The production of soft drinks falls

2024-09-01 22:44:00, Aktualitet CNA

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In the summer months, producers are facing an increase in consumption of up to 7% compared to years, while the low off-season demand due to demographic changes remains problematic. In 2023, according to data from the Ministry of Agriculture, production fell by 15% compared to 2022. Higher costs from rising wages are affecting the loss of competitiveness in the market, as imported products are being sold cheaper.

Producers of soft drinks continue to work with reduced capacity during the year, due to the decrease in consumption due to the emigration of the population. These summer months, the largest producers increased production by up to 7% due to tourism.

But the cost of production remains high, due to increases in employee wages, while the price of energy has been stabilized for almost two years. This is leading to loss of competitiveness, as soft drinks from imports, especially Italy and Poland, are traded at cheaper prices.

According to data from the Ministry of Agriculture, in 2023, 66.1 million liters of soft drinks were produced. Compared to 2022, domestic production decreased by 15%.

From 2013 to 2016, the production trend has been slightly increasing. The peak of production is marked in 2019 and 2021. In 2021, 80.2 million liters of soft drinks were produced.

Compared to 2021, production for 2023 has decreased by about 18%.

Source: Ministry of Agriculture

Consumption falls

In the greatest difficulty are the small manufacturing factories, which distribute their products to rural areas, which have been forced to reduce production.

Kosta Bezhani, administrator of the Dropulli factory, which has been producing "Fresh Company" brand soft drinks since 1992, told "Monitor" that he is operating the factory with only one shift of employees and with limited capacities, due to the lack of of purchasing power.

"This year can be considered one of the most difficult in terms of consumption, which is automatically affecting the reduction of production. It has never happened that the factory works with only one shift of employees during the tourist season.

In the hot summer months, when the demand for soft drinks is also high, the production lines were put to work with three shifts of employees, day and night.

While this year in the summer months there is no high demand for soft drinks. Consumption is the same as last season.

We expected a high flow of tourists, but we see that this year there are no tourists. While during the year, the demand is very low, due to the emigration of the population, especially in the rural areas that are almost depopulated", he asserts.

The decline in consumption

Kosta Bezhani: "This year can be considered among the most difficult in terms of consumption, which is automatically affecting the reduction of production. It has never happened that the factory works with only one shift of employees during the tourist season. In the hot summer months, when the demand for soft drinks is also high, the production lines were put to work with three shifts of employees, day and night.

The downward trend for purchases, due to emigration, especially in the districts, has also been felt by producers of other sectors, such as drinking water producers, due to emigration.

The population has decreased in all regions of the country according to the data of the 2023 Census, compared to the data of 2011. Only for Tirana there is an increase of only 1.2%.

From the Census data, the largest decrease in the population in percentage occurred in Shkodër with 28.3% fewer inhabitants compared to the 2011 data, and in Kukës with 27.3%, while the population of Tirana, during this period, it has increased by only 1.2%.

The increase in the population in Tirana and the decrease in other counties results in the increase in the percentage of the resident population in Tirana, from 26.8% in 2011 to 31.6% in 2023.

But the decrease in production, due to the decline in consumption resulting from demographic changes, has put the small producer of soft drinks in the Dropulli area into the fifth year of difficulties. The lack of profits is making it impossible for the entrepreneur to make investments.

"We have been producing for 5 years now, but with very low profits, even no profit, because we have no one to sell our production to. In rural areas, the population has decreased, even in districts as well.

On the other hand, we are also in cost difficulties from the workers, who are paying high wages to the unqualified.

It is really painful that the investments of several million euros made over the years are not managing to generate profits, but only income at the salary level. So we are entrepreneurs turned into employees.

With an income of up to 1,000 euros per month", says Mr. Bezhan.

The company "Fresh Company" was founded in October 1992. Soft drinks are produced in the factory set up in the Dropulli area, with an investment of over 7 million euros in 2008.

In the factory there are about 50 employees and 10 distributors who are distributed throughout Albania.

