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“For branding we should compete through quality, not price”

05 January 201819 min reading

“Earning rates must continue steadily so that companies can sustain their development in a healthy way. We need to know that we can conduct our business with more respectable figures, and use our bargaining power accordingly. We must use our service to our customers as a convincing element. Companies must compete through their qualities. If the price will be the convincing element, we will continue to lose.”

okcul

Okçul BARLIK

Uğur Makina - CEO

Okçul Barlık, CEO of Uğur Makina, evaluated the world markets from the perspective of milling machinery manufacturers. Describing his findings related to the change in recent years in the market, Barlık expressed his suggestions about how Turkey could better struggle with its rivals in this field. With the drop in oil prices that had started in 2012, Barlık said that many projects are suspended in the countries in which the energy sector constitutes the backbone of the economy, yet he also emphasized that institutionalized companies in the sector continue to invest. Drawing attention to the presence of various manufacturers in the different segments when ranking the challenges to the branding of Turkey in this sector, Barlık said, “If Turkey really wants to be a brand in the world, not only it has to produce high-quality machinery, but also give good responses to customer demands of all fields such as project designing, execution, and post-sales services.”

The answers Okçul Barlık, CEO of Uğur Makina, who hosted Miller Magazine in his office in Istanbul, gave to our questions:

In recent years there has been a change in the market. The recession in the world market, economic depression, political problems ... Could you please tell us what kind of change you have experienced in the milling sector particularly in the last 3-4 years, within the framework of your own observations? Where did the recession take place in the world? First of all, it took place in the countries whose source of income was predominantly originated from oil. Oil prices rose between the years 2008 and 2012. During this period, there was a significant amount of investment and these developing countries invested during this process. Thus, there was a substantial demand in those countries. As the revenues increased, these countries opened up their investment resources and finance to the last. Therefore, there was a substantial demand for investment. In fact, this is not due to very high demand, but because large firms and industrialists could get long-term loans with low interest. However, when oil prices came down all of these countries stepped on the brakes. A slowdown in the food processing sector has begun. Today, who is getting business done? Corporate firms whose volume is enough for growing by itself continue to invest regardless whether in industrial countries or underdeveloped countries. This is true in Africa, in the Far East, and Turkey as well.

There is instability throughout the world today. In our geography, in America, in South America, in the East ... However, in the milling sector corporate firms that have developed on a solid basis and increased their business volume continue to invest. This has nothing to do with the supply and demand balance in the market. A self-growing business volume is encouraging them to invest. Each of the companies we work together in Africa today has at least 5-6 factories. This indicates that they are growing but their profitability is decreasing. Since their profitability decreases, they are trying to decrease the ratio of general expenses to the capacity through increasing the capacity. In this way, they are trying to keep their profitability constant. By this means, investments continue.

The situation in developed geographies such as Europe and America is as follows: We are conducting turnkey projects also in Europe. We are doing big-scale businesses on a machine basis in the US, too. Many facilities have filled their lifespans due to environmental factors and high production costs in these lands. They have to renew them now. Therefore, investments continue in those regions either. Thus, this is the situation in the last 5-6 years in the world for our industry.

Turkey is a very important country in terms of the milling industry, remembering it is the world leader in flour exports. Turkey has won a substantial potential not only in flour exports, but also in technology. It has achieved a very significant potential in the production of milling machines. Now, how is Turkey’s status among rival countries such as Switzerland and Italy? First, let me say this: The reason why Turkey is the world leader in flour exports, is milling machinery manufacturers. Without milling machinery manufacturers, Turkey could be the 20th of the world in exports at best with such wheat production and consumption figures. Because, we, as the milling machinery manufacturers, provide state-of-the-art facilities to the producers with low costs. In this way, return for depreciation and return costs occur much faster when compared to other countries, especially Europe.

