HAVE A COKE AND A SMILE IN TURKMENISTAN

C O N F I D E N T I A L SECTION 01 OF 02 ASHGABAT 001107 SIPDIS SCA/CEN; EEB COMMERCE FOR ELLEN HOUSE E.O. 12958: DECL: 09/01/2019 TAGS: PGOV EIND EINV ECON ETRD TX SUBJECT: HAVE A COKE AND A SMILE IN TURKMENISTAN REF: ASHGABAT 1077 Classified By: DCM Sylvia Reed Curran for reasons 1.4 (b) and (d). ¶1. (C) SUMMARY. On September 1, Economic Officer visited the Coca-Cola bottling plant in Ashgabat at the recent invitation of the plant General Manager Kadir Uslu (reftel). Uslu asserted that despite Turkmenistan's intense bureaucracy, Coca-Cola's brand name and multinational approach to Turkmenistan have contributed to significant growth over the last few years. The Coke plant manager described Turkmen bureaucracy and GOTX pressure to employ only ethnic Turkmen as major issues his company faced. At the same time, Coke representatives remained upbeat on expansion into untapped markets and the introduction of new Coke products in Turkmenistan in the nearest future. END SUMMARY. A MULTINATIONAL APPROACH TO PRODUCTION ¶2. (C) After offering Economic Officer a Coke, Uslu and his Chief Operations Manager Rivdan Duric provided a lengthy tour of the Ashgabat Coca-Cola Plant. Uslu proudly stated that Coca-Cola Turkmenistan was a multinational enterprise, and this multinational approach was as important to Coke's success in Turkmenistan as the secret formula. He explained that the large steel water tanks were German-made, the state of the art water filtering/purifying system was from the USA, the high-quality sugar was from Azerbaijan, the concentrate or syrup was from Coke plants in France, assembly line equipment was French, and the small, plastic granules that would eventually turn into bottles were from South Korea. Uslu stressed that unlike bottling plants in Europe and the U.S., the Ashgabat plant had to be creative and flexible in acquiring equipment and products from many different countries, especially since the GOTX heavily regulated all imported equipment and supplies. ¶3. (C) As the tour continued, both Uslu and Duric became more critical toward Turkmen government policies. One of the policies, they added, was the insistence that Coca-Cola Turkmenistan only employ ethnic Turkmen at the plant. Uslu stated that several times a year Turkmen officials inquire as to the ethnicity of employees of the plant, demanding specifically that ethnic Russians be replaced with "real" Turkmen. Uslu added that during these government visits, he shows government officials his employees' green, Turkmen passports as proof that even the ethnic Russians at his plant are Turkmen citizens. He added that he had several ethnic-Russian physicists, chemists, doctors, and engineers on his staff because the Turkmen government was still shutting ethnic Russians out of government controlled enterprises. Uslu pointed out one employee who was busy repairing large boilers. According to Uslu, this employee was a brilliant Russian-born physicist that could not find work any where else in the country due to his ethnicity. Uslu was uncertain how far the Turkmen would go in insisting that ethnic Turkmen be hired over other ethnicities, and he expressed increased concern for his non-Turkmen employees. IT'S ALL ABOUT THE WATER ¶4. (C) The plant directors beamed as they showed off their American-made water filtering and purifying equipment. Uslu stated that this equipment was arguably the most important component at the plant. He explained that this investment in American equipment not only filtered out the sand and mineral particles that abound in Turkmen water, but the equipment also filtered out bacteria and harmful contaminates, making Coca-Cola products in Turkmenistan "the safest drink in town." He added that he was certain that no other Turkmen-produced soft drinks on the market used filtering systems to ensure the beverages were potable. He also ASHGABAT 00001107 002 OF 002 announced that Coca-Cola had started bottling both carbonated and noncarbonated Bon-Aqua drinks as the demand for highly purified water in Turkmenistan is always high. ¶5. (C) Coca-Cola plant operations manager Duric lamented the fact that Coca-Cola disposes of thousands of gallons of water per day, as there is no water treatment plant infrastructure in Ashgabat. He stated that Coca-Cola had approached the Turkmen government on several occasions about bringing water treatment and conservation technology into the country, but the government to date refuses to move on any initiatives, choosing instead to "send millions of gallons off into the desert to evaporate." Duric added that Coca-Cola Turkmenistan brings water treatment inspectors from the U.S. on a regular basis to certify that the plant water meets western standards. THE PRESIDENT LOVES COKE CLASSIC ¶6. (C) As the Coke reps discussed plans to bring new Coke brands on to the Turkmen market, Plant Manager Uslu pointed at pallet after pallet of what he called "original Coke." He stated that if he ever is in a bad mood he just comes out to the warehouse and looks at all the Coke Classic waiting for shipment, and a large smile immediately returns to his face. Uslu stated that Coke Classic represents 60 percent of sales in Turkmenistan, mainly because Turkmen trust the brand, and more important Turkmen President Berdimuhamedev, a dentist by trade, "loves his Coca-Cola Classic." ¶7. (C) Uslu stated that the Turkmen President only drinks Coke Classic from small glass bottles. Uslu explained that every few months, a government official from the President's office comes to the plant and selects random cases of bottles of Coke for the President's own consumption and for his guests. Uslu then has to sign an official government certificate stating that the coke bottles deemed for the President were not tampered in anyway and are of the highest quality. He noted that the "Presidential supply" is of course "gratis," but when former President Niyazov was alive, he came personally to the plant and paid for his supply with a large wad of cash that he pulled out of his pocket. MITIGATING THE BUREAUCRACY ¶8. (C) Coke reps told Economic Officer that Cola Light (a sweeter version of Diet Coke) is growing in popularity with Turkmen, and that plans are in the works for introducing Coke Zero, but bureaucratic hurdles have kept Coke Zero in limbo. The reps added that there was a 40 percent growth estimate for the summer quarter due to the new line of products destined for Kazakhstan, but Turkmen and Kazakh "bickering" delayed shipment to Kazakhstan until mid-August, depriving the company of key, summer sales months. The Coke reps added that Central Asian bureaucracy and corruption is maddening, but persistence has won out for Coca-Cola Turkmenistan, which will tally its eleventh year of operation in a few months. ¶9. (C) COMMENT. The visit to the bustling Coca-Cola plant in Ashgabat Turkmenistan confirms that foreign companies can prosper in the country if they have thick skins and are committed for the long-term. Coca-Cola Turkmenistan is primarily a Turkish company with only 20 percent U.S. ownership, and the Turkish business model is currently well received in Turkmenistan. Nonetheless, Coke representatives repeated the importance of U.S. Embassy advocacy on the company's behalf when the company invariable faced new problems with the government. END COMMENT. MILES