The Domino Effect
Chirina is one of the largest companies in Georgia that operates a full meat production cycle and controls the whole production process, from each specific egg to your plate.
Revaz Vashakidze celebrated the New Year by receiving two awards. He was named the 2018 Entrepreneur of the Year by Forbes Georgia, while Chirina was awarded Blue Ribbon status by the European Bank for Reconstruction and Development (EBRD), which means that the company stands out for its best practices and high potential.
As we shall see, both of these decisions are completely justified.
Chirina is the largest poultry farming complex in the South Caucasus, and one of the most successful food production companies in Georgia. Founded in 2010, it has already invested approximately ₾160 million and managed to position itself as one of the leading players on the meat production market. The company, whose major brand is Biu-Biu, employs more than 400 people.
The company was the first in Georgia to open stalls selling fresh chicken under the Biu-Biu brand name. It was also the first local firm to implement modern practices in poultry production, and it continues to upgrade them on a regular basis. What is particularly impressive, is that one can recreate the whole production line at Chirina – from each specific egg to your plate.
“We were aiming to create and implement advanced, modern agricultural products. Once it is implemented, the effect is immediately on hand,” says Rezo Vashakidze.
Chirina continues to expand its production even further. The gradual increase in investment is also part of the long-term vision which the company was founded upon.
“It is fine and well to say that you are going to build a farm and start poultry production, but there are so many details to this process – be it incubation, poultry rearing, establishing a raw material base, or branding. We addressed all of these issues in advance, which ultimately allowed our company to establish itself on the market,” states the Deputy Director of Chirina, Keti Vashakidze.
Not only has the company managed to establish itself, but it has become the largest, vertically integrated enterprise in the South Caucasus.
Chirina currently owns breeder, pullet and broiler farms, a feed mill, a grain dryer factory, a meat processing plant, a hatchery, a rendering plant, a waste water treatment plant, apple gardens, a fruit refrigeration complex, and the veterinary laboratory Sana.
Furthermore, the company partly provides its own raw materials for production, as it owns vertically integrated enterprises and lands for growing corn and wheat. Since this is not enough for mass production, Chirina also buys and processes raw materials from Georgian farmers.
“Chirina’s activities have a domino effect,” says Keti Vashakidze. Indeed, since the grain dryer factory was built in Sartichala, the number of uncultivated plots in the surrounding areas decreased significantly, as a real market was created for the local farmers.
The principle of a vertically integrated enterprise and the domino effect are the two main aspects that led Chirina’s founder Rezo Vashakidze to become involved in poultry business.
Vashakidze is a biologist by profession. Having graduated from Tbilisi State University, where he studied together with Kakha Bendukidze, he obtained graduate and doctoral degrees at the Engelhardt Institute of Molecular Biology (EIMB) in Moscow. He subsequently worked at the EIMB in the field of genetic engineering.
“I had the advantage of being a biologist who spoke English,” recalls Rezo Vashakidze, adding that choosing a career field that was relatively well-shielded from corruption and crime allowed him to achieve success in Russia. “The oil business was most affected by corruption and crime. I protected myself by pursuing a degree in biochemistry. No gangster knew chemistry at the time.”
Vashakidze went on to participate in the privatization of chemical plants. He owns shares in several of them to this day. In 2007-2008, following the rise of nationalist sentiment in Russia, he first sent his family back to Georgia, and later moved back himself.
“Georgia was actively fighting corruption, and I found the investment environment to be attractive,” Rezo states, explaining his reasons for deciding to invest in his home country. He saw demand and job creation opportunities in the field where he chose to conduct business. The case of Chirina demonstrates that the poultry business has created a whole new cluster, meaning that the jobs required for this cluster are more diverse and long-term in nature.
Sourcing qualified staff remains a challenge, but here too, Chirina has implemented a system which its top management claims to be successful: each year, the company invites specialists from abroad to teach staff about the latest developments and approaches in the field, and to conduct on-site work with them for a certain period of time. At the same time, company employees regularly take part in international conferences and exhibitions.