Now, as for the status of Turkish milling machinery production in the global sector… In fact, the capacity of this sector developed in Turkey more than any country in the world. Why? We know only Switzerland and Italy in this sector. However, there was Germany before. There was England. There were Switzerland and Italy too, but the root of this business is MIAG firm in Germany and Simon Richardson in England. If you look at the century-old milling history in the world, these are important milestones. Bühler shifted to milling from casting industry as a consequence of its collaboration with MIAG. In 1954, Simon company manufactured an 8-roller-miller in Çorum. My grandfather was then an electrician in the facility. There, he learns about milling. Then he starts to manufacture machines. In those years, it was very difficult to bring spare parts from abroad when a machine breaks down. Spare parts were very expensive. So they had to make their own machines themselves. This is how the story of milling begins in Çorum. We bought that mill from its former owner 12 years ago and renovated it. We turned Simon’s mill into a museum.

Anyway! Back to what I was saying, Turkey is very well located in terms of capacity. Which countries remained technologically developed? Switzerland and Italy. Not only we, but the entire world sees it this way. We, as Turkey, are in somewhere between Switzerland and Italy. We are well above Italy in terms of volume. In the case of total machine manufacturing, we are neck and neck with the Swiss company. But as economic volume, we are far behind that company. The production of the whole country is less than one quarter of the annual volume of the company in Switzerland. Unfortunately, there is such a handicap.

In fact, the question “Where are we?” is not the right question. The question is, “What should we do to reach better positions?” Because, Turkey has become really well in this sector. I am saying this, without making discrimination among any province or company. Today, even a machine produced by a company with the smallest capacity or outdated technology runs. There are no machines that are not running. In Turkey, there are companies which have proven themselves with their technology, craftsmanship, and product and material quality and caught up with Swiss quality. And, it is not just a couple of companies. Their numbers continue to increase. This is a pride for Turkey. These companies should be able to sell the beautiful machines that they produce to the world at better prices so that we, as Turkey, can come to a good place in the milling sector.

What should be done to achieve this? What criteria should be considered in this context? Only technology? Service? Or advertising? Sometimes even your name, or your origin can make a difference ...

There is the keyword, “origin”. Secondly, as the number (of firms) increases, there is a competition that unavoidably prevents branding. I just said, there is no machine that does not run. Everyone in the middle and upper segment develops themselves. But only the quality of the machine is improving. Unfortunately, however, R & D cannot be brought to the spotlight at the desired level. It is not enough for a turnkey mill project that the machine just runs well, and the craftsmanship is nice. They need to be upgraded to better levels. The service, spare parts supply, quick delivery and answering the customer’s phone ... They all constitute a whole and Turkey will come to the point it deserves if all implemented duly and only then it will have a proper competition with Switzerland. There are companies that show great sacrifices to compete with this brand. These companies are making their own production, developing technology and machine models. But R&D should not mean changing the machine’s cabin just like changing the exterior cabin of a car. What kind of manufacturing technologies should I develop for longer lifetime operation of the machine? Esthetics is temporary. But if you make permanent improvements in the internal structure of the machine, if your machine works for 3 years, 5 years without any need for spare parts, or failures arising from craftsmanship, only then you will start to build a brand.

If Turkey really wants to be a brand in the machinery manufacturing sector in the world, it has to satisfy the customer demands substantially not only with machinery quality but also in all fields such as project designing, execution, and after-sale service. Everyone can do it. The smallest company, the biggest one. But if a small company can achieve 2 projects and still take 5, it cannot provide this service. Likewise, if we take 20 projects a year while we can achieve only 10, we cannot provide this service. The Swiss company can achieve 50 projects a year, but if it takes 100 projects it cannot. So we all have to cut our coat according to our cloth.

How can we increase the value of branding? Is the service alone enough? Unfortunately, we, as Turkey, cannot achieve branding in the milling machine industry because there are various manufacturers in different segments. There are ones with 10 employees. There are also machine manufacturers that employ 50 people, 100 people, 300 people and 500 people. Everyone shall know his place. If a company that employs 10 people tries to establish a turn-key facility abroad, we cannot achieve branding. At the end of the day, 1 or 2 firms may come out smelling of roses and achieve branding. But you say, may Turkey be a brand as a whole. This small firm shall operate as a supplier to others for Turkey to achieve branding. And they (big firms) shall design turnkey projects and take over their responsibility. Only then when we become a brand. If you say, may 100 manufacturers in Turkey become brands, that’s not possible.

