Srecko Nakic, Deputy Chairman of Atlantic Group Management - We will not sell Serbian brands

(Srecko Nakic)

It is good that Atlantic Group has won the "race" for Droga Kolinska, parts of which are Grand prom, Soko Stark and Palanacki kiseljak, because we intend to develop all production capacities and individual brands we've bought. We are not thinking about selling any part of the business and that is what makes us significantly different from all other bidders for Droga Kolinska, which were mainly investment funds that take over companies in order to sell them after some time, Srecko Nakic, the Deputy Chairman of the Management of Atlantic Group for Droga Kolinska division, says in an interview for eKapija.

- We are here because we want to develop the brands of Droga Kolinska, which is what we have been doing with all previous companies we've taken over to date. Upon our acquisition in 2001, Cedevita has grown into a respectable brand. Owing to continuous investing, all segments of Cedevita's products have been additionally developed and they have entered new markets and new channels of distribution. Cedevita is now well-known all around the region. The same has happened to German Multipower and all other acquisitions we've made. By taking over Droga Kolinska, Atlantic has become the second largest food company on the territory of former SFRY, which is an excellent position for our entire product portfolio.

In an interview for eKapija, Srecko Nakic stresses that the primary tasks of Atlantic Group in 2011 are: quick and efficient integration of Droga Kolinska, strengthening of the regional distribution network, and export of products to Western Europe and Russia.

eKapija: You took over the management of Droga Kolinska in late November. What was the situation at the time and what were your first steps?

- We were already familiar with the operations of Droga Kolinska. The acquisition was well-planned and we bought the company because we thought what it did was good, but what additionally surprised us was the presence of a large number of positive and quality people at the company. It is clear that the brands we have taken over are of high quality and have great prospects, while we also see plenty of space for the future growth. The first steps are aimed at implementation of synergies through a joint appearance in the market because both company had their own direct sales networks, which we are now trying to merge into an optimal sales team. That will be finished on April 1 in all countries of the region where Atlantic is present.

For the sake of simpler and more efficient management, Atlantic Group has generally organized business operations on the basis of division principle. Upon the acquisition, Droga Kolinska has been incorporated into the system of Atlantic Group as the fifth division, while other four are: distribution, health and care, sports and active nutrition, and farm. The newly formed division Droga Kolinska has five ranges of products in its product portfolio: coffee (Grand Kafa, Bar kafe), snacks and confectioneries (Soko Stark), delicatessen spreads (Argeta), soft drinks and water (Donat Mg, Cockta, Jupi) and baby food (Bebi). The biggest share of products in that portfolio - coffee, snacks and confectioneries, Cockta and Jupi drinks, as well as Karadjordje water, are produced in Serbia by Grand Kafa, Soko Stark and Palanacki Kiseljak. Donat comes from Rogaska Slatina, while Argeta pates are produced in Isola and Sarajevo. Therefore, by taking over Droga Kolinska, we have got brands that are on the top of the list of the most recognizable and top-quality Serbian and regional brands, some of which, such as Argeta, Donat and Cockta, also have a potential for the EU market.

eKapija: How much will the product portfolio be changed? Will any of Serbian brands cease to exist?

- We are absolutely not thinking about stopping the production of any brand. There are some changes in the portfolio of products, but only through certain improvements, which are a regular part of the job - Soko Stark's waffle products have already been redesigned and can be found on the shelves, while we also plan to launch some new products. In addition to water, Palanacki Kiseljak also produces Cockta and Jupi drinks. Cockta achieves record results in a very tough competition and its sales have grown by 60-70% over the last five years.

eKapija: Do you plan some new investments in the market of Serbia?

- Over the last five years, tens of millions of euros have been invested in the production capacities of Droga Kolinska, primarily in the automation of production and packaging. Such investing in the development of production, brands and sales will definitely continue. For start, we have approved investments in the modernization of existing capacities in 2011. People at Palanacki Kiseljak are working on the improvement of capacities. Some lines are being upgraded at Soko Stark, while some new ones have already been introduced. Automation of the packaging process and modernization of the production at Soko Stark in the last five years have resulted in greater capacities and the highest level of protection of the health safety of products.

eKapija: Are products from Serbia going to be in higher demand in Croatia?

- For various reasons, the brands of Droga Kolinska are not present in Croatia as much as they deserve. In order to buy products, consumers must be satisfied with their price-quality ratio and, finally, they must be available. For example, Smoki is recognized in Croatia as the "generic brand for flips products", but it has not been available as much as it should have. That means that there is a chance for a big growth and we intend to work hard to achieve that. When it comes to Stark, another product that can be found in Croatia is chocolate banana. The market shares of both brands are today insignificant, but once they enter big market chains, which is the subject of our ongoing negotiations, their shares will grow significantly. As far as coffee is concerned, that is more of a local, traditional category, but if we analyze the overall shares in the market of former Yugoslavia, Grand Kafa ranks higher than all three other manufacturers. Last year, Grand Kafa increased its market share in the market of Bosnia and Herzegovina and became the No. 1 in Macedonia for the first time ever.

Therefore, we will definitely improve the presence of Serbian brands in Croatia, as well as in the region. Soko Stark produces about 25,000 tons of confectioneries and exports approximately 30% of them. In the category of flips products, Stark in the leader in Serbia, with the market share of over 50%, and it achieves record results in all markets. By expanding the portfolio of Najlepse Zelje brand in the category of chocolates, we have made it possible for that domestic product to become the best-ranked in the market of Serbia.

eKapija: Grand coffee is one of the most expensive in the market of Serbia. There are already some private brands that are much cheaper. How do you fight with such competition?

- Premium brands, one of which is Grand coffee, will always find their way to the buyer. The price of Grand coffee is in proportion with its quality. Besides, we also have Bonito brand in the category of black coffees and its price is much lower.

eKapija: Price of raw materials is growing. Is there going to be an increase in prices of your products?

- We will try to keep the prices at the level our consumers expect from us. However, the price of coffee hits record high in the last 30 years, countries that supply cocoa are in a big crisis, the price of sugar is growing, business environment and macroeconomic situation are quite unfavorable, so that we will have to think about correcting our business policy in case conditions become even worse.

eKapija: Do you plan to buy some other company in the region?

- Not in the near future. We are now focused on Droga Kolinska and overall operations of Atlantic Group. The most important is to unite business process, exploit all planned synergies and focus on brands and market.

eKapija: Would you be so kind to present us your financial results for the year 2010?

- Atlantic Group registered a total revenue in the amount of HRK 2.3 billion (about EUR 310 million) in 2010, which is 3.6% more than in 2009, while the net profit grew by 10% and reached HRK 106.8 million (EUR 14.4 million). Atlantic Group, without Droga Kolinska, sells 55% of products in the market of Croatia and the rest in international markets. Germany was the biggest foreign market last year, while the biggest sales growth was achieved in Italy (15%). Together with Droga Kolinska, Atlantic Group registered a revenue in the amount of HRK 4.5 billion, 82% of which came from the regional market.

eKapija: What was your personal challenge when you accepted the new position?

- My business motto is that things in a business do not depend on one man and my biggest task is to give people a freedom in what they do and what they are responsible for, to try to understand their business challenges and help them understand that they also decide about the segment they are dealing with and the company's development. As one big team, we can try to do as much as possible.

M.K.