CIS, Middle East, Europe, North Africa
Opportunities and problems
Cereals and bread - Food
safety №1 globally
Export-oriented grain business in Kazakhstan - a new guaranteed business model .
Huge global demand for grains and oilseeds
With the growth of the population of 1.2% per year nutritional needs grows. In 2015, the volume of world cereal production totaled 2 billion tons with the turnover of 322 million tons. Export prices in the main directions are stable, with a growth trend.
Kazakhstan - producer and exporter
There are 13 000 farms in Kazakhstan with an annual production capacity of not less than 16 million tons and export volume of not less than 7 million tons. Internal need at least 9 million tons.
20% of the grain is lost
Due to infrastructural deficiencies of the country, the lack of adequate storage space, the part of non-placed on elevators and non-exported grain is lost.
Farmers can't sell
The inability of the traders, and especially farmers to come out to foreign markets by new effective ways. They mainly use established contacts and exchange, which dramatically limits the market.
Good dividends in the short term
Under optimal conditions (streamlined procurement - logistics - marketing - sales) average check of 15 000 tonnes = 2.6 million USD, the average profitability of 14%, the average transaction cycle = 30-40 days.
Solution and uniqueness
In order to win credit of trust of producers it requires for start working capital for the purchase of grain volumes and the subsequent sale of its overseas
The new model of marketing and sales
Optimization of each step of supply chain
Working without intermediaries
Barriers for local farmers, small traders and outbiders for export:
The numerical values of the Kazakhstani exports in thousands of tons of grain
for the 1st quarter 2016
Purchase of grain volume from a farm
1. Sampling and expertise of the quality of grain in the laboratory at the elevator.
2. Payment to the farm (price on the truck).
3. Loading in dump trucks (implemented by farm).
Transportation to the elevator
4. Transportation of grain by dump trucks (18 KZT Ton-km, 4 days)
Receiving, processing and storage at the elevator
5. Receiving grain (average 3 days). Getting grain receipts from elevator.
6. Cleaning and Drying. In the case of the volume accumulation - storage until the shipment.
7.(Or) purchase volume exact at the elevator from a farmer or a mediator at the adequate price. Such grain volume is already ready for shipping by grain receipts.
Loading on railway tracks to carriages and dispacth
8. Preparation of logistics documents.
9. Carriages supply and loading.
10. Expertise of an independent global grain expert companies (SGS or Baltic Control), employed either by us or by the client (average 3 days).
11. Dispatch. If term is FOB Aktau, then further loading on a ship in port.
Receiving the money
12. After the shipment, after client recieves documents of the relevant quality and shipment confirmation, client provides access to the amount of money on our account (by terms of letter of credit). The deal is made.
13. Making the VAT refund
Offer on Landing Page
The unique selling proposition, compiled by latest Sales Technologies in Russian and English. We use Descriptor, Heading, Offer by 4U Technology, Call to Action (CTA), the benefits and confidence-triggers are implemented. If the end-clients (foreign mills) will respond not sufficiently much, we will translate the page to the language of the importing country, and, accordingly, contextual advertising too. In the nearest future, we will add customer feedbacks to improve confidence.
Internet Marketplaces and SMM
The whole range of goods ADs, from wheat and barley to rape and sunflower seeds, is placed on international platforms like alibaba.com, globalsources.com, exportbureau.com and etc. According to analysts of similarweb.com Alibaba traffic in March 2016 amounted to 693.5 million . visits. 15% is interested in the production and raw materials. Statistics of platforms effectiveness have not been calculated yet, but the requests from platforms are recieved. In the nearest future we plan the promotion through Facebook and Instagram.
Ads in Yandex.Direct customized for advertising only in Russian-speaking countries in Russian. Google Adwords set up in all importing countries across Eurasia in 2 languages. If the conversion is not sufficient, we will translate the contextual ad to the language of each importing country and will refer to the appropriate LP. Currently there are 2,856 keywords, 2,387 minus-words. For the first week only in Yandex,Direct there were 8289 views, 561 clicks, CTR 6,77%.
Recieving the incoming stream
English-Russian speaking Sales manager recieves incoming calls refered from website. Requests from website mostly are customer contacts with a request to call back. The manager calls back by the so-called "Incoming-call sales scripts" - elaborate and stated talk-algorithm to determine the needs, conditions, budget of customer and to sale efficiently.
Active search and calls for traders and customers
Sales manager also actively rings up the database of mills and traders abroad. By "active sales script" manager attempts to analyze the client's needs, then the task is not to sell the goods, but move the client to the next stage of sales pipeline. Database of overseas mills and traders is in constant active search on the internet, analyzed and supplemented by marketer.
Daily price analysis
Analyst in order to update prices to date, using traders contacts, web resources like igc.int (International Grain Sources), kazakh-zerno.kz, monitors prices on both local and international markets and exchanges. Market export price in dollars and the local price in tenge gives the trader incoming information on the economy of each individual deal on the day of the client's appeal and the date of sale
Accepts requests for export using talk-scripts, actively seeks and rings up all the foreign mills and traders.
Purchase manager (x2)
Accepts requests for the procurement, active search on databases and on Internet marketplaces. The second manager finds volumes in the field (outsource possibly).
Shipping manager, ships the grain to the elevator, is responsible for the carriages supply, documents registration, control on the way.
Monitors and updates market prices on a daily basis. Sends information to Trader. (Outsource perhaps).
Decision making on the deals (price, profit, conditions).
Control of all processes, problem solving and final decision making.
Mediators and outbids
Outbids buys required volume from farms in advance. They organize the process between local dump trucks, grain elevators and end-mills. Small one-time amounts up to 5000 tons per year. Work is not constant, without any long-term strategy.
