Ready, steady, go – Hungary! (Business Days 2014, Part 2)

In Thursday’s first section the topic was the interrelation of agriculture, the food industry and retail. Zoltán Házi managing director of the Budapest Wholesale Market expressed his concerns about the domestic market: those who can’t produce for export are either stagnating or they see their positions worsening.

György Vámos, general secretary of the National Trade Association (OKSZ) opined that the government’s policy makes life difficult for businesses in all three sectors. He told that if compared with 2006, the volume of retail contracted by 8 percent in 2013. From the three sectors agriculture is in the worst position, especially crop farming. ÉFOSZ secretary Réka Szőlősi took the floor next, who shed light on the fact that the food industry isn’t only stricken by falling demand but also by the fact that politics blame the sector for the negative trends in public health. She emphasised that statistics show really well, the number of overweight people isn’t primarily growing because consumers eat salty snacks, but because of their lifestyle in general. ÉFOSZ’ new initiative is a scheme of voluntary pledges: food industry enterprises can join the initiative to make consumers eat and live more healthily. Nestlé was the first company to join the programme told Györgyi Gyovai, customer communications and marketing director of Nestlé S.A. This year the company defined ten nutritional commitments they wish to meet. One of the key areas is product innovation, the company pledged to add minerals and vitamins to tasty basic products, thereby improving the quality of food people eat. The director pointed out that for them internal communication is just as important as external, so with the participation of dietitians the company is organising educational training programmes for Nestlé workers. This year the VIP sector of the conference was the milling and baking industry. Two experts moderated the roundtable discussion, Pek-Snack managing director István Justin and Goodmills Group managing director Zoltán Poór. The presentation of Dr Zoltán Lakatos, the president of the Hungarian Grain and Feed Association introduced the high-level concentration that occurred in the Hungarian milling industry in the last 15 years. He thinks this process will continue as the current production capacity is still 50 percent above the level the domestic market’s needs – because of this competition is fierce and prices are going down. He reiterated that the government should reduced the VAT on flour from 27 to 5 percent. József Septe, the president of the Hungarian Bakers’ Association told in his presentation that there are about 1,100 Hungarian-owned enterprises in the baking industry, for which the appearance of foreign – mainly Albanian – bakeries causes a big problem. To make things worse, a growing proportion of consumers are buying cheap baked goods only. Bakers are stuck between retailers and cereal producers, and it would also be crucial for them to cut the VAT on basic food products. Tamás Éder, president of the Hungarian Chamber of Agriculture (NAK) expressed his opinion that in local baked good supplying small and medium-sized bakeries have played and will play an important role. Ferenc Blázsik, owner of Sikér Zrt. said that the milling industry needs to join forces with the baking industry. Márta Szilágyi, president-CEO of Goodmills Zrt. told that the optimal situation is when flour and wheat prices are changing together, but there are periods when the price change goes separate ways – this is the time when life becomes hard in the milling industry. Ilona Ludászné Máté, the director of Calypso Plus revealed that in most bakeries 60 percent of sales is realised by 4-5 products with very low profit margin or in certain case with loss on them. János Galántai, Pek-Snack’s managing director shed light on the fact that many bakers are afraid to increase prices, because there is so much free capacity in the sector that they might lose their position as the supplier of retail chains, as another company would be willing to produce at lower prices. In the first half of Thursday afternoon the Brand Goods Association Hungary hosted the first section, where the moderator was the association’s general secretary, Zoltán Fekete. András Gyenes, managing director of Unilever Hungary was the first speaker. He introduced the new stages in the company’s Sustainability Plan, the realisation of which started back in 2010. Unilever drastically reduced the calorie-content of their ice creams and cut the trans fatty acid in their margarines, they surveyed the heath condition of employees and their new deodorant packaging has 25 percent smaller ecological footprint. Mike Nixon, the managing director of Nestlé Hungária Kft. spoke about the importance of creating values together. He announced that by 2016 Nestlé will give work to 10,000 people below the age of 30 and will also create the same number of trainee positions. In Hungary they will have 180 trainees and 150 employees younger than 30 by 2016. Joris Huijsmans, general manager of Heineken Hungária expressed that they believe in the concept of inclusive growth, which takes into consideration the needs of the state and society too. They also work on creating brands which aren’t simply lovable but adorable: this can only be done with programmes and activities which