Deputy Director of Chirina Keti Vashakidze understands the value of education very well. Her professional debut virtually coincides with the company’s origins. She received an education in economics in the United States and Germany, before undergoing her graduate studies at INSEAD.
When she returned home from the US in 2011, Chirina was a well-calculated business plan. Keti did not have to think long about fully involving herself in the process of turning the plan into reality. However, she recognized that conducting real work required more than just theoretical knowledge. Prior to setting up the system with her team, she made sure to fully familiarize herself with all aspects of the process, be it the best practices (for which she conducted extensive travelling and communication with partners), setting up production, creating new products or bringing those products to the market. When Keti Vashakidze returned to Georgia, she never contemplated working in the public sector, as she firmly believes that the country can only achieve progress on the back of a well-developed private sector. In the case of Chirina, she first realized the company’s role in the country’s economy in 2013, when Biu-Biu chickens went on sale for the first time.
“It is so encouraging to enter a shop and watch people choose the product that you helped create,” states Vashakidze.
Observing the choices made by the consumer is not only encouraging, but absolutely necessary in business. According to Chirina’s founder Rezo Vashakidze, up to 16,000 people visit Biu-Biu chicken stores every day. Data such as customer spending per visit and by district, or their payment method of choice, is highly valuable for the company to gather and analyze.
When asked about the patterns emerging from the aforementioned data, Rezo states that there are few positive conclusions that can be drawn.
“The volume of sales largely depends on people receiving their salaries and pensions on time. Chicken is the cheapest type of meat, so if people are not buying it, then it is safe to assume that they do not have money.”
Rezo Vashakidze believes that the National Bureau of Statistics ought to be demonstrating the same scrupulous approach he takes with his own company when it comes to collecting and updating data, making it transparent and accessible for the private sector. He laments the fact that the data provided to him on request by GeoStat rarely matches his own analyses. According to him, Georgia’s economic policy will never reflect the country’s real needs unless an accurate overall picture can be presented. For Vashakidze, even a vital piece of data such as the economic growth figure remains no more than a number for as long as it is not being translated into real per capita GDP growth.
All international studies show that per capita GDP growth increases meat consumption. According to the UN Food and Agriculture Organization (FAO), production and consumption of chicken meat has been steadily growing since 2005, and this trend is set to continue until at least 2030.Qualified forecasts show that annual production and consumption of chicken meat in developing countries during this period will increase by 3.6% and 3.5%, respectively.
The FAO identifies per capita GDP growth as one of the most significant factors that influence meat consumption. Other major factors include population growth, urbanization, pricing and technological achievements in the field of meat production.
Chirina is not scared of competition. On the contrary, the company regards it as the main stimulant for growth and development. Its plans were never limited to the local market, and in the context of competition, unlike many other players on the market, it views consistent product quality as a factor of equal importance to pricing.
“Our goal is to ensure that our products are always of the same high quality, and it does not matter whether you buy them today, tomorrow, or in a year’s time,” Keti Vashakidze explains. According to her, it is impossible to achieve uniformity and consistency in production without implementing standards. Furthermore, Chirina carries out regular veterinary lab tests and reduces the risks associated with product quality to a minimum.
“People who eat high-quality food get ill less frequently, meaning that it costs the country less to look after them,” explains Rezo Vashakidze, adding that the terms of the EU-Georgia Association Agreement are based upon sound business logic.
“The Europeans would not have implemented so many production standards unless they knew that streamlined production brings higher profits in the long term.”
People at Chirina have never questioned the need for standardized production, and at no stage have they regretted investing in this area. Today the company’s production is virtually waste-free. For example, at the end of the poultry rearing cycle, chicken droppings are taken to a special landfill, where they are converted to organic fertilizer (compost), which is used to grow corn and wheat on the company’s land. The use of the more natural and healthier compost instead of chemical fertilizers significantly increases the quality of the final product.
