Feature story

Cheers to donors …with Albanian beer

Subscribe to feature stories email alerts

Related links Albania homepage Small business homepage Albania Reconstruction Equity Fund [Project Summary Document] EBRD contributes to Albanian economic recovery through equity fund [Press Release]

Advanced brewing skills.

A new production line.

A toast to success.

For families and society in general in post-communist Albania, emigration is a sad fact of life. But there are often happy endings to the migration story as economic exiles return to their native land with ideas, experience, cash and technology to put to work in their own business ventures.

After communism fell in Albania, the brothers Artan and Kastriot Stroka and their family had no source of income -- they could no longer find jobs due to the family’s affiliation with the previous regime. As was the case for 35% of Albania’s labour force, or 22% of the total population which left the country between 1990 and 2003, emigration seemed the only solution.

Kastriot Stroka headed out in 1991, first to Greece, then to Germany. He worked at several breweries abroad. As a chemical engineer, it was easy for him to learn to make beer and in 1995, he returned to Albania with brewing skills and savings. While most Albanians use remittances (money sent home by emigrant family members) to meet daily family needs or construct new houses, the Strokas had another plan in mind.

“We trusted my elder brother when he decided to set up a mini-brewery. He is the brain of our family,” says a cheerful Artan Stroka.

They rented premises in a suburb of the Albanian capital, Tirana, to house the beer production line they purchased in Hungary with Kastriot’s foreign savings. Once operational, they sought credit to finance the purchase of more equipment, including a beer laboratory but they were turned down by several banks. “A loans officer told us bluntly that ‘the bank would risk too much by investing in a small business like yours, and there is no future in Albanian beer,” says Artan Stroka.

Outdoing the ancestors 

The Strokas have shown there certainly is a future in Albanian beer, an industry built on a solid past in this ancient Balkan nation. The Kaon tribe that lived in Butrint, south-eastern Albania from 800 to 600 BC was the first known to have produced beer. Did they ever manage to make enough beer for all Albanians? This is the question that goes through Artan Stroka’s ambitious mind as he contemplates the possibilities for his family’s Kaon mini-brewery  which is able to meet local demand thanks to financial support from the EBRD’s Albania Reconstruction Equity Fund (AREF)*.

Mr Stroka believes his involvement with AREF has been a daring thing by Albanian standards. Experience had taught the 36-year-old that the easiest way to build businesses in Albania was through government favour or close ties with criminal elements. He chose a third way: to try to run a clean business within the formal economy. This decision meant his company qualified for AREF investment.

AREF’s guiding hand

“There would be no Kaon beer today without the support of this man,” says Mr Stroka, toasting Sergio Mangione, head of AREF. “We had a partner in our business until 1999, but he pulled out. Banks would not lend us money and our dream of distributing Kaon beer all over Albania was about to fall apart. Then in 2002, AREF invested $500,000 in our business for a five-year period. We were then able to buy the property where we’d built the mini-brewery, introduce a new line of cans and increase production,” says Mr Stroka.

“AREF examined about 280 projects, out of which only 11, including Kaon, proved worthy in terms of risking EBRD and donor money,” says Mr Mangione. To address Albanians’ deep mistrust of selling stakes in their family firms to foreigners, the fund combined debt with equity in designing many of its deals. For example, AREF agreed with Kaon that the principal would be backed by collateral and repaid in full as in a loan arrangement, but AREF’s profit would be based on the brewery’s profitability rather than a pre-set interest rate.

Its work being done, AREF is being wound up, to be replaced by mid-2006 by a similar fund covering the western Balkans as a whole, with €20 million in EBRD capital and €10 from the Italian government which is also providing €2 million to pay for technical experts to support the fund. Did these AREF investments pay off? Yes, and in more than just financial terms. “Is it worth seeing a child grow up? Is it worth seeing an unbankable local company grow stronger and access the banking system? Is it worth seeing a country move from informal to formal economy? Yes, and that is what AREF has done with Kaon beer,” answers Mr Mangione while sipping beer.

Today Kaon beer sells across Albania; the number of bars stocking its draught has grown from 180 in 1998 to over 2,000 today. One hundred workers are employed in the mini-brewery where monthly wages range from $200 to $1,000.

What is the future of Kaon beer? Mr Stroka says, “Thanks to the Albania Reconstruction Equity Fund, we are one of the best mini-breweries in Albania. I know this because I drink every competitor’s beer. It is important now to meet local demand and then, one day, we will export Kaon beer rather than migrant labour.”

*The Albania Reconstruction Equity Fund was the first venture capital fund in the country. It was established in 1998 to support small and medium-sized enterprises with $14 million in capital from the EBRD and the Italian government which also provided $3 million in grants to support expert advisers for the fund.

Written by Marjola Xhunga, Communications Adviser.

Photos: R. Hackman

Contact:
EBRD Albania office

11 April 2006