Apr 29, 2021

Interview of the CEO / President of the Management Board of

Alkaloid AD Skopje for the business magazine “Economy and Business”

1.E&B: Mr. Mukaetov, may we first congratulate you on this year’s important anniversary - Alkaloid’s 85 years in business. The company has made impressive progress throughout the decades. What is the secret of success, and what business decisions are you most proud of?

Zhivko Mukaetov:

Thank you for congratulating me! Alkaloid's successful performance is primarily a result of the quality of staff the company employs, the quality of its products, of the brand Alkaloid and of all its individual brands that generations of employees have built throughout the years. The keywords for our successful growth may be dedication and hard work. In addition to the 85th anniversary, this year marks the 15th anniversary of my tenure as Alkaloid’s CEO, when we have made many endeavors important for the company’s growth. If I have to single out just a few strategic decisions those would be: the construction of the cephalosporin antibiotics production plant, the choice of the UK’s regulatory agency MHRA as our referent agency, the digital transformation of the company, doubling the number of offices outside our Skopje headquarters, the establishment of the R&D Institute and the Quality Control Centre, the opening of the plant in Serbia, the establishment of the Business Development Department, and many other decisions that made the €53 million in sales in 2005 grow to €197 million in 2020.

2. E&B: the visionary approach of the previous CEO, your father Trajche Mukaetov, laid down the foundation of Alkaloid’s success, which you have built upon. How difficult was it to take over from such a great manager as Trajche Mukaetov?

Zhivko Mukaetov:

It was not easy at all! Trajche Mukaetov was the visionary of modern Alkaloid. His contribution to the company’s development and promotion, defining its business strategy and long-term policies was enormous. As a great strategist, in 1995 he started building the new state-of-the-art pharmaceutical plants, in cooperation with the world’s leading financing corporations, with lots of instability in the region and for the first time without a state guarantee.Trajche Mukaetov was my father, my teacher, and my mentor. In September 1999, he gave me a chance to start working in Alkaloid, but it took me some time to gain his trust. I earned it by working hard, being a proactive manager, and creating a quality team. Change of generations in Alkaloid took place systematically, step by step, with big challenges but without sudden shocks. From today's perspective, I am happy that the new generation of managers took over a firmly founded, debt-free company, with a long tradition and an extensive brand portfolio, ready to grow and develop smoothly. We inherited a system firmly founded on good corporate governance principles, but we brought new energy in line with the latest trends. We always had Trajche Mukaetov’s motto in mind: "Alkaloid is a company for eternity, and we must think about our future."

3. E&B: What does Alkaloid’s ID look like today?

Zhivko Mukaetov:

Alkaloid is the sixth-largest pharmaceutical company in Southeast Europe. It employs 1860 people in its headquarters in Skopje and 570 in its branch offices outside Macedonia. It sells in 40 countries and has a broad marketing network of 20 offices in 14 countries worldwide, covering a market of over 200 million people. Alkaloid shares are among the most traded on the Macedonian stock exchange, and the company has 5100 registered shareholders. The company is one of the largest taxpayers in the country, with €18,25 million in taxes paid in 2020. At the moment, the company has 1130 active domestic suppliers.

To support the Macedonian health care and pharmacy, in 2007 Alkaloid established the Trajche Mukaetov Foundation. Investing in Macedonian sports and culture and in the community in general, is among our top priorities.

4. E&B: We are in the middle of a pandemic. Despite the unfavourable circumstances Alkaloid had impressive results in 2020. How did you manage to do it?

Zhivko Mukaetov:

Looking back, Alkaloid has had continuous growth in the past 16 years. If we compare 2019 to 2018 when sales increased by 13% and net profits grew by 18%, in 2020 sales increased by 9%, while net profits grew by 15%. At the very beginning of the health crisis, despite the enormous rise in the costs of raw materials, we reduced the prices of 158 products crucial to our consumers in times of pandemic. Although there was a shortage of raw materials and disruptions in transport, we managed to ensure continuity in our production. This crisis reminded us all how immensely important domestic production of strategically important goods, such as pharmaceuticals and food products, is for a country.

5. E&B: What was the biggest business challenge in the past year?

Zhivko Mukaetov:

As everyone in the world, our company transformed its overall operations on all levels. As unpredictability and uncertainty were very high, in the very beginning, our decisions were in a trial-and-error mode. It actually made us leave the comfort zone, elevate operations management to the highest level, thoroughly calculate all risks and act smartly. We were aware that we had to find alternative ways to keep the usual product stocks and stay in touch with our colleagues, partners, and stakeholders. Since we are part of the healthcare system, our burden of responsibility continues to be huge. The pharmaceutical industry imposes strict regulations in normal circumstances, but maintaining a safe environment and processes in times of pandemic is an enormous challenge requiring great caution. I am especially pleased that we did not fail at any moment! We kept large stocks of crucial raw materials, changed our product portfolio, and did everything we could to protect our staff and ensure safe processes. We all showed solidarity, mobility, adaptability, and a high level of empathy. We were aware that this is a health crisis that requires a human response.

6. E&B: The pandemic will last for more than we initially thought, and we can learn some business lessons from past experience. What is your message to entrepreneurs and less experienced managers about management in such disastrous conditions? What should they pay attention to? What should they do?

Zhivko Mukaetov:

Like any crisis, this one cannot last forever. The past year was a significant stress test for all of us, but giving up shall not be an option. Nothing is easy, neither for companies nor for individuals, but hard times require hard decisions and hard times reveal heroes. The reality check is inevitable, but rationality and sobriety should prevail in every manager and every business. Reformulating processes, finding alternatives to reach and communicate with customers, sustainable adaptation to change, and perseverance are some recommendations worth applying.

