The Business Year

Serkan Eriş

KAZAKHSTAN - Industry

Hop & Skip

General Manager, Efes Kazakhstan

Bio

Born in 1971, Serkan Eriş graduated from Dokuz Eylül University in Izmir with a degree in Public Administration, and began his career at Efes Turkey in 1996 as a Sales Supervisor. He spent some years in Romania with Efes, before moving to European Telecommunication Holding in Germany to work as a Sales and Marketing Manager. He then moved to Kazakhstan to work with Efes as a Sales and Marketing Manager, Sales Director, and currently Managing Director.

How would you define Efes Kazakhstan’s current strengths? Efes Kazakhstan is one of the leading companies in the beverage industry, and is a very important player in the Kazakhstani market. […]

How would you define Efes Kazakhstan’s current strengths?

Efes Kazakhstan is one of the leading companies in the beverage industry, and is a very important player in the Kazakhstani market. In terms of reputation and brand recognition, the company has a very strong position. We entered the market in November 1997 via an initial investment in Karaganda. In our first year, we were ranked fifth in the beer market with a 10% market share and an annual production volume of 8 million liters. With the right investments and strategies, we increased our position to first place by September 2010. As of January 2012, Efes has an annual production capacity of more than 280 million liters and a 52% market share. We have 11 brands in our portfolio, including international brand names such as Bavaria and Amsterdam Navigator. We also have strong local brands, such as KruzhkaSvezhego, Karagandinskoe, and Tyan-Shan. Additionally, we produce Bely Medved, which was created in Russia and made international through our group. We set a goal for Efes Kazakhstan to become the most admired company in Kazakhstan by 2020. In line with this aim, we have heavily invested in the management of both our factories. At the same time we understand the responsibility that comes with operating in the alcoholic beverage sector, and therefore we carry out strong social responsibility programs to promote responsible drinking.

Anadolu Group and SABMiller have formed an exclusive partnership. How would you characterize the prospects for collaboration?

In order to create synergies between the two companies and exchange knowledge, a strategic alliance between Anadolu Group and SABMiller was established. Through this alliance, SABMiller’s beer operations in Russia and Ukraine, and sales rights in the CIS region and the Middle East, will be transferred to Efes in exchange for 24% of Efes’ shares. Currently, SABMiller does not operate production facilities in Kazakhstan, and therefore the regional experience and presence of Efes in the domestic market will benefit both companies. We will soon incorporate leading SABMiller products such as Miller, Grolsch, Pilsner Urquell, ZolotayaBochka, and Kozel into our portfolio. Through its global strength, SABMiller offers Efes a window on the entire world.

What comparisons can be made between the beer segments in Kazakhstan and Turkey, where Efes is originally from?

In Turkey, there is no strong segmentation in the beer market. Customers are served Efes Pilsner at five-star hotels as well as at corner shops in low-income neighborhoods. In contrast, Kazakhstan has a very fragmented market, and each brand has its own market position. There are five segments: super premium, premium, upper mainstream, lower mainstream, and economy. We focus on the top four segments, and the Efes Pilsner brand belongs to the premium segment, which accounts for about 9% of the total market. Therefore, although Efes Pilsner is a very successful flagship brand in its own segment, it is not our main volume brand in Kazakhstan. On the other hand, the consumer base for hard liquor in Turkey—with the exception of rakı—is small and very specific. In Kazakhstan, the consumption rate of vodka is decreasing due to health concerns. This is a positive trend for beer, but it is also beneficial for consumers. Indeed, beer contains 100% natural products and its alcohol content is much lower than strong spirits by volume.

How would you assess the tax regulations concerning beer in Kazakhstan?

In many countries, beer is not considered an alcoholic beverage; however, in Kazakhstan this is not the case. Beer is defined as an alcoholic beverage, and all legislative limitations concerning alcohol apply to beer as well. And if we look at the taxation of drinks with different levels of alcohol content, the excise tax for beer is higher than that for vodka per liter.

How does Eurasian economic integration affect the beer market in Kazakhstan?

After the establishment of the Customs Union in 2011, certain issues are being handled on a supranational level. Currently, negotiations concerning many topics are in progress, in addition to decisions related to the beer market of Kazakhstan and the Customs Union as a whole. The Union of Beer Producers, of which I am the president, is making efforts to change the status of beer and establish its differentiation from strong spirits. While the Customs Union made it easier to trade among the member states, it made it more complicated to export to other countries. In fact, 100% of our exports are destined for Kyrgyzstan. The remaining CIS markets are handled by Anadolu Efes’ headquarters in Turkey. With the establishment of a permanent and healthy Customs Union, we are expecting expansion to our neighboring countries and increased benefits for all parties. I see growth potential and believe that it will be good for Kazakhstan.

What export opportunities does this integration provide Kazakhstani brewers?

As the Russian market has a capacity surplus and logistics expenses are high, Russia is not a potential export market for our beer. Moreover, Efes already has a very strong market presence in Russia, with a portfolio very similar to that of Kazakhstan. Should we observe a capacity shortage in Kazakhstan or in Russia, the Customs Union can be an opportunity for Efes to make more efficient use of its capacity in both operations.

How do you see 2012 shaping up?

Our goal is to continue on the path of sustainable and healthy growth. While the sector is projected to grow in single-digit terms in 2012, we intend to reach higher growth rates and increase our market share. At the end of 2011, the global macroeconomic outlook was not entirely optimistic. However, with the latest developments and new measures in place to resolve the European debt crisis, we have a more positive view of 2012.

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