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 COMPANY PROFILE |
 Astera - tradition and future perspective
After being found in 1991 by Krassimir Mitev and Loukan Loukanov ASTERA strode "at a single go" the way from its first steps in Bulgaria to its establishment on the international markets. From the creation of its first independent prescription, through its busy foreign trade activities to the building of an all-round strategy and the winning of the auction for the purchasing of AROMA Inc - the largest Bulgarian enterprise for perfumery and cosmetics, ASTERA Inc would combine successfully the two basic factors for its success : the inherited tradition and the aspiration to constant development.
Today ASTERA Inc is a holding which incorporates the perfumery and cosmetics enterprises of AROMA Inc, Sofia and RUBELA Inc, Rudozem, as well as its subsidiary ASTERA TRADE, which handles the distribution of the company’s production on the domestic market.
The holding pursues all strategic activities : innovation, finance, resource supply, marketing and advertising, capital construction, investment and foreign market realisation.
ASTERA’s philosophy relies on the major values of high quality and professional management. The goal of our efforts is the constant growth, which , on a long-term scale projection, can be defined as the transformation of the company into a leading producer of perfumery and cosmetics not only for Bulgaria, but for Europe also. For the fulfilment of its objectives the company is implementing a multi-project business plan, which comprises of three basic aspects :
Modernisation of the equipment and technology of the two plants held by ASTERA. In 1997, an investment of about USD 3.5 million was made in ASTERA’s affiliate Aroma.
Extension of the production range of ASTERA.
Organising its own distribution network initially in Bulgaria and later in its basic markets.
Short History
October 31, 1924 : the establishment of AROMA : the first cosmetics factory in Bulgaria.
1924-1927 : AROMA established as the leading name in the area of perfumery and cosmetics. In 1947 it was nationalised and transformed into state property.
1962 : The entire perfumery and cosmetics industry in Sofia was incorporated into AROMA State Industrial Enterprise. AROMA became the largest Bulgarian perfumery and cosmetics producer.
1965 : the Toothpaste workshop in Ilientsi, Sofia, was completed and rendered operative.
1965 : AROMA began producing aerosol products for the first time in Bulgaria.
1966 : The product range of AROMA reaches the number of 60 items: tooth-pastes, shampoos, hair colouring, cosmetic milk, face creams, beauty cosmetics, etc. The production is being exported to 18 countries.
March 16, 1978 : The construction of a beauty cosmetics plant in Rudozem begins.
April 10, 1980 : the beauty cosmetics plants in Rudozem is completed, including its three major production lines : Cosmetic products, plastic packages and tubes.
December, 1988 : The plant becomes an independent company under the name of RUBELA State Company.
1991 : Loukan Loukanov and Krassimir Mitev establish ASTERA Ltd. with the trade and production perfumery and cosmetics as its subject of activity.
1991-1996 : The company developed successfully in its innovation and foreign trade activity. It managed to establish on the foreign markets.
1996 : ASTERA Inc buys 74% stake in AROMA Inc, Sofia.
1997 : ASTERA Inc buys RUBELA Rudozem.
1997 : ASTERA TRADE is established as the distributor of the products of ASTERA on the Bulgarian market.
Quality, High Professionalism, Precise Innovation Programme
Today more than 1500 people work in ASTERA, and their main goal is the high quality of the more than 320 products of the company. In 1998 an Integrated Information System of Business Management was introduced.
Along with the quality performance and the professionalism of its employees, ASTERA’s success is guaranteed by the precise innovation programme, developed in accordance with the demands of the main markets where it is operating.
All of ASTERA’s products are developed in the scientific research laboratories of the company according to the world standards for quality control. ASTERA’s partners are world known, multinational companies.
Quality control on the raw materials, substances and the final products is exercised in each workshop by the subordinate labs and by the central testing laboratory.
