Serbian fly rings out Albanian companies: bread off the standard

The factories are working with a third of the capacities, while the negative effects are spread across the chain. Large factory managers in the country sound the SOS alarm. Here are recommendations for exiting the situation. Is consumer safety being violated? How flour imports are growing again, as they dropped significantly after 2000, as a result of the development of local industry

The alarm the Soot Industry gave a year ago that Kosovo's import of Serbian flour is seriously affecting food safety and is unjustly damaging their businesses appear to have become reality, already confirmed by sector entrepreneurs and official customs and balance figures.

The difficult tax-free business environment and high energy prices have received the final blow from an imports trick from Kosovo, where protein-free cookie flour is entering as cheaper flour. Of this phenomenon, the country's largest flour - producing factories have suffered a double - drop in laps in 2016 and work at half the installed capacity.

Customs data for 2016 confirms a drop in wheat imports (used as raw materials by the local processing industry) and an increase in available flour imports, while the price forkg of flour entering Albania from Serbia has dropped significantly and is significantly lower than the one coming in from other countries like Greece or Italy.

The managers of Albanian processing enterprises report that the situation has deteriorated further to 2017. The Millelli Processing Industry Association reported that at least 50 processing lines in the country have closed operations over the past two years, and the situation is becoming difficult for large operators. Employment in the sector has been significantly reduced, as the entire chain connected to the industry has been put in trouble of paying off loans.

On the other hand, consumers are completely exposed to a deep lack of standards. Serbian flour with standard protein 9% cannot become bread without the help of certain health-dangering adults. Explaining this situation, Adziymer, chairman of the Miller Co-operative Industry Association, said that if the Albanian government does not intervene by the end of the year to prevent dishonest competition, the situation will deteriorate and the bankruptcy will include major block factories. Bloja, the factory owned by Mr. Hadziymer last year without a drop in the annual lap by 61%.

Even the other major market operator, Miell Tirana, last year closed the dropped sales balance 12%, while activity has been involved in a drop trend for at least four years. Mille Tirana manager Roland Hysey said the soot industry, as never before, is involved in an unfair competition of imports that are primarily a consumer risk. Mr. Hysey said his activity has been put in trouble, announcing that unless appropriate measures are taken in time, he could shift activity to import field.

The same situation has included the other Atlas flour processing factory, which for the same reason has been introduced into the crash cycle. The revenues from Atlas's sales suffered an annual decline of 23% in 2016, according to balance data delivered to the National Record Centre. Dimitrios Thomoglou, one of Atlas's leading shareholders and at the same time its administrator, confirmed shortly before Kosovo's standardless flour imports have caused his factory to work with only 40% of capacity.

The factories give the alarm

Unless it ends unfair flour competition from Kosovo, Albanian industrialists will shift activity from blitz to other sectors. The “Bloja” plant saw half a lap in 2016 and the situation, according to Mr. Hagiymer, who runs it, has deteriorated further this year. Of the 3.7 billion sales of the Soot factory in 2015, they fell to 1.4 billion dollars in 2016, and this year is expected to close even worse. Hadziymer is seriously considering moving to other activities, even abroad, because the stability in the processing industry has declined significantly. The fact that there are about 200 factory employees has made it sensitive even under difficult conditions.

Sales have also declined at a double rate for the Atlas factory. Of the 1.4 billion dollars of sales in 2015, they saw a 24% drop in 2016, causing Atlas not to shoot more than $1 billion. Mr. Thomoglu has earlier confirmed that the event has contracted significantly due to cheaper imports on the domestic market. Its shareholders have invested 21m euros in contemporary technology to produce about 300 tonnes of flour per day, but only one third of capacity is being exploited. Dimitrios Thomoglou, currently the manager, but also one of the factory's main shareholders, said the investment not only does not justify itself, but the company is being subsidised by the profits of other activities.

The other processing plant, Miell Tirana, has also marked a decrease in activity.

In 2016 its annual ride was 1.8 billion dollars, with a 12% drop compared to 2015. Its manager, Roland Hysey, confirmed that the situation has been burdened by non-quality flour competition from Serbia and Kosovo for the past two years. I've been trying to withstand competition by keeping quality high. But the decline in purchasing power and consumption is leading to the purchase trend towards cheaper prices without taking into consideration food safety”, Hys said. He announced that if the situation does not change, it would consider shifting activity from production to import.

But as large factories cope with the serious situation because of the financial power and market they possess, it has been even heavier for small operators.

In almost the same situation is the entire block industry in the country where many small operators have left the market.

Serbian mill, how they dominate the market

Bloja Industrialists' Association claimed that Serbian flour, especially in 2017, is sharing the market in half with Albanian production. “From our data, flour imports from Serbia, Kosovo and Montenegro have reached about 100,000 tonnes last year, while total flour consumption is about 200 thousand tonnes. Earlier, in the early 2000s, imports from countries in the region were in the minority”, Hadziymer said. According to data from Customs in 2016, flour imported from Serbia was 42 thousand tonnes, while another large part smuggled in claimed flour producers. According to official data from customs imports of flour from Serbia have increased by 43 percent, in 2016. While the price of imports from Serbia has dropped significantly, putting into question the quality of flour imported from this country. According to customs data, a kilogram of flour from Serbia was imported by 25 cents per cent of the dollar per tonne from 35 cents per kilogram, which was the price of pounds in 2014, as well as from this country.

The price for the entity is much cheaper than flour imported by other states, such as Greece and Italy, at about 42 cents per kg, according to quantity data and prices from Dogan.

