Siberian container glass manufacturer Sibirskoe Steklo recently completed the expansion of Furnace No1 at its Novosibirsk, Russian facility. Its CEO, Pavel Bobosik, discusses the investment as well as market conditions in the region.
Why did you decide to make this investment?
There were two main reasons. The furnace was already working for 11 years (construction started in 2007) and another reason was to increase overall efficiency by extending the furnace, modernising it and adding another feeder with two new forming machines.
This way we will get an energy efficient glass melting furnace with a daily pull between 375 tonnes up to 410 tonnes (compared to the previous 255 daily pull) with five forming instead of three ten section machines.
How big is the new furnace and how many bottles do you anticipate to supply once it is fully ignited?
As said before, the pull was significantly increased, but with 130m2 and very good boosting from FIC we can manoeuvre with the capacity according to the needs of the market and the needs of our key customers.
We are ready to change colour through the year from amber to green and to flint. Actually the previous condition of this furnace (Furnace No.1) did not allow us to do that. We do have two other furnaces operating in flint glass only, but the large one is having colouring in the feeder. It helps us to serve the luxury bottle market to local customers.
Our total daily melting capacity went from 320 tonnes in 2013 to 620 daily tonnes last year through a serious of investments and adding lines to existing furnaces. We have now reached a daily capacity of at least 780 tonnes of bottles with 12 glass forming machines.
Can you tell me more about your company?
Our company is split from the previously known Ecran factory. In the framework of restructuring we split the assets.
Ecran is today a management company on the Industrial park – a brownfield territory with many industrial and non-industrial tenants, which is not needed for Sibirskoe Steklo and glass bottle manufacturing.
Both companies belong to the industrial holding RATM. The company started to produce only flint glass on very old machines during the 1990s for local vodka manufacturers mostly in Western Siberia and for local processors of vegetable and fruit juices they also produced simple jars.
After 2000 the number of furnaces was extended and around 2006 the first new machines from the Czech company Sklostroj were installed.
After good development of the market, in 2007 it was decided to build up a new largest furnace (current No.1) for production of amber glass with three ten-section double gob new machines from Sklostroj.
The booming market with beer and demand for amber BB bottles was stopped with the global financial crises in 2009 and consequent decline of purchasing power and demand for beer in Russia. Anyway, at the end of 2009 was decided to finish the almost ready made project and in spring 2010 the new capacity was available to the market.
Ecran/Sibsteklo in those days could produce amber and flint glass packaging. With regards to the still bad market in Siberia and overall in Russia at that time, it was necessary to heavily export. Up to 60% of production volume went to Kazakhstan, Kyrgyzstan, Turkmenistan.
It was also good for training of personnel, because of lack of high professionals, and very well trained people, the quality was fully sufficient to sharply increase quality requirements from our global customer producing beer in Siberia.
It is interesting, but only a few people know that the absolute majority of beer in Russia is produced by ABInBev, Carlsberg and Heineken and local independent breweries play little role on the market. I often make jokes that Novosibirsk - the city where Sibirskoe Steklo is based and produces its wonderful glass packaging, is the capital of the global beer industry!
I have been around beer and glass for 30 years and never have been in a city, where the distance between breweries of global 1 and 2 and 3 is between 12 and 15km. Maybe I could be wrong,
But it shows the potential of our very local market and also it proves our quality due to constant quality inspection on the spot from those global leaders. Above that, our furnaces are more or less in the same distance from their bottling lines.
Another large advantage is that we have also local larger breweries in distance according to Russian conditions in relative proximity -250 and 400km. They take care of glass bottles, they value beer in glass bottles, they are financially stable and their forecasting is accurate.
They are buying each around 50 million bottles and another one, which is more far away is buying more than 100 million. Those brands, they have no decline, even in Covid times.
So we have a large and diversified pool of customers in Western Siberia. We only missed green glass, which is now no problem with the introduction of the new furnace.
Above that we are almost constantly sold out in flint glass. In the past two years we observed a passion of marketing people at large breweries to bottle the beer into flint bottles.
Me, as a citizen of Czech Republic with very solid opinion about all aspects of beer, have internal issues with that, to see Pilsner type of beer to be packed into flint glass, but local marketers and customers are always right so we needed to shift part of our capacity for vodka, mineral water bottles and jars to serve beer markets with flint beer bottles.
As said, a small part of our production - around 5% are jars. We are quite lucky also with the vodka market for our vodka bottles.
Although many vodka manufacturers moved their bottling capacities into the European part of Russia, because of the high density of population there and proximity of markets, we still have in the city very modern bottling capacity of the largest Russian vodka manufacturer - Russian Standard which we serve.
Around us are also two other top vodka manufacturers and a couple of smaller. So the vodka market remains for us the second most important market.
Another advantage is that we are the most easterly large glass packaging manufacturer in Siberia. Therefore we supply customers from Ural to Vladivostok and Kamchatka. And there are many smaller vodka manufacturers and some beer manufacturers including global companies.
The size of the Far East market and certain instability on the market however does not make feasible to build up capacity there, something what we would do if it makes sense.
How many people were involved in the construction? How was the construction period in regards to Covid-19?
In construction works have involved over 120 people, mainly from Russia, some of them representatives of European companies-suppliers, which due to Covid limits were not able to cross the borders.
The Covid-19 caused twice the postponement of construction. First one in spring 2020, where we have materials from China about three weeks later, same have been refractories from Europe with some delay. All other supplies have been from Europe and they arrived on time.
