Rookie capitalists against Real Madrid - Can DFG, Nectar, MK, Victoria, Agrokor, Podravka and Atlantic join forces?

When Director of Danube Foods Group (DFG) Slobodan Petrovic, the oldest participant in a panel on regional business alliances held on the premises of the Serbian Chamber of Commerce (SCC), said loud and clear that what impeded the merger of our large food companies, not everyone was glad to hear that.

The Balkan idyll, where Kostic advertises Pik Vrbovec in China while intending to sell his products in Turkey through Podravka, suddenly didn't seem so likely to happen.

And here is what Petrovic said:

- DFG has negotiated acquisition, sale and merger with almost everybody at this table – with Agrokor, Podravka, MK Group, Nectar, and Atlantic Group. And you know what – we've failed. We have failed because all of us are young capitalists and because everybody wants to be a majority owner or nothing. That wish we must overcome. Imagine what an industry that would be!

Domestic giants, European miniatures

A panel discussion on alliances in the agricultural and food industries was recently held as part of the Management Forum at the Serbian Chamber of Commerce. Aside from Petrovic, participants in this panel were also Enzo Smrekar from Droga Kolinska (Atlantic Group), Agrokor Executive Vice President Ante Todoric, Zoran Mitrovic from Victoria Group, Bojan Radun from Nectar, Podravka President Zvonimir Mrsic, Miodrag Kostic from MK Group, and Zlatko Bazijanec, director of AT Kearney.

(Slobodan Petrovic)

Everyone agreed that for some more significant success, especially while opening up more and more to the market where Nectar must know every move of Rauch, we must be competitive at any cost.

It is not hard to draw a conclusion that the merger of strong regional companies is gaining in significance because demanding and large markets, such as the EU and Russia, must be offered appropriate quantities of products in addition to high quality and acceptable price. Domestic giants in the world market are not far away from miniatures. Because, although Balkan kings of sugar, pates and juices stated that EUR 7 billion worth of revenues "were sitting" at their table, their rivals in the market marathon "weigh" between 200 and 300 billion euros each.

However, the question that remains is how bad is, and if it's true, what Petrovic said - everything is allowed as long as the ownership structure is let alone. On the other hand, even if that's true, that does not have to mean automatically that the deal dubbed "regional alliance" is not going to happen. One of the possible recipes for cooperation in the agricultural and food industries was given by Director of Droga Kolinska (Atlantic Group) Enzo Smrekar.

- I believe that we should work more on connecting with each other than on merging. For example, there is no need for all of us to engage in distribution, which is very expensive. Instead, we could unite and have a joint network. Besides, for companies like Droga and Atlantic Group, it would be very useful to join forces with "colleagues" in negotiations with retailers. I think we could achieve much better conditions in that way.

(participants in the Panel on Business Aliances, at the Management Forum)

Ante Todoric from Agrokor was of the same opinion.

- The market is dispersed, there are many small places, which is why the distribution is expensive.

Who would like to connect with whom

Zoran Mitrovic, president of Victoria Group, said he had nothing against Smrekar's idea.

- I believe that is one of the ways to confront large companies and compete with them. We wouldn't mind, given that our company would maybe be even stronger and operate easier - said Mitrovic.

He also revealed that Victoria had led informal negotiations with both MK and Agrokor.

Podravka President Zvonimir Mrsic too believes that a cooperation, even at the level of ownership structure, is a precondition for a success in the global market. On the other hand, he did not miss the chance to underline the importance of surrounding countries for the home of famous "Vegeta".

- As much as 70 percent of our revenues are generated in the region, and I can say that Podravka, practically, lives from the region. Conquering new markets is important, but it is never easy. For example, we are now penetrating the market in Turkey and in order to earn the first Lira in Turkey, that your product starts selling, you need to invest EUR 30 million. It is then clear why it is important that the company be as strong as possible.

(Enzo Smrekar)

European Union is a two-way street

Croatia, which is about to join the EU, will soon face new challenges. On one side, the grandiose world market opens to them, while on the other hand, a merciless competition comes along. Although it was announced that the European Union would try to persuade CEFTA countries to keep the lowest and zero duties on Croatian products after its admission to the EU, businessmen are worried. The CEFTA chair is slowly slipping away, while favorable foreign brands are definitely going to appear on shelves in Croatian stores soon. What to do?

- Leadership in our respective markets will not save us from the competition. Our region is small, we are all together as big as Istanbul. I can freely say that we are a local football club playing against Barcelona or Real Madrid. Our advantage lies in our knowledge of the market. It will be easier for us to adopt than for foreigners. All the problems they could face in the Balkans we have already faced and overcome - said Ante Todoric.

His fellow citizen and colleague Zvonimir Mrsic is of the opinion that the loss of CEFTA benefits could cost them a lot.

- Once we lose our CEFTA membership, entry to the EU will cost our food industry between 250-300 million kunas per year.

Our neighbors' "troubles" could be a benefit for Serbia, considering all the benefits from Mother Russia. However, if our wish comes true, this will not be some long-lasting benefit because the admission to the European Union is also something that we aspire to. Therefore, the Croatian recipe for overcoming these initial troubles brought by the membership will be of use to us sooner or later.

Who should help whom

Fortunately or unfortunately, Serbia does not have such troubles yet. That does not mean that we don't have our own problems. While politicians point their finger at businessmen, saying that we all must carry a burden of the crisis, businessmen claim that authorities should take a bit more care. Concretely, as they say, foreign countries grant incentives to encourage agricultural projects, thus making food prices more competitive, while domestic players cannot count on something like that. In the meantime, it seems that consumers suffer the most. However, nobody has asked them for opinion.

- We have taken our share of responsibility, we are working, producing, paying our taxes and want to grow bigger. What we need is an appropriate government framework, less bureaucracy and the transfer of inactive property to those who know and can do something with it. We do not ask for too much help, that is, neither more nor less than what our competitors have, and if the state provides that to us, these seven billions may grow into 17 or 70 billion euros - President of MK Group Miodrag Kostic says to eKapija.

Despite the vanity, we all constantly negotiate, Kostic adds.

Milica Stevuljevic