GOZNAK: Literally Russias Biggest Money Makers20 2014

GOZNAK: Literally Russias Biggest Money Makers

When Russias leading coin and bank note manufacturer Goznak commemorated its 195th anniversary last year it was doing more than celebrating its status as of one of Russias oldest companies; it was also drawing domestic and international attention to the critical role it has played in Russias economic and financial fortunes for nearly 200 years and which it continues to do to this day.

While most of the celebrations took place in the city of Perm where some 40% of Goznaks 9,000 employees are now based, the anniversary had particular significance for its Paper Mill in Saint Petersburg. Founded back in 1818 by Emperor Alexander 1, the Mill was instrumental in helping stabilise a Russian economy that had been dangerously undermined by the counterfeit notes printed by Napoleon prior to his doomed invasion attempt six years earlier.

Goznaks string of mints and paper and print plants have been trusted partners to successive regimes ever since and, according to its current General Director Arkady Trachuk, this confidence has been well founded . We have kept hold of our basic expertise in the manufacturing of paper and documents since those early days, he says, but we issue modern documents as well. So we consider ourselves to be a company that has old traditions but that has remained consistently up to date.

That the present administration shares his faith is symbolised by the fact that it handed the company a major role in the manufacture and distribution of badges and commemorative medals carrying the official Sochi 2014 logo of Februarys Winter Olympics. By the time both the Olympic and Paralympic Games had run their course last month, Goznak will have produced some 5 million items bearing the logo over a three year period.

Goznak also counts organisations such as the Federal Customs Service, the Russian Union of Insurers and the Federations Supreme Arbitration Court among its partners; and while banknote and coin production remain its core activities it is one of the few (if not the only) company in the world that is engaged simultaneously in papermaking and printing, coin metal and jewellery manufacture and, increasingly, device and data processing and storage services. With a turnover of 45 billion roubles (U.S $1,350 million) its capacity is also impressive and it is currently able to produce 11,000 tons of security paper, seven billion bank notes, five billion coins, up to 40 million passports and 45 million postage stamps as well as a whole raft of other specialist products each year.

These days, Goznaks range of specialist products such as ID documents and payment cards call for the implementation of cutting-edge security technologies which it develops at its own in-house facility in Moscow. The Research Institute Goznaka is the only one of its kind in Russia and has helped Goznak stay in the vanguard of developments in specialist printing techniques, paper production and the manufacture of plastic-based documents. In recent years the Institute has developed more than ten new materials which can be used as additives in order to give ink and paper special properties and has also pioneered 2-D iris printing technology and the strip-embedment insertion of security features into banknote paper.

Although the Central Bank of Russia remains Goznaks biggest customer and still accounts for some 35% of its order book, investment in technology and its paper production facilities have enabled it to triple its exports from 200-400 million to 1-1.5 billion banknotes over the past five years. Goznaks access to Russias plentiful reserves of timber for paper production has also come in useful. Many countries issue banknotes but dont also make paper and this has proved to be a growth market for us; ten years ago we were exporting between 100 and 200 tons and that has gone up to 5,000 tons today.

Given the unique characteristics of the market the company operates in, however, Trachuk is clear that quality and technological development hold the key to Gosnaks future growth as much as quantity. About 150 billion banknotes are issued around the world each year and the industry has a very strict structure with most of these being supplied by companies that are owned by the state or by their national banks he explains. There are also other limitations; for instance, euros can only be issued by companies based in the eurozone, so it is not necessarily a big market.

So it is back to intellectual property, innovation and quality. We now have our own set of developments and copyrights which means that we can offer our customers some unique products. We now also have a wide network of representatives that promote our services to national banks across the world. With fraud an ever-present threat, there is little chance that demand for Goznaks products and services are going to dry up any time soon.

Source: FORTUNE, Europe Edition March 17 2014 Number 4
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