The difficult economic situation due to the spread of COVID-19 is not the first "crisis" in the 25-year professional career of Serik Tolukpayev: the collapse of the financial system in 2008, the devaluation of tenge and dumping by Russian competitors. Having worked in distribution and poultry industry since 1995, the current Head of Aitas KZ Holding was able to develop his "winning formula". According to him, in a crisis you need to remember two things – a strong team and a strong balance sheet. These two constant components will help you meet any difficulties with dignity.
- Serik Kulumbekovich, Kazakhstan business is going through difficult times. What do you think? And, what are your forecasts for the economic development against the backdrop of the pandemic?
- Yes, we face serious challenges, the resolution of which requires strong management. Aitas KZ has it, and I am glad that our partners always appreciate this fact. Due to this, despite the crisis, we have ambitious plans for the nearest future. At this time, I consider it a luxury. The company plans to launch a large Poultry Breeding Plant. We have already purchased a factory under construction in Almaty region and are currently profiling it for breeding poultry. This will be the largest project in Middle Asia, Central Asia, and CIS. According to our calculations, we plan to produce about 160 million hatching eggs at Almaty Breeding Plant. Thus, we close the chain, instead of imported hatching eggs from the Czech Republic, starting the new year we switch to our own egg and reduce the cost accordingly, too. Thus, Makinsk and Ust-Kamenogorsk Poultry Plants will be provided with their own eggs. Moreover, next year we plan to double the capacity of Ust-Kamenogorsk Poultry Plants, which is additional 28-29 thousand tons. For all this, we plan a Poultry Breeding Plant. We plan that Makins Poultry Plant will expand by another 2 times to 100 thousand tons in 2022-2023. In Almaty region, in the South of Kazakhstan, we will build a poultry plant for another 200 thousand tons, designed for export. This is what our medium-term strategy looks like.
As for forecasts for economics development as a whole, there are too many uncertainties at the moment, but I still think that we are on the verge of a major historical break. In my opinion, this blow in the form of a coronavirus pandemic that has passed through all the countries is just the tip of the iceberg. Still to come: the global view of consumption will change, which will cause demand to stagnate or fall, as the global economy now bases mainly on consumption. The pandemic will change our habits, which is a good thing, because otherwise we, humanity, as a species will probably disappear, well, in two or three centuries. And so there is a chance, and we must use it, learn to appreciate other things, other than just the ability to wear ten pairs of boots or fifteen trousers. There are other very interesting things in life. Even though the world is not likely to return to growth rates, I do not see this as a pessimistic scenario, I look at its positive side and it is likely to lead us on a smooth road. I believe that we will come to this, you mustn't consume so barbarously.
- Makinsk Poultry Plant was put into operation about two years ago. What results have been achieved so far? How did the coronavirus pandemic and the state of emergency affect the operation of the poultry plant? The borders were closed, how did you manage it?
- You reminded me of the date, and I remembered the events of that day. Thereat, we opened a poultry farm along with such an interesting event as cooking the world's largest chicken kebab – 223 meters. With a huge crowd of people, our coal for some reason did not burn that day, although earlier we had a rehearsal, everything was fine. It turned out that on the final day we brought coal of a different temperature. And just as well, you know, the launch of production is an unpredictable thing, it was quite difficult at the beginning. For the first 3 months, the energy infrastructure was not ready, in particular, the water supply. Since the production and industrial infrastructure was not ready, we urgently had to finish it ourselves. For the first 2 months we watered chicken not with piped water, but imported. About a quarter later, we gradually started to grow. This year, we have almost all indicators within the budget. Moreover, we plan to exceed the production plan. If we had 28,000 tons in the budget, we will go for 29,000 tons, which is the maximum capacity. Thus, both budget, financial, and production indicators are in the budget corridor.
As for the state of emergency. In part of managing the movement of people and cars, there were many initiatives on the part of the Government. But we received all the permits in time, because the state authorities understood that this food is necessary first of all for the population. In other words, we quickly found ways to solve problems such as delivery, transport, and logistics of our products to the consumer.
- So the pandemic did not significantly affect production volumes?
