SURVEY Entrepreneurs: an export agency would be welcome
INTERVIEW Alojzije Jukić: Software is our key for recognisability
BUSINESS TRANSFER Owner retires, workers out of jobs
PAGES 2-7
PAGES 8-11
PAGES 24-25
SUPPORTED BY THE CROATIAN CHAMBER OF ECONOMY
www.privredni.hr
PVinternational C R O A T I A N
B U S I N E S S
&
F I N A N C E
M O N T H L Y
January 2016, Year IX, No 254
TIHOMIR OREŠKOVIĆ TO ASSUME THE OFFICE OF THE CROATIAN PRIME MINISTER
A BUSINESSMAN LEADING THE CROATIAN GOVERNMENT
50
days following the parliamentary elections, the Republic of Croatia has finally elected a mandatary for the formation of the new government. For the first time in the recent history of Croatia, the government will be headed by a non-party expert and a person who has not been elected by the general public during the elections. Nevertheless, Tihomir Orešković, who will assume the leading political function and who comes from the world of business, has been welcomed with optimism and approval by the public, primarily by the business community. He was proposed as a mandatary by the Croatian Democratic Union (HDZ) that is forming a parliamentary majority with Most - the Bridge of Independent Lists, which has imposed itself during the elections as the „third party“ without which the two major political parties in Croatia cannot form a new government. Irrespective of being an entirely new political figure, Tihomir Orešković is already well-known to the Croatian business community. His career in “real economy” is impressive: in July 2014 he became the Chief Financial Officer at the large pharmaceutical corporation Teva Europe, whereas in April 2015 he was appointed as the Chief Financial Officer of Global Generics business in Teva, located in Amsterdam. He assumed these functions following his office of President of the
ble, since the government is primarily a political entity”, commented Luka Burilović, President of the Croatian Chamber of Economy. He pointed out the example of the CCE which, also headed by the figures from the real sector, showed that structural reforms could be made instantly and that adaptation to generators of economic development was imperative. Consequently, public administration needs to follow suit. “A new mandatary primarily requires some experience in management of a large system, confirmed competencies and results and they need to have a deep insight into the essence of contemporary
Management Board of Pliva, the Croatian company owned by the Israeli giant Teva. „I would like to express my utmost satisfaction with the final decision on the mandatary of the Croatian government. The Croatian economy cannot afford the luxury of some developed countries which formed their governments during a period of one year. The Croatian economy is frail and burdened with serious problems. A non-party expert can be a sensible solution against the backdrop of the current economic circumstances. Some political wisdom would also be desira-
A NON-PARTY EXPERT CAN BE A SENSIBLE SOLUTION AGAINST THE BACKDROP OF THE CURRENT ECONOMIC CIRCUMSTANCES, STATED BURILOVIĆ business activities. Stable policy is a prerequisite of a successful economy, which in turn is a pre-requisite for a stable state“, noted Burilović.
EXCLUSIVE FOR PRIVREDNI VJESNIK: THE HENDAL AGENCY SURVEY ON E
2 | PVinternational | January 2016 | No 254
EXPORTS
ENTREPRENEURS: AN EXPORT AGENCY WOULD BE WELCOME Around 18.5% of those surveyed noted the utmost necessity for the establishment of such an agency or institution, whilst 35% of respondents believed its foundation would be required. Nevertheless, 47% of respondents stated they were neither prepared nor interested in forming clusters intended to foster exports through various forms of activity, whilst 23% of those surveyed expressed their interest in the foundation of this type of agency by Igor Vukić
A
n export agency that would unify offers and sell products from a specific sector abroad would be required, according to over 53% of Croatian entrepreneurs questioned in a survey conducted by the Hendal Agency exclusively for Privredni vjesnik. Those surveyed included owners, managers and other decision-makers in 400 companies. The representative sample was divided into five types of activity:- production, construction, tourism, trade, transport and services and according to company size:- up to 50 employees, up to 500 employees and over 500 employees. The results thus provide an objective insight into the attitudes of Croatian entrepreneurs. According to the responses given, around 18.5% of those questioned feel a company or an institution that would sell products by several clustered companies on the international market is an absolute necessity. An additional 35% agreed on the need for the foundation of this type of agency. “Agencies such as those currently operating in Germany, primarily in Bavaria, are also required in Croatia. We need to adopt their operating model. Nevertheless, I am not sure who should be in charge of this project in Croatia”, noted Krešimir Slavica, with the company Teko that operates near Šibenik. German trade intermediaries operate systematically and primarily target specific customers. They assess those companies in Croatia with the potential to become business
How do you rate measures and incentives intended to boost exports of Croatian products on a scale of 1 to 5 (with 5 being the highest grade) 40%
35.1%
35%
PROSJEČNA OCJENA:
30% 25% 20%
19.0%
2,44
21.7%
14.6%
15%
7.6%
10% 5%
1.9%
0%
1
2
3
4
partners with German companies. Subsequently, these companies are contacted and meetings arranged between them. Agency representatives meet German entrepreneurs at the airport, accompany them to the negotiating table, and provide comprehensive assistance. “Activities provided by this type of agency or institution would imply substantial benefits for entrepreneurs, since the current situation on the market requires prompt reforms”, concluded Slavica.
BOOSTING EXPORTS Nevertheless, co-operation with an agency that would concentrate offers in one sector,
5
I don’t know
2.4 average grade for measures intended to boost exports
29% entrepreneurs anticipate improved exports results
January 2016 | No 254 | PVinternational | 3
THE HENDAL AGENCY SURVEY ON EXPORTS
How has your market position changed during the last two years following Croatian EU accession? Your position is currently.... 60% 54.6% 50% 40% 30% 20%
10.8%
15.1%
14.3%
10%
4.1%
1.2%
0%
significantly inferior
slightly inferior
unchanged
slightly improved
significantly improved
I do not know
N=400 poslovnih subjekata
Are you willing and interested to merge in order to foster exports through various forms of activity? 60% 50%
47.5%
40%
24.5%
30%
17.3%
20% 10%
6.6%
4.1%
I am extremely interested
I do not know
0%
No, I am not
Perhaps, I am not sure
I am interested
N=400 poslovnih subjekata
Corporate results primarily depend on commitment at work, as well as on products and services and companies should not be overly reliant on the state”, emphasised Goran Adamović, Eurolam
would imply the clustering of Croatian entrepreneurs or joint appearances on a market. However, according to the survey, 47% of respondents stated they did not wish to participate in clusters intended to foster exports through various forms of activity. On the other hand, 23% expressed their positive attitude concerning this issue. The overall measures to boost exports of Croatian products were evaluated with an average score of 2.4. A quarter of those surveyed ranked them 1 or 2. Nevertheless, 29% of entrepreneurs participating in the survey – primarily those already involved in exporting stated that they expected the final results at end of the year to exceed the results recorded last year. Around 10% of respondents believe their exports will increase significantly, primarily because Croatia has become a fully-fledged member of the European Union and expor-
4 | PVinternational | January 2016 | No 254
ting has been greatly simplified. “Croatian EU accession has had a positive impact on her economy. Procedures have been greatly simplified, goods can be delivered to customers or imported from another member state far more effectively and efficiently. Moreover, Croatia is exempt from value added tax on imports from the EU, which eases the situation. We had to tackle the issue of resources to pay VAT on imports before generating revenue from sales. These resources can now be used for other purposes”, pointed out Goran Adamović, with the company Eurolam. His company is involved in construction equipment, wood and furniture industry and products such as doors and other carpentry, plywood and adhesives. He added that measures provided by the government to boost exports have not yielded significant results. Incentive programmes to boost productivity provided by the Ministry
CROATIAN BUSINESS & FINANCE MONTHLY
The need for a company/ agency/institution that would unite products and sell Croatian products abroad? 40%
35.6%
35% 30%
24.3%
25% 20%
18.4%
18.6%
15% 10%
3.1%
5% 0%
Negative Perhaps/neutral attitude, it is attitude not needed
Positive attitude
Extremely enthusiastic
Do not know/ I do not wish to answer
N=400 poslovnih subjekata
If you are an exporter, could you provide an assessment of exports by your company in 2015 compared with 2014? 90%
80.0%
80% 70% 60% 50% 40% 30% 20% 10%
1.4%
8.3%
7.3%
2.4%
0.6%
0%
I am not an exporter
Exports will Exports Exports will drop will remain increase unchanged
Exports will soar
I do not know
N=400 poslovnih subjekata
of Economy need to be pointed out as an indirect method of assistance. Nevertheless, this also implies pre-accession assistance, rather than assistance provided from the state budget. “On the other hand, we need to be aware that market positioning is fundamental. Corporate results primarily depend on commitment at work, as well as on products and services and companies should not rely excessively on the state”, emphasised Adamović.
