Top quality products for local and foreign markets

Croatia is a young country. In formal terms, we gained independence in 1991. We did not have our own country for a long time – the last Kingdom of Croatia was in the 1400s. It is also true that we had a pretty tough period at the beginning of the 1990s with the separation of the republics from the former socialist Yugoslavia. Sadly, it did not work like it did with the Czech Republic and the Slovakia where they separated peacefully. Along with the toll in human lives, there was a huge erosion of wealth and industry was destroyed as well as houses and buildings. Croatia managed to recover from that period; however when Poland, the Czech Republic and Hungary joined the EU we lost momentum. We could not do it, even though those countries were beyond Croatia in terms of economic development. 
 

We are finally going to join the EU in 2013, and this is really important for us as a country and a nation. Croatia is not just geographically and economically part of Europe, but it is also culturally, historically and emotionally European. We are a small nation, so for us, it is extremely important to be part of the EU family. One should also consider all the pros and cons in terms of what is happening with Europe itself, though. 
 

Firstly this is a good push for all elements of Croatian society. Over the past ten years, Croatia has been prepared and is in line with legislation, standards and norms. We would be too optimistic to say that all segments of Croatian society were ready for EU accession, but constant improvements are standard across EU itself. For companies that are used to being subsidised and are not used to working on corporate governance and the quality of management for instance, it is going to be more difficult now. You cannot count on everybody; there are always winners and leaders. From our perspective, we see the EU as a big market with the potential to be better integrated and be partners with larger institutions. Today we are living in a global world with vast competition, and companies need to work on internal processes to increase competitiveness up to the next level. 
 

The EU can help, but nothing is going to happen automatically. However, being part of the larger community will enable us to benchmark ourselves better and collaborate without formal barriers to the institutions that can provide more funds and advice as well as cooperation. These are all opportunities and we are definitely going to make the most of them. You have so much focus on yourself without being able to grab things from the surroundings, but if you have a long-term strategy and vision, and if you can work on the environment more and understand that there are more opportunities and more potential, then I am sure that people and organisations who are capable will be able to cope and prosper.
 

I was elected as a non-member of parliament. There were only four of us – I was a member of the business community, there was a trade union representative, a university representative and a representative from the president of the State. The other members were all members of parliament, including the political opposition. We observed the work of the Croatian negotiation team. Different stakeholders took part, and information was passed onto the Croatian society through the representatives. It was such a complex process, and the majority of it was not real negotiations – it was about the adjustment of legal rules between the EU and Croatian legislation. But there were some areas in the agribusiness and the free movement of people and goods and other issues which were more complex, like shipyards, relationship with neighbours and Slovenian access to the open sea etc. 
 

I cannot say how much of an active role we had in that, we were not negotiators obviously, but for sure, through the parliamentary committee, every political party that is part of the parliament was involved, plus different stakeholders in society. It surely raised the transparency of the entire process, giving it additional legitimacy. 
 

Today we are one of the top ten companies in Croatia, including banks. We are the second largest private company in terms of turnover, with about US$850 million, employing 4,500 people in eleven countries. We have grown partially organically, and partially via acquisitions. Since 2001, we have acquired companies in Croatia, Germany, Serbia, Slovenia, Macedonia and the UK. All of them were acquired from private owners and companies that are listed on the stock exchange across the globe, which shows that all our growth was accomplished through a very transparent process.
 

Atlantic Grupa is today generating a quarter of its turnover in the Croatian market, about a half in the rest of the southeast Europe (SEE) region, and the remaining quarter is generated in the Western Europe, Russia and CIS countries. This shows that our business is not so dependent on the local community and local relationships, although Croatia is still our largest individual market.
 

We started the company with six people in 1991, and today we are a large company for Croatia and the region, although we are still quite small in European terms. We have excellent people with good interpersonal chemistry, and a great corporate culture. We have always had a very transparent way of doing business, which was proven once again late last year when we signed a very large financial transaction with EBRD and IFC as part of the World Bank and four large European banks. 

We were not obliged to refinance our debt of 307 million and the rate we agreed is lower than the sovereign rate for Croatia. This shows that the trust from the financial community and institutions is very high, and proves that we have high quality management, sound strategies, high quality corporate governance and transparency. 
 

