Ferrero increases investments in Georgian nut business

Ferrero Trading Lux has purchased 3,000-hectares in Samegrelo for a future hazlenut plantation. The Italian firm reportedly paid 6.5m EUR and is expected to invest an additional 8m EUR next year in the venture. “Nut trees have been planted across 1,200 hectares and they will cover the total area within the next year,” Argo Georgia Director Iva Khokhlov told GBW. « The plants will bear fruit in two years and will become full-grown trees in 10 years. »

Agro Georgia, which specializes in nut planting and production, was founded in February 2007 by Ferrero. It currently employs 170 people. The company announced its investment at the first congress of nut farmers which was organized by Agro Georgia on June 24. Sheraton Metechi Palace Hotel hosted the congress which discussed the challenges faced by Georgian companies. Loan accessibility topped the agenda and organizers have pledged the meeting would become and annual event.

Some 1m tons of nuts are produced annually worldwide. Turkey is the top producer accounting for about 80 percent of worldwide production. Georgia is fourth with around 21,000 tons per annual harvest. Aleko Ttintsadze, Georgia’s deputy minister of agriculture says developing hazelnut cultivation is important in Georgia as, “52 percent of our total employed population is employed in agriculture.”

Before last August’s war, Georgian nut companies exported 80 percent of nuts to Europe, according to the Association of Hazelnuts of Georgia. Due to the financial crisis and expensive bank loans, the companies have failed to provide stable supplies and have since suffered in the European market. They have since had to retreat to the Asian market and are now exporting the same amount to the east.

“The European market was lost due to unstable nut supply. All of the member companies face difficulties now as they find it hard to get cash,” Mikheil Khomeriki, head of the Association of Hazelnuts of Georgia, told GBW. Tsintsadze explained that the state is offering low-interest loans to the companies of different industries and these loans will become accessible for nut farmers as well.

Some 20m GEL has been earmarked for aid packages. According to the Ministry of Agriculture, the state charges 12 percent interest on the loans which is competitive compared to the 24 percent interest offered by Georgian banks. The cheap loans can also be obtained from the European Bank for Reconstruction and Development which has invested around 74m EUR in the Georgian agriculture sector since 1991.

Elisabed Koiava, EBRD’s country representative said that the bank either issues loans or buys stake in the companies, like it recently did with Argo Nuts. “The EBRD would buy a maximum of 35 to 40 percent stakes in the company as it prefers to leave controlling interest in the hands of its original founders,” Koiava said. « The interest rate is defined on a case-by-case basis but it is still lower than a 24 percent interest loan of Georgian banks.”

The other two nut companies have also applied to the EBRD for assistance. But Khomeriki says he’s skeptical about propping up hazelnut production through financing. He says he does not have high expectations about this congress either and says that they will not make much difference for Georgian companies.

“The state only issues loans for purchasing warehouse equipment and not for just turnover purposes which is a real challenge for companies,” he said. But according to Jemal Inaishvili, chairman of the Georgian Chamber of Commerce and Industry, the solution lies elsewhere. He says nut businesses should look to the state to become a major player as is the case in neighboring Turkey.

“The nut business is subsidized by the state in Turkey and this sector is a priority for the country,” he noted. In the short-term perspective, the Ministry of Agriculture says that out of the 20m GEL aid money, only 7m has been allocated for purchasing warehouse equipment. “The rest of the money will go to support turnover cash opportunities,” Agriculture Ministry spokesman Giorgi Chaduneli told GBW.

Source : Georgian business