CROATIAN GOODS GROWING THEIR REPUTATION Around 11% of entrepreneurs surveyed believe their competitiveness ranking has dropped considerably following Croatian EU accession. Moreover, 14% of those surveyed added that their ranking has
seen a slight fall. The largest number of those participating in the survey – 54.6%, stated that their market position has remained unchanged. Nevertheless, some sectors have not undergone significant changes following Croatian exit from CEFTA. This was the case with Eurolam: Goran Adamović added that the products his company sells were not subject to customs duties previously. Hence, exports to, for example, Serbia, may be generated according to terms and conditions effective for the rest of the EU. Furthermore, Croatian full membership of the EU implies a further positive feature. Croatian goods have grown their reputation since these goods originate from within the EU. “It is not yet a reputation on a par with that of German products, but following Croatian accession our products have
become at least slightly more appealing to third markets, as well as in the EU”, stressed Igor Leščić with the company Drvoproizvod. According to him, credit lines for export support provided by the Croatian Bank for Reconstruction and Development may be considered as export incentives. These credit lines are an extremely valuable form of assistance intended for entrepreneurs and, combined with export guarantees, they provide solid support for export activities. Leščić highlighted the fact that his company participated in specialised fairs in Germany and Russia as a result of assistance provided by the Croatian Chamber of Economy. This form of assistance is also extremely valuable for exporters, noted Leščić. January 2016 | No 254 | PVinternational | 5
ASSEMBLY OF THE CROATIAN CHAMBER OF ECONOMY
2016 HAS TO BE THE YEAR OF REFORM The challenges of the Croatian economy in 2016 are a relatively slow recovery and development of the EU economy, higher global prices of raw materials and energy, anticipated interest rises on the global market, public finance consolidation, high cost of public debt, and faster implementation of reforms, Jasna Belošević Matić highlighted by Krešimir Sočković
O 1.5% growth of GDP in 2016
0.3 3% building activity growth by the end of 2015
90% possible public debt in GDP
11.2% growth of export (9 months 2015)
ver the next year, GDP will grow at a rate of 1.5%, and after two years of industrial productivity growth, the fall in the construction sector has stopped, the President of the Croatian Chamber of Economy, Luka Burilović, noted at the last Chamber Assembly in December. “We have been recording faster growth in retail, and for the first time, over 70 million overnight tourist stays. Moreover, exports are rising. However, for the seventh consecutive year we have seen higher unemployment and public debt. Furthermore, there is insufficient investment. This is why it is high time policy creators should take this situation seriously. There is an impression that everything is fine in this interregnum. However, this is only an illusion, far away from the truth. The system is blocked. Everyone anticipates what will happen. Decisions are not being made. In fact, everything has been brought to a standstill. Croatia cannot afford this luxury, not even for another day since we have a fragile economy and huge problems”, noted Burilović. The Chamber President warned all political parties that it is time to change, since this is the only precondition for recovery. The creators of policies have to take it upon themselves to solve the present status quo that is damaging for all of us. The Croatian Chamber of Economy is an example in showing that reforms are possible. When others were talking, the Chamber implemented them. Despite individuals who constantly tried to stop their implementation, entrepreneurs’ comments and praise as well new membership applications, from family farms to hospitals, prove we are on the right track, CCE President concluded.
ECONOMIC GROWTH STIMULATED EXPORTS Assistant Manager of the Sector for financial institutions, business information and economic analyses at CCE, Jasna Belošević Matić,
6 | PVinternational | January 2016 | No 254
presented the state and trends of the Croatian economy for this year. Based on her analyses, after falling for the past six years due to which GDP this year will be 11.1% lower in real terms
CCE ANALYSTS ANTICIPATE 1.5% GDP GROWTH FOR 2015, WHICH WILL PUT CROATIA IN A SLIGHTLY BETTER POSITION IN RELATION TO OTHER EU MEMBERS. compared with pre-crisis 2008, during the first nine months of 2015, GDP grew 1.6%. Growth was mainly stimulated by goods and services exports, but unlike the year before, local demand growth was seen. As a result of changes in income tax, in force from the beginning of the year, personal spending saw higher growth; state spending grew at a moderate rate and a slow recovery in fixed capital was also noted, Jasna Belošević Matić pointed out. CCE analysts anticipate 1.5% GDP growth for 2015, which will put Croatia in a slightly better position in relation to other EU members. However, the CCE warn this growth is still lower than that of the entire EU. This level of growth is still seen as fall in relation to the EU average development. The anticipations for 2016 are relatively pessimistic, since it has been evaluated that growth could be less. Until we achieve GDP growth of around 4%-5% a year, we cannot talk about development, Jasna Belošević Matić opined.
CROATIAN BUSINESS & FINANCE MONTHLY
The analyses show that after five years of falling, industrial production saw growth last year, which also continued this year. From January to October of 2015, industrial production was 2.7% higher compared with the same period the year before. However, in relation to the first ten months of 2008, it is still 15% lower. The fall in the construction sector has stopped, but its future and possible recovery remain uncertain. In fact, the crisis in the construction sector, which started at the beginning of 2009, seems to have reached its end, but without clear signs of a continuous and sustainable recovery. During the third quarter, the con-
struction sector saw 3% growth in relation to the same quarter of 2014. This is the first quarterly growth after 2008. Retail registered 0.4% growth after two years of falling. It could also register growth in 2015 but on a more moderate level.
TOURISM GROWS, EMPLOYMENT FALLS Tourism continued to grow in 2015. During the first ten months, 7.7% more overnight stays were registered in relation to the same period last year. The number of local tourists increased around 11.3% year-on-year; the number of foreign tourists increased around 7.4%.
Concerning employment, negative trends continued for the seventh consecutive year. The Chamber assesses that registered employment will be 85% in 2015, and active population 90% of the level of 2008. Unemployment will be one 20% higher. Challenges and risks that the Croatian economy will face in 2016 include a relatively slow recovery and development of the EU economy, higher global prices for raw material and energy, anticipated interest rises on the global market, public finance consolidation, high cost of public debt and faster implementation of reforms, Jasna Belošević Matić concluded.
UNSUSTAINABLE GROWTH DYNAMICS
Public debt reaches €38.27 billion Under pressure from a continuously high budget deficit, public debt continued with long-term unsustainable growth dynamics, reaching €38.27 billion at the end of August. After debt increased by €19.25 billion between 2008 and 2014, this year it grew by a further €1.03 billion during the first eight months. If this trend continues, the percentage of the public debt to GDP will reach an alarming 90% by the end of
the year. This could have a negative effect on further decreasing the already low investment rating of the country. The European Commission anticipates that debt will continue to rise until 2017, when it will reach 92.9% of GDP. This high level of both debt and interest, which will soon reach 4% of GDP, have a negative impact on the possibility of accelerating economic growth.
January 2016 | No 254 | PVinternational | 7
INTERVIEW ALOJZIJE JUKIĆ, President, Management Board,
IRRESPECTIVE OF ANYONE’S WISHES AND EFFORTS, CROATIA WILL NEVER PROVIDE ANY LARGE PRODUCERS OF ANY GLOBALLY POPULAR DEVICES, YET WE MAY MANAGE TO ACHIEVE THAT WITH SOFTWARE, noted Alojzije Jukić.
8 | PVinternational | January 2016 | No 254
Comping
SOFTWARE IS OUR KEY FOR RECOGNISABILITY Notwithstanding of the fact that it is frequently highlighted by the media that the IT industry has been recognised as strategically important for boosting country competitiveness, the concrete steps taken by the state in the local computer sector remain to be seen in order to justify these claims by Boris Odorčić odorcic@privredni.hr
C
omping is a Croatian ICT company currently employing 80 experts and has been on the market for over 25 years. It provides corporate technology solutions and related services. “The business solutions we provide are developed to meet client requirements, aiming to reduce costs and increase productivity”, opined Alojzije Jukić, President of the Management Board of Comping, adding that their competitive advantage is a comprehensive approach – from planning to implementation. Their business solutions are based on a combination of expertise in technology, insight into the business environment and innovation and effective tools, methodologies and best business practices.