True, we published it in line with EU legislation, much earlier than we were obliged to do so. We have also been given awards for investor relations; we had the largest private IPO (initial public offering) in the region over the past 20 years in 2007, and were soon recognised by East Capital as Discovery of the Year in 2009. Over the past two years we have received several awards for the best performing share and are still amongst the most liquid shares on the Zagreb Stock Exchange, although it is a tiny market.

It all proves the trust of the financial community, and we are very appreciative and proud of it. 
 

We could say that if Nestlé is the number one in the industry in the world, Atlantic Grupa is a small Nestlé in this part of Europe. We are in different FMCG (fast-moving consumer goods) segments, and we are the largest coffee manufacturer in SEE. We are the leader in savoury spreads in SEE, and also hold leading position in Austria, with a strong presence in Germany and Switzerland. We recently entered the Spanish market, and we are present in Sweden and Russia. 
 

With Multipower, we are the leading European player in the niche of sports food and supplements. We are number one in Germany and Austria and number two in the UK and Italy as well as Sweden. We have a presence in several European markets with the brand Donat MG, which probably has the richest source of magnesium in natural water. It has been on the market for 150 years already. We have knowledge of top-quality products, and we know the markets we are present in, particularly the regional markets.

We are probably better than our international competitors with all due respect to them, but we are also expanding our business internationally, with a selection of our brands in different markets. We cannot be expected to take our coffee brands to the UK or chocolate to Austria, because we do not see potential for such a large extension of the business, but there are business lines with high potentials and we are supporting their international growth.
 

We acquired Droga Kolinska two years ago in a half a billion US dollar transaction, which was the largest acquisition ever by any private enterprise in SEE. The process was very transparent where a Slovenian multibusiness company decided to sell its food and beverages division. There were 55 potential investors, 33 financial and 22 strategic investors. We won the process by offering the highest bid and the best strategic fit for the company. This was important because it was probably the first time in the recent history of Croatian-Slovenian relations, where a Croatian company acquired a Slovenian company without any bad press. We only have positive experiences as an investor in Slovenia. We helped soften political discussions, because we have proved that cooperation is possible. 
 

Today, Droga Kolinska has been fully integrated into Atlantic Grupa. The acquisition doubled the turnover and we became a very important employer in Serbia as well as in Slovenia. Today we all feel a part of the common success story. Within our organisation there are many people who used to work for Droga Kolinska in the past, and are now key managers within Atlantic Grupa. Our sales have grown by 4.5% last year and our revenues and EBITDA margin by over 10%. This was completely organic growth, without any acquisitions. 
 

We expect similar results to last year, by organic growth. Our first target is to further internationalise the business. We are strong in the region, equally in individual markets in Croatia, Serbia, Slovenia, Bosnia-Herzegovina and Macedonia, with standardised procedures. By expanding beyond the region does not mean we are escaping the region, but we expect more growth in the South Pacific and Russia and CIS countries in particular. For example, in Russia and the CIS countries our turnover at the moment is about 30 million euros and in four years’ time we are aiming for 100 million euros. This is strong growth. 
 

Also, through the reorganisation we have established strategic international distribution units, and we have started hiring international colleagues to help us boost the planned growth. We are building a team, which is going to facilitate our penetration to new markets and we will be stronger in the Austrian, German, Swedish, British and Italian markets. We are focused on international growth. 
 

We really believe that it is important to be a good citizen, and we try to give back part of our profits and invest them in communities where we make it. There are several examples that prove that Atlantic Grupa as a company is a good citizen. For example, in Bosnia-Herzegovina we have long been a partner of the Sarajevo Film Festival, probably the most important cultural and even social event in Bosnia-Herzegovina. The magnitude of this festival is beyond the red carpet and film stars coming to Sarajevo. We are supporting exactly the projects that help develop long-term sustainability, such as the Sarajevo City of Film, a project where the film festival gives opportunities to new talents to make short movies and have their first professional experience of making films.

There are only two criteria for young filmmakers – the film has to be made in Sarajevo, and the teams of screenwriters, directors, artists, editors and production participants have to be multinational. We are very proud, because some of these have very good results. 
 