- No, not really. Sales rate was more likely to be affected. It is important to understand that our production volume and sales volume are two completely different things. At some point, we, of course, had storage of over 1,500 tons of products, but basically this is normal. We felt a particularly strong drop in sales when markets, food stores, restaurants, and bars closed – and this is a significant part of our consumers. We have experienced such a blow twice, the last one just a month ago, when the quarantine was extended and the state again closed food markets. However, this is not a reason to say that the coronavirus somehow strongly affected operations of Aitas KZ. People still continue to eat, and if it is not eaten in a restaurant, it is eaten at home, so the pandemic did not have any significant impact, everything is fine.
- How many jobs were created at the plant?
- 850 jobs were created at the poultry plant, this is also the planned indicator. The average salary is about KZT 215 thous. for the plant. This is a very high figure. It is much higher than the regional one for Akmola region. It is probably comparable to the average salary of regional centers. 90% of employees are local people. 7% are those who came from other regions of the country, and 3% are expats, mostly citizens of Russia and Ukraine. At the beginning, we had a lot of expats, more than 70 people, and now there are about 20 left, in key positions. In particular, for example, Yevgeny Proskurin, the General Director, who has been working for the company for a long time and is a very good specialist.
- Did the closure of international borders somehow affect the production cycle, because eggs are imported from abroad?
- You know, yes, there were certain problems related to the closure of international borders. First of all, it was necessary to change drivers at the border. If you remember, at the very beginning, the situation in Europe was much worse than in our country, so our authorities demanded to divide countries into categories A, B, and C. That is, in those countries where the pandemic was developing quickly, drivers had to be changed at the border, and they were not allowed to enter Kazakhstan. Fortunately, we have good suppliers who managed to organize the entire process. So now we have no problems with the egg supply. Another problem that we have faced was, first of all, the import of foreign labor, consultants in particular. In order to bring back our foreign employees who crossed the border into the country, you need to get a permit. This is a rather complicated procedure, but we are coping with it. There were also some difficulties with disinfectants due to the sharply increased demand for them. Disinfectants are our working environment, that is, regardless of the epidemiological situation, we constantly use them in production.
- What is the hatchability percentage?
- 85% is considered to be a good indicator, you can even say brilliant. We are getting about it now. We have very good partners in the Czech Republic, they supply high-quality eggs, and we are satisfied with our cooperation. But, it is clear that now, as I have already said, logistics chains have become more complicated due to the coronavirus. Moreover, their cost price has increased due to the devaluation of tenge. Accordingly, we had to look for a solution, and we found it, and I think we found very good one. As I said, we plan to switch to our own eggs next year.
- And how did you solve the feed issue, is it also an imported product?
- No, most of the feed is local. But we have such an important component as soy. It is mostly imported. Fortunately, in the last year, the cost of feed, in particular the cost of soy components - full-fat soybeans and soybean meal - are at a historic minimum now. In this regard, of course, this makes situation with soy easier. On the contrary, the situation with our local feed is complicated, especially with wheat. In the past year, the price has increased sharply, almost doubling. Now its cost is 85-90 tenge per kilogram. This is now the main challenge for us and for the industry as a whole.
- How much of the domestic market share do you already hold?
– Today, we produce 57-58 thousand tons, out of 350, so this is about 15%. We will produce 20%, well, a little more - 23-24%. Here we will reach the figure of 90 thous. tons next year. Thus, I think it will be 27% of the market. To be honest, we do not count such indicators. Some companies like to watch competitors, some - to watch surroundings. Actually, we are just working, we know the size of the market, we know that we have a niche for import substitution, this is key for us. We have a lot to develop, which is what we are going to do.
Since I know distribution very well, we use all the channels: retail, professional channel, and HoReCa. In other words, we are represented in all the channels, and we work with all the channels. We have both our own distribution and distribution through subdistributors. We have direct delivery to all the channels, and you can pick up products from us yourself. We have our own chain, so to speak, many stores that work with us under agreements where we provide refrigeration equipment, for example, in retail. We are working with chilled products in the East and North, now we are slowly entering Almaty, trying it out. We are working with chilled products on the territory of all Kazakhstan plus Russia, as well as a little part in Kyrgyzstan and Uzbekistan. Since last year, we have started delivering chilled products to Russia in small batches.
- Borrowed funds of Development Bank of Kazakhstan were used for the first and second stages of Makins Poultry Plant construction. In your opinion, what makes DBK attractive for large and medium-sized businesses?