Aroma
ASTERA’S COMPANY
High Levels of Technology
AROMA Inc applies modern technologies and uses the equipment of leading world companies such as FRIMA, POLITIPE, AISA and PAMASOL - Switzerland, IWKA - Germany, NORDEN - Sweden. AROMA Inc is the single producer of aluminium mono-blocks for Bulgaria. In 1997 ASTERA Inc purchased for AROMA Inc new machines for the toothpaste workshop from NORDEN - Sweden and AISA - Switzerland.
1997 PRODUCT PORTFOLIO OF AROMA INC :
Toothpaste - 65%
Shampoos - 14%
Cosmetics - 10%
Hair treatment substances - 6%
Aerosols - 4%
Perfumes - 1%
RUBELA
ASTERA’S COMPANY
Along with its production of perfumery and cosmetics, RUBELA produces laminated foil. The company is the only producer of laminated oil for Bulgaria and one of the few such producers in Europe. The range of laminated products includes mono- and bilaterally coated textures, paper, polymeric foils, three- and five-layer laminated complex. The foil meets the demands not only of the cosmetic industry, but of the pharmaceutics and food and beverage industries as well.
The equipment used in this production is from SUMITOMO - Japan; KMK - Switzerland; IWKA - Germany; NORDEN - Sweden; SENAGO - Italy; OMAG - Italy.
For Cleaner Environment
We believe that the health and beauty of a man stem from the harmonious coexistence with oneself and with nature. Both of our plants apply harmless and cleaner production technologies. The aluminium flasks of the aerosols, the toothpaste tubes, and the plastic packing are recycled completely. A considerable part of the toothpaste range is offered in joint packs.
ASTERA The International Markets
Almost 90% of ASTERA’s products are being exported for Russia, Ukraine, the Baltic republics, Kazakhstan, Moldova, Belarus, Mongolia, Azerbaijan, Armenia, Georgia, Uzbekistan, Albania. ASTERA is present at the markets of Romania, Poland, the Czech Republic, Hungary. The company is gradually entering the Arabic region, Latin America, the USA and the SAR.
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| STRATEGY |
Interview with Mr.Krasimir Mitev and Mr.Loukan Loukanov
Presidents of Astera AG:
Q: In the presentation of the company I have seen , the turnover of the company was around 40 millions $ but since you are entering new markets I would like to know about your expectations concerning the financial results for 1998.
A: May be I should clear something out first. The production capacities of our two plants are very large and they produce great volumes of products. Unfortunately, our main markets are the Russian market and the former Soviet Union countries and the Eastern European markets. And the volume of our products is very large, the products are very low priced. That is why our turnover in terms of prices is low, for instance a tooth paste costs 20 cents. We produce and sell annually about 100 million tooth pastes. If we compare the prices of our products with the prices of international companies like Procter and Gamble, Colgate, SmithKline and Beecham, which are about a dollar for a tooth paste, we will find out that for the same products volume we would be able to achieve a turnover that is 5 times higher than the one with our prices. When we are telling about 20 cents we mean a sale price. The same is the situation with shampoos and deodorants, hair-colorants and all other products which are from 5 to 10 times cheaper than the ones produced by international companies. Of course, to answer directly to the question we are entering new markets now - Romania, Turkey. We are registering new companies there. We are establishing a joint venture in Russia. We are working in a different mode than we worked so far - we are not working with a local distributor any more. We are participating in the largest cosmetic exhibitions world-wide and that’s why we are expecting for next year an increase of the turnover of about 10-12%. The question is very interesting, so historically Bulgarian economy was connected with the Russian markets. For that reason Aroma and Robela have been structured in such a way as to produce very large volumes of not that high quality production. So Astera, Aroma and Robela are 80% dependent on this markets. We put a lot of efforts to decrease that percentage of dependancy on these markets because we feel that it is dangerous for us. This is the reason that we are diversifying our markets at present even on other continents. We invested a lot of money in new technologies and products lines which gives us the opportunity to produce more and more high quality products that respectively results in an opportunity of selling not only on the Russian market but on other markets. And we are expecting an increase of the turnover several times over the coming years. Practically we are at the very beginning of an expected development because firstly we are changing the production environment and we are investing in new products and technologies. Secondly we are changing our products range . And finally we entering new markets that are an alternative to our traditional markets in Russia and the former Soviet Union Republics. The results of this stage of our development: production facilities are equiped with high quality technologies as a large international companies ( some of them ) . That’s what you saw in the film, the tooth paste production facilities are equivalent to such equipment of Smith Klein Beecham - Aqua Fresh. As to product lines we use recipes the same as the large companies use. But we consider this as a fundemental without which we can not continue developing further. For that reason we can not expect considerable results and returns on these investments in this current year That is why I said that our expectations of an increase of the turnover this year is 10-20% but over the next years we hope that it will multiply by 2 or 3 times. What I can add is that we own Aroma for two years only. Before that it was a state owned enterprise in which for 15 years nobody invested anything and it did not work with all of its capacities. I have always said that the good business requires three things: money, good management and time. Time is very important for us.