Do you consider the Croatian market of ICT products and services as developed? The Croatian IT market has been developing continuously and keeping abreast of trends. It is important to realise who we compare ourselves with, since, if we compare ourselves with Western markets, we are underdeveloped and are far from some IT standards. On the other hand, if we compare ourselves with Eastern countries, our rate of development is substantial. There is certainly vast potential for development, yet one cannot expect revolutionary growth and a turning point yet. Nevertheless, there is definitely room for a market transformation towards the services sector. Software is certainly a segment in which the Croatian IT sector can be identified. Irrespective of anyone’s wishes and efforts, Croatia will never provide any large producers of any globally popular devices, yet we may manage to achieve that with software, primarily through mobile and cloud platforms. Several Croatian companies have already achieved significant success in this field, even
No 254 | January 2016 | PVinternational | 9
INTERVIEW
CROATIA AND ICT EXPERTS
A discrepancy between the requirements and the expertise provided
Is there a sufficient number of ICT experts in Croatia and are they provided with an adequate formal education? Generally speaking, there is a sufficient number of ICT experts in Croatia, yet the issue of their adequate knowledge, expertise and skill still remains open. A discrepancy between requirements and expertise provided certainly needs to be highlighted. ICT skills are most frequently acquired at
faculty, open universities, authorised training centres, free online courses and certification. It also has to be stressed that computing and information technologies are amongst the few categories in which there are current proposals to increase enrolment quotas at faculties. On the other hand, employers definitely opt for holders of industrial certification and additional education of ICT experts. Nevertheless, there is still the issue of attitude frequently adopted by local experts, since they are currently not yet prepared for continuing education. A large number of professionals believe that their education is completed when they graduate. Unfortunately, this attitude inevitably eventually leads them towards incompetence, as they lack the knowledge required and hence we can talk about a lack of experts. Against this backdrop, I would point out the estimates according to which the European Union will lack as many as 900,000 ICT experts by 2020. Unfortunately, it is a well-known fact that the EU has seen a 9.5% drop in ICT graduates since 2006.
25 5years
at a global level, primarily in the area of computer games software.
Comping business activity
What is the percentage of Comping’s own solutions compared with those provided by other companies? Business solutions provided by Comping are exclusively our own solutions developed on cutting edge partner platforms such as Microsoft, IBM, Hewlett Packard and Sedco, to name a few. The idea behind our development strategy is the development of our own business solutions combined with top quality IT support and consulting services. Around ten years ago, Comping became a supplier of technology for the banking sector and hence we are now a reputable business solution provider for them. Moreover, we are currently using standard technologies and open architecture and we have been recognised by global leaders such as Microsoft, by whom we have been awarded the winning Microsoft Midmarket Solution Provider prize for 2014, for InCloud business solutions based on Microsoft Dynamics platform and Microsoft Lync communication solution. This year we have seen a considerable degree of success with Microsoft at a global level, where Comping ranked amongst the top four partner companies involved in business application development.
80 0experts employed in the company
0.21billion
€
value of Croatian software exports in 2014.
100 0million
€
growth of the Croatian IT services market over the next 4 years (according to IDC Adriatics)
I believe you are also present throughout the region. When we operate in the region, we mainly focus on vertical solutions and our portfolio
10 | PVinternational | January 2016 | No 254
comprises of solutions intended for the enhancement of profitability and business process automation. We are present in the banking and the corporate sector throughout the region. We provide integrated business solutions in the Czech Republic, Bosnia and Herzegovina, Serbia and Slovenia, and we are currently negotiating with several companies in Macedonia. Successful business co-operation with branches of large companies operating in Croatia frequently provide new opportunities for implementation of projects in the region.
IRRESPECTIVE OF BEING A SMALL COUNTRY, I BELIEVE WE HAVE EXTREMELY POWERFUL INNOVATIVE ABILITIES Has the state adopted a maternal or paternal attitude towards the ICT sector? I have to express my full satisfaction with the results of the Croatian IT industry at an international level. We currently provide a vast array of competitive products, ranging from games, to robots and applications, as well as electric cars, and all these products present the
CROATIAN BUSINESS & FINANCE MONTHLY Croatian IT industry in the best possible way, globally. Several years ago, we provided a broad range of fundamental infrastructural preconditions required for the development of the IT industry; coworking premises, business incubators and accelerators and a large number of meet-ups and IT conferences. Finance is certainly an important prerequisite; the state provided financial assistance for the launching of start-ups through the Croatian Employment Service (HZZ), the Croatian Bank for Reconstruction and Development (HBOR), the Ministry of Entrepreneurship and the Croatian Agency for SME’s, Innovation and Investment (HAMAG-BICRO). Concerning financial surveillance in the banking sector, in my opinion business stability is vital. In the case of Comping, being a company with extensive business experience and a reputable business and financial history, it is far easier to negotiate and communicate with banks on financial surveillance compared with start-ups or companies with a shorter history. Irrespective of the fact that it is frequently emphasised in the media that the IT industry has been recognised as being of potentially strategic importance for boosting country competitiveness, the concrete steps taken by the state in the local computer sector but it remains to be seen id these claims are justified. Against the backdrop of some concrete data stating that Croatian software sales at a global level were worth €0.21 billion last year, one can certainly be optimistic. Moreover, according to a recently conducted analysis by IDC Adriatics, the Croatian IT services market is expected to grow by almost €100 million over the next four years, which is also extremely positive.
What is the importance of the ICT sector in the economic development of a country? ICT is a branch of industry that creates competitive advantage, yet the manner in which the overall economy uses the ICT sector is fundamental. If it uses it adequately, it automatically enhances its competitiveness, becoming more efficient, increasing its productivity, reducing risks, providing improved analytical models, with a deeper insight into competitors and thus more successful. Consequently, one can speak of interdependence. What can the Croatian ICT sector offer to both Europe and the world?
I have recently read research stating that Croatia ranks third in terms of the fastest growing IT companies in Central Europe. Irrespective of being a small country, I believe we have some extremely powerful innovative features within in the ICT sector, through software solutions and application development. It shows significant and continuous success in this
ICT CREATES COMPETITIVE ADVANTAGE, YET THE MANNER IN WHICH THE ENTIRE ECONOMY USES THE ICT SECTOR IS FUNDAMENTAL segment both amongst individuals and small businesses and I believe that there is immense potential for us in this segment both in Europe and globally.