- I think that DBK is more suitable for large business, it has a very large potential. This is an institutional bank. It moves where it is difficult for the market one to move. DBK has complex, long-term projects that require long, serious funding, both in terms of volume and timing. I think that's what makes it attractive. It is attractive for its requirements, which sometimes seem very bureaucratic, for example, such a mechanism as FTC (financial and technical control). Even we have got loan debt, but now we use it not only in operation with DBK, because it is a good mechanism for managing risks and controls. We integrated it into our system. Good instrument.
-How much is it easy/difficult to get a loan in DBK?
- If I say it's easy, it won't be true. If I say it's difficult, it is also not quite true. You know, it is a more conservative bank, not exactly a market bank. We have something to compare with, for example, EBRD. I will say that DBK is much less bureaucratic, much more inclined to search for opportunities for the development of the company, rather than for the purpose of earning money. We withdrew from the Shareholder Agreement with European Bank and changed over to Development Bank because of a number of advantages: yet this is our native instrument, the Kazakh one. After all, each of us has an internal demand for assistance to the Motherland, so you will always find support there. Maybe one person will disagree, but still the majority responds to it. I always say that, when it is very difficult, I say, address the earth, it will help you. It is very difficult to explain how it helps, but if you love it, it will always help you. You just explain to people that we need this, and if you are sincere, then I think, they will always understand you and make a decision in favor of the Motherland. And there are a lot of real patriots working in DBK.
- Please, tell us, what human qualities are important to you when selecting employees?
- Now one of our requirements, mine first of all, is a set of values, such as love, will and wisdom. This is probably the most important thing. For example, wisdom has patience, wisdom has such valuable things, wisdom has so to say the ability to forgive. These qualities are exactly most important for the leader of today, who meets the challenges. Charismatic, smart, determined - these are rather the qualities of the capitalist world. And we seem to have come to a period of post-capitalism. For example, a coronavirus pandemic is likely to lead to a different normality. And the demand will not be for those who do it effectively, but for those who do it sustainably. And sustainability is always associated with wisdom. Sustainability is always tolerance for some things, for example. Or sustainability is love as a category. It provides sustainability to the system. Therefore, these are the things that are in demand in our company, the characteristics or prerequisites for these characteristics. For love, wisdom, and will.
- How do you develop rural regions? A stadium and a mosque were built in Ust-Kamenogorsk with your support. What contribution are you currently making or planning to make to Bulandy region?
- We have made all welfare work systematic. We do not consider it as a charity, but rather as the duty and mission of the Holding. As I have already said, this is the service to the people of Kazakhstan and this is the mission for the country's sustainable development. In three regions: Katon-Karagay, Ulan and Bulandy. We have created Funds in all of them. The main purpose of the Fund is the sustainable development of the area. What are we doing? First of all, we go to the region, analyze it, and develop a strategy for the region. Then we try through our Fund to unite the society, businesses and authorities for the implementation of this strategy. For example, the strategy we developed for Bulandy district is called "Creating the Northern Meat Cluster of Kazakhstan". The meat cluster means not only our growth, but the growth of related industries, e.g. bag, pallet, feed elements production, etc. In other words, we provide grants, support business, and support social infrastructure. We offer businesses to build this region together. And we invest together. And you know, we are getting very interesting and beautiful projects. We are working in three areas in this region: economy, social environment, and ecology. In the social environment, for example, this year we are allocating grants for the opening of medical services. This is, for example, dentistry. In the field of education, for example, we recently signed a Memorandum with Nazarbayev Intellectual Schools and we are jointly opening four schools in these three regions with the support of NIS. This is how we introduce standards, soft skills. Every year for ten years, we will allocate KZT 100 million. And this year, this money went to grants. And to a number of design and estimate documents for the development of the district infrastructure. And the most interesting thing about it is that we are part of this ecosystem, and we also involve the authorities and civil society. This is our greatest achievement, that we united all key stakeholders to implement the strategy. Well, this is what our approach to social responsibility looks like. Although I don't like the word "social responsibility", I like " love for my country". Love for the people, love for the family.
- How do you motivate yourself?
- I don't motivate myself in any way, I just work. As I said, I love my family, my country, and people. That's what motivates me. I love my life.