Small trading companies
Average size traders sell grain on the local and foreign markets. Example: Korvet LTD (korvetltd.kz). Without their own production. Purchase grain from partner farms. Occasionally advance payment. Sales volume - more than 30 thousand tons per year. Exports to 15 countries.
Major players as holdings KazExportAstyk Atameken Agro, Alibi and Ivolga have full cycle - from production to delivery to the customer. In parallel they provide leasing of agricultural machinery and sale agrochemicals and other products, advance and consult partner farms, control subsidiaries farms. The area is about 1000 hectares, the storage volumes on its own and partner elevators and warehouses are 1.2 million tonnes.
Currency risk at the time of the deal. Practice of Commodity Exchange is as follows: on the date of the deal with the customer-importer following parameters get fixed: price per ton in USD, the amount of the transaction, the volume, the quality and the exchange rate. The local purchase price in KZT depends on world prices and fixed to dollar, it is regulated by Food Corporation.
The risk is in the purchase, local price in tenge may rise shortly, or USD/KZT rate will quickly fall, making the deal unprofitable. It is necessary to buy the same day and fix the price on the contract with the supplier. The risk is in the execution of supplier obligation at a price.
Supplier's grain quality
Supplier's grain quality may not satisfy as declared on the stage of shipping from the elevator and testing by independent experts. This leads to the cancellation of purchase and the search for the other volume, which consequently leads to currency risk. The decision - to buy high-quality volume with expertise in advance and look for a buyer immediately.
We completely depend on KTZ. Lack of carriagies for rent in peak season is highly possible. There is a relative in "Kaztemirtrans".
Also under the terms of FOB, DAP, DAF we have risks till the destination for the delivery, terms and quality. If train goes for long-distance in a hot month, the grain can easily spoil. The average time of transportation from 5 to 15 days for the CIS. In speical cases, we need to share risks of quality with a buyer. And carry on CPT terms (payment delivery without incurring risks).
Bad harvest in KZ, good in Russia
It was a bad harvest in Kazakhstan in 2014, poor quality of the grain, but it was very good in Russia. Prices in Russia were much lower than ours. This has affected on the fact that Kazakhstan had to import 400 thousand tons from Russia. The volume of exports fell from 8.8 to 6.4 mln. tons. It was a rare case because basically, if we have a bad harvest, then Russia has as well. Objective risk.
Missed buyer's logistics and shipping deadlines
We depend on queues at elevator, from process of expertise to wagons supply on railway tracks by KTZ. Also on queues at Aktau seaport at shipping vessel. It needs to optimize and monitor the effectiveness of processes, as well as communications and good contacts in each partner party. To be effective, the best option is own elevator with railway tracks.
Long-term return of VAT by state
Part of deal's profit is in the VAT, which the state must return to the exporter. The risk is in delay or non-payment of taxes by the state. There is a relative in tax department, who charge for the VAT refund.
"Gorelli Group" cases
The company "Gorelli Systems" is an Internet service provider and systems integrator, provides IT and telecom services in the complex for medium and large businesses. In the market for over 5 years. In 2014 it was implemented a social project - free Wi-Fi internet access in buses of Astana titled "Wi-Fi Bus", which gave a positive response from the public and city municipality. Currently, the company serves more than 100 major clients in Astana and Almaty. In 2016, the "National Business Rating of Kazakhstan" awarded the company "Gorelli Systems" in "2016 Industry Leader" category. Group of companies "Gorelli Group" actively develops alternative directions in the area of road construction, sales of metal products and agricultural trading.
Headquartered in Astana at ul.Beybitshilik, 14. office 316. Phone +7 7172 999 890, e-mail: firstname.lastname@example.org
"Gorelli Systems" LLP
gsystems.kz Telecom services for business in Astana and Almaty, the turnover of 7 million tenge per month, net profit of 2 million tenge per month. Over 5 years in the market.
"Gorelli Construction" LLP
Road Construction in Kazakhstan, the turnover of 100 million tenge. profit of 30 million tenge for 4 months. Company is in the market for half of construction season.
Status Gorelli Agro by 1.05.2016
2 months have passed from the initial idea to its current status. What do we have now?
real needs of export for the first week after the launch (contextual advertising was spread only for CIS countries)
tons of sunflower seeds
thousands tons of wheat
thousands tons of barley
tons of premium class flour
Number of proposals for the purchase of crops in Kazakhstan in the first week
tons of sunflower seeds
thousands tons of wheat
thousands tons of barley
tons of premium class flour
Nearest goals of Gorelli Agro
1. Get the financing of 1 million USD to 31 May 2016
2. Make profit 200,000 USD until 1 August 2016, realize 3-4 volumes, gain experience and contacts with the best scheme
3.Pay off whole invested captial until December 31, 2016 on the peak season sales
The economy is represented in the Excel file, it shows the average export deal of 15 000 tonnes of 3-grade wheat. It planned to be procured in advance from farms in sales season and supplied to the client on conditions EXW, CPT, FOB. The average margin in this case is 27%, transaction cycle is 2 months. In case of buying ready volume from the elevator from hands of traders and mediators, margin drops to 10%, the transaction cycle is reduced to one week. File shows the seasonality of sales. It reflects Cashflow and matrix of Return on Investment (ROI)
Debt investment (percents per year)
ROI = 20%
ROI = 30%
ROI = 40%
ROI = 50%
ROI = 60%
or mortgage property
We also consider the assets (estate) as mortgage to obtain a bank guarantee in the international bank and provide it to the client to get its prepayment
get your capital roi calculations even today
Leave the request and verify the details of the project at a meeting or by telephone
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