Which area of the ICT sector do you expect to show growth, where will the results fall, and where will we see stagnation? If the IT sector is divided into three fundamental components – hardware, software and services, we can state that the hardware component will show stagnation, perhaps even reduce. By this, I imply primarily a drop in infrastructure ownership, partly due to system consolidation and partly due to a cloud computing upswing. On the other hand, it has to be highlighted that the hardware sector displayed an increase in demand on the smartphone market that has become almost synonymous with the IT industry. The value of last year’s smartphone sales exceeded €0.1 billion, an 18% increase in sales compared with the previous year. Growth in these IT market segments encourages Croatian companies to embrace cloud computing, mobile technology, as well as development and investment into social networks and IT security that are all inextricably interconnected with these trends. The software and the services segments need to grow considerably, as these are currently global trends and they will also affect Croatia. Services
are becoming increasingly predominant in established markets and they are considered as an especially significant value-added feature for the user. Once you have implemented a comprehensive solution for the user that they can use to solve their problems, they are fully aware of the value-added and are hence prepared to pay for it. What are Comping’s business programmes in the forthcoming future that need to be particularly highlighted? Comping is undergoing a growth stage and a new wave of employment this year, and I would like to point out that in 2015 we already hired 20 new employees. Furthermore, the takeovers that are likely to occur in the near future certainly need to be pointed out, since we are intensely considering this option; we have been analysing and considering several interesting companies whose takeover would ensure a more efficient tackling of some of our weaker segments, as well as the upgrades we are striving for. Consequently, we are interested in companies that are in a broader sense involved in business intelligence, as well as those that have become involved in the area of huge quantities of data processing, which is colloquially named Big Data. We have some expertise in this field, yet we are aware of our shortcomings and of what we need to do in order to improve. No 254 | January 2016 | PVinternational | 11
MARKETING NEGATIVE TRENDS IN ADVERTISING INVESTMENT HALTED AGENCIES IN 2014 COMPANY
TOTAL INCOME
EMPLOYED
MCCANN ERICSSON ZAGREB
170.164.000
58
PUBLICIS DOO
136.437.200
36
MEDIACOM CE ZAGREB
135.853.400
15
REAL GRUPA
109.219.600
30
OMNICOM MEDIA GRUPA
93.437.600
7
ADVANS
75.635.000
7
OMD MEDIA
70.307.600
19
EUROPLAKAT
57.667.300
42
AKTER PUBLIC GRUPA
50.307.200
20
U.M. UNIVERSAL MCCANN
47.144.100
-
DENTSU AEGIS NETWORK
45.851.600
-
MPG
44.874.200
142
MEDIA POLIS
44.761.700
8
PHD MEDIA
35.731.200
4
UNEX GRUPA
33.877.700
21
HBO ADRIA
33.722.100
9
CARAT AUSTRIA ZAGREB
31.929.500
-
ZAGREB PLAKAT
29.997.700
12
BRUKETA&ŽINIĆ
29.763.800
36
SKYNET
28.698.300
30
NJUŠKALO
26.381.500
33
ALERT
22.089.400
7
IMAGO REKLAMNA AGENCIJA
20.850.800
36
MEDIA
20.668.600
4
DIRECT MEDIA KOMUNIKACIJE
20.561.300
5
BBDO
19.220.000
32
GREY WORLDWIDE ZAGREB
10.412.800
23
DEGORDIAN
10.062.700
33
A RETU
Following six years of crisis, th latest data provided by the Cr €0.2 billion in 2014. However, by Ilijana Grgić
Source: Bisnode
12 | PVinternational | January 2016 | No 254
F
ollowing six years of crisis, the negative trend in investment in media planning is finally over. According to the latest data provided by the Croatian Association of Communications Agencies (HURA), advertisers invested €0.2 billion in 2014, although this is only 1% up compared with the previous year. TV advertising still accounts for half the entire advertising volume and showed 4% growth. Investment in TV advertising came in at €95.3 million. Online advertising showed the highest percentage growth at 9%, whilst, in addition to classical display advertising, online browser and social network advertising both also recorded substantial growth. Investment in online advertising was €15.6 million. 2014 saw a 6% increase in radio advertising and the value of investment in radio advertising was €17.6 million. Print media advertising still shows a downward trend and in 2014, the value of investment was 7% down in
URN TO HOPE
e negative trend of investment in media planning is finally over. According to the roatian Association of Communications Agencies (HURA), advertisers invested this is only 1% up compared with the previous year display similar developments as the Croatian market.
to data on media investment in 2014, the advertising industry is recovering”, noted Fraculj.
SEVERE COMPETITION IN A SMALL MARKET
relation to last year. Nevertheless, irrespective of the drop in print media advertising, investment in this area was €40.9 million. Outdoor advertising recorded a slight drop of 3%, and investment in this segment was €16.8 million last year. The
TV ADVERTISING STILL ACCOUNTS FOR HALF THE TOTAL ADVERTISING VOLUME value of investment in other types of advertising was €1.4 million. It is important to note that Croatia saw the highest growth in investment in the food, trade and finance sectors. According to estimates, the regional market appears to
Media planning is yet another aspect of advertising that in turn is an integral part of the creative and culture industry. These extremely dynamic sectors generate around €2 billion in revenue year-onyear, which accounts for 2.4% of the total revenue in the Croatian business sector, whilst the percentage of advertising and marketing communications stands at almost 16%. Irrespective of the fact that Croatia is a country with only 4.2 million potential customers, all the leading marketing agencies are currently present in the marketing market. According to data provided by Commercial Croatia (Poslovna Hrvatska), revenue generated by the top 30 agencies involved in marketing communications exceeded €0.2 billion last year. The Zagreb-based agency, McCann Ericsson Croatia, showed the highest level of revenue. It consists of five specialised agencies: McCann Zagreb, Universal McCann, Momentum, Weber Shandwick and DigiPark McCann). Mario Fraculj, President of the Management Board of McCann Zagreb stressed that Croatia saw signs of crisis recovery only in 2015. Furthermore, he noted that the previous decline in economic activity was also followed by a drop in the Croatian global competitiveness index, a high rate of unemployment and the lowest level of investment during the last 17 years. He added that, against the backdrop of general economic trends, the marketing communications industry saw negative trends, a decrease in advertising budgets and the winding-up of several media and agencies. “Croatia is the only country in the world that constantly recorded a drop in investment in media advertising during the period 2008 - 2013. Nevertheless, according
INVESTMENT IN INTERNET ADVERTISING SHOWED THE HIGHEST PERCENTAGE GROWTH AT 9% Real Group (Real Grupa) is a full service agency that provides integrated marketing communications services, and has shown significant growth, irrespective of a severe economic crisis in Croatia. “Notwithstanding the fact that Croatia is a very small country, a large number of agencies are competing to arouse the attention of a limited number of clients. The market is demanding and extremely dynamic, and competition severe”, stressed Krešimir Renzo Prosoli, Director of Real Group. He added that new global trends in the area of marketing show that full service agencies are becoming increasingly important, since they provide comprehensive services of development of marketing, communications, media and creative strategies. “Clients are striving for a comprehensive one-stop solution that meets all their requirements. The trend of online advertising is already considered a long-term trend, on a par with interactive advertising methods. Companies are increasingly focusing on corporate social responsibility and consequently the agency assists them in implementation and communication of similar projects”, stated Prosoli. January 2016 | No 254 | PVinternational | 13
INTERVIEW ANDREA ŠUMANOVAC, Managing Director, Unex Group and Unex Media
EVERYONE WANTS “MORE FOR LESS” Regarding the popularity of media, television will remain the dominant medium for some considerable time. Nevertheless, the level of other digital media is constantly increasing. Print media is definitely not doomed, albeit its full recovery cannot be anticipated with certainty by Ilijana Grgić
I have noticed that creative quality is actually increasing and one could state that those involved in creative market segments normally prove the most effective when faced with severe challenges
U
nex Group has been on the Croatian market for 23 years as an agency for marketing, advertising and market communication and it is considered as the market leader. Until 2002, it operated as one company; subsequently Unex MPG, a specialist company was founded intended for media planning. It was over time transformed into Unex Media. Privredni vjesnik spoke about the Croatian marketing market, as well as global trends in this field, with Andrea Šumanovac, Managing Director of Unex Group and Unex Media, who is widely considered as the most powerful woman manager in the Croatian world of marketing.
Could you compare the Croatian marketing market with the regional market? The Croatian marketing market does not differ substantially from the regional market, since the entire region is facing identical or similar issues. The value of the marketing market in the region has been constantly downgraded. Moreover, budgets have seen substantial cuts over the last several years, yet identical results are expected. Perhaps this may sound negative,
THE VALUE OF THE MARKETING MARKET IN THE REGION HAS BEEN CONSTANTLY DOWNGRADED but I have noticed that creative quality is actually increasing and one could state that those involved in creative marketing normally prove to be the most effective when faced with severe 14 | PVinternational | January 2016 | No 254
challenges, whilst business strategies adopted by the agencies that have established their positions in integrated communication solutions and services, have proved to have the greatest potential. Concerning the increasing use of digital media, we have adopted new technologies and trends almost at inception and our advertising potential has been highly upgraded. Social networks have an increasing reach and everlarger numbers of users, whilst new technologies such as Real Time Biding are gradually becoming available in the Croatian market.
