univer euphoria or euphobia · 2012. 1. 10. · univer swot 60 year old hungarian company market...

EUphoriaEUphoria or or EUphobiaEUphobia??

Hungarian company and its challenges Hungarian company and its challenges by joining the EUby joining the EU

Univer Product Zrt.Univer Product Zrt.March 15, 2007 March 15, 2007

Italian (Hungarian) Italian (Hungarian)

exampleexample

�� Seems identically applicable to Seems identically applicable to HungariansHungarians……

�� Visible that the challenges start at a Visible that the challenges start at a different leveldifferent level……

Basic factsBasic facts

�� EU is the worldEU is the world’’s leading trading s leading trading powerpower

�� Handles 20Handles 20--22% from the world trade 22% from the world trade of goods and 22of goods and 22--25% from the world 25% from the world trade of servicestrade of services

�� EU and USA are the worldEU and USA are the world’’s largest s largest economieseconomies

EU trade partnersEU trade partners

1.1. USAUSA2.2. JapanJapan3.3. ChinaChina4.4. CanadaCanada5.5. TaiwanTaiwan6.6. South KoreaSouth Korea

Basic conflictBasic conflict

�� Many of the new joiner countries are Many of the new joiner countries are able to produce agricultural products able to produce agricultural products at a lower price levelat a lower price level

�� Free market opportunities conflict with Free market opportunities conflict with the interests of older EU membersthe interests of older EU members

Standpoints of EUStandpoints of EU

�� Giving further fGiving further financialinancial assistanceassistance to to agricultureagriculture

�� Reasons: social, food safety, Reasons: social, food safety, protection of sensitive sectorsprotection of sensitive sectors

Enterprises in the EUEnterprises in the EU

�� Major importance in the economy of Major importance in the economy of the EUthe EU

�� Enterprise politics plays prominent role Enterprise politics plays prominent role (but limiting: tenders, availability of (but limiting: tenders, availability of financial resources, enterprisesfinancial resources, enterprises’’ own own resources)resources)

Barriers for theBarriers for the

new joiners new joiners

�� Social and geographical barriersSocial and geographical barriers�� Administrative barriersAdministrative barriers�� Investment barriersInvestment barriers�� PricingPricing�� Key: extended sales service team Key: extended sales service team barriersbarriers

UniverUniver

Company GroupCompany Group

Univer Zrt.

Univer Szövetkezeti Zrt.

Univer Coop Zrt.

Univer Product Zrt.Alföld Zrt.

Univer

Product Romania s.r.l.

Univer Product Zrt.Univer Product Zrt.

Activity: Production and sales offood seasonings.

� Year 2006 in numbers:� Headcount (persons) 440� 3 production seats: 2 in Kecskemét and

1 in Hetényegyháza� Net turnover from sales (mEUR): 37,8� Pre-tax profit (mEUR): 4,2� Development budget (mEUR): 0,7


Hetényegyháza productionplantProduction of Univer Magyar Ízek brandedproducts since 1965,using freshHungarian paprika.

Market shareof brand in Hungaryis over 80% !


Market leader mayonnaise: 35,7%Mustard second on the market: 27,9%Ketchup second on the market: 12,7%(AC Nielsen HUN ON2006)

Kecskemét 1 production plant

Production of Univerbranded products:mayonnaise, mustard,ketchup,salad dressings,sauces, McD sauces.

Kecskemét 2 production plant

Production of Univerand Kecskemétibranded products:baby-food, tomatobased products


Univer ProductUniver Product

Romania Romania s.r.ls.r.l..

Activity: Production and sales of foodseasonings in Romania.

Year 2006 in numbers:Headcount (persons): 68Net turnover from sales (mEUR): 3,0Pre-tax profit (mEUR): 0,3Development budget (mEUR): 0,75

Joining EU:Joining EU:

new rulesnew rules

�� Before joining:Before joining:–– Waiting for 10 yearsWaiting for 10 years…… (H, CZ, SK, PL)(H, CZ, SK, PL)

�� Reason:Reason:–– EU was not willing to modify the agricultural EU was not willing to modify the agricultural support system and market protectionsupport system and market protection

�� Outcome:Outcome:–– Disappointment (Fortunately Romania had a lot Disappointment (Fortunately Romania had a lot faster joining procedure.)faster joining procedure.)