In fact, this is what we do wrong. One would wish that everyone go and design a turnkey project for sure. For example, if I were not in my current position, it would make me happy to supply proper machinery to a company. Let that company become a brand in the world as company X. At the end of the day, it will earn and make me earn. If it earns, it will make me earn. If it does not earn, it won’t make me earn. Now, as long as we live in this handicap, rivalry comes about. A company in the lower segment gives a price of 100 liras for a turnkey project. Yet the nominal value of this job is 200 liras. The Swiss are doing the same project for 400 liras. Now when the client sees the 100 liras, he says “This is worth the cost. However, another firm in Turkey is trying to sell for 100 liras,” and bargains. Thereon you decrease the price to around 120-130 liras. As such, the money you get comes to nothing within the project as it is spent for service. You also have to compromise on after-sales service. Indeed, if the first desired figure were valid, that actual service could be given. By this means, Turkey can become the first country in the world in this sector very quickly. Because we are good at machinery quality.

The Swiss company has established 2 or 3 factories in Turkey in the recent period. I am emphasizing the following: The facilities that we have established in Turkey are far better than those of that firm, are much faster in terms of output, reach to full-capacity much faster, and start to run stably much faster. “We have sold the machine, we ran the factory. Good luck and good-bye.” This shouldn’t be the attitude. It is very difficult for a customer of the Swiss company to change his direction. Now, we have started to sell turnkey factories to the customers of this company. We are selling 12 or 13 turnkey facilities to customers who have been doing business with this Swiss firm for years. It took us decades to achieve this.

So, today where are the most intensive markets, regions, in terms of exports? Where lies the investment potentials? Yes, as I mentioned at the beginning of our conversation, there is a recession in the emerging countries of which income are bound by the oil prices. But oil prices have begun to rise, and some small liveliness has begun with it. I think the oil market will get used to 70 dollars range. When these figures are reached, countries will regain their investment appetite of 5-6 years ago because there are many investments waiting.

We have remaining receivables from some oil producer countries for 5 years. This negatively affects our competitive capacity. On the other hand, we do not provide services only to oil producing, undeveloped or developing countries. We are also doing business in Europe. For example, despite the political instability in Ukraine, we continue to serve the investors there. As a result of the fight we have put up for many years, we have been suppliers to several major corporations in North America. We are receiving orders. Thanks to our good agencies, we are making turnkey projects and also exporting machinery to South America. Africa is already an essential market for everyone. We currently have projects in 8 or 9 African countries either in the project phase, in the assembly phase or in the contracting process.

CHINA FACTOR IN THE FAR EAST MARKET Another region that has potential is the Far East and Southeast Asian countries where population grows and grain consumption have increased. Do you have any projects towards these regions? Let’s take the countries one by one if you wish. It is not possible to do turnkey business in India, however we sell machinery enough for about 10 factories each year. Our machinery is running in about 50 factories. We have conducted three or four projects. As for Pakistan, it is a price-oriented country. We do not seem to be able to sell our machines around there because they demand very cheap machines. Still, we sell a project in a year or two. If we go to more distant geographies, there is a substantial population in Indonesia, the Philippines and Malaysia. Also Bangladesh and Myanmar ... Years ago in Bangladesh we shook hands for a few projects, but later they were abolished due to price. Later on, since we focused on Africa, we ignored those lands to some extent. Now we have signed a new turnkey project in Bangladesh. We started production for a factory with a capacity of 500 tons per day.

We also have a few factories in Indonesia and the Philippines. But there is a sensitive point like this: We have a handicap like China. Here with China, now we are experiencing the same incident between the Swiss firm and Turkey. The Chinese are offering 50 liras for the project for which we offer 100 liras. As such, most of the projects are shifting to China, especially in Indonesia. China also has the logistical advantage for sure.