What trends are prominent year-onyear? Concerning the popularity of media, television will remain a dominant medium for a long time. Nevertheless, the level of other digital media is growing constantly. Print media is definitely not doomed, although a full recovery cannot be anticipated with certainty. Originally, campaigns were launched through TV commercials, but now web platforms and web applications are the usual mode. Launching a campaign is not sufficient, irrespective of the value of its investment, since being incorporated into a consumer lifestyle is currently fundamental, as well as continuous communication through social networks. Digital media provides new channels, and there is growing digital segmentation. Instagram, Twitter, LinkedIn are slowly becoming an integral part of the media mix, whilst Facebook has been irreplaceable for a long time. Result-based monitoring and the impact of TV and offline media on website visitor counter is being more and more highlighted. Media impact attribution is becoming increasingly important and we anticipate it will be even more. Moreover, packaging design and redesign are becoming increasingly emphasised, implying a new aestheticism both in ad-
CROATIAN BUSINESS & FINANCE MONTHLY
vertising and on store shelves. The millennial generation has grown up and their communication needs show significant differences.
What are the business opportunities in this sector? Businesses are currently faced with an increasing number of challenges. Expectations “less for more” have become a reality and so agencies and media are striving to act in accordance with that principle. Great ideas that can be implemented with minimal expense and yielding maximum results are fundamental. Digital expansion implies a rapid developmental pace. Our agency has also followed this trend through introduction of a specialist digital division and following last year’s acquisition of a high potential team of DocType experts. Consequently, we have already seen significant results, since our digital solutions are integrated in all our deliveries to clients. In addition to channel segmentation within digital media, new challenges, as well as opportunities, are appearing daily. Available channels provide immense quantities of data and consequently opportunities for addressing the target group. Against the backdrop of these opportunities, the optimisation and keeping abreast of campaigns are hugely challenging, yet significantly superior results are more feasible provided the campaigns are effectively optimised.
GREAT IDEAS THAT CAN BE IMPLEMENTED AT MINIMAL EXPENSE BUT YIELDING MAXIMUM RESULTS ARE FUNDAMENTAL What are the global trends in the advertising industry? Last year saw downward trends in investment by large advertisers in TV advertising, according to analyses conducted on the American market, and the results were extremely interesting. According to statistical data, American TV companies saw a 40% drop in advertising for computer and IT technology, followed by a 20% decrease in the advertising of personal hygiene and beauty products, whilst the advertising of restaurants ranked third showing a fall of 11%. Simultaneously, the fashion industry advertising increased by 22%, whilst pharmaceutical advertising was 14% up. NBC.com and ESPN.com recorded a decrease in TV advertising revenue, whilst simultaneously showing soaring digital video ad sales by an amazing 70%. As I have already pointed out, a digital presence is imperative, even for those clients who did not opt for it from its inception. January 2016 | No 254 | PVinternational | 15
INDUSTRY FOOD AND BEVERAGE PRODUCTION AND REGIONAL RETAIL
BUSINESS ACTIVITIES S ILLIQUIDITY THE BIGGE Turnover and sales of food and beverages has shown a slight fall during the past few years. The largest turnover and highest number of companies in this sector are in Serbia, although Croatian companies achieve the highest profit levels. The most stable business activities are in Slovenia, with Bosnia and Herzegovina recording the highest level of illiquidity. For the past few years, retail has seen growth by Krešimir Sočković sockovic@privredni.hr
O
ver the past few years, turnover and sales in food and beverages have shown a decrease across the region – from Slovenia and Croatia to Bosnia and Herzegovina as well as Serbia. Turnover is the highest on the largest national market, Serbia, where the largest number of companies is registered. There are 2,860, which is 45% of the total number of food and beverages companies registered in the region. Croatia has a 29% share with 1,829 companies.
DECREASING REVENUE AND PROFITABILITY Only 434 large-sized and medium-sized companies operate in this sector, of which 45% have been operating for over 10 years; 87% produce food and beverages and 13% produce just beverages. During the past several years, revenue and profitability have been falling, with an annual
TOP 5 based on profit Vindija d.d.
337.527.392€
PIK Vrbovec 287.109.271€ - mesna industrija d.d. Coca-Cola HBC - Srbija d.o.o. Zemun
273.509.573€
Podravka d.d
256.607.602€
Dukat d.d.
224.361.494€
Source: Bisnode
52 largest trade chains in the region KATEGORIJA
2012.
2013.
2014.
Assets (€)
7.757.373.500,70
7.770.143.882,79
7.943.204.946,83
Equity (€)
2.924.211.104,62
2.801.113.544,52
3.037.917.277,63
Finantial obligations (€)
2.150.545.354,83
2.255.730.926,66
2.303.664.521,83
Total income (€)
9.386.583.241,04
9.724.876.919,15
9.904.752.753,98
30.552.494,95
148.762.822,99
75.769.672,97
72.739
76.279
77.544
Netto profil-loss (€) Employed Source: Bisnode
16 | PVinternational | January 2016 | No 254
LIGHTLY DOWN, WITH ST CONCERN decrease of €100 million on average, and annual profits decreasing by €50 million. The decreasing turnover has a knock-on effect seen by a higher unemployment rate. Currently, only 130,000 people are employed in this sector in all four countries. In 2012, over 151,000 people were employed. Large-sized companies earn 80% of total revenue and employ about two thirds of the employees (66.5%). In 2014, corporate revenue was slightly below €14 billion (€13.99 billion). In 2012, it was €280 million higher. Profitability followed this fall. In 2013, the total profits by companies were €261 million; three years previously it stood at €358 million. Regarding turnover, 40% was achieved in Serbia; 35% in Croatia, 10% in Bosnia and Herzegovina, and 15% in Slovenia. Unlike the other three markets, the Slovenian market saw higher turnover during the past year. Profitability is not evenly divided, and it is the highest in Croatia (45%), mainly due to companies like Vindija, PIK Vrbovec, Dukat and Podravka. In 2014, profits grew in Slovenia, but other countries saw a decrease. One third of total profits were achieved in Bosnia and Herzegovina; 13% in Slovenia and only 10% in Serbia. Last year profits grew in both Slovenia and Bosnia and Herzegovina.
ILLIQUIDITY IS THE CRUX OF THE MATTER The greatest concern is illiquidity. Almost 18% of companies are not liquid, and 30% of food and beverages companies in Bosnia and Herzegovina are frozen. Some 4.39% of regional companies are insolvent, mainly in Serbia (7.6%). As Business Solutions Manager at Bisnode Marko Srabotnik says that this is a consequence of the fact that operating costs in many companies are growing, but sales are decreasing. Operating costs in Slovenia equate to 78% of sales; in Croatia they are higher (72.19%), but in Serbia profit margins are significantly lower, since operating costs are 89% of sales. The situation
Share of total revenue (mil EUR) 2067 1441
10%
Share of total profits (mil EUR) Croatia
15%
34
13%
BiH 5655
40%
cannot be improved even by the state of supplies that range from 11% in Slovenia, over 16% in Croatia to 20% in Serbia, Srabotnik highlights. Sector ratings are not fantastic. At the top are Slovenian companies who are the best performers based on their financial ratings and the habit of paying invoices. Concerning the liquidity of good performers, there also companies from Serbia. Retail is seeing a slight fall, but profitability saw a dramatic fall in 2014. Retail turnover of the 52 largest retail chains in the region totalled €9.904 billion that year, €55 million more than in 2012. Retail profits came in at €75.8 million, almost half those of the previous year when it stood at €148.8 million.
Slovenia Serbia
4284
87
33%
24
Croatia
9%
BiH 116
45%
Slovenia Serbia
35% Source: Bisnode
Source: Bisnode
No 254 | January 2016 | PVinternational | 17
ANALYSIS
18 | PVinternational | January 2016 | No 254
BUSINESS 2015
INCOME IS EVER-REDUCING Entrepreneurial income decreased from €34.2 billion in 2008 to €27.81 billion in 2014. Over the past five years, total income per employee is 7% higher and 5% across the whole of Croatia. Total income per employee was 57% above the Croatian average in 2014 by Ilijana Grgić grgic@privredni.hr
A
lmost 35% of total income from Croatian entrepreneurs is achieved in trading. Of a total of €82.51 billion income created in 2014, €28.27 billion relates to trading, and of 104,470 entrepreneurs, 28,245 or 27% are those entrepreneurs whose activities are mainly related to trade.
