The FINANCIAL -- The FINANCIAL interviewed Dr. Samson Pkhakadze, Chairman of the Wissol Board of Directors.

Wissol Petroleum Georgia has become the winner of Golden Brand Award of 2008 hosted by the Global Idea and newspaper FINANCIAL with the support of Chamber of Commerce of Georgia and AmCham.

The FINANCIAL interviewed Dr. Samson Pkhakadze, Chairman of the Wissol Board of Directors.

Q. Could you state the reasons why your company was awarded? What has Wissol done to become the favorite brand for 2008?

The Golden Brand Award means a lot for Wissol. Whether it’s a company in Georgia or abroad, the main achievement for any organization is the brand image and brand loyalty. There are companies where 70%-80% of the value comes from their brand. The same goes for Wissol when we’re talking about significance of brand.

Therefore for a company such as Wissol, being named as a favorite brand in petroleum industry is crucial. We have long-term plans of working on the market place. Our 13 year experience in doing business in Georgia has shown us where we are today and where we want to be in the future. Wissol has received many awards, but becoming Golden Brand has a different sounding and meaning. It proves and resonates that we are leaders and shows us that we are developing and moving our company to the right direction.

Q. How important do you regard the event in terms of the company’s image promotion, especially during financial crisis which has become sword of Damocles for many industries?

During last months the purchasing power of Georgian population has decreased significantly.  The effect of Russian aggression has been aggravated by financial crisis and staff reductions in leading industries. As a result of having less money in their pockets, consequently some clients have switched to relatively non branded, smaller gas stations, which offer cheaper products.

In spite of this, Wissol managed to maintain the sales figures. Though, retention of customers indicated on the strength and loyalty to Wissol. Of course incentive schemes, expansion activities and etc are key determinants of how many clients serve every day. Every cent is important. Every either counts. Wissol is ready to face challenges because it’s a strong brand image.

Q. What’s been the most important news about Wissol in 2008?

I’ll refer to the first question and define what Wissol’s strategic objective is. Years ago we have decided to become the highest quality oil product importer in Georgia. When we say oil products, first of all I’m talking about the Gasoline and Diesel. Our main achievement in 2008, we would say, was that we became the brand offering the highest quality Italian origin petroleum products. The annual surveys that are conducted by Wissol twice a year prove this fact. Plus our sales have grown by 25% in 2008 compared with 2007.  Strengthening the brand awareness and becoming Golden Brand Award winner was the aftermath of the fabulous work done by the whole Wissol team.

Q. How big was the amount of investments in 2008?

In 2008 Wissol invested GEL 24,730,000 and in 2009 the company plans to invest GEL 15-20 million.

Q. Which areas were selected by your company as major investments in 2008?

We invest mainly in further expansion of the network of our service stations.

In addition, Wissol Group is the active supporter of Georgian sport. Recently we finished the rehabilitation process of the football school “Avaza”. This is one of the oldest football schools, which has been rebuilt according to UEFA standards by Wissol Group within the Tbilisi Sport’s Infrastructure Development Project. The total cost of the investment was more than GEL 900,000 (USD 537,345).

In the framework of Wissol healthy lifestyle promotional campaign, the company is also building a 200 metre open, modern cycle track (velodrome) according to the project of famous Dutch architect Sander Douma. Cycle track built with a special Dutch wood will have administrative building, training hall and stand of 150 seats.

Also, Wissol is now building two open Rugby stadiums and outdoor and indoor football pitches in Dighomi village that will have separate gym rooms and administrative buildings.

According to the contract signed between Wissol and Kolkhida Media Rights Holding in 2008 Wissol became the official sponsor of national championship of Georgia. The Aim of the project is to develop the Georgian Club Football and to promote the Georgian national championship. Overall, Wissol investments in the sport infrastructure developments reached nearly USD 4,000,000. We owe sport centers and will operate in as per Wissol standards.

Q. What are your plans of investing in sport in 2009? Will the economic downturn, be halting these projects?

Of course there will be some minor changes in terms of financial support. But our main goal in 2009 is to finish all above mentioned projects that we’ve started in 2008. Those projects are important both for Georgian sport development, society and future generations. We very much care about health life involvement of youth in sports rather then drugs, street activities and etc.

Q. How much did Wissol contribute to the budget of Georgia in 2008? Was the amount higher than in 2007?

In 2008 Wissol contributed GEL 76,823,158 to the budget of Georgia. In 2007 this number was GEL 75,731,382. If not for the August war and falling prices on international markets, we guess Wissol could have made bigger progress compared in the regard to 2007. However, we still think Wissol team did a good job in 2008.

Q. By what percentage the income of Wissol Group will be growing through 2009?

In 2009 our minimum budget will be to keep the results that we had in 2008. 2009 is the year of belt tightening and cost optimization for businesses. Everything is being done to avoid staff reduction at our company. Up till now we haven’t reduced our staff. This is thanks to our diversified portfolio, which enables us to balance some decrease in sales in some segments by pulling on other segments. Considering our uninterrupted quest for growth and excellence we definitely expect that we will move the company forward.

Although the forecasts are not encouraging in 2009, Wissol has already added 5 new stations to its network. 80 people were employed. I think during a crisis it’s a significant achievement for a company.

Financial markets haven’t seen crisis of such magnitude since the great depression.