The dominant in the import flour market, according to Albanian industrialists, is coming because of the cheaper price this product enters the Albanian market. Free prices, according to producers, have been created for two main reasons. First, lack of flour standards. The level of proteins in flour is the main indicator of its quality. Just like the Carats for Gold and Octaves for oil. In Albania, Serbian flour entering from Kosovo has the 9% standard of proteins, while flour for bread should have 12% protein level, Haxhiymer declares. Standard flour 9% is usually permitted for cookies, as they are enriched with other sugar and fat foods to reach an acceptable food level.

Second, flour coming from countries in the region costs cheaper and because of subvention policies that mainly Serbia -- as the biggest producer in the region -- applies to the entire flour production chain from direct funding to producers to the subsidy of machinery, equipment and labs for factories.

Albanian industrialists claim that all this scheme is being supported by the government. All flour without standards from Kosovo comes ambalhesed in the sack “Mell for bread”, while customs in no case have analysed the quality of this flour and did not penalise importers for abusing the standard. As it comes to Albania, Serbian flour passes a string of abuses. Albanian industrialists claim they have evidence and discovered this chain. Serbia still applies a more relaxed trade regime with Kosovo.

Kosovo tradesmen, cereals for animals receive them excluded from the VAT. Therefore, much of this wheat is processed and mixed with a higher quality in Kosovo factories and then sold on VAT in Albania. The claim of Albanian industrialists is proven by the decline of wheat imports. During this year's eight-month anniversary, wheat imports dropped by 10% compared to the same period last year. The decline has been even greater during 2016, already turning a rapid trend.

The wheat import grows

According to customs data, total flour imports increased in 2016 by 29% compared to 2015. They amounted to a market value of about $18 billion. Half of these imports were made up of Serbia. Data shows that the import of flour has steadily increased for the past three years. 65% of the flour imports come from Serbia and Kosovo and the rest from Italy and Greece.

On the other hand, wheat imports have seen decline for the same year. wheat imports during 2016 dropped by 7% to 325 tons, while wheat importers report that in 2017 the decline is even greater. In 2016, Serbia was the largest supplier of domestic grain market, which imported 44% of total imports by 143 tonnes. In 2015, Russia was the first supplier to reach about 60% of the total, as imports from Italy have apparently been lowered.

Serbia and Russia supply over 87% of the Albanian market with cereals, at prices twice as cheap as other partner countries, which have 13% of the market. A ton of wheat from Serbia costs, according to data from INSTAT, 206 euros, while the same amount from Russia is 188 euros. One ton of wheat from Italy is seen as costing 666 euros and from Spain 756 euros on average for 2016. Imports from these two countries are not even 2% total. Spanish and Italian wheat is not used for bread, but for other parts of the flour industry that require a higher quality.

The following graph shows that in 2016, when Albanian industrialists appeared, there is a strong increase in total flour imports by 30%. In the same year, wheat imports, which serve as raw materials for the domestic industry, fell by about 13%.

Kosovo is competing Albanian industry

The brewery instead of beer and flour is being competed by Kosovo imports. Miles and beer in Kosovo are extending more and more dominance to the Albanian market, putting Albanian industries undergoing systematic sales decline in serious trouble. In 2014, Albania and Kosovo were involved in a new trade conflict because of flour. The Miller Processors' Association officially announced through an open letter to the prime minister, bankrupt because, without the standards imported by Kosovo, it was bankrupting the local industry. Albania's processing business claimed that protein standards in Kosovo's flour were slightly more than 9%, while Albanian factories produce at standard 12% and, therefore, at a higher cost.

The Albanian government has lowered protein standards in flour with instructions, favoured import and led to imminent bankruptcy in the country's industry. On the other hand, Kosovo's flour industry claimed that, the government of Albania was discriminating Kosovo goods on its markets. So far, Kosovo has won the battle. The flour processing industry has suffered a 40% decline in the past five years, and this is reflected in the decline in wheat production in over 100 tonnes last year.

But it seems that the battle between the two countries subsided after the Ministry of Agriculture gave him a solution with a mechanism that applied for proteins. Albanian authorities allowed flour for cookies to be imported with the standard protein 9%, while flour for bread was introduced at 12% standard. But Albanian producers charge customs that they are not preventing flour with bread packing, which has the standard of cookie flour.

How the whole economy is affected

A small market like Albania has difficulty coping with imports from major markets, but not for imports from Kosovo that is a relatively new market and with still fragile institutions. Hadziymer from the Miller Processors Association claims the industry has invested about 150m euros in factories and plants. However, the threat of unfair competition has made it difficult to return investment and repay loans to banks. Many sector businesses have already turned into bad creditors”, he says.

He also confirmed that over the past two years about 30% of employees have been cut, and the support chain has been severely damaged. The production lines of cardboard bags were established, which supplied Albanian flour factories, but some of these are already closing down. Hadziymer says the negative effects have gone beyond trade and extended to the production sector. Villagers have little interest in planting wheat if factories do not accumulate it. “We planned to set up a support scheme for Albanian farmers to buy wheat from them, but with import competition we cannot realise”, Hadziymer said.

He says Serbia, for many years, has been implementing a very vicious policy of subsidies, which Greece, Macedonia and Montenegro were concerned about. They do a subsisting that is contrary to any agreement signed so far in terms of flour. If you go to Serbia, the difference between flour and wheat is 10 euros, while it should be minimum 100 euros, because expenses are involved for labour costs, ambalazin, hymns and so on, he explained. This has made all Serbia's warehouses clean. There is no leftover grain left without entering from Serbia, and the only states where they are walking hard are us and Kosovo, because all the others reacted. The road that Serbian wheat makes right now to get here is either directly from the mills, that it is the mills, not those factories there, or as the first substance in Kosovo”, Hadziymer said.