INVESTMENT STARTED TO INCREASE IN 2014, AND WAS 38% HIGHER COMPARED WITH 2013 Based on the analysis performed by Bisnode for Privredni vjesnik, these entrepreneurs employed 182,707 people. Entrepreneurs in trade achieved €0.31 billion in nett profit in 2014, and invested a total of €0.69 billion and achieved exports of €1.89 billion. The percentage of entrepreneurs specialising mainly in trade decreased from 30.3% in 2008 to 25.1% in 2014. When observing total income from entrepreneurs from this sector during the period 2008-2014, it may be seen that this sector has seen continuously lower income year after year. From €34.2 billion in 2008, it decreased to €27.81 billion in 2014. However, trade in Croatia is an activity that achieved the highest
total income, as is probably the case globally.
INDEX GROWTH During the past five years, total income per employee in trade is 7% higher. Across the whole of Croatia, it was 5%. However, it is important to stress that in 2014 total income per employee in trade was 57% higher than the Croatian average. The value of this indicator with large trading companies is 40% higher than the average of large-sized companies. Income per employee in medium-sized trade companies was 83% higher than the average in Croatia. The value of this indicator with smallsized companies is 65% higher than the average. Last year, nett profit per employee in trade was 24% above the Croatian average. However, when observing size, large companies account for a 74% lower nett profit per employee than the average. Medium-sized companies achieve a nett profit per employee as opposed to the regional average, where a nett loss per employee was registered. Concerning nett profit per employee, small-sized companies registered 284% higher value. Since 2010, investment per employee in trade has been 3% lower. In 2014, it was 31% below the Croatian average. Furthermore, large-sized companies made 25% less investment compared with the average, and medium-sized companies had 44% less investment compared with the average of medium-sized Croatian companies. Small-sized companies
28.245 entrepreneurs from the trade area operate in Croatia
182.707 people employed in trade
1.6 6 billion
€
income achieved in trade in 2014
No 254 | January 2016 | PVinternational | 19
ANALYSIS
TOP STORES IN CROATIA
Konzum holds a strong leading position Based on income achieved in 2014, Konzum has the strongest position in Croatia, followed by Petrol and Plodine. These are followed by Lidl, Kaufland, Crodux, Tisak, Orbico, Medica and Spar. However, we would arrive to interesting conclusions if we were list stores whose main activity is retail for wider consumption, excluding oil derivatives or pharmaceutical products as well as motor vehicles. In this case, KONZUM would still be first with income over €1.73 billion, followed by Plodine (€0.45 billion), Lidl (€0.44 billion), Kaufland (€0.4 billion), Spar (€0.29 billion), Tommy (slightly over €0.27 billion), Mercator (€0.25 billion), Metro Cash&Carry (slightly over €0.23 billion), Billa (almost €0.21 billion) and Studenac (€0.16 billion).
0.31billion
€
nett profit in trade in 2014
1.89 9billion
€
exports of trade companies
had 40% less investment compared with the average in Croatia. Based on the number of employees, trade ranks second, with 179,126 employees (21.6%) just behind the processing industry with the highest employment rate in 2014 (223,597 or 26.9%). Large companies employed over 33% of total employees, medium-sized 14.5% and small-sized companies employed over half of total employees. The percentage of those employed in trade in real sector stands at 21.5%. Even though the number of employees has been decreasing since 2010, it is interesting that the average salary in trade has been growing since 2010. The lowest average salary stood at €560 in 2010, after which it has
been steadily growing. Medium-sized companies have the highest average nett salaries; 13% higher compared with large companies and
TRADE COMPANIES ON AVERAGE FINANCE 77% OF ASSETS FROM EXTERNAL SOURCES 29% higher compared with small companies Over the last five years, total income in
Total income changes (in HRK millions) in trade from 2010 to 2014 224.000
222.568
220.217
220.000
217.092 216.000
212.000
0.69 9billion
€
investment in trade in 2014
211.983
211.661 208.000
2010. Source: BIsnode
20 | PVinternational | January 2016 | No 254
2011.
2012.
2013.
2014.
CROATIAN BUSINESS & FINANCE MONTHLY
TOP 10 PER INCOME
TOP 10 PER NETT PROFIT 1. KONZUM
108.802.474
1. KONZUM
13.454.641.107
2. PETROL
5.151.065.843
2. LIDL HRVATSKA
97.768.731
3. PLODINE
3.416.052.501
3. DINOVA-DIONA
91.453.293
4. LIDL HRVATSKA
3.331.138.320
4. Agencija ALAN
79.681.773
5. KAUFLAND HRVATSKA
3.032.138.315
5. MAGMA
78.376.234
6. CRODUX DERIVATI DVA
2.882.483.573
6. dm-drogerie markt
69.528.865
7. TISAK
2.748.347.964
7. TOMMY
63.529.541
8. ORBICO
2.497.667.392
8. MEDIKA
61.468.475
9. MEDIKA
2.229.871.697
9. L’OREAL ADRIA
52.277.383
10. STUDENAC
48.087.333
10. SPAR Hrvatska
2.211.519.150
Source: BIsnode
Source: BIsnode
trade has increased by €42.9 million, of which 44.3% was through large companies, 17.8% in medium-sized companies and 37.8% in small-sized companies. The percentage of total income of trade in the Croatian real economy was 33.8%. Trade companies should be satisfied in terms of nett profits, since they have increased 27 times since 2010. Concerning the nett profits of trade companies, the trend has been positive for the past two years. The percentage of nett profits in the real economy is 26.7%. Furthermore, after falling for three years, current liquidity saw a positive trend in 2014.
Investment and exports Until 2013, investment in trade saw a fall, but in 2014, investment in this sector started to increase, and is now 38% higher, compared with 2013. Large companies accounted for 61.6% of total investment in the trade sector. It is important to note that the investment share of trade in the real economy stands at almost 15%. Despite difficult years, exports per employee were 56% higher between 2010 and 2014. Trade companies finance 77% of assets from external sources. Since 2013, the level of indebtedness has been moving in a positive direction. Sector analysis shows that small-sized companies have the highest level of debt; in fact, it is 14% higher compared with medium-sized companies and 17% higher compared with large companies. Concerning payments, a two-year positive trend has been seen. Large companies on average collect their payments 37% faster than medium-sized companies and 53% faster than small-sized companies.
Nett profit changes (in HRK millions) in trade from 2010 to 2014 2288
2500 2000
Export changes (in HRK millions) in trade from 2010 to 2014 15.000
14.157
14.000
1500
500
13.000
981
1000
12.481 11.748
12.000
85
0
11.052
11.000
-500
10.000
-505
-1000
9666
9000
-1500
-1371
-2000
2010. Source: BIsnode
2011.
2012.
8000
2013.
2014.
2010.
2011.
2012.
2013.
2014.
Source: BIsnode
No 254 | January 2016 | PVinternational | 21
VICE-PRESIDENT OF THE CROATIAN CHAMBER OF ECONOMY, JOSIP ZAHER, C
ORIGINAL CROATIAN SELL INFLUENCE Spenders have become more rational and more sensitive to price, and the value of individual shopping is decreasing significantly whilst spending structure is changing
T
he 1990’s in Croatia were marked by the transition process and the influx of foreign supermarket chains entering the local market as global players. Local traders were unprepared for this arrival, but as time passed they found ways of becoming more successful through restructuring, consolidation, and associating as well as being aware of opportunities locally, Vice-President of the Croatian Chamber of Economy for Tourism, Trade and Finance, Josip Zaher notes, adding that original Croatian traders have significant influence on today’s Croatian retail market, showing their strength created by consolidation, by expanding within the region and the EU. Zaher
Trade activities will have to grow at higher rates to reach the level achieved in 2008 Josip Zaher, Vice-President of the Croatian Chamber of Economy,
6% MARKET GROWTH IN 15 YEARS
SPAR CROATIA: WE WANT 10% O
They invest €30-40 million every year in Croatia. During the past decade they inv
S
par Croatia was founded by Spar Austria Group 15 years ago and is the youngest company in the Group. It is worth noting that Spar Austria is part of the large Spar Group of independent companies operating under a common logo. The business concept of Spar expanded rapidly. Today, independent Spar companies operate in 35 countries, on four continents, and the number continues to grow. In Croatia, the first Interspar retail centre opened in Zadar in June 2005. Ten years later a total of 17 Interspar hypermarkets and 35 Spar 22 | PVinternational | January 2016 | No 254
supermarkets had opened across Croatia, employing a total of 2,700 people. Currently, Spar has 6% of the Croatian market. “Our goal is to continue expanding and double this share, that is, to hold 10% of the Croatian market”, CEO for Spar Croatia Helmut Anton Fenzl says. He also added that they focused more on personal development in terms of growth, but are willing to consider every opportunity offered to them. They invest €3040 million every year in Croatia. During the past decade, they have invested over €350 million. From our first day, almost
all Croatian products were available. Last year we sold €50 million of Croatian products through the Spar Consortium. Cedevita, Čokolino, Argeta, prosciutto and salami of Pik Vrbovec, products of Ledo, Dukat, Vindija are only some of the suppliers already on Spar shelves outside Croatia, Fenzel highlights. The sale of small local producers on Spar shelves was made possible through co-operation with Spar Premium products. These producers often have excellent products produced in limited series manufacturing, but without the possibility of big marketing
CROATIAN BUSINESS & FINANCE MONTHLY
CONSIDERS RETAIL
LERS HAVE SIGNIFICANT points out that this development peaked at the beginning of 2000. Then, local trade was marked by investment, growth in spending, turnover and employment as well as infrastructure development of the modern trade network and extremely strong competition. Between 2000 and 2008, retail turnover saw continuous real growth. For example, in relation to 2001, 2002 turnover grew at a rate of 21.5%. The upward trend of the retail business is a reflection of changes in personal spending, which has had a significant influence on the real growth of GDP over the period. A high level of correlation between GDP movement and movement in retail business activities was established, Zaher highlights. Economic trends in Croatia during 2008 led to certain disruptions caused by global changes that resulted in stable spending and reduced business activity in retail. These continued during the past years, except in 2011 and 2014, when mild recovery rates were seen.