As for economy of Georgia, it already feels the pain. I often hear that Georgia’s economy is small and surely we are in much safer situation than our neighbors. In fact, our country is a small economy, but it’s also a very open economy. Negative trade balance has direct effect on the exchange rate of GEL. Earlier this was not so apparent and painful because of capital inflows. Those investments financed the operational account deficits. If we look at banks in Georgia many of them are backed by International Finance Organizations and banks. The credits are not emitted in same sizes as it used to be 7 months ago. People limit their deposits and for this reason without donor’s aid chances are not good.

Q. What impact will USD/GEL exchange rate fluctuations have on oil prices?

Importers are the first ones affected. Buying in USD and selling in GEL becomes less profitable when there is devaluation of GEL. If this trend in GEL exchange rate continues, we will have to increase prices on fuel products.

Q. Which products were best selling in 2008?

Euro Regular (93 octane) and Premium (95 octane) were the best selling products last year in Georgia. It’s noteworthy to stress that in last 2 months we managed to equalize the sales of premium and economy package.

Q. Which product demand is most affected by price fluctuations?

Economy package customers are very sensitive towards price changes. As for the premium product users they are less sensitive. This is why when prices on oil increase, we try to first increase prices on premium products rather than economy products.

Q. Do you think injecting a law which would decrease taxes for those companies that support sport would be beneficial in Georgia?

First of all we should say that Wissol definitely would benefit from this law, as we are one of the biggest contributors and sponsors of sport in Georgia. But, as an economist I can say that injecting this kind of law in Georgia at this moment would help but will bring collateral damage for the businesses in general. This kind of tax incentives are not working well in emergent markets like Georgia. Every company should have equal opportunities for development. Nobody has forced Wissol to build stadiums and sponsor teams. It is just another direction of company development billed with social responsibilities.  This kind of law can provoke different inequalities and fraud which would be harmful for the competitive environment. Enforcing such law was beneficial in USA and some western European countries, but I’m quite skeptical for the success of such tax incentives in Georgia at the moment.

Q. After the August events a lot of people have been left without shelter. Great number of refugees is today lacking financial support. What has Wissol done to help these people? What is going to be the amount of funds directed to refugees in 2009? 

When Georgian nation was in a state of war waged by Russian Federation and when over 100,000 Georgians were displaced, Wissol Group was fully committed to meet emergency humanitarian needs created by the crisis. For this particular objective, the company has established Wissol International Solidarity Foundation (WISOF). Besides, from the very first days of the conflict Wissol provided food, health, nutrition products and hygiene to hundreds of IDPs sheltered in different schools of Tbilisi , Gori and Rustavi. The WISOF was used as an aid to the most vulnerable, including displaced persons and children left without homes regardless of their nationality and ethnicity, families of soldiers who died in the war.

Furthermore, at the end of  November, 2008, Wissol donated GEL 500,000 for the gasification of Shaumiani area in Marneuli region and village Khikhani caring about 361 IDP families to warmly overcome cold winter. Besides Wissol is active supporter of Iavnana foundation providing monthly financial aid to the orphan children of soldiers dead in August war.

In general we are trying to promote social responsibility inside company. Naturally this support will continue in 2009 no matter how serious the crisis turns to be.  If the crisis aggravates we’ll need to put twice more effort in helping people. Without a doubt, company should take care of the society where it operates. In the meantime we believe that, wherever we operate nation-wide, our activities should generate economic benefits and opportunities and enhance the quality of life of our stakeholders. This is what Wissol does by operating responsible business, making social investments, organizing charity activities, supporting sport and paying the taxes.

Q. Wissol group is one of the biggest business groups in Georgia, the leader in the energy sector .You are presented on the market through sub-brands: Wissol Petroleum, Wissol Gas, Air Wissol and Wissol Gas Distribution Company. What’s the current market share of your company in terms of corporate and retail segments?

In 2008 we managed to broaden the retail client base by increasing brand awareness. The 70% of sales today comes for retail and the rest for corporate clients.  The percentage of corporate segment used to be 43% in 2006-2007. I’m hoping that in 2009 we’ll manage to achieve further rise in number of retail segment.

There are two main factors which determine whether or not retail is increased. First is the product quality and second is the quality of service at Wissol gas stations. These two combined make up the mix that strengthens the brand.

Another thing that increases the retail sales are discounts. For 28 000 drivers in Georgia Pirveli Card - Wissol’s discount card for individual clients, is the top of the wallet card as since the introduction of the products they saved up to GEL 3 ,000,000 already.

Besides, last week we started a campaign in partnership with Geocell. Wissol’s loyalty card holder clients buying minimum 20 liters of fuel are getting Golden Number from Geocell totally free. This project has been very effective. Through the first week of the campaign our sales increased by 10%-15% on average already.

Q. How severe has the staff reduction issue been at your company?

Up to 1,500 people are employed at Wissol Group and no single person was dismissed due to the financial crises in the country. Furthermore since August, 2008, 220 people joined the company staff. We try the optimization of staff through retraining and professional development.  In couple of days we are starting a training center for Wissol employees. New training center is an important exercise. .

The Wissol Code of Conduct gives equal opportunity to employees to grow and build career inside the company.

The management vision is to give every employee equal opportunity for promotion and development of their talent not only in offices but also at service stations. There are quite a number of cases of promotion of an operator to a position of station director. In the corporate newsletter we have a special page for employee comments and every employee can write their ideas for the company’s development. All the comments are reviewed regularly and the ideas of the employees are incorporated in the company’s strategic plan.

Written By Levan Lomtadze