Q: What are the main obstacles you face in your business?
A: I can talk on the subject may be for hours and hours. But I will try and I will only about the external obstacles. You heard about our intention to diversify our markets in Western countries but not only Eastern. But what happens when we enter those markets with our products and our money - we face a lot of obstacles and limitations. For example : to certify a product of ours in EU we have to pay a lot of money first and wait several moths to receive a permit to sell our products there. For instance right now , for Austria we need to wait till the end of the year until we get the permit to sell our products there; I am not talking about the money we have to pay. Have in mind that 80% of the ingredients are produced in Western Europe. The situation in USA is very different because we did not have any problems with FDI and we proceeded much quicker there. We sent our shipments to the States very quickly and started selling them while in Western Europe that is impossible - in the USA it was no longer that 3 or 4 days. And this is the answer to the question: Why first in the States? You would say that they are very far from us. Apart from these restrictions which have been established with one purpose only to protect their own interests, and at the same time we talk about united EU and equal opportunities to all produces, we are expecting these markets to open up to us too. I am not talking about the huge problems of the Bulgarians with the visas for Western Europe especially. For example, I have changed several passports so far because there is not any space left from all the stamps and visas. At the same time from these 40 millions $ turnover last year we have spent about 70-80% of them which is approximately 30 millions $ for purchases of ingredients from EU countries. So on the one hand we are good customers , we buy there products and on the other hand we are not wanted there. They seem to be telling us that our place is in Eastern Europe. I remember the time when the whole Western Europe and the USA desired Eastern Europe to unify them. And the same time they have pitched up new barriers. That is only a minor part of the outer obstacles of our business but they are the major obstacle to the development of a company like ours because as we told you if we continue to be dependent on the Russian market our turnover will stay the same and even go lower. And besides we are too dependent on the political situation in Russia too. I completely understand that everything is policy and business in this world and we have to put our efforts at our best to overcome these obstacles and move ahead in our development. It is very hard to compete with the big companies in this world but I think that once upon a time they had their initially stage as well and in this sense I rely on my efforts and the efforts of my colleague and the efforts of the whole team and I am very positive for a final success. We are trying to make up on our falling behind with trends of a lot of work
. The things related to the internal problems which could be the problems of every investor in Bulgaria. Firstly I would to like to mention the not very good wording of certain laws in Bulgaria and the not very well operating banking system. The biggest problem for an investor is the mentality of the employees who are not used to working in new conditions of a free market economy.
Q: But inspite of those problems how would you comment the bigger benefit margin that you have here compared to that one in , let say in the USA, where it is 2%?
A: It depends on many things. Bulgaria is now under a currency board regime which is a very serious limitation of exportation because each export company loves inflation. For one and the same dollar we are going to get different levs amounts and that’s why even the big countries do not try to keep the inflation at a zero level. Look at what happened to the Japanese Yen. It is not exactly the inflation but the local currency rate. One example: because of the fixed currency exchange rates we have fixed incomes, and at the same time there is still inflation in Bulgaria, from the bottom we are pressed by increasing expenditures and from the top we are pressed by fixed revenues. And it was exactly that reason that made me say that it depends if we have a better benefit margin than the Western companies. Besides in our field of operation the competition is strong enough.