GROWTH LACKING The trend of recovery in retail was identified during the first nine months of 2015. Thus, a 2% growth rate is anticipated on an annualised level. It is worth noting that business activities in Croatia during 2014 were 12.4% down over 2008. It is a fact that trade will have to grow at higher rates to reach the level achieved in 2008, Zaher says. The current economic climate has changed the behaviour of spenders. They have become more rational and more sensitive to pricing and the value of individual shopping is significantly decreasing whilst the spending structure is changing. Concerning the development of store format in Croatia, similarly in Europe, the number of small-sized stores decreased in parallel with the development and expansion of the big supermarket chains. However, a percentage of them survived due to their competitive advantage and regional share. I think it is good the market has stores of different formats, since each of these
contribute to the better offer of quality products, Zaher highlights. The survival of small-sized stores actually ensures the supply chain in the country since it is often forgotten that stores on islands, in the mountains have a huge social impact in supplying the population, especially the elderly. Croatia is a tourist destination, so the development of small-sized stores is an advantage, and better offers relate to more spending, Zaher points out.
CLASSICAL IS ETERNAL Concerning e-trade, Eurostat data for 2014 show that internet trade is growing in Croatia. For example, 16% people bought online in 2012; 19% in 2013 and 22% in 2014. Online shopping has marked potential and could be an opportunity for all Croatian trade entrepreneurs. However, classic stores are the future, although innovations will be required. Notwithstanding, we will continue to shop mainly in classic-type stores, Zaher concludes. (I.G.)
OF THE CROATIAN MARKET
vested over €350 million investment or advertising, he explained. He also added they are able to help them with their trademark. Good examples are Mariolina from Krk, Pršut Voštane, Pisinium from Pazin, Igomat from Samobor, Biz milk factory near Požega, Viksi from Vinkovci, and Euromilk from Zelina. As we have a centralised warehouse, we are able to expand co-operation in procuring fresh fruit and vegetables from a growing number of family farms. Unfortunately, many do not produce sufficient quantities, but it would be useful if they could join forces, Fenzel concludes. (I.G.)
Last year we sold €50 million worth of Croatian products through the Spar Consortium. Helmut Anton Fenzl, Spar Croatia CEO
No 254 | January 2016 | PVinternational | 23
BUSINESS TRANSFER BAROMETER CROATIA 2015
OWNER RETIRES, WORKERS OUT OF JOBS According to data provided by the Financial Agency, the oldest company owner is 92. There are around 16,600 companies in Croatian with owners over 55 and these companies employ some 18,000 people by Igor Vukić
around % owners
44
want to stay connected to the company as consultants
23
only % owners want to retire fully from company everyday life
W
hen a company owner in Denmark turns 55, the first birthday card he receives is from the Ministry of Finance. “Happy Birthday. Have you come up with a plan about to whom you will leave your company”? – Ministry officer will ask. According to research, in around 30% cases of ownership transfer something goes wrong. Companies ‘die’, leaving workers on the street. Therefore, the Danish Ministry is justifiably worried about tax income stability. There are around 16,600 companies in Croatia whose owners are over 55, and according to data provided by Fina, the oldest owner is 92. These companies employ some 18,000 people. Compared with the experience in other
24 | PVinternational | January 2016 | No 254
countries, one third could soon start looking for a new job, as mentioned at a conference on business transfer held by the Croatian Employers’ Association (HUP) in December.
BUSINESS TRANSFER ERA The conference was an opportunity to present the Business Transfer Barometer, composed by the SME’s and Entrepreneurship Policy Centre (CEPOR). Almost a quarter of Croatian entrepreneurs over 55 have not yet considered changing their role, not even over the next 10 years, said Mirela Alpeza from CEPOR. Around 27% of the survey participants estimate they will introduce changes in three to five years, and around 26% think their role will change in five or more years.
CROATIAN BUSINESS & FINANCE MONTHLY Around 17% are extremely pessimistic, thinking their company will shut down after their retirement. Around 6% believe the company will be sold to a new owner, and 65% expect the business will continue as before. In 61% of cases, the present owners hope they will be replaced by a member of their family. However, this is a sensitive process. Many bankers would rather continue lending to the old father and have nothing to do with a spoiled son who changes occasionally, said Zoran Kureljušić, Director of SME Marketing Sector at Privredna banka Zagreb. Business transfer is one of the most important topics for the Croatian economy. Entrepreneurs often consider this important move either too late or not enough, Kureljušić thinks. If the 1990’s were the years of establishing companies whose owners were around 30, then this is the era of business transfer. Companies that recognise possible challenges on time and consult experts, have better chances of successfully transferring their business to future owners, Marina Tonžetić from the Croatian office at Deloitte highlighted. In co-operation with CEPOR, the Ministry of Entrepreneurship and Crafts has prepared a manual for business transfer. Transfer is espe-
THE OWNER’S AGE IS NOT THE SOLE REASON FOR CONSIDERING BUSINESS TRANSFER cially important for family-owned companies. The owners do not pay enough attention to this matter, mainly due to insufficient literature or any serious discussions on the matter, Ivan Topčić, founder of company Tim kabel, evaluates.
BUSINESS TRANSFER PLANNING Some owners decided to leave their companies to their deserving employees who are not family members. For example, in 1996 Ivan Perić founded Projekt in Rijeka, a company specialising in consulting and designing water supply and irrigation systems. He tried to sell the company a few years ago, but he could not find a suitable investor. Instead, he offered two of his engineers the chance to establish companies that would take over the business of Projekt as its branches. As a result, the new companies successfully managed to overcome the usual obstacles of companies new to a certain business activity. They used
references, financial indices and ISO standards of Projekt. Since 2013, Projekt has had two employees. Ivan Perić retired and works as an agent and consultant. His daughter handles accounting and monitors financial affairs of all three companies. According to CEPOR research, around 44% owners want to retire from the everyday life of their company, but they want to stay connected to it as consultants. Only 23% want to retire completely from their company. The owner’s age is not the only reason for considering business transfer. In 2002, Kristina Ercegović founded the first agency specialising in so-called mystery shoppers who monitor the service of various stores. After six years, she wanted a change and started a new business. She hired an agency specialising in selling companies. After the first round of 20 potential buyers, the selection was limited to eight individuals. Eventually, they found a buyer who paid the price of average nett p profits assessed over the next five years. hows According to CEPOR, this example shows fer in it is a good idea to plan business transfer ional advance as well as search for professional renehelp. In addition to the Ministry of Entrepreneurship and Crafts, CEPOR and HUP, the Croatian atian Chamber of Economy and the Croatian Chamber of Crafts also offer consulting seration vices, as of course does the Croatia Mediation ween Association, especially if the conflict between co-owners, who are also family, exceedss the company’s limits.