Furthermore, the waste produced at the company’s meat processing plant is fully converted into protein products. Modern equipment for the protein feed mill is supplied by the Danish firm Haarsley. The waste gets processed into chicken fat, while the flour produced from bones, feathers and blood is used in agriculture as an animal feed supplement. To this end, Chirina is working with a company that produces cat and dog food. According to Rezo Vashakidze, feathers, blood, head and feet make up approximately 30% of a chicken – waste which needs to be disposed of. Thus, out of every 2,000 tons of product, approximately 600 tons have to be thrown away.
“This is a major problem,” says Vashakidze.
Systemizing the issue of natural waste and implementing norms is one of the areas where Chirina is actively working with the Georgian government. The company is pushing for the implementation of certain standards in production waste management, and it has studied the international best practices in this field. However, despite many years of proactive communication with the government, this issue has still not been resolved.
“Reducing bureaucracy and speeding-up the decisionmaking process would significantly improve the business environment. The public and private sectors ought to be actively collaborating towards the same goal – to live in a better country,” states Keti Vashakidze.
Another challenge facing Chirina, which cannot be resolved without active government support, is the issue of exports to the European Union. Although the company itself is in full compliance with all EU norms, food exports require the country’s harmonization with all the stipulated standards. This means that unless Georgia implements all the required norms, Chirina will be unable to export its products to the EU.
Rezo Vashakidze has also studied international practices in this field. According to him, some countries have requested quotas for individual harmonized enterprises, meaning that the enterprises in question were inspected by the appropriate EU authorities and allowed to carry out exports due to their compliance with the set norms. Vashakidze believes that more active communication with the business sector will allow the government to avoid such dilemmas, as well as ensuring that international agreements are better suited to the private sector and more beneficial for the country.
“It is simple to import poultry and eggs from Turkey, but the same cannot be said about the process of exporting products in the other direction. The same applies to China, with whom we have a free trade agreement. Chinese products are actively being imported to Georgia, but when we applied for permission to export chicken feet to China, we have had no response for 18 months. We have tried involving everyone, from the embassy to the ministry, but still we have heard nothing,” states Rezo Vashakidze, adding that the only neighboring country with whom Georgia has a wellfunctioning trade relationship is Azerbaijan. Chirina has been exporting its products to Azerbaijan for the past 18 months.
Vashakidze firmly believes that the government must focus on efforts to fully harmonize trade relations with the European Union, and only then turn its attention towards opening new markets for high-quality local products.
Senior managers at Chirina hope that the company can implement best production practices in the country and set an example for other local players in this field. According to them, the more vertically integrated large enterprises there are in Georgia, the faster we can change the existing picture, whereby half of the population is employed in agriculture, yet the sector only accounts for a small share of the country’s GDP, making it greatly dependent on imports.
“Scale economies are an important aspect,” states Keti Vashakidze, explaining that this is one of the factors that have allowed the company to manufacture high quality products at competitive prices. In this context, she believes that experienced, large-scale enterprises such as Chirina must be the main target group for initiatives such as the preferential agro credit project. Indeed, the company built the grain dryer factory and warehouse complex in Sartichala through government support. According to the Ministry of Agriculture, the total investment amount was H6 million.
Chirina also has big plans for the current year. First, the company plans to build new farms and increase poultry meat production by approximately 1,800-2,000 tons per month. Secondly, it plans to expand its production of processed poultry products (chicken ham, sausages etc.), for which it will only use high-quality local meat. The company also wishes to start producing turkey meat, but this will depend on whether the revenue and purchasing power of the population increases.
Until then, Revaz Vashakidze and his team are sure to continue gradual progress towards achieving their goals. The company has a streamlined philosophy. It is reflected in the company founder’s quote, which I have purposefully reserved for the conclusion of this article.
“If business does not work at home, then it will not work away from home either.”
That, too, is a domino effect.
ARTICLE IN GEORRGIAN.