In Croatia we recently opened a basketball training centre, a complex of facilities for youngsters and professionals. We are involved in professional and also recreational sports, that help move kids from the streets and help them develop a healthy life style, give them opportunities in the right environment to practice and be supervised by good teachers and coaches, and help them to become good citizens. We provide around 1,000 kids with a top quality environment to practice the sport. 
 

There are several projects going on; many of which are small. But these small activities are important. You do not have to do miracles everyday – you have to be human. We are doing lots of things that we do not even talk about, especially when it comes to supporting a group of people or a segment of society that is somehow impaired, needs help and funds, and in many occasions we can help to increase the quality of life amongst this groups of people. 
 

The nation showed maturity with the election of Mr Josipović, choosing an educated president who is very wise and decent. A president is, though, not an operational institution such as the Government. The president represents the country, commands the army and co-leads foreign affairs. The president can suggest solutions, but he is not in charge of economic development in the country. In an effort to help in a difficult situation and provide a balance, he decided to invite several people from the university, consultants and the real economy sector into his Economy Council which meets on occasions by Mr President’s invitation. It is a sort of a think tank, we discuss matters from all the different perspectives and it is then up to the President to decide what he is going to take from this advisory. I think it is always good when politicians show an interest and listen. 
 

The awards are important, not primarily to boost one’s ego, but it is particularly important for team spirit, because it shows that we are doing a great job as a team. I did not accomplish all these things by myself; I could not have. We have recognition from the media and our colleagues and independent juries. It is a good sign and a good feeling, showing that our vision of entrepreneurship stands solid, backed by results and recognition of others. 
 

I believe that there is great potential for Croatians and Brits to cooperate. Croatia is a prospective country for investment, and the most attractive sector will probably be tourism. Many Brits are coming over to Croatia in the summer already. 
 

I also see a lot of potential for families purchasing second homes here, as well as investment in tourism and services that support the industry. There are also good prospects in the software services and the pharmaceutical and food industries. Croatia has a lot of knowledge in the shipyard industry, and I can see opportunities for cooperation in some specific fields in that area. Also, in the energy sector. Generally, I’m not a fan of stereotypes of people and nationalities, but I think we can that Croatians are warm people and they like foreigners. There is a long relationship between the two nations, the Brits have been in Croatia since 1944 when Fitzroy Maclean was here in the Second World War, and now we are living a new century; we have to find new bridges to connect the countries. 
 

On average, our people are more than honest, and I would say that they are transparent. Every piece of foreign direct investment (FDI) coming from the UK will be more than welcome here, and I really believe that whoever comes here is going to have a good time. If you interview expats in Croatia and ask them what it is like living in Croatia, they will say that they like it. Even when their assignment ends, they want to come back. They want to buy or rent homes because the climate is good, food as well and water is clean. Croatia is small with good transport links via international airports and perfect highways. We are a small community and you feel good. Croatia has the potential to become a kind of European California where people live with a good quality of life.   
 

I find it good. The UK Government fully supports Croatia. You can witness that your project have been well received by key players in Croatia. These initiatives are always good. Today if you ask average Englishmen about Croatia, they will not know much about it. They will talk about holidays, but we want this reaction from potential investors as well.
 

Croatia has an issue with economic development. There are big debates within Croatian society, and the Government and the opposition, as well as different social groups in terms of how this country should develop. Croatia needs reforms for future development. EU accession was and still is one of the catalysts that will speed up these structural reforms. Structural reforms are not popular anywhere because they hurt. They are hurting everybody. The moment you start to change, people feel insecure and do not feel comfortable. I would say that the EU could be a facilitator in that regard, but the EU will not help us if we do not help ourselves first internally. The EU also has much greater issues than the Croatian reforms, like Spain and Italy, and relations with Russia and Turkey. 
 

It is very hard to tell what is going to happen. People talk about the budget deficit and what we have to do with FDI and privatisation etc., and all of these concepts are talked about, more or less. But I would say that you have to instil trust in the citizens. One cannot promise 50 or 60 year olds so much; but benefits for their children or the next generation are considerate. People will be able to make sacrifices for seven to ten years, because their kids or grandchildren will have a better future. Our best young people are going to be offered jobs everywhere, in three years’ time we are going to become a member of Schengen and our best professionals are going to leave if we cannot offer them to make a better future here. This is also a challenge in a way.