Since 2007, Machine Retail Group (MGR) has been successfully implementing projects for the production and supply of modern industrial equipment, industrial automation and engineering services in Russia and abroad, as well as actively investing in innovative technologies and materials. In 2017, MRG entered the markets of Uganda and India, having launched the production of composite rebar in these regions.
We asked Konstantin Gorchakov, the CEO of MRG-Composites Uganda and the Leading Technical Specialist of MRG-Composites India, to tell us about his experience in the composite industry and the company’s projects.
Konstantin, please tell us a little about yourself, how did you come to the composite industry and MRG?
I have been interested in composite materials since my youth. I am passioned about motorcycles, and composite materials offer, perhaps, the most affordable range of technologies with low material costs allowing to solve a wide range of tasks, both decorative and constructive. I began to work with composites professionally since 2008 when I used manual and vacuum molding and RTM for advertising production.
In the MRG group of companies, I was responsible for several venture projects, mainly in the energy sector. In 2016, we faced the task of localizing the production technology of blades for wind turbines of the megawatt class, and our task was to actively interact with world leaders in this area and our Russian defense enterprises, which have sufficient scale of production. Since 2017, I began to engage in the development of composite production in Uganda and India.
Tell us how you started up in India and Uganda?
Since I represent the MRG-Group, one of our and personally my tasks and professional interests was access to the international markets. In fact, the task was to start a business in a promising developing country to understand the culture of doing business and the commercial potential of the region in general.
It so happened that one of our partners invited us to Uganda and after working out some projects we settled on organizing the production of fiberglass reinforcement using the pultrusion method. Capital expenditures are relatively small, which significantly affects the investment decision. In developing countries, the main emphasis is on the cost of material, and composite reinforcement (FRP-rebar) in principle meets the basic concepts of price / practical applicability of the material.
India became the second site after the “break-in” of the project in Uganda.
Why were the markets of India and Uganda chosen? As far as we know, these are not the easiest countries for business development.
Indeed, developing countries pose great risks, which, however, are offset by relatively higher potential profits.
Uganda was chosen for several reasons: all year-round construction, cheap labor, the predominant low-rise construction, the trend for industrial development, the relative stability of the region.
As engineers, we are aware of all areas and limitations of using FRP-rebars and the conditions of the local market as a whole allow us to consider the technology promising for implementation.
The legislative framework for FRP-Rebars in Uganda was completely absent, so we became pioneers not only in terms of manufacturing but also in training and implementation of the standard. As a result, last year, with our efforts, Uganda became the first country in East Africa with an existing standard for polymer-based reinforcement. The ACI standard was taken as a basis, however, with physic mechanical characteristics close to the Russian GOST standard.
India also did not have a national standard, and now we are actively working on its implementation. ACI is also taken as a basis.
Both countries use British Standards at their core and this, of course, imposes very large restrictions on the use of FRP-Rebars in large or government projects due to the virtual absence of BS on FRP-rebars.
A significant problem is the complete lack of engineering staff capable of making calculations based on this material.
We actively cooperate with several specialized universities in Uganda and India and with our intellectual support we will soon see the first graduation projects on the topic “Concrete Structures Reinforced with GFRP-Rebars”. Lectures at several universities and joint practical research have already been planned.
A very important obstacle is that in these regions there is a lack of knowledge of the properties of the material, the principles of manufacturing and application technologies, which results in a high degree of mistrust from the market and significant difficulties with promotion.
What products are manufactured in India and Uganda? What are the differences between markets and demand for such products?
In both countries, we produce only GFRP-rebars. The differences in markets can be characterized by several key factors. First is the size. Obviously, the Ugandan market is not comparable to the market of even one of the states of India, which imposes restrictions on the potential number of players.
Secondly, it is an intellectual factor. I like to call FRP-Rebars as an intellectual product. From an engineering point of view, customary steel also requires mathematical calculations, but in the situation with FRP-rebars, the importance of understanding the basic principles of physics also interferes. For example, in Africa, the average level of education is lower than in India, which significantly hinders the implementation of new material. Simply put, a person needs education to be able to understand how “plastic” can be stronger than “steel”.
In general, I consider the Indian market as much more promising on the one hand, however, much more difficult to penetrate on the other. Extremely strong “steel lobby” and the cultural difference with Europeans.
From the demand point of view, you need to be aware that it takes time for a new product to enter the market, starting with legislation and technical support and ending with a sufficient level of confidence in the material. All this requires considerable effort and time.
Despite the good prospects for the material, markets are now in their initial stage, and it inevitably affects demand which can be described as low and unstable.
Do you use Russian or Indian pultrusion lines? Why did you choose this particular equipment manufacturer?
India has advanced pultrusion technology for profiles, but currently there are no companies producing lines for FRP-rebars. At the same time, I am sure that within a couple of years we will definitely see the FRP-rebar lines of Indian origin.
