APU: Beverages

THE COMPANY: The name APU comes from Arkhi Pivo Undaa (Vodka, Beer, Drinks). Established in 1924, three years after Mongolia’s communist revolution, APU is the country’s largest beverage producer and its first national brand. APU was partially privatised in 1992, with 51% of its shares retained by the state, and 49% sold through the Mongolian Stock Exchange. In 2001, the remaining state-owned shares were sold through public auction, and the company was 100% privatised.

APU Joint-Stock Company (APU JSC) has 55% market share in the Mongolian beer market (up from 48% in 2007) and 58% market share in the vodka market (up from 16% in 2007). It produces five different brands of vodka, from standard to premium quality, and six different beers. In addition, it produces juice, milk, bottled water and soft drinks. The company has 11% market share in “other beverages.” The company also has one of the most extensive distribution networks in the country: APU products are sold at over 6000 locations. The company employs more than 800 people. APU is one of the few Mongolian beverage producers with a Certificate of Quality ISO-9001:2001. It has also enhanced its management systems by adopting ISO 22000 certification in 2011, and made its operations more environmentally friendly by adopting ISO 14001 certification in 2011. Borgio, APU’s brand of beer, is now available in aluminium cans, a move which puts it in compliance with all international standards. The company imports some raw materials from China, and exports its products to Korea, Japan, and Germany.

APU JSC directly manufactures its products. It has five manufacturing plants. The vodka plant was completely reconstructed in 2004, and now operates with equipment made in Germany, Austria, and Italy. The plant has a production capacity of 10m litres per year. The beer plant was refurbished in 2003 with German and Austrian equipment; it has a production capacity of 25m litres per year. The water and soda plant was refurbished in 2003-2004, and has a production capacity of 11m-13m litres per year. The milk and juice plant operates with equipment made in New Zealand, and has a production capacity of 6m-7m litres per year. Finally, the “Nature Agro” spirit plant opened in 2008. It uses German and Italian equipment, and is able to produce 15 tonnes of pure spirit per day.

A holding company, Capital Group, was established in 2006 to manage APU’s projects, provide administrative support and develop APU’s strategy. It owns 83% of APU JSC. Moreover, APU Trading, which employs some 200 people, has been responsible for APU’s marketing since 2003. Depod is responsible for the company’s recycling. It produces over 70% of the bottles used in production. The company had MNT116bn ($90.5m) in assets as of the third quarter of 2011, representing a 403% growth from MNT28.6bn ($22.3m) in assets at the end of 2004. During recent years, APU has continually expanded its market share.

In 2009, it produced 45.6m litres of beverages, and sold 43.4m litres of those. In 2010, it produced 63.3m litres, and sold 61.7m litres of that. Expected production in 2011 is 80.7m litres, and 2012’s production target is 93.5m litres. Meanwhile, revenues increased from MNT86.9bn ($67.8m) in 2009 to MNT122.1bn ($95.2m) in 2010 (40.5% growth), net income increased from MNT8.1bn ($6.3m) in 2009 to MNT19.7bn ($15.4m) in 2010 (143% growth). During the first three quarters of 2011, revenue was MNT161.5bn ($126m) and net income was MNT19bn ($14.8m).

DEVELOPMENT STRATEGY: To date, APU has invested $60m in production and distribution facilities. It is also expected to complete in 2011 a fully automated warehousing centre and an integrated dairy and beverage plant. In June 2010, APU secured a $25m loan from the European Bank of Reconstruction and Development to double its beer production capacity by 2014.

The company is planning aggressive growth in its existing markets for beer in polyethylene terephthalate bottles and aluminium cans. It is also targeting the Russian, Chinese, European and US markets with its premium vodka brands. APU’s financial auditor is KPMG.