Food for thought in Azerbaijan

By bne IntelliNews April 29, 2010

Clare Nuttall in Baku -

Azersun Holding already accounts for around 27% of food production in Azerbaijan. The country's largest food producer now plans to open several new production plants, both at home and abroad.

Azerbaijanis frequently boast that their small country has nine distinct climatic zones, from the semi-deserts of the central lowlands to the icy heights of the Caucasian mountains. In the Soviet era, Azerbaijan was one of the main suppliers of products including tobacco, fruit and vegetables, and raw cotton to other republics, since the range of agricultural conditions have made it possible to cultivate a wide variety of products. Like most industries, food processing declined in the 1990s, but investments by companies such as Azersun have helped to rebuild the sector.

Azersun's growth in the last two decades has seen the expansion of its product range, with its main products now including tea, cooking oils and margerines, sugar, and hazlenuts. Today, it is one of the largest companies in Azerbaijan. In addition to its food processing plants, in 2006 it expanded into agricultural production with the launch of subsidiary Azersun Kend Teseffufati, which is now active in several regions of the country, growing sugar-beet, soy, tomatoes, barley, peas, corn and other products. "Our company has around 27% of the food market in Azerbaijan, though we account for up to 50% in some market segments," Azersun's president, Abdoolbari Goozal, tells bne.

Azersun's growth into one of the largest conglomerates in Azerbaijan was also driven by the government. "In 1994, three years after Azersun started operations, the former president Haidar Aliyev decided that he wanted food production to be consolidated into our company, because of our intelligent employees and high production standards," Goozal explains. "The current government also supports our operations."

Power of brands

Azerbaijan's food market has developed considerably since Azersun's launch; as average spending power has ballooned, consumer demand has become steadily more sophisticated. "When Azerbaijan first became independent, there was demand only for basic foodstuffs such as sugar and butter. There was little money, and brands were not important. Since then, the mentality has totally changed - quality is now all important," says Goozal.

The introduction of modern production techniques has helped Azersun not only on the local market, but also in carving out export markets within the former Soviet Union, Turkey and the Middle East. Azerbaijan is one of the countries that has attracted a lot of interest from arid Middle Eastern countries such as the United Arab Emirates (UAE) as they try to secure stable supplies of food. "Around 35% of our production is exported, and the remaining 65% is for the local market. All our production is to international standards, whether it is sold at home, or in Russia, Turkey, Kazakhstan or another country," says Goozal.

Goozal admits the last two years have been difficult due to the global economic crisis, but says that Azersun is in the process of setting up new production plants, several of which are due to come online this year.

Within the next two months, Azersun is due to open a factory to produce iodised salts near the Masazir salt lake in Azerbaijan's Abercon peninsula. The company is working with Unicef on the project, which is intended to supply 100% of Azerbaijan's needs for iodised salt. "Azerbaijan has a history of diseases related to iodine deficiency, which is why we are setting up the factory," says Goozal. Azersun is also setting up a factory for food canning and packaging in Krasnodar, Russia. A milk factory is due to be opened in Azerbaijan in 2010, and in future Azersun has plans to launch production of chocolate and confectionary.

Outside the food and related sector, Azersun is building a new petrol terminal that will receive oil from Kazakhstan's Tengiz field and connect to the Baku-Tbilisi-Ceyhan oil pipeline. "There is capacity to handle up to 20m tonnes of Kazakh oil. Phase 1 of the terminal as been started, and within three months we will complete negotiations on the second phase," says Goozal.

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