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BOTTLED WATER EXPORTS AND PACKAGING - WATERLOK, LLC
Among Armenia's abundant natural resources is very high quality spring water. An investment of $6 million is being sought for developing the Canadian and US markets for bottled natural spring water -- Canadian approval and US contracts are in hand. Export quality packaging for shipping spring water to North America and juices, brandy, wines, and canned products to nearby international markets needs under $1 million investment. Gofropak will provide better cardboard boxes for Armenian producers.
Company: Waterlok LLC
Amount: $ 6,000,000
Tenor / Terms: 60% of equity
Documentation: Waterlok has firm contracts signed with two importers of spring
water to the USA and Canada
Use of Funds:
Item Capacity Approximate
price (US$)
Remark
Bottling line 7,000/h 1,000,000 B&H Labeling (UK)5
Labeling line 7,000/h 150,000 B&H Labeling (UK)
Pre-form manufacturing machine (1) 4,000/h 750,000 STEKA (Italy)
Pre-form manufacturing machine6 (2) 4,000/h 750,000 STEKA (Italy)
Bottle blowing machine 7,000/h 1,000,000 SIDEL (France)
Plastic cap manufacturing machine 8,000/h 500,000 Presently does not
manufacture
Filters N/A 150,000
Construction and modernization N/A 300,000
Raw materials N/A 1,400,000 Granules and labels
TOTAL 6,000,000
Legal Status: Company with limited liability, proposes to transform to joint-stock company
Local / Strategic Partners:
o Econo Enterprises Inc., Mr. Harry Ghazalian, President.
2245 Eglinton Ave. East, Toronto, Ontario, Canada Tel: 416- 759-9293
o Prodotti di Puglia, Mr. Frank Zuccaro, President.
10 Benton Rd., Toronto (North York), Ontario, Canada Tel: 416-407-1750
5 Manufacturers of machinery provided are tentative.
6 The price for one 7,000/h machine would be the same as for the two. Purchasing two provides for more
flexibility.
Current Operations:
Waterlok, established in 2000, presently bottles and exports fresh potable water. Hologram
Plastic is another local company with 5-year experience of manufacturing PET pre-forms and
plastic bottles for the domestic market, and supplies Waterlok with plastic bottles. Given that
the export price of bottled water is very competitive, the company has established excellentrelations with importers of water in several countries, and the water complies with technical standards. The project sponsors propose to merge the existing bottling (Waterlok) and plastic bottles manufacturing (Hologram Plastic, belongs to the same group of investors) capacities and
to attract an equity investor (USD 6.0 million) to modernize and substantially increase the capacities and to expand the profit margin. For obtaining natural spring water the source pipe has been extended to the factory in Yerevan from Aparan (the water from this spring is well known for its taste). The company has exports contracts with large customers in Canada and has already shipped several containers.
Sales and Marketing Plan:
If operating at present capacities, the company plans to sell around US$1.5 million worth of water per annum. Its current capability does not allow for physically satisfying the existing demand. Initial plans are to sell water in North America. Later, sales to Middle East and Central Asia as well as small proportion to the domestic market are expected. In summer 2000, the company qualified for a $80,000 start-up loan by the USDA. Before that, the company had done
market research, which demonstrated potential in Canada, USA, UAE, Cyprus and Turkmenistan. After having the trademark registered and the labels designed and printed in Canada, the company has signed firm contracts with two big food and beverage importers to the USA and Canada -- Prodotti di Puglia and Econo Enterprises Inc . The total amount of the first export contracts is about $1.42 million (220 forty foot containers, 27,000 bottles in each, at $2.90 per 12 one-liter packaged bottles CIF Toronto, Canada price). The company has the
permissions from Canadian authorities to import the water. An experienced specialist from the US (ex-Senior Engineer in several famous soft drink companies7) has assisted Waterlok8 and proposes to assist in bringing valuable technical and marketing expertise to the new company with ambitious plans for expansion.
Business Plan:
The company s strategy is exclusively export-oriented. The plan is to merge the existing bottling (Waterlok) and plastic bottles manufacturing (Hologram Plastic belongs to the same group of investors) capacities and to attract an equity investor to modernize and substantially increase the capacities and expand the profit margin.
7 Such as Shasta Beverages, McKesson, etc
8 Co-financed by IESC
Competition:
Only two companies in Armenia bottle spring water. One belongs to a large local industrial group and is called NOY , and the other one is bottled by local Coca-Cola Bottlers and is called Bonaqua . However, Waterlok's export plans do not expect any competition for the limited domestic market.
Regulatory Considerations:
There are few barriers (e.g. bureaucratic red tape) in levying export duties in Armenia. In addition, the USA (one of the potential markets) has a favorable trade regime for Armenian goods imports. Also, the investor may take advantage of a profit tax benefits for ten years after the investment is made.

Investment, Capital Cost and Financing Structure Proposed:

Company: The Gofropak Company
Amount: $ 800,000
Tenor/Terms: 80% equity
Documentation:
Details of supply contracts with major producers of wine, brandy, soft drinks, and canned products. Charter of Incorporation as limited liability company (for Waterlok)
Use of Funds: $ 85,000 3 Cutting Machines (700boxes/hour)
$ 110,000 1 Flexoprinting Machine (2,500boxes/hour)
$ 45,000 1 Photocliche
$ 48,500 1 Rabbet-sticking machine (2,000boxes/hour)
$ 75,000 1 Recycling machine
$ 66,500 Construction works
$ 50,000 Computer design equipment
$ 480,000 Equipment and construction
$ 320,000 Working capital
$ 800,000 Total
Legal Status: Company with limited liability.
Local Strategic Partners:
Yerevan Brandy Plant (Pernod Ricard), Vaiots Dzor (Areni) Winery, Pharmatech, Bulvinos Chemicals, Abovian Brewery (Kotaik), Jermuk Co., Avshar Winery, SPS Cigaronne, Grand Tobacco, other hard liquor and soft drinks producers.
Current Operations:
Corrugated sheets are imported and cardboard boxes of various size and type are produced in the company. Main stages in the simple production lines are cutting, folding, gluing, and printing.
Sales and Marketing Plan:
Since the new company will be manufacturing cardboard boxes using both old and new equipment, it will retain 100% of Gofropack s existing market. In addition, new long-term contracts will be signed with the Brandy Plant, Coca Cola, Grand Tobacco and others. The sales volumes are planned to go up from the present 100,000 boxes per month on average to 350,000-400,000 boxes per month.
Business Plan:
The Company proposes to expand and enhance the quality of production to cover larger share in the local market and establish itself in the Georgian market as well. The new equipment will produce better boxes to meet the increasing standards of demand. Part of investment (40%) will be used to purchase raw materials at much lower cost also.
Competition:
The main competitor with 10% of the market is Gofrotara LLC. Another 4-5% is with small local workshops producing for very few specific small customers. The rest of the market demand is satisfied by direct imports by few processors and producers (for example, shoe manufacturers import boxes from Italy to then pack and export shoes in them).
Investment, Capital Cost and Financing Structure Proposed:
An equity investment of $ 800,000 is expected from the Investor, of which capital cost will $480,000 (60% of total investments), and the rest ($ 320,000) raw materials will be purchased.
Regulatory Considerations:
Tax benefits for investments of $1.0 million and more. No duties and taxes on imports of materials and on exports of finished products in Armenia.

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