Warning! Traffic diverted! – Business Days 2009 (Part 1)

By: trademagazin Date: 2009. 10. 27. 08:00

This was the sub-title of the joint Business Days conference of Trade magazine and Lánchíd Klub on 30 September-2 October in Tapolca. The venue was decorated with traffic signs – symbolising the complexity of orientation in the world of economy. This annual gathering of experts from different FMCG sectors broke every record, since 40 companies contributed to organising the conference and 352 participants registered. Zsuzsanna Hermann, Trade magazin’s editor-in-chief welcomed participants Wednesday morning. She emphasized that the crisis changed everything, including conditions in the milk sector, this year’s special guest. “New traffic regulations. Drive wisely!” was the motto of the morning session, moderated by József Tarsoly, the managing director of Coca-Cola. In his introductory presentation, he analysed the economic situation of the world and Hungary. He told that the main problem domestically was the budget deficit, unpaid taxes and corruption, and the numerous incalculable factors at the time of crisis. Finally, he asked the two guests to provide a macroeconomic analysis and to present some kind of prognosis to the participants of the conference. György Jaksity, the president of Concorde pointed out the milestones in the development of the crisis and its speciality: the disappearance of loans. American consumers’ level of consumption cannot be compensated by drastic growth in China and India. Economist Dr György Matolcsy sketched up a possible way out. In his opinion, our problems are rooted in the disappearance of 1.5 million jobs after Hungary’s accession to the European Union. Therefore, the task now is to create jobs, which would form the basis of economic growth and pave the way for a balanced economy. Decreasing the level of bureaucracy, a tax reform, a new energy and agricultural policy were also unavoidable. He talked about the workshop he had organised to solve the existing problems with the help of 100 experts (economists, engineers, sociologists and scientific experts). Dr Imre Tímár, owner-managing director of Tanner Trade, moderated the afternoon session. He spoke about the past and present of the milk sector. Consumption is stagnating in Hungary, 177 l/person/year, while in the European Union it is 253 l/person/year; demand for Hungarian products needs to be increased. In the European Union, the milk quota system will be phased out by 2015, so we have to be prepared for the invasion of other, more effective milk producing countries. Péter Szautner, marketing and business development director of FrieslandCampina Hungaria gave an overview of the sector and highlighted that Hungary was only able to use 85 percent of its 2 billion-litre milk quota. He thinks that the solution for processing companies could be improving their cost efficiency, investing in brand building and promoting consciousness and brand loyalty among consumers with campaigns. The company rationalised its portfolio and with 4 brands (Pöttyös, Milli, Completta, Oké) in 8 categories they are stable market leaders now. Gerbrant Redner de Boer, the CEO of SOLE-MIZO stated that dairy products have become mass products and private labels were getting stronger. Import is on the increase and export cannot grow. He said that it was not fair to expect patriotism from consumers when they are poor. The government needed to define the lines of development for the dairy sector and intervene when necessary. Mr de Boer’s presentation was followed by the arrival of the Minister of Agriculture and Rural Development, Dr József Gráf, who came straight from a government meeting. He told that since 2005, 92 percent of EU-funding was used by Hungary and that agriculture generated 13 percent of the GDP, employing or affecting the lives of about 2.5 million people. While 2008 was a good year for Hungarian agriculture, 2009 brought disappearing loans, financing problems and a shrinking export. Food industry declined and generated loss, the milk sector was in a bad condition (from 16 October the government started paying subsidies to farmers). The Competition Authority gave a red light to the Code of Ethics, so this complex issue is now in the hands of MPs. Many in the audience were afraid that Parliament’s decision was not prepared enough. Gábor Antal, the CEO of Hód-Mezőgazda Zrt. spoke about the lack of effective interest representation and lobbying by the milk sector. In his view, the solution for the problems would be horizontal and vertical integration: cooperation in selling and processing by producers, like Alföldi Tej Kft. does it. He told that Hungarian milk production could be ruined in a year and we would never be able to rebuild it. Dr Gábor Udovecz, the director of Agricultural Economics Research Institute spoke about a high level of milk yield, but a low level of consumption in Hungary, compared with the EU average. A good division of labour by producers and regional processing power would provide the sector with room for development. Kornél Saltzer, Spar’s managing director started his presentation by looking back at 1989 and examining agricultural production, processing, the food industry and retail. The political transformation made agriculture collapse and these negative changes resulted in a fragmented production structure. Despite a decreasing production, food product retail sales keep growing, with both export and import levels increasing. Black and grey economy has a 30 percent share. Instead of demonising others, we have to concentrate on possible ways out – said Mr Saltzer. We need to rediscover and stabilise the domestic market before moving on to foreign markets. For this, the right volume and quality of products, reliability, innovation, brand policy and the elimination of the black market are needed. The evening continued in a pleasant environment at the grill party, where a surprise programme, wine, and pálinka tasting guaranteed the perfect mood. István Matus, the operative director of Szentkirályi Ásványvíz moderated the morning session on the second day. In his opinion, the safest way to a destination was on the main road – following the strategy. He told that the number of shops was decreasing and 30-60 percent of sales were realised in promotion. He thinks that the time has really come for category management. Judit Szalóky-Tóth, Nielsen’s managing director told in her presentation that the crisis changed consumers: they became more conscious. Nielsen’s international BLOG monitor indicates that the crisis became less important news. Consumption did not fall, consumers try to keep up the volume by spending less on consumer electronics, clothing, travelling and HORECA, without cutting down on everyday shopping. Instead of low prices, they look for the best price/value ratio. The market share of supermarkets and discount stores grows above the average in retail; the same is true for private label products (both trends started before the crisis, though). Ottó Burger, CBA’s sales director said that retailers were reacting rapidly to the changed behaviour of consumers. A good example for this is the appearance of Tesco Express and CBA Príma networks. Príma stores meet the highest consumer demand and offer traditional, locally relevant products to shoppers. CBA was able to keep its position as the number two retailer; now the company plans to launch a discount store chain, named CBA Cent. Hungarian chains like CBA feel responsible for small shops and offer them an opportunity to survive. Ákos Kozák, the managing director of Gfk Piackutató gave a presentation about rapidly changing consumption habits in Europe and Hungary. We are falling behind in terms of GDP and PPI indicators, therefore reaching the average living standard of the European Union will happen later than expected at the time of accession. The present economic crisis is unique and difficult to model. Savings grow and fewer loans are taken out, while the willingness to purchase is oscillating, but moderately up since the nadir in March. Private consumption in Europe hit a historical low, with HORECA, health services, clothing and entertainment suffering the most. In a few years, family expenses (overhead charges) will be the biggest item of expenditure by Hungarian households. People tend to spend more time at home, as they look for sense of security and focus more on self-sustainment.

Related news