Compared to last year, the number of employees has decreased by 10%. "Fresh Company" markets soft drinks in 0.5 l and 1.5 l packaging with the logo "Fresh Cola", "Rico Fresh", "Turbo", "Fresh Up", "Fresh Orange".

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How is tourism affecting consumption?

For large producers, the situation appears differently during the tourist season. While the drop in consumption from emigration is a problem that is also felt by them during other months of the year.

But the tourist season seems unable to recover the demand pit caused by demographic changes.

According to them, the demand during the year has not increased, influenced by the demographic changes of the population due to emigration abroad.

Helidon Rruga, the manager of the factory producing soft drinks and fruit juices "Derby Albania", affirmed for "Monitor" that during the summer months they do not have a problem with consumption, since the arrival of tourists has positively affected the demand.

The problem remains the progress of demand outside the tourist season.

"In the other months of the year, the demand is decreasing, due to the reduction of the population from emigration, especially in rural areas where depopulation is higher", he asserts.

In 2022, due to the increase in costs, influenced by the beginning of the Russian attack on Ukraine, they were forced to increase the selling prices by up to 20%. The tightening of prices and the exodus especially of young people in that period shrunk consumption according to producers.

For two years now, manufacturers claim that they have not changed the selling prices of soft drinks, as this would affect the loss of competitiveness compared to cheaper imported goods and would add to the decline in consumption.

But, according to them, the main reason for the decrease in consumption outside the tourism season remains the decrease in the population due to emigration.

In the soft drinks market in Albania, the investments of manufacturing factories over the years are for a larger consumer market.

As the number of the population of Albania for the year 2023, compared to 2011 is 420 thousand inhabitants less according to the Census data.

The impact of tourism

Representatives of "Agna Group", one of the largest producers of foreign brands of soft drinks such as "Pepsi", "7 Up", "Ivi", "Lipton", claimed for "Monitor" that due to the tourist season production has increased by 5 to 7% compared to years. According to them, the demand during the year has not increased, influenced by the demographic changes of the population due to emigration abroad.

Can market expansion be achieved through exports?

For some of the local producers, one of the alternative solutions "to escape" from the decrease of consumers, as a result of demographic changes, remains the diversification of markets.

The head of the "Fresh Company" factory, Mr. Kosto Bezhani said that he is studying the alternative of increasing exports, mainly in Azerbaijan, where the demand for Albanian liquid products is very high, due to the competitiveness of prices.

We are studying the possibilities for the expansion of the export market, in order to increase the production activity, since the domestic market has decreased, there are fewer consumers due to emigration.

A very good opportunity is the export of soft drinks to Azerbaijan, where the demand for Albanian products is high, after the meetings we held with the entrepreneurs there.

But the cost of transportation remains problematic, accounting for almost 40% of the value of the product to be exported. So if you are going to export a truckload worth 1,000,000 ALL of soft drinks, the cost of transportation is 4,000 euros.

This would automatically increase the selling price for export. If the price were to increase, the product loses its competitiveness and is no longer profitable for foreigners to buy", asserts Mr. Bezhan.

Even the administrator of "Agna Group", Mr. Kristo Naçi, claimed earlier for "Monitor" that the "Made in Albania" brand is not an advantage, while the costs of transportation abroad are too high. For producers, the only solution remains to reduce production when demand is low.

One of the leaders of the largest companies producing soft drinks, "Coca-Cola Bottling Albania", Mr. Luca Busi, in an interview for the "Business Plus" podcast, said that compared to 30 years ago, the climate of doing business in Albania has changed positively.

"There has been a development, prudence on the part of everyone, which is very visible, very clear, because without this dynamism, without this speed and without this growth, in the end things are not realized.

Enterprises, companies are made of people and our employees have grown, improved and are faster.

We definitely do our job, because every year we do more than 3000 information, trainings so the population of our company is like a plant that needs to be watered and to grow, it always needs care.

This is, more or less, the system in Albania, entrepreneurs, enterprises, people, employees have grown in recent years and, as we said, they have been able to maintain this wonderful result.