We use Russian equipment at our manufacturing facilities. Before the start of the Ugandan project, I visited several machinery manufacturers in Russia and China and chose the most optimal supplier.
Initially, the MGR-Group is a company that started with the supply of processing equipment for the Russian industrial complex. The management is mainly formed with engineers and we are able to evaluate the quality of a particular equipment.
Working with a Russian supplier, we speak the “same language” and jointly participate in the modernization and improvement of equipment in a practical way.
In terms of quality and compliance with the declared characteristics of the end product, the Russian equipment fully meets the GOST standards, which completely suits us.
Do you only work with fiberglass? Was there any experience with basalt fiber? If so, what differences did you observe in the characteristics of the end product and in the technological process?
Currently, we only work with fiberglass roving. The main reason for this is the optimal Price-to-Quality ratio of the end product.
As soon as we can get to the large infrastructural projects of India and Uganda, where direct costs will be less important than operational, we will definitely present basalt fiber as an alternative to more expensive carbon fiber, but with relatively close physical and mechanical characteristics.
From your Instagram account we see that you are actively involved in the development of the composite industry in India?
Both in India and Uganda we are engaged in the development of the legislative framework. We also see our big task in the promotion of pultrusion technology and composite materials in general.
In our opinion the composites are materials of the present and the future which offer not only cost-effective solutions but also reduce the environmental load during the manufacturing process.
We do a lot for the educational processes in these countries, I personally give lectures for students and professors in relevant universities. In Uganda, in particular, we presented cases of composite materials application in a wide range of technologies. In India we focused on specialized issues related to FRP-Rebars.
What difficulties does a foreign entrepreneur face when offering a new product or new technology in the local market?
In Uganda, there are no difficulties with business development in general. This country is extremely friendly to investors. However, the other aspects should be considered: the level of tax legislation, the banking sector, government agencies, and the business culture. Developing markets bear high risks in these regions. As a result, it is extremely difficult for Europeans to run business in Uganda. You must consider high risks, long-term investments, high operational costs and long periods of capital return.
India is mainly deprived of these aspects, but the cultural issue is crucial. I do not recommend to involve expats to the top management roles in India.
In both regions, it is necessary to consider very significant cultural differences, which imposes serious difficulties for running a business in general.
What is the situation with certification? Are there any difficulties? What standards do you utilize?
As I have already mentioned both regions use British standards.
India does not have a legal framework and certification of FRP-rebars is simply not possible at the moment, but there are no difficulties with other products made of composite materials.
Contrariwise In Uganda we implemented the ACI standard and with UNBS (Bureau of Standards) you can get a quality mark for FRP-rebar, but there are no standards for other composite materials.
Summing up, I’ll say that in these markets you need to check the availability of a standard for each product, specific application, or characteristics.
How did the situation with coronavirus affect production? Does the company continue manufacturing? Are there any problems with the shipment and transportation of products to other regions and countries?
In both countries we are mainly focused on domestic markets so it is difficult to say whether there are any significant restrictions on international supplies.
The supply chain in India is completely local, so there is no difficulty with materials. In Uganda, due to local characteristics, we are forced to keep large reserves of raw materials, which ensures a high stability.
India and Uganda are on lockdown (April 2020) and all manufacturers do not operate.
What measures will be taken to preserve and develop the business in overall economic slowdown?
Having experience with running a business in developing regions we initially considered high risks associated with the instability of our manufacturing facilities operations. A stop for a month or two does not affect the business in general.
Will assortment policy, pricing policy, sales and marketing system be reviewed?
The core idea of promoting FRP-Rebars on the market implies a high sensitivity to fluctuations in steel prices, therefore, competitive prices are monitored on a daily basis. We are forced to be extremely flexible in pricing, which also has a very negative effect on the planning of investment programs.
We will adjust the price for our products depending on the market situation at the moment when the construction materials market opens.
As for the assortment, there are certain products that form the main revenue and for these products we always maintain sufficient reserves.
It should be noted that the pultrusion technology for rebars is relatively flexible in terms of technological readjustment and does not require strict scheduling of the manufacturing process.
Since the fiberglass reinforcement market in both regions is in its initial stage, I see no reason to change the marketing strategy.
Do you have any idea what will happen to the composite market after the economic recession caused by the COVID-19 pandemic?
I do not think that COVID-19 is able to significantly change the modern world economy in general and the composite materials market in particular.
With all this, as investors and businessmen, we cannot help but notice the global tense state of uncertainty that has accumulated in the business community.
The fact that in the next decade the world economy will change, gives an understanding of the inevitable global restructuring of domestic and foreign markets, which in turn means the possibility of introducing more advanced and economically feasible technologies.
In the current situation, I would not have predicted changes in composite materials markets. I just want to note that the market itself will determine the most stable and demanded solutions. We have the opportunity to prove that composites are the timely and vital response to the challenge of the next round in the development of a human society.
Companies: MRG Composites