new rulesnew rules

�� Major changes:Major changes:–– Launch of HACCP food safety system Launch of HACCP food safety system (Parts of this system was compulsory (Parts of this system was compulsory since 1966 in Hungary)since 1966 in Hungary)

–– 178/2002: regulations of food production 178/2002: regulations of food production and salesand sales

–– Permission to use GMO productsPermission to use GMO products–– Strict regulations for product informationStrict regulations for product information


new rulesnew rules

�� Disadvantageous changes:Disadvantageous changes:–– Free market instantlyFree market instantly–– Basically any product could enter to Basically any product could enter to Hungary after 2002Hungary after 2002

–– Hungarian consumer did not stand by the Hungarian consumer did not stand by the Hungarian productsHungarian products

–– Following the regulations is challenging Following the regulations is challenging (or impossible)(or impossible)


new rulesnew rules

�� Our recommendations for Romania:Our recommendations for Romania:–– Not be set up by foreign goods, lots of Not be set up by foreign goods, lots of them are of inferior qualitythem are of inferior quality

–– Increase the severity of the food safety Increase the severity of the food safety regulations regulations


Market situation in May Market situation in May

20042004�� Market share in AM 2004:Market share in AM 2004:

Mayonnaise AM 2004 (volume %)

Univer; 41

Competing

brand; 21,9

PL; 24,5

Other; 12,6

Mustard AM 2004 (volume %)

Univer; 27,6

Competing

brand; 33,8

PL; 24,4

Other; 14,2

Source: AC Nielsen, Hungary


Market situation in May Market situation in May

20042004


Univer SWOTUniver SWOT

60 year old Hungarian company60 year old Hungarian companyMarket leader (mayo, paprika)Market leader (mayo, paprika)Excellent human resourcesExcellent human resourcesMarket knowledgeMarket knowledgeBenefits of personal connectionsBenefits of personal connectionsStrong subcontractor structureStrong subcontractor structure

StrengthsStrengthsNon multinational companyNon multinational companyLower capital valueLower capital valueHungarian specific portfolioHungarian specific portfolioNarrow portfolioNarrow portfolio

WeaknessesWeaknesses

Export opportunities / no customs Export opportunities / no customs feesfeesPossibility to produce PL products Possibility to produce PL products for the EU marketsfor the EU markets

OpportunitiesOpportunitiesNew low price products from New low price products from importimportConcentrating tradeConcentrating tradeMore PL products in HungaryMore PL products in Hungary

ThreatsThreats

May 1, 2004May 1, 2004

Joining at lastJoining at last!!

Heat up Cool down

Shocking effectsShocking effects

�� Torrent of goods from:Torrent of goods from:–– PolandPoland–– Czech RepublicCzech Republic–– GermanyGermany–– AustriaAustria–– The NetherlandsThe Netherlands–– and whoever wanted to enter the and whoever wanted to enter the Hungarian marketHungarian market……


�� Open market for low cost EU Open market for low cost EU producers (half price, double volume producers (half price, double volume ketchup, mayo and mustard dumping)ketchup, mayo and mustard dumping)

�� International tendersInternational tenders

0

10

20

30

40

50

60

70

80

90

100

2000 2001 2002 2003 2004 2005 2006 2010

Other

Drogery

Independent

Small grocery chain

C + C

Discount

Supermarket

Hypermarket


�� Fast structural changes in tradeFast structural changes in trade�� Turnover % estimation for 2010 in HungaryTurnover % estimation for 2010 in Hungary



�� Market share changes to ON 2006:Market share changes to ON 2006:Mayonnaise ON 2006 (volume %)

Univer; 35,7

Competing

brand; 22,1

PL; 32,1

Other; 10,1

Mustard ON 2006 (volume %)

Univer

28%

Competing

brand

35%

PL

28%

Other

9%


Grown from 24,5%in 2004

Grown from 24,4%in 2004

Private LabelPrivate Label

development anddevelopment and

current European trendscurrent European trends

Source: Jeff Freeman

A definition ofA definition of

private labelprivate label

�Products which carry a retailer’s brand, suchas:

� name of the retailer � (e.g.- Tesco)

� or name of retailer’s brand � (e.g. Penny-Gustoso, Billa-Clever, Metro-Aro)


Why do retailersWhy do retailers

develop private label develop private label

programmesprogrammes? ?

