New times and a new world (Part 1)

The number of participants at the joint Business Days conference of Trade magazin and Lánchíd Club, held at the end of September each year, is growing from year to year. On the first day the topic was macroeconomic issues and the event’s host, Zsuzsanna Hermann welcomed participants. József Tarsoly, the managing director of Coca-Cola Hellenic and moderator of the morning session took the floor. He used television footages to evoke the past couple of years and he highlighted that the signs of crisis had been palpable in Hungary since 2006. Mr Tarsoly asked György Jaksity, the president of Concorde to speak about global macro trends. He told that we are living in a 2-speed world. In the BRIC countries demographic conditions are favourable and due to constant development economic growth is high – by 2050 they will most probably join the USA in the club of superpowers. At the same time, developed countries struggle with bad demographic conditions and debts, plus economic growth is low too. Hungary is a mixture of the two country types mentioned above. Our country is characterised by a reluctance to welcome immigrants, a low level of labour activity, debts, and problems in healthcare and the pension system. Dr Béla Fischer, the president of the Sugar Product Board and Sugar Industry Association moderated the afternoon session and he started with surveying the main regulating elements of agriculture and the industry. Dr Zsolt Feldman, deputy state secretary of agriculture at the Ministry of Rural Development spoke about the ministry’s goals: preserving jobs in the country, increasing the level of employment, manufacturing products with a higher added value, improving productivity and competitiveness. He told that developing countries are new market for us, but at the same time they can also become our competitors. Income should be made steadier in agriculture and a firm infrastructural, financing and risk management background must be established. According to Dr Gábor Udovecz, general director of AKI the world of agriculture is developing in several directions. In Hungary there are only 59 large farmers, despite that efficiency of production increases with farm size. In the international trade of mass products the EU is not competitive and Hungary is below the EU average. Therefore only highly processed, special products and those with a protected geographical origin can be successful on both the domestic and the external market. Mr Udovecz also spoke of the wine sector and we learned that per capita wine consumption fell by 5 percent in the last 8 years in Hungary. The sector is still characterised by a lack of strategy and high production costs. Agricultural economist Dr György Raskó informed participants that a farmer in the USA produces three times more agricultural GDP than a farmer in the EU. Hungary could be in a better position because geographical and weather conditions are good, but a lack of integration prevents us from realising our capabilities. Gábor Soltész, president-CEO of Ostoros-Novaj Wine was of the opinion that the Hungarian wine sector could easily end up as the sugar sector. Fragmented ownership structure, lack of professional competence and cheap import wine all contribute to the bad performance. Zoltán Gyaraky, head of the food processing department at the Ministry of Rural Development introduced the organisation structure of the ministry and analysed the status of food industry in the European Union. He emphasised that within the processing industry food and beverages are the number one in the EU; Hungary’s contribution to the production of EU-27 is 1 percent. This year the government will elaborate a comprehensive and progressive strategy for the period until 2020, in cooperation with market players. Györgyné Folláth, the managing director of the Federation of Hungarian Food Industries stressed that the number of employees in the food sector and production plunged by one third since Hungary’s accession to the EU. In the future Hungary should try exporting products with a higher added value, instead of exporting base materials. Péter Feiner, president of the Hungarian Trade Association spoke of retail’s 12-percent contribution to the GDP and of the overregulated environment in which legally operating units and retail chains have to work. He is convinced that in their minds consumers are optimistic – hopefully in the next stage this optimism will reach their wallets. In the evening participants took a break and relaxed at the garden party in the heated tent, testing the products of Matheus Pálinka and Ostoros-Novaj Wine. On the second day Zoltán Poór, president-CEO of Pannon-Mill was the moderator of the morning session. He told that instead of routine solutions market players have to be creative and pro-active. Judit Szalóky-Tóth, Nielsen’s managing director gave an overview of consumer expectations and FMCG trends in Hungary and Europe, using the latest survey results. She told that the consumer confidence index was moderately growing in Hungary, but it did not yet reach the level where volume growth would start as well. Private labels managed to increase their market share, but top brands kept their leading positions. GfK’s managing director, Ákos Kozák tried to answer the question ‘Are we good enough in crisis management?’ He told that unique phenomena took place in Hungary during the crisis, therefore it is difficult to tell whether the usual 8 quarters will be enough to restore the original level of food consumption after the crisis ended. Modern consumption structure will be established in Hungary around 2020, instead of the formerly scheduled 2015.Gábor Dávid, Metro’s customer management director lead the project of establishing a matrix organisation: they analysed the characteristics of main consumer groups and based on the results they defined different customer segments. Products, prices, services, promotions and communication were all tailored to these segments’ needs. Sales director György Óvári summarised what Metro thinks an integrated food and non-food wholesaler is like. According to Per Bank, Tesco’s CEO the same global trends affect all countries, only their spreading intensity and speed are different. However, special local characteristics also have to be taken into consideration to meet the demand of local consumers. Gábor Dolmányos, Tesco’s hypermarket operational director drew attention to the fact that they are working with more than 800 Hungarian suppliers and exporting private label products to other countries in Central Europe. They know from their survey that 40 percent of shoppers choose Hungarian products because they trust them more, while 26 percent buy Hungarian to support the Hungarian economy. In general consumers consider those products to be Hungarian, which are made in Hungary. A round table discussion closed the morning session, where all retail chains were represented. All participants agreed that their relationship with both suppliers and customers have to be reconsidered.