Just looking at you, the last 3-4 years have been amazing, unpredictable, as we look at a very strong Albania growing, we look at the GDP that is growing, we look at the effect of tourism that is growing in recent years, we also look at investments of new ones coming from foreigners outside Albania, who have started to invest in Albania.

So, all these indicators are very positive. This is the merit of this strong growth journey", he asserted earlier.

Source: Customs, Ministry of Agriculture

The manufacturing beverage sector continues to remain without employees; Rising wages add to costs

The reduction of the population and its aging over the years is deepening the pit of labor shortage. For several years, soft drink manufacturers continue to raise the concern that they cannot find employees, as young people are leaving for emigration.

In order to finalize recruitments, in recent years businesses have increased salaries, bringing them to levels from 700 to 1,000 euros.

But even the salary increase does not seem to be able to solve the problem for employees. On the other hand, the increase in wages is affecting producers too much to increase production costs, since they are also paying unqualified employees.

Kosto Bezhani, the entrepreneur of soft drinks from Dropulli, said that in the area of ??Gjirokastra, it is impossible to find employees, as the depopulation is high. He claims that he is also having difficulties in Tirana in finding employees in the distribution chain.

"I am looking for employees for the distribution of soft drinks in Tirana. The salary offered is 600 euros per month + additional % from sales. I am not able to find employees, because due to the high circulation of informal money, young people are engaging in jobs where the earnings are easier and many times higher.

While new employments are also urgent in the factory. A significant number of employees have reached retirement age. I started their replacements.

I am hiring employees of the agricultural sector in the industrial sector.

These are unskilled workers for the industry, which imposes costs on producers. The establishment of vocational schools, especially in rural areas, is quite necessary in order to increase the number of qualified labor force", he underlines.

The "Agna Group" company, in order to solve the problem of the workforce, has repeatedly increased the salaries of employees, bringing them to the average level of 1,000 euros.

"Due to the lack of labor force from emigration, we have continuously increased wages. Currently, the average salary for our employees is 1 thousand euros. the policy to increase wages has proven to be effective in curbing the departure of employees.

But also the salary increase of the employees should be in line with the productivity of the work. I think that increasing the average salary in the economy to the level of 1,000 euros would curb the departure of young people and their family members to emigrate", asserted earlier Mr. Christo Naçi.

Company representatives claimed that wage increases have increased costs for production, including costs from purchasing packaging, transportation and energy.

"Despite the high cost, we are forced to maintain this salary level, in order to prevent people leaving the country.

Every day more and more young people are looking to leave for Germany or other countries. The salary increase to the level of 1,000 euros not only by the entrepreneurs, but also the increase of the average salary in the economy, would manage to curb the departures", claimed company representatives.

In the sector of production and packaging of soft drinks of the company "Agna Group" there are about 300 employees.

Source: Customs

Imports "suffocate" the Albanian production of soft drinks

Imports of soft drinks continue the upward trend. For the months of January-July 2024, according to Customs data, imports increased by about 1% compared to the same period last year.

The highest increase in imports was recorded in the annual total of 2023. For this year, 105 million liters of soft drinks were imported, the highest amount imported since 2016, according to Customs data. Compared to 2022, imports expanded by 8%.

In Albania, over the years, most of the consumption is occupied by local soft drinks. For 2021, soft drinks widened the field to occupy 54% of the market, compared to 47% that was their weight in 2020.

For 2023, when the quantity produced in the country also decreased, the weight of imports in the market reached 61%, compared to 55%, which was their weight in 2022.

According to the producers, soft drinks are entering the country at cheaper prices than those produced in Italy and Poland.

"Many products of these countries are being sold cheaper than domestic products, as they do not pay additional costs for marketing.

Against the competitiveness of imports, we cannot increase the selling prices, as their presence at cheap prices has expanded in the market", claimed one of the producers of soft drinks.

Small producers of soft drinks continue to find it financially impossible to strengthen the brand, which requires a very high budget, since you have to face the competitiveness of international brands such as "Coca Cola" or "Pepsi" that are produced in the country.

According to the producers of the soft drinks sector, large sums are needed for the marketing of the brand that is produced in the country, to achieve sales in front of international brands./ Monitor.al