�� Higher profitability and profit marginsHigher profitability and profit margins�� Better competitive positionBetter competitive position�� Increased visibility of store name Increased visibility of store name �� Increased customer loyalty Increased customer loyalty �� Lower sourcing costsLower sourcing costs�� Pricing free of manufacturer pressures and Pricing free of manufacturer pressures and of state price regulations of state price regulations

�� Control within retail system: store image, Control within retail system: store image, inventory control, range and qualityinventory control, range and quality



Retailer brandRetailer brand

evolution in Europeevolution in Europe

� First were generics with low prices and high margins

� Then came “Me-too” products

� Third generation emphasizes quality and innovation

� Many retailers use all three


Selected category Selected category

conclusionsconclusions

� One of every four products sold in Europe is private label

� Overall private label market share is highly dependent upon local conditions

� Conventional retailers are beginning to explore new areas for their brands, including non-food


Summary of exclusiveSummary of exclusive

PLMA surveyPLMA survey

�� Nearly 90 % of retailers surveyed say that they will expand Nearly 90 % of retailers surveyed say that they will expand their private label their private label programmesprogrammes in the near futurein the near future

�� Over half will look for new sources of retailer brand products Over half will look for new sources of retailer brand products from other parts of the worldfrom other parts of the world

�� More than half saw retailer brands as crucial to consumer More than half saw retailer brands as crucial to consumer trust of the retailer and for building consumer loyaltytrust of the retailer and for building consumer loyalty

�� Nearly 60% of Central and Eastern Europe respondents said Nearly 60% of Central and Eastern Europe respondents said that retailer brands help establish their identity in new that retailer brands help establish their identity in new marketsmarkets

Consumer advantagesConsumer advantages

�� Products as good or better or more innovative than Products as good or better or more innovative than ““AA”” brandsbrands

�� Prices are 5Prices are 5--25% lower than 25% lower than ““AA”” brandsbrands

�� Consumers trust the nearby store, which is Consumers trust the nearby store, which is important for fresh food and personal care itemsimportant for fresh food and personal care items

�� Instead of looking for a new brand in each product Instead of looking for a new brand in each product area, there is a trusted name throughout the storearea, there is a trusted name throughout the store



Opportunities for Opportunities for

suppliers suppliers

�� Some retailers are beginning to look at sourcing on a Some retailers are beginning to look at sourcing on a regional or even panregional or even pan--European basis in certain European basis in certain categoriescategories

�� A way to quickA way to quick--start exports without high costs, but start exports without high costs, but quality is criticalquality is critical

�� Better margins than for branded productionBetter margins than for branded production

�� An alternative to high cost of developing of manufacturer An alternative to high cost of developing of manufacturer brandbrand


General conclusion: General conclusion:

successfulsuccessful

private label isprivate label is

�� Dynamic and innovative,Dynamic and innovative,

�� Highly dependent on the retailer and Highly dependent on the retailer and local consumer tastes and sensibilities, local consumer tastes and sensibilities, andand

�� Responsive to concerns from the Responsive to concerns from the public about quality.public about quality.

Joining EUJoining EU

The positive sideThe positive side

�� Our products can be exported without Our products can be exported without customs fee obligationscustoms fee obligations

�� Lower Lower labourlabour costs led to win costs led to win important tenders with high important tenders with high production volumes:production volumes:–– AldiAldi PL saucesPL sauces–– Uncle BenUncle Ben’’s sauces for s sauces for MasterfoodsMasterfoods



�� Univer production plant in Univer production plant in BaiaBaia MareMare�� Developed Developed ditributionditribution and sales and sales representative team in Romaniarepresentative team in Romania

�� Utilized comparative advantages (cost Utilized comparative advantages (cost structure analysis in Hungary and structure analysis in Hungary and Romania)Romania)

�� Building Univer brand in RomaniaBuilding Univer brand in Romania

NoiNoi am ales am ales calitateacalitatea..

VoiVoi??

Thank you for your Thank you for your

attention!attention!

univer euphoria or euphobia · 2012. 1. 10. · univer swot 60 year old hungarian company market...

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