In 30% cases business transfer fails, and companies die
Many bankers would rather continue lending to an old father and have nothing to do with a son who may make expensive changes Zoran Kureljušić, Privredna banka Zagreb
No 254 | January 2 2016 0116 016 16 | PVinternational PVint PV int in nter errn ern nat at ati tiio ona on nal | 2 na 25 5
THE FASTEST GROWING TECHNOLOGY COMPANIES
SERENGETI FROM ZAGREB IS THE BEST LOCAL COMPANY The number of Croatian companies on the list of the 500 fastest growing companies doubled last year, and took better positions compared with last year, Ivica Perica from Deloitte highlights by Boris Odorčić
T TOP 500 FASTEST GROWING COMPANIES GLOBALLY
52% software companies 18% media companies 10% communications 10% hardware 6% bio-technology 4% clean technology
he company Serengeti from Zagreb, specialising in software development outsourcing took 104th place on the list of the 500 fastest growing technology companies in the private and public sector in the EMEA region. The company, founded in 2007, achieved the highest place amongst other Croatian companies on the list of the 500 fastest growing technological companies Technology Fast 500, which Deloitte Global has been publishing for the past 15 years for EMEA (Europe, Middle East and Africa). In addition to this company, there are other local companies quoted - Nanobit (120), Integracija od-do (189), Sedmi odjel (204), Infinum (254), InfoCumulus (393), Accelerati (427) and Degordian (436). Compared with last year, the number of Croatian companies on this list, doubled. Furthermore, they had higher positions compared with last year. Last year Infinum took the lead position compared with other Croatian companies (142). The average four-year growth achieved by Croatian companies in 2015 totalled 474%, Manager at Deloitte’s Consulting Department, Ivica Perica says.
CATAWIKI SEARCHING FOR A FURTHER 100 SOFTWARE DEVELOPERS Catawiki is at the top of the 500 list. It is a Dutch online company specialising in auctions and was founded in 2008. Catawiki organises over 100 auctions each week in 80 specialised categories, including old-timers, collectible photos, and items from the film industry. The Swedish iZettle AB and Israeli Zerto follow. Overall, the EMEA region achieved average income growth of 1,012% and the list
26 | PVinternational | January 2016 | No 254
includes companies from over 20 countries. “We are a dynamic and opened-minded startup. We owe our hyper-growth to our talented 300 employees. Each has unique qualities and knows how to use them in their team. The most important thing for us is to employ the right people. Over the next few months, we plan to employ 100 global software engineers in Amsterdam”, CEO and co-founder of Catawiki René Schoenmakers says. For the second consecutive year, France dominated the list, which has been the case for the past five years. The remaining five leaders come from the same countries as in 2014 - the United Kingdom, Norway, the Netherlands and Sweden. Two Israeli companies, operating in the United Kingdom are amongst the first five, that is, ten leading companies. Software companies took over 52% of the total number of companies included on the list, followed by the media sector with 18%. The list is rounded off by companies from the communications (10%), hardware (10%), biotechnology (6%) and clean technology (4%) sectors.
RISING STARS The second Deloitte’s list includes the 50 fastest growing technology companies in Central Europe and ranks eight Croatian companies in a slightly different regional perspective. Of these eight, Serengeti is the top, ranking ninth, Nanobit 11, Integracija od-do 18, Sedmi odjel 24, Infinum 30, InfoCumulus 42, Acceleratio 46 and Degordian 47. The first place, dominated mainly by software and media companies, is held by the Czech company Simplity, specialising in consulting and data
CROATIAN BUSINESS & FINANCE MONTHLY
warehousing, followed by Polish SkyCash Polska (development of mobile systems for parking and public transport payments) and Hungarian Szallas.hu (online real-estate business). In addition to these two lists, Deloitte
CATAWIKI IS AT THE TOP OF THE 500 FASTEST GROWING, A DUTCH ONLINE COMPANY SPECIALISING IN AUCTIONS published a list of “Rising Stars”, which includes young companies showing great potential, who have been operating less than five and no more than three years with annual income below €30,000. Two Croatian software companies are on this list: Axilis (3) and Osmi bit (11). This year the programme criteria changed. Income growth is no longer highlighted over five-years, but rather a four-year period, and the sectors are categorised as software, hardware, communications, media, life sciences and clean technology.
TOP 10 IN 2015 4-YEAR GROWTH OF INCOME
COMPANY
STATE
1
CATAWIKI
NETHERLANDS
2
IZETTLE AB
SWEDEN
3
ZERTO
4
WORLDREMIT, LTD.
5
TABOOLA
6
SKYSCAPE CLOUD SERVICES LTD
7
SECRET ESCAPES
SECTOR
45.080%
MEDIA
30.114%
SOFTWARE
ISRAEL
24.088%
SOFTWARE
UK
20.385%
SOFTWARE
ISRAEL
13.797%
MEDIA
UK
13.391%
COMMUNICATIONS
UK
7818%
MEDIA
8
CLEAN MARINE AS NORWAY
7260%
CLEAN TECHNOLOGY
9
GROVE SOLUTIONS LTD
UK
6649%
COMMUNICATIONS
10
ETRINELL AS
NORWAY
6033%
SOFTWARE Source: Deloitte
CROATIAN COMPANIES ON THE LIST COMPANY 104 120 189 214 254 393 427 436
SERENGETI NANOBIT INTEGRACIJA OD-DO SEDMI ODJEL INFINUM INFOCUMULUS ACCELERATIO DEGORDIAN
4-YEAR GROWTH OF INCOME
SECTOR
843% 754% 539% 476% 397% 277% 256% 251%
SOFTWARE SOFTWARE SOFTWARE SOFTWARE SOFTWARE SOFTWARE SOFTWARE MEDIA
Source: Deloitte
No 254 | January 2016 | PVinternational | 27
WE PRESENT ENSO, Garešnica
CROATIAN EXPERTISE FOR BMW The company produces systems on the ‘make-to-order’ principle, mainly for the motor industry; it introduced the quality management system ISO 9001 in 2015
T
he Garešnica-based company Enso is involved in the production of automated products and machines as well as in the development of computer programming, primarily in the motor industry. The company was founded in 2007 and currently employs six highly qualified individuals, primarily in the field of electrical
OWNERS – INVESTORS – ARE RELUCTANT TO OPT FOR INVESTMENT IN AUTOMATION, NOTED JURETIĆ engineering, computer science, mechanical engineering and mechatronics. The company is not involved in the serial production of automated products, since it operates according to the ‘make-to-order’ principle. It introduced the quality management system ISO 9001 in 2015.
Đuro Juretić, Director of Enso, pointed out that the company follows long-term market trends. In addition, he emphasised that, against the backdrop of the periodic nature of investment cycles among their clients, and orders placed, there is an incongruity between the services provided and the subsequent payment throughout the year. Nevertheless, over the last several years the company has maintained a positive balance sheet and showed growth. “Considering that our business activities involve clients from the European Union or from foreign-owned domestic companies, the economic indicators suggesting mild growth are not a sufficient incentive for domestic companies to opt for investment in the automation of production. The awareness of the significance of market competitiveness resulting from automation is currently still extremely low amongst Croatian companies, mainly amongst those which are state owned”, 28 | PVinternational | January 2016 | No 254
stressed Juretić. He added that owners – investors – are reluctant to opt for investment in automation, since they are currently not aware of all the benefits this can bring.
CONQUERING LOCAL AND EU MARKETS Enso sells its products both locally and in the EU where it provides services of programming and machine commissioning for the motor industry, primarily for BMW, Audi and Mercedes. Moreover, the company develops and sells electronic devices and, designed and manufactured a machine for varnishing electronic components for a Slovenian customer. Since there is substantial demand for programming services of control units in the motor industry, the company is aiming to increase the number of employees. Thus, additional room will be provided for corporate development, aiming to launch new products, boost service quality and expand the existing range of services based on newly-acquired knowledge and abilities. “We are striving to be recognised as a high-quality and reliable provider of high-technology solutions for the control of finished products, through the development of our own devices for testing and quality control“, concluded Juretić. (S.P.)
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2007. the year Enso founded 6 highly-qualified employees in by the company