Growing Stronger Branches

What were some of the upgrades or benefits that took place at Atropatena as part of the Year of Agriculture reforms of 2015?

In line with the Year of Agriculture, the government offered some great incentives and provided significant subsidies to the sector. Governmental compensation for purchasing agricultural machinery reached 40%, for example. These initiatives are put in place because Azerbaijan is not yet fully self-sufficient in terms of food. We are still importing grain, dairy, and meat. The shocks in the international economy over the past year have forced us to make some changes. For decades, we had a stable market and enjoyed greenhouse-like conditions that we were hoping to have forever. We believe that the shocks of 2015 will actually increase the competitiveness of business. Businesses are reconsidering their approaches and practices, cutting down expenses, diversifying, and working on import replacement to become less dependent on currency fluctuations.

Atropatena is implementing a project to produce poultry products and feed in Azerbaijan. What are the details of this new plan and how will animal feed production help reduce the price and cost of products?

We have a dairy production business, a farm (about 4,000 heads), and, on top of that, last year we shifted toward poultry production. Much needs to be done to develop our Sesame Broiler brand. We are studying the production process in depth and are thinking about producing all the essential components within the country within 2-3 years, which will eventually allow us to reduce our costs. When our currency was expensive, it was not good for us as a producer; it was difficult for us to compete with imports. In this sense, the devaluation has boosted local production and had positive effects in the long run. The coming transition will be a difficult task. Azerbaijani citizens’ purchasing power is decreasing because disposable income is not growing. However, within a few years it will level out.

Is Atropatena looking to expand its product range, both as a distributor and as a producer?

Yes, we are now working to expand our product range. We are focusing our current investments in two main areas, and we have new dairy and poultry brands in the pipeline. We will also be moving toward deeper production. Since 2015, we have been considering replacing imported ingredients to reduce our costs.

As the country looks to expand the agricultural capacity and promote agricultural exports, what are some of the international markets into which Atropatena is looking to expand?

We currently have some exports, but they are not significant. We are doing marketing research on neighboring countries as well as in the Middle East—countries such as Russia and Saudi Arabia. The Russian market is huge, and we are seeking to export products that are not sold there yet, such as white cheese, which is a local specialty. It is a natural, high-quality product and it will definitely appeal to Russian customers. It can be followed by ayran, kaymak, and more. As for the Middle East, it has a limited dairy industry and enjoys high purchasing power. It is also important to consider the expiration date for products exported to the Middle East because of its distance. We are now considering various logistics options in this regard.

Atropatena launched a number of products for the European Games. What are your thoughts on Formula One Grand Prix coming to Baku and does Atropatena have any similar plans for this event?

Our marketing department is currently working on that. We are thinking of producing a special campaign related to ayran, as we are the market leader in this segment. Ayran is a healthier alternative to fizzy drinks that you can have on the go.

Atropatena is partnered with many transnational corporations, such as Nestlé and Danone. What is the value added by these partnerships to your company?

We consider distribution as a sort of a transition to business. If you look at large companies, they operated as distributors at some point. Such examples can be found in Japan and South Korea with Samsung or Hyundai. The distribution business allows us to pick up best practices and quality standards. We are already producing together with Danone and in 2016 we want to expand this partnership. Because our currency is cheaper, larger companies find it more feasible to produce locally in Azerbaijan and export to neighboring countries from here. In this sense, the market is becoming more and more interesting. I believe that the experience Azerbaijan gained in developing the oil and gas industry can be applied in other industries. Since we have attracted global players, we have also gotten introduced to new technologies. This has allowed us to enter international markets and developed local talent. It is the optimal mode. In my opinion, to overcome dependence on oil dollars, it is necessary to make investment in Azerbaijan more beneficial. This will attract large companies. If we consider the Russian dairy market, there are two main players: Danone and PepsiCo. The latter purchased WBD, the market share of which was about 30%. The two of them cover about 70-75% of the Russian market. Dairy produced in Russia is exported, which brings money to the budget. We should be doing the same in Azerbaijan.

Coming out of successful parliamentary elections at the end of 2015, what is Atropatena’s outlook on 2016?

This year will bring better dialogue and understanding between the government and business. Different options to support business were discussed during the last meeting with the president on January 26. Dialogue with the authorities and ministries became a lot more intensive after that. The government is seeking the advice of businesses on what needs to be done. The government is putting a lot more thought into ways to develop the non-oil sector and create more jobs. I believe that 2016 will become a critical year in this regard.