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Ground-breaking dairy deal in Azerbaijan
EBRD agribusiness deal secures $5.7 million for Milk-Pro
Three doctors in Azerbaijan hit on a novel way to get supplies when, after the
Soviet Union collapsed in 1991, local economies and markets imploded. With
just $112 in share capital, they set up their own small factory, next to the
hospital where they worked in the capital, Baku, to produce infant food
supplements.
Today Milk-Pro is Azerbaijan’s leading dairy company, and the only one using
industrial quantities of fresh milk to manufacture fresh dairy products such
as yoghurt and cheese. Now the EBRD is investing $5.7 million of debt and
equity in the fast-growing company, which needs room to expand. It is one of
the Bank’s first direct agribusiness projects in Azerbaijan and part of an
effort to help businesses develop outside the country’s dominant oil sector.
The finance, through which the EBRD will acquire 25 per cent of Milk-Pro, will
enable the company build a larger dairy factory in Baku, modernise its
existing factory in GoyShay Town, 200 km west of Baku, and improve milk
collection. The company expects sales to double by 2007 as a result.
The project is important not only in supporting Milk–Pro’s expansion, but also
because it should provide a clear example to the Azeri farming community and
small dairy companies considering how to improve the quality and quantity of
their own output, said Hans Christian Jacobsen, EBRD Director of Agribusiness.
This is a rare investment in a fragmented sector dominated by family
businesses in rural areas, he added. With oil investments helping average
incomes to rise, an increasing proportion of the population is able to buy
more sophisticated – typically imported – fresh dairy products. Expanding will
help Milk-Pro compete successfully with imported products, said Dr M
Shikhiyev, Milk-Pro’s General Director and one of its founders.
This project is in line with the Bank’s Early Transition Countries initiative,
launched in 2004 to stimulate market activity in the Bank’s poorest countries
of operations, particularly outside the oil and gas sectors, through smaller
transactions supporting the local private sector, rural development and
diversification.
The EBRD signed its first deal in Azerbaijan in 1994 and has invested €480
million in the country, mobilising a further €4.92 billion from partners. The
EBRD has invested €3.5 billion in more than 217 agribusiness projects across
central and eastern Europe and the CIS.
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