili shared his experience of creating a successful brand. He also gave his suggestions for how to develop the economy in the country.
Q. GEL devaluation continues to be one of the main issues for the Georgian economy. What was its impact on your company - are you witnessing a slump in consumer solvency?
A. The instability of the national currency remains a real problem for Georgian businesses. Local production is closely related to the European and U.S. markets. So, changes in the national currency directly impact on them. Nikora has been no exception. Given the absence of a local farming industry the company is entirely dependent on imported raw materials. So, we are purchasing them in foreign currencies. Bank responsibilities are putting more pressure on our business. They are also fixed in foreign currencies.
If the recent trend of depreciation of the Georgian Lari continues, Nikora will not be in a favourable position either. Due to its specifics, the crisis impacts on the food products market last. However, currently we are observing certain precautions being taken by consumers.
Q. What was the starting volume of investments issued at Nikora, and what is the company’s value now?
A. The volume of investments at the starting point was scanty. I cannot even name the exact figure. The key issue was that there was a single-minded team, from a founder to an ordinary worker. They started working hard in order to succeed. This was the main investment, and one which has no monetary value. These factors ensured that Nikora evolved and established itself as one of the most powerful holdings and largest employers.
Naming the current value of the company is a complicated matter. This issue is regulated by the stock market, which practically does not exist in Georgia.
Q. During the past 16 years of its existence, which year would you distinguish as the company’s most successful, and which the least?
A. Like other companies operating in the market, 2008-2010 were the most difficult years for Nikora. The August war and the events of the aftermath left quite a trace on the activities of the holding.
The most successful years were 2012-2014. Nikora aggressively started expanding its supermarket chain during these years, and as a result of that, the company’s turnover has increased dramatically. We remain devoted to this path and will not slow down our pace.
Q. The company still has to import raw materials. Why can’t you replace them with local production, and do you have any plans for activities in this direction?
A. In Georgia there still does not exist farming which can sufficiently provide raw materials on such a scale as Nikora requires. Several pork farms have been established recently. They offer a very high level of quality. However their prime cost is on average 1.5 times higher than that which is imported. The difference is significant. It is naturally reflected in the final price of the finished product. Therefore, we still have to import pork, mainly from Brazil, the U.S. and European countries.
Some steps have been taken on the domestic market in pork production. I hope that if the production is improved and increased, then the self-cost will be reduced. So, we can assume that at some point Georgian production will manage to compete with imported products.
As for beef, I am not aware of any properly developed cattle farm in Georgia. Nikora uses local beef in its semi-cooked production, (pelmeni, pancakes, cutlets, etc.). However, these are actually goods delivered by small-holding farmers.
Nikora itself holds a farm in the Gardabani region. At this stage we are farming only quail and quail eggs.
We do have some plans for the direction. However, it is not in a short-term perspective and does not allow us to think about replacing import.
Q. The majority of those in the Georgian business community prefer to invest in food products, mostly via franchise deals. Why do Georgians avoid establishing their own brand and production development?
A. Creating a successful brand is the most difficult thing in business. Gaining consumers’ loyalty towards a brand takes years. Maintaining this loyalty requires daily hard work. The history of Nikora is a good example of that.
Bringing a successful, already-recognizable brand to the market is very simple. It requires less risk and investments. In this case we are dealing with an established trademark, with an already popular format and name.
Q. Economic development continues to be one of the country’s biggest challenges. What is your view and advice on how to develop the Georgian economy?
A. The Georgian economy will only be developed if the Government supports local business development with active steps. It will contribute to the enlargement of export potential. Proper determination of the country’s economic directions is crucial. This includes: infrastructure, transit service, agriculture, food and light industry, tourism, the service sector, energy and financial services. Start-ups in these directions should be offered tax and other preferences. The Government should create an attractive investment environment. A new liberal tax system needs to be implemented. The responsiveness of the education system is also important. The education system should be focused on bringing up highly qualified specialists in prioritized business directions. Qualified specialists should meet the demands of the job fair from specific areas.
Q. What are your expectations - by how many percentages will your realization increase in 2015 in comparison with 2014?
A. Due to the economic conditions that have developed in the country, it is unlikely that we will reach the targeted 40% growth rate. We hope that having 25-30% realization growth of the holding is quite realistic.
Q. As a successful company which suggestions would you offer to start-ups looking to succeed?
A. Like in any other activity, in business it is important to make proper choices in the initial stage, to establish a team of like-minded people, initiate a real plan, be innovative, constantly striving for improvement, moderate risk and finally - to work, work and work.