are valuable and special at the same time. Adrian Cernautan, managing director of Coca-Cola Hungary Services Kft. gave a presentation about how they try to fight obesity. Since 2008 they have been indicating calorie content on products, they have introduced low-calorie drinks and have stopped targeting children with ads. The company also heavily promotes the importance of physical exercise. Work continued in the afternoon with the non-food section. Ágnes Szűcs-Villányi, retail service manager with Nielsen gave the keynote presentation. She brought the good news than in 9 from the top 10 household chemical and cosmetics categories they measured both volume and value sales growth. Consumers most often purchase these categories in drugstores and hypermarkets, but the growth is rooted in the discount store channel. After a long time the share of sales in promotion dropped for the first time, from 55.4 percent to 52.8 percent. László Varga, sales manager of Henkel Beauty Care revealed that at Henkel the innovation rate is 40 percent, which means that it affects almost half of their portfolio in a 16-month period. Henkel’s experience is the promotional pressure is growing. Szilvia Brodár, Unilever’s customer marketing director called the audience’s attention to the special communication used by Dove, and talked about the important role of the brand in making women more confident. Target Sales Group managing director Balázs Tóth warned that these days consumers know really well which product ingredient they don’t want to use, for instance many are afraid of parabens. These consumers are happy to find TSG’s Inecto products which are paraben-free. Zoltán Venter, the managing director of SCA Hygiene Products pointed out that due to the growth of the discount store channel, where the product assortment is narrow, the role of specialist shops and drugstores is expected to become more important. The lower proportion of sales in promotion is the result of the same trend. From the retailer side László Hovánszky commented on what has been heard. He disapproved of the fact that all advertisements are the same and said that innovations don’t really bring anything new. On Thursday work ended with the Trade Marketing Club meeting. POPAI Hungary Association president Ágnes Csiby and general secretary Ildikó Kátai moderated the meeting, where the guests were Attila Katus, former aerobics world champion and owner of the Katus Body and Katus Food brands, and sports manager and Budapest Jump organiser Stefano Favaro. Mr Katus spoke about what his career as a professional athlete taught him that can be used in business as well. Mr Favaro used to work for the Benetton team and he shared his experiences in marketing communication and sports sponsorship. At the Business Days conference Friday is traditionally about communication. The section’s moderator was communication expert and former television presenter Szilvia Krizsó. Dr Gábor Laki, the director of PricewaterhouseCoopers gave an overview of the regulatory framework and the latest measures. He went into great detail about the advertisement tax that entered into force on 11 August 2014. He made it clear that net sales form the basis of the advertisement tax, but added that the question is: Which category own-purpose advertisements and directly related costs fall into? Katalin Miczinkó, sales director of Ringier introduced how they reported from the football World Cup in Brazil, in close cooperation with sponsors. Prize draws and games were also used to engage people in the activity, and it was a great result that website visitors spent almost 10 minutes a day with World Cup content. János Arany, sales and marketing director of Ebola Play summarised how to advertise online efficiently. He told that 20 years ago banners’ click-through rate was 78 percent, by 2000 this dropped to 9 percent and today it is 0-0.2 percent. This shows that banners need to be made playful and interactive. In the second part of the communication section the focus was on stores and the first presenter was Dávid Kétszeri, customer service director of GS1 Hungary, who spoke about the advantages of SafeBrand. He told that QR codes on products are only useful if their contents are credible, accessible, updated and optimised for mobile too – GS1’s BrandBank offers all of these. Tesco’s area director Miklós Vörös emphasised that more and more of their customers use online and mobile platforms. Spar’s head of region Lajos Papp mentioned that customers are looking for answers to increasingly complex questions and by using new technology they can find them. DS Smith PackRight Centre manager Attila Takács introduced the PackRight system, which is basically a flexible methodology for taking into consideration the needs of the whole supply chain already in the designing period. Judit Molnár, the managing director of Win-Store Media called attention to the dynamic expansion of digital in-store communication. One of her examples was a Nike store where 470 digital posters and many other tools, videos and a running machine make shopping more fun. The Business Days conference closed with a conversation between Tibor Benedek, the coach of the men’s water polo team, László Benedek, commercial director of Kaiser Food and Zita Tóth-Csanádi, deputy CEO of Univer Product about success, motivation, support, perseverance, trust, faith and long-term engagement