But postponing construction into the beginning of the season was not good for our customers, so we decided to postpone it for autumn, before severe weather hits Novosibirsk.
In the end, the positive market and high demand for bottles in autumn did not allow us to make enough stock for the upcoming season of 2021 and we have been forced to postpone it for another time to the end of January and beginning of February.
On the other hand, it gave us an opportunity to assemble a new feeder, complete all cold end and make cold tests of our newly acquired two glass forming machines, which will operate on new forehearth in tandem.
The biggest challenge was not availability of representatives from Europe at assembly and tests, with few exceptions, but with modern technology and mastery of our team we have been to overcame this Covid-19 obstacle.
What factors made you choose this furnace?
I will not hide that the biggest argument for construction of this furnace was economic efficiency. And of course, once you invest you are today in Russia forced to make environmental and energy efficiency measures. Russia signed the Paris Climate Protocol and from next year to 2027 will introduce a lot of new norms and we must be ready.
What else did the investment involve?
We have purchased new inspection equipment, modernised all existing equipment including batch house, conveyors lines, cooling system.
Therefore, in spite of postponing construction of a new furnace, we fully utilised given time (almost a year) with making such investments and improvements, mostly with our own stuff, which pulled down the total costs significantly. Anyway, the total investment was over €20 million.
Was digital technology a part of the investment?
Yes, partially. Some decisions still have to be made. I am a big fan and believer of digital technology in our industry. I do believe in the ‘dark factory’.
So we made a lot of preparation and on one line we installed a complete system of monitoring and evaluation of the process until packaging. We are in constant touch with companies operating in this area.
Above that, Novosibirsk with its Akademgorodok – the Russian version of Silicon Valley has a strong scientific base for digital technology. We work together on a few projects with them around digitalisation of bottle manufacturing.
What is the glass market currently like in Siberia?
The current market, especially due to Covid-19, is shaky and fragile everywhere. In Siberia we have been a little bit more lucky in our market, because nobody from our customers was producing beverages for restaurants, which have been here also closed for a long time.
So our bottles go to retail, and retail was not hit, because consumption moved to households and weekend houses unlike in European part of Russia, where consumer habits and share of glass bottles for restaurant consumption is much larger.
Also we do not export except Kazakhstan. Many of our colleagues in European part of Russia suffered due to Covid, closed restaurant market for their products and due evaporating exports to Europe.
We have to fight with many challenges in the field of ecological payments, Russian government requires a 100% collection rate now and wants the responsibility transferred to bottle manufacturers.
Two years ago, our company Sibirskoe Steklo together with Ruscam started the Association of Glass Packaging as an independent association from post-Soviet Steklo Soyuz to fight these issues.
We have been active and currently we are members of different committees at Ministries, Russian Parliament and government bodies.
This enables us to stop measures, which would have a negative impact on our market and at the end on health of consumer and environment. Plastic is still the biggest threat to us with increasing pressure of aluminium dose, which we expect this and next year. However, if exports rebound, I am not pessimistic about the prospect of stability on Russian market for glass bottles.
We are producing more ecological bottles, the transfer to NNPB technology is almost complete and many brands of vodka are delivered in NNPB bottles.
Once I arrived in Ekran to make restructuring of the factory, our average beer bottle weighed between 340-360 grams. Today, this is only between 265 and 285 grams.
We constantly work on increasing the share of cullet in our batch and investing into equipment for processing of cullet in glass factories.
We do invest into a system of collection. This is not only economical and environmental measure, but also it makes glass bottles more attractive. We can see transfers in sizes of bottles. Bottles are getting smaller, from 500ml in a beer bottle to 465ml. Even 100ml bottles are popular in the vodka segment.
What message do you give your customers after this investment?
First of all, the message is that we are a very stable company. Financially stable with our team and reliable. Further, they can get green bottles in Siberia.
Also that we trust them, therefore we invested. We trust in their long term strategy in Siberia and we feel committed to their strategy. And I do hope that our investment presents for them stability in supplies, reliability and increased quality and also move to a more ecological production.
How would you like the company to evolve over the next five years?
I think that this question would be mostly relevant five years ago, where we have been with our team on the beginning of our big journey to make Sibirskoe Steklo a strategic company in Siberia.
Now, five years later, with construction of new furnace No.1, limits of size of market, inability to export except to countries like Kazakhstan, Mongolia etc. due to large transport distances we are close to our limits.
But as you know, in manufacturing, you are never finished with evolution. We still need to upgrade several forming machines, we need to extend proper warehousing capacities and we will work on digitalisation. This is most important.
Achieving higher efficiency without investments into digital technology will be not possible. Also environmental challenges will not keep our sleep intact.
We are just to acquire new location for sand in order to avoid transport of sand from 1700km distance and invest there. Our investment into increasing cullet flow will continue. We do have projects, which is study phase, on how to acquire soda in Siberia. So you can see, there is always something what you can to grow and be responsible and efficient .
But mostly, I am happy for the journey which we went through with our holding RATM, with our owner Eduard Taran, and mainly with our team of professionals at Sibirskoe Steklo.
From the very beginning it was not easy, but finishing our largest furnace No. 1 is the nice ending of the most difficult part of our journey to make Sibirskoe Steklo an important factory within Russian glass container industry and absolute leader on territory between Ural and Kamchatka.
Sibirskoe Steklo, Novosibirsk, Russia
