The €382m transaction, based on Atlantic Grupa’s winning bid in July, creates a regional multinational with annual turnover approaching €650m and a product portfolio mostly composed of brands known from the former Yugoslavia. “But we’re not selling memorabilia,” insists Emil Tedeschi, chief executive.
“Now we’re selling products to new generations born in Serbia, Croatia, Slovenia . . . not in Yugoslavia. And they’re having their kids and buying our products”, he told the FT in an interview last week.
The key to long-term viability, he adds, is “investing in brands, not appealing to nostalgia.” He cites the Slovenian soft drink, Cockta, a pre-war brand that has caught on again in the region. “People either like of dislike the taste. You can play a bit on retro-mania, but your original customer is getting older and older.”
Television advertisements position the Croatian-made drink mix, Cedevita, or the Serbian crunchy snack, Smoki, to compete against global brands. “It’s not all: ‘How nice it was in the 70s or 80s!’,” Mr Teseschi says.
Feelings about Yugoslavia are mixed anyway. The former Balkan federation, a founder of the Non-Aligned Movement, enjoyed higher living standards than any other communist country, even if these were fuelled by soft loans from the west. But economic deterioration preceded the violent 1990s break-up.
For many people in the region, bitterness still lingers. Yet when a good product comes onto the market at a good price, consumers rarely think too hard about its origin.
Droga Kolinska and Atlantic Grupa have highly complementary portfolios, in the sense of similar regional coverage with very little overlap of products, Mr Tedeschi says.
The Croatian firm started distributing Wrigley’s chewing gum while the war for independence still raged. Fast-moving consumer goods proved more profitable than toilet paper, especially with the glut of post-war humanitarian aid. Its the concentration on renowned “ex-Yu” brands came later.
Droga Kolinska comes with two strong coffee brands: Barcaffe for Slovenia and Croatia, and Grand Kafa (a post-war Serbian label) for the rest of the former federation.
The group’s brand portfolio includes strong local, regional and, increasingly, pan-European brands, the chief executive says. He also points out Argeta, Bosnian and Slovenian-made tinned pate, as a late-Yugoslav brand that has blossomed in recent years, with strong sales in Germany, Austria and Switzerland.
Atlantic Grupa’s aggressive expansion defies the trend of the depressed Croatian economy, which appears to be headed for an even worse 2011 than 2010. (Only strong tourism figures this year have staved off an Irish-style debt disaster on the Adriatic coast, some analysts suggest.)
Mr Tedeschi says he’s worried about his country, but not his company.
“Philosophically – and actually – we are an international company. Our headquarters is in Zagreb, and I, the majority owner, am a Croatian citizen,” he says. “But after the acquisition of Droga Kolinska, Croatia now accounts for no more than 1/3 of our turnover.”
Post-war Balkan retail giants have also tried to break out of their home markets, although the economic crisis has left them financially overstretched.
Atlantic Grupa went public in 2007 with the region’s largest initial public offering for a purely private-sector company, as opposed to a privatisation sale. Around 26,000 individuals and 150 institutions, including Croatia’s main pension funds, bought shares. The company has delivered growth for four years straight.
The company beat four prominent private equity funds in the last round of bidding for Droga Kolinska. Quick cash for the sale could stave off bankruptcy for the troubled Slovenian holding company, Istrabenz.
Atlantic five years ago bought a western European factory – for Multipower, the sports food supplement. It looked like a brave step for a Croatian company. “But generally speaking I don’t see this as that big a deal. Where you can find a market, whether Germany or Kazakhstan, and can generate profit in a transparent way . . . it deserves respect,” Mr Tedeschi says.
