Afghanistan gains first Coca-Cola factory

Afghan distributor Habib Gulzar Ltd has invested US $25 million in a company and plant to produce Coca-Cola in Kabul.

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By  Roger Field Published  October 5, 2006

Habib Gulzar Non-Alcoholic Beverages Ltd, a drinks producer based in Kabul, Afghanistan, has become the first company to start producing Coca-Cola in the country. The US $25 million factory started production early in 2006, but was officially opened in September, owing to security problems. Habib Gulzar Non-Alcoholic Beverages was itself established by Habib Gulzar Ltd, a leading distribution company in Afghanistan with about 40 years experience in the country’s FMCG sector. The company started distributing imported Coca-Cola products in 2005 before gaining the franchise for Coca-Cola for Aghanistan and investing in the plant. The factory, which employs almost 300 people and has the capacity to produce more than five million 24-bottle cases of soft drinks a year, is initially producing Coca-Cola, Fanta and Sprite, in 250 ml glass bottles and 1.5 litre PET bottles. The operation will reduce Afghanistan’s dependence on imported soft drinks from countries such as Pakistan, Turkmenistan, the UAE and Iran. Salman Rawn, country general manager, Habib Gulzar Non-Alcoholic Beverages, is optimistic that sales of the plant’s products will perform well in the local market, despite a difficult security situation in many parts of the country. “We have got backing from the Ambassador and also from President Karzai himself,” Rawn told Retail News Middle East. “If I calculate up the total soft drinks market, whether it is Pepsi or other drinks being imported, there is a big market already here. All of these years these products have been imported. In Kabul, there are also many expats here, so for them the Coca-Cola name is not new.” Rawn admits that while the security situation in Kabul is relatively good, distribution outside the capital city is often more fraught. “In Kabul city we are distributing with direct distribution trucks,” he said. “Outside Kabul, we are distributing via the distributor’s and wholesaler’s indirect network. There are still a couple of areas that we have not been able to penetrate. In Kabul the security situation is not that bad, but when we go out, we have to be very careful.” Operations are also made more difficult owing to infrequent power supplies in Kabul, Rawn added. “It’s not only the security, the other bigger issue for production in this country is the electricity, because obviously a beverage is best when it is chilled but the electricity in most of the plant is very short. It comes for only two, three or four hours at a time, and that impacts on the production,” he said. But elsewhere, the business climate for Afghan FMCG producers has improved. For example, the country’s government recently changed the tax system in favour of producers. Indeed, Rawn said that sales of drinks from the plant had been slow in the first half of 2006, and this was partly due to a 5% tax on imports of raw material in Afghanistan, compared with a 2.5% tax on manufactured products, and this gave imported soft drinks an advantage over those produced by Habib Gular’s plant. “Just recently in the past month they have revised the duty structure giving some advantage to the local investee, otherwise it was much cheaper to sell imported products from outside the country rather than producing in the country,” Rawn said. Directors at Habib Gulzar also set up the plant in a bid to benefit local people, as well as to tap a potentially lucrative business opportunity, according to Rawn. “They started discussing putting up a factory because they thought just importing Coke would not do much good for the country. The idea was to put up a manufacturing facility here that can contribute to the economic development of the country and also provide employment and technical know-how to people in Afghanistan.”

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