Travels around FMCG – Business Days 2012 – part 1

Around the World in Three Days was the title of this year’s Business Days conference, held in Hotel Pelion, Tapolca. A record number of more than 450 participants attended the event. On Wednesday morning Trade magazine’s Editor in Chief Zsuzsanna Hermann welcomed the guests and work commenced in the first section, dedicated to macroeconomic issues.

The first presenter was FHB Bank’s deputy-CEO Gábor Gergő Soltész, who stated that in the last four years investment activity slumped in Hungary, from 23-24 percent to about 15 percent. As a comparison: in neighbouring countries the same ratio is around 20 percent. This phenomenon drastically cut the country’s growth potential and banks became much more risk sensitive. Ferenc Karvalits, vice president of the Hungarian National Bank (MNB) reminded participants that the 4-percent growth in the early 2000s was only possible with serious indebting and after the financial shock of economic recession from 2008 domestic demand fell sharply. Another problem is that the activity rate of Hungary’s labour force is a mere 55 percent, while in neighbouring countries it is 60-70 percent. Dr Ákos Kozák, managing director of GfK started his presentation with the interesting fact that Hungarians spend more than they earn. How is this possible? Households find resources and use techniques which cannot be measured by official statistics, e.g. black economy, free work to help out each other, increased level of self-sustainment. He forecasted a 95-100 percent FMCG product consumption for 2012 (if compared with 2011) and stagnation for 2013. György Jaksity, president of Concorde Zrt. spoke about how the governments and central banks of different countries are able to stabilise their economies and induce growth. His view is that banks speak more than they act, but Mr Jaksity remains optimistic as in his opinion the current crisis forces badly needed changes in the attitudes of both society and economy. After lunch the representatives of retail chains discussed retail strategies. Norbert Csizmadia, secretary of state responsible for economic planning coordination in the Ministry for National Economy was the first presenter and he shed light on the efforts of the government to turn Hungary into a regional hub in Europe’s economy. He sees potential for growth in markets of the Far East and in implementing an economic integration in the Carpathian Basin. Judit Szalókyné Tóth pointed out that 91 percent of Hungarian consumers changed their spending habits in the last 12 months and 74 percent of them are buying cheaper groceries. Sales of food categories audited by Nielsen rose 5 percent in terms of value but declined by 2 percent in volume; average prices were up 7 percent.

After a decade and a half, the number of FMCG stores stopped decreasing. A roundtable discussion followed, which was dominated by three issues: sustainable growth in food industry, market players cooperating to optimise the value creation process and working together with governmental and non-governmental organisations. CO-OP Hungary Zrt.‘s president Lajos Csepeli told the secretary of state that Coop acknowledges the government’s measures but would like to see more thorough preparation work when it comes to legislation and more consultation with stakeholders in the retail sector. Mr Csepeli also told that Coop integrated 1,200 stores into a central IT system and launched the House of Hungarian Flavours concept to support small farmers. Miklós Vörös, regional director at Tesco Hungary spoke about the unused opportunities in the supply chain. The goal is to keep inventory levels low but to improve the availability of goods (just in time inventory). METSPA’s managing director László Hovánszky revealed that they started joint product development with both METRO and SPAR, and not only with PL products but also with ‘B’ brands. He also spoke about the significance of thinking together when it comes to annual negotiations with suppliers. Alíz Csűrös, expansion project director of Auchan feels that very often the government’s claims about retail chains suppressing Hungary’s agriculture are unjust. Her view is that the ministry could help to make domestic suppliers more reliable, which would also give a bigger chance for Hungarian products to appear on the shelves of foreign stores. Tibor Kujbus, managing director of Reál called attention to the threat that the new tobacco law will force many small shops to go out of business. He opined that the government should give priority to fighting VAT fraud. The second afternoon section analysed the chances of Hungarian food products on foreign markets. Moderator Dr András Köves stated in his presentation: the majority of Hungarian grocery products are unknown abroad and with the current low level of investment it is impossible to change this situation. Péter Biczó, PricewaterhouseCoopers (PwC) partner thinks that Hungary’s food industry is modern and export-oriented but the latter characteristic also makes the sector vulnerable. His view is that Slovakia could be a good target country for our export products but Slovenia is hard to conquer as local brands are strong and retailers’ goal is regional dominance. Gábor Ámann, sales director at Pick Szeged Zrt. introduced how big a challenge it is to be present from Japan to the USA. From their HUF 57-billion sales revenue (2011) meats’ share from export was 53 percent and 29 percent of meat products was sold on foreign markets. The next presenter, György Seregi, sales director of Bonbonetti outlined how the company, which exports to more than 50 countries, decided to change its strategy because of growing ingredient prices, the increase in VAT and the NETA (public health product tax): they signed and agreement of cooperation with Ukrainian confectionery giant Roshen, which includes turning Bonbonetti into an umbrella brand. János Arany, industry manager of Google spoke about how Google can tailor marketing to different markets and target groups. The company is more than a search engine now: it is part of an advertising network. Ágota Kiss, line manager with SGS briefly summarised how SGS can help in exporting. Synergon’s managing director Romulus Steinbinder highlighted the fact that behind every success story we find advanced information technology. On Thursday the morning section’s topic was ways of increasing consumption and it was suggested that the solution could be cooperation. Endre Fazekas, the CEO of Sió-Eckes was the moderator and he told that cooperation is an economic necessity and a strong market weapon. Unilever’s marketing director Péter Szabó introduced the way Unilever worked together with retail and Horeca units for increasing sales in the category – the result was two-digit growth. Györgyné Marosfi, the corporate relations director of Univer Product Zrt. illustrated the significance of cooperation using more examples. From Tesco Hungary sourcing director Ádám Lendvai elaborated on the issue of constantly monitoring consumer demand. They organised six regional forums for suppliers who were given the chance to appear with their products in regional and national Tesco stores. Master Good Kft. co-owner László Bárány spoke in detail about Tesco’s support in the form of guaranteed sales and a quality assurance system, with the help of which the two companies doubled chicken sales, currently selling in the value of HUF 7 billion a year. Krisztián Gergely, sourcing manager with METRO shared the difficulties of the fish segment with the audience and spoke about the need to increase fish consumption in Hungary, including the role METRO intends to play in this. Gyula Borbély, managing director of Jászkisér Halas sees great potential in the barramundi species, which they started to breed within the framework of a pilot project on 800m². They can deliver fresh fish to METRO stores in just 5 hours. Gábor Lemák, the president of the Mobile Wallet Association gave a presentation about mobile telecom companies and other sectors such as banks and card companies cooperating to convince consumers of the advantages of the mobile wallet. Tamás Antal, regional managing director of Mood Media reckons that sensory marketing is a good way of convincing shoppers to buy more when they are in-store. Dave Hodges, commercial director of Brandbank shed light on increasing sales efficiency with correct product data and online access. Their services will soon be available to retailers in Hungary. (To be continued).