7. E&B: Even in these hard pandemic times, Alkaloid did not stop being a socially responsible company. Could you please tell us what your company has recently done in that field?

Zhivko Mukaetov:

Under circumstances when the world economy is struggling to mitigate the impact of the health crisis, there are not many companies that can help in such hard times. Alkaloid was the first Macedonian company to donate €200.000 to the COVID-19 charity account of the Macedonian Ministry of Health set up to cope with the health crisis.
Alkaloid, Alkaloid KONS, and the Trajche Mukaetov Foundation donated further €1 million for various purposes. Of those, €125,000 went to the countries in the region. Many healthcare and educational institutions, associations, and numerous individuals received our donations.

8. E&B: Alkaloid is successful because of its exports. What is the company’s export structure by country? Where was the highest growth? Did the pandemic change the way consumers interact with your products abroad?

Zhivko Mukaetov:

35% of the last year’s consolidated sales were on the domestic market while 65% were in exports. 33% were sold in Southeast Europe, 20% in Western Europe, 10% in Russia and CIS, and 2% in other countries.

We achieved the highest growth in the Czech Republic, Albania, Georgia, Hungary, Armenia, Bulgaria, Romania, and Serbia. We are particularly proud that we started selling our pharmaceutical products on the Canadian market. Five years ago, 40% went to exports and 60% to the domestic market, while in the past three years, the ratio has reversed. In 2020 we continued exporting despite the deteriorated communication with our existing and potential partners.

9. E&B: You are constantly entering new markets, with the UK being the latest. What do you expect from that market?

Zhivko Mukaetov:

The UK is a particularly demanding market. Market entry is hard, and the market is very competitive. The reason is that manufacturers have to meet the highest standards that apply to the most rigorously regulated product category in the world. We are currently exporting around €5 million in pharmaceuticals there, but after BREXIT, this is a strategically important market for us.

10. E&B: Surviving in the international market requires permanent investment in research and development. Other countries help and stimulate their exporters to invest in R&D and new production plants. Should our state provide more help in this field? Do you also have any suggestions about the state’s economic policies in general?

Zhivko Mukaetov:

Our dedication to growth and development and keeping pace with the latest trends in pharmacy made us invest more than €200 million in production plants, equipment, labs, technology, software, and human resources in the past 20 years. Investment in R&D is a prerequisite for a modern and competitive product portfolio, which helped Alkaloid position its brand worldwide.

In 2018 Alkaloid received government financial assistance supporting investment and revenue growth. This program honoured domestic investors equally as the foreign ones for the first time. This support for us was an additional incentive to invest in Macedonia. This program will be mutually beneficial - Alkaloid will increase and modernize its production capacity, and the government will benefit from new jobs and a stronger economy. The synergy between businesses and government should be a feature of any healthy economy.

On the other hand, in the support given to innovation and R&D, we are at a disadvantage compared to our international competitors. Therefore, I think that the government should start supporting innovation in the big companies as well, because, in addition to the innovation capacity, skills, and knowledge they have, they also pull many smaller domestic partners along.

11. E&B: The quality of human resources is another essential resource for sustainable development. Can you find appropriate personnel, qualified enough to work in a company such as Alkaloid?

Zhivko Mukaetov:

The image, values, and credibility of any company primarily depend on its organizational culture and people. Alkaloid will always serve as an example for top-quality processes, trained and motivated staff, standards compatible with global industry regulations, and highly competitive products worthy of worldwide availability. In the labour market, we strive to recruit the best candidates through multiple rounds of selection. In recruitment, we pay special attention to the quality of education and skills. We are even more responsible when professional staff is concerned. Unfortunately, recently on multiple occasions, we had many cases when we eliminated the job applicants even in the first selection round. The situation became worse in 2017 when we decided to start with our internship program. In 2018 we signed memoranda of cooperation with several national universities and high schools, and our HR department started working together with them in planning, adapting, and aligning their curricula for education and development of interns that suit our mutual needs. This stimulates the students' creativity, their personal and professional development and prepares them to face future professional challenges. We are currently discussing with the Macedonian and German governments to establish a dual education class in the medical high school under the auspices of both governments. We are also cooperating with the Swiss Embassy on the 'Education for Jobs" program and are considering establishing a knowledge and skills building academy within our company. Young people need just a little motivation to achieve excellent results. However, the education system, unfortunately, fails to broaden their horizons! Statistics indicate that there is a shortage of professions that correspond to the labour market needs, that staff is insufficiently trained and motivated, but we strive to create a sustainable positive change regarding the burning issues in society, at least in our immediate surroundings.

12. E&B: Question about burning issues?

Zhivko Mukaetov:

Since its independence, Republic of Macedonia has been facing various challenges. Pandemic aside, I think our society lacks critical thinking and priority of interests in general. I often see decadence in the people’s spirit and system of values. It seems that we live in a deeply politicized society where even the usual daily communication is about politics, which creates an atmosphere of absolute polarization and division. I think we would be more productive if we would put politics aside and respect each other primarily as people, neighbours, and fellow citizens. There are exceptions, of course, but society fails to recognize talent and praise success. On the other hand, it undeservedly worships false idols. Yet, critical thinking and respect are learned in early childhood, and we often witness outbursts of aggression in young people. Usually, it is because of accumulated dissatisfaction in the basic cell of society - the family.

Children are a reflection of their parents, and young people are an image of the circumstances in society, so I think home education and formal education are extremely important, starting from the most basic levels: kindergarten, elementary school, simple extracurricular activities, and so on. But again, unjustified and often partisan decisions yield poor results. Young people are leaving the country out of desperation, searching for better financial opportunities abroad, and if the domestic economy manages to increase its focus, it could give hope of a much better performance. I think substance matters more than form, and I have a fulfilling substance in my family and in the company I lead.