But there is another nuance. Indonesia has the largest flour company in the world: Bogasari. This company is dominant on the market. It controls and leads simply everything. So when it wants to pave the way for investments, it does. It blocks when it wants so. Everyone is dependent on it. You have to be a very small mill so that you will not bother anyone. The case is just like that in the Philippines. ‘WE HAVE ENTERED THE AMERICAN MARKET’ Can you mention the big projects that you have conducted in the last few years for us? Let’s start with Turkey. Ninety per cent of the companies that made Turkey the world champion in flour exports is purchasing turnkey facilities from Ugur Makina. From Istanbul to Tekirdağ and Muratlı; From Mardin to Mersin and Samsun, we have built factories all over this land. Especially in Mardin, we have built 19 large and small factories so far. Totally, there are 45 flour factories in Mardin. Almost 40 percent of them were established by Uğur Makina. Mardin is a very important place for us not on a project basis but as a region.

Thrace is also a very important region of us. Perhaps 30-40 percent of the capacity in Thrace is processed by our machines. These companies are export-oriented, entering the top 500 in Turkey and having a substantial potential.

Apart from these, our Swedish project is very important for us. Putting Switzerland and Italy aside, we are the first company to take a turnkey project from a large group that has large-scale investments in Scandinavian countries. Previously, this group has not received even a bolt from Turkey. This project was accomplished as a result of long efforts made. That facility is active now. It has been running for 5 months and they are very glad. Indeed, studies of the second facility for the same group have been commenced. We have been selling machinery to Europe for years, but Scandinavian countries are very different. Germany is very different. It is really quite a success to sell machinery to these countries.

In America, as I said, we also sell machinery as the main supplier to a group that owns about 30 factories around the country. This is also a good market for us. We have been trying to enter the American market for 10 years and it is only the last 4 years that we have achieved to sell machinery here. We did not give up on our struggle to get into this market. We participated in the fairs every year, sent machinery, and spent money. But now we are reaping the fruits. And in Africa, we have customers who will never leave us and whom we will never forget.

‘TARGET REGIONS: JAPAN AND AUSTRALIA’ In the forthcoming process, our target is Japan and Australia in the Far East. We are conducting studies towards these lands. Turkey has not received its share from Japanese and Australian markets. It is our dream to reach out there. The South American continent is a developing continent with population density, a large number of countries and a big amount of grain production. There are a few jobs every year in Brazil now every year for sure. And Canada is another target. These are areas of which potential will increase as long as we provide good service. We aim to increase our business volume by providing good service around here. I have a humble wish related to our future: Companies must do research before they enter a country market, such as: “Which companies are doing business in this country? What is the price sense?” Competing with a Swiss company, you are conducting a project in a country. Meeting through a coincidence, a company gives offers to that market. The company is acting as if it is building a factory in Kirsehir, in Turkey, and gives the price offer accordingly. Therefore, when it attempts to take a business with a figure 50 percent lower than yours without knowing the price perception of the market, the customer is not pleased with this. The seller cannot make money either. At the end of the day, Turkey is the party that suffers. The situation needs to be analyzed well. In order for the companies to sustain their development in a healthy way, the profit rate should be maintained in a stable manner. We should know that we can do our job with more respectable figures and accordingly we have to use our bargaining power. We must use our service as a persuasive element against the customer. Companies must compete with their qualities. If the price becomes the convincing element, unfortunately we will continue to lose.

‘IT IS A PLEASURE TO SEE MILLER IN FOREIGN COUNTRIES’ Stating Turkey is developing in every aspect of the milling industry, Okçul Barlık, CEO of Ugur Makina, spoke highly of Miller Magazine of Parantez Group. Barlık told that they were delighted to see Miller when they pay a visit to their foreign customers. Expressing that Miller is on the right track, Barlik said: “It is a great pleasure to see the Miller magazine on the table of an industrialist in any country of the world. Until 10 years ago, I was seeing none but World Grain magazine and we were in need of such magazine. The way how people perceive Turkey does not only consist of producing machinery. It has to be presented well, and well-planned PR should also be carried out. Printed publications are gradually becoming preferable if they have beautiful and interesting content. People are reading. They do not just take the magazine in hand and put away. These are very important things. Now I am looking at it, it comes at even better levels. This makes us happy.”

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