Q: How do you face this competition?
A: All the international companies present on the Bulgarian market but we do not face real big competition with them because they have different pricing segment. At the present time that means a competitive advantage. Practically their segment in Bulgaria and Russia is very little because this is the segment of the rich people that are not too many still. But what I meant was internal domestic competition because of the socialist’s regime there was a differentiation, specialisation of the different countries from the Eastern European Block. For example Bulgaria was specialised in the field of cosmetics, pharmaceuticals and tobacco production. For that reason in these fields of operation the production capacities were built with the purpose of serving the markets of the whole Eastern European Block and it is more than enough for the demand of our country market. For example if our two plants work on three shifts for a period of three weeks they will satisfy the demands of the domestic market for a period of one year. Our production capacities are equal to those of Smith Klein Beecham for whole Europe. We can produce ,for example, tooth paste - more than 300 million pieces per year, the laminator that produces the laminate foil can produce 500 million square metres - 500 million tubes.
Q: When you are talking about diversifying your activities what about that one - packaging?
A: Practically to satisfy the demands of our main market - Russia, the price demands, we are forced to produce a lot of packages too. Then besides we have inherited facilities with very large production capacities. Our main market depends on a variety of factors, like the health of the president Eltsin, or the election’s results and for a certain period of time our regular sales can drop by 50% and other times they can increase 2-3 times. As to the question about packaging we are in a situation now to produce great quantities and sell them to other companies around Europe but in the USA as well. Because we know that in USA there is a demand for our laminated flasks. We can supply a lot of them.
Q: Do you have other plans for partnership in the States? How is it looking like the one you have started and what are your expectations?
A: At this stage we are at the moment we have started with trade activities on the American market with ready products . Of course, our participation in International Cosmetics Exhibitions have the purpose of establishing partnerships with local producer companies. Even we have some ideas as to establishing our own production capacities in the States but they are at an initial stage still and we are still making a research. As we said a while ago , the entering in several markets like Turkey, Romania, USA, Ukrain, it requires very precise finalising of the operations. Our plan for the States includes two stages: one of them is the trade activities and the second is the developing of local production operations with a joint venture with a local companies. We don’t have a partner at the moment but our company in L.A has been operating for a month there and we are expecting together with our activities there to meet a prospective partner. One of the main targets of this company is marketing apart from sales. Based on the marketing information we hope to get we will discuss here with whom , how and where we will make a joint venture in the USA. The truth is that we do not have good developed contacts in the States as it is with West Europe. Because in Western Europe our main providers are international well-known companies like Henkel, Hoechst, Degusa. That is why we are very well known in Western Europe personally and the company its self but the situation is different in the USA and in that sense your article will help us. Moreover, we are very happy with the policy and the procedures established in the USA towards Bulgaria because the business there goes very fast compare to the way it is here with Western Europe. There is still a lot of prejudices in Europe than desire for work at the moment. Doing business in Western Europe touches on different psychological issues while in the USA is much more easy in that line. They are still interested in who you are , where are you from while in the States they are interested in what kind of business are you going to offer.
Q: Now as a final issue, what would be your final message to them?
A: As far as the possibilities for investments and job opportunities in Bulgaria are concerned I can say for certain that Bulgaria is one of the most attractive locations. Because you can still buy in Bulgaria a good production facility or a working business at a low price and you can have skillful employees not extensively educated but skilled who can run the business in a very smooth manor . Besides for those potential American investors who would like to enter the markets in Eastern Europe and Bulgaria in particular
, Bulgaria would present the advantages of having traditional markets in all these countries and the advantage of the Bulgarian products that they are very well known there. I think that these are very serious advantages which can be very well used by a serious potential investors. Of course, there are negative aspects in the economical development of Bulgaria and we are not covering them but we think these that they are minor and the positive ones are the those that should be paid attention to.
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© World INvestment NEws, 1998.
This is the electronic edition of the special country report on Bulgaria
published in FORBES Magazine's
November 30th issue.
Developed by AgenciaE.Tv
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BULGARIA, 
