FT reporters examine three European companies that have emerged from the recession fighting fit


Conjuring up Croatia’s largest private sector company from the ashes of the 1991-95 war for independence seemed like “mission impossible” at the time, recalls Ivica Todoric, chairman of Agrokor. Starting out as a modest trading business in seeds and flowers before the break-up of Yugoslavia, it faced problems typical of the post-communist transition.

“The former socialist system, the former way of organisation, management and technical solutions, and the closed-circuit market all heavily affected the start-up,” Mr Todoric says.

Wartime difficulties sound incidental, the way he tells it. Yet the war added tremendously to the challenges of raising capital. The financial isolation continued even after Croatian forces won. “There was no money coming in … from outside,” he says. While Agrokor moved to snap up cheap privatisation purchases, it lacked the financial depth for serious expansion.

“In 1997, we considered selling our ice-cream portfolio,” he says. Fortunately for him, he and the prospective buyer failed to agree on price.

Ledo, the domestic ice-cream brand that Mr Todoric bought in 1994, has grown from 500 employees to 2,400; capital investments worth €1m (£830,000, $1.2m) have increased to €50m; and annual turnover of €15m now stands at roughly €300m. More importantly, it has exchanged its near-monopoly in an initially impoverished market of fewer than 5m people for an “open [regional] market with serious global competition”, he notes.

Staffing levels at his flagship Konzum supermarkets have grown from 1,800 to 18,000, with turnover rising from €300m to €3bn.

Agrokor managed to tap into international capital just in time for the post-conflict recovery. The European Bank for Reconstruction and Development, set up in 1991 to foster post-communist reforms, granted the company a syndicated loan worth roughly €170m, which opened the way for fresh commercial financing.

London-based bankers imagined Mr Todoric as a reclusive monopolist at the top of his Zagreb office tower. “When we first heard about Agrokor, we were told … ‘He’s a tycoon, that’s not a company the EBRD should work with,’” says Gilles Mettetal, the bank’s director for agribusiness. “But when we went there, we found better transparency than we had expected.”

Still, the EBRD insisted on corporate restructuring. Agrokor had initially applied for help with launching a corporate bond. “They were turned down by the credit committee because they were not ready,” Mr Mettetal says. “So we went back to Agrokor and said, ‘How about a syndicated loan … to refinance your loan portfolio?’”

Regionally, Agrokor is now Bosnia-Herzegovina’s second-largest group by turnover and ranks among Serbia’s top 10 investors, with €400m invested over the past seven years, company officials say.

The EBRD has also supported Serbian agri-business, notably MK Group, known for sugar, and Victoria Group, a soya producer. By contrast, Delta Holding, Mr Todoric’s main regional rival, blossomed without such help. Prior to the global crisis, Delta and Agrokor attempted a partial merger, which fell through after the two chairmen disagreed on valuations.

Agrokor has free-floating shares on the Zagreb Stock Exchange, but Mr Todoric retains firm control, holding 92 per cent of stock.

“This is one of the first companies owned by a so-called tycoon to open its capital to non-family members,” Mr Mettetal says. “It has gone from a very entrepreneurial company to a very well-structured multinational.” – Neil MacDonald


Azbuka Vkusa is not your typical Russian food retailer. Founded in 1997, the company has quickly made a name for itself in Moscow over a seven-year-period of aggressive expansion that saw the company’s store count jump from four to 26.

While the global recession and Russia’s 8 per cent drop in GDP last year might have been expected to take a toll on a company that specialises in selling Rbs250 (£5.50, $7.90, €6.60) containers of Danone yogurt, Rbs550 boxes of Special K and Japanese apples at Rbs1,000 per kilogram, Azbuka Vkusa is thriving thanks to Russia’s growing middle classes and loyal wealthy customers for whom price tags tend to be secondary.

After losing 20 per cent of its clientele in the first weeks of the crisis as panicked customers downgraded to lower-end stores, Azbuka Vkusa quickly won them back. Today its customer base is continuing to grow, says Vladimir Sadovin, the company’s chief executive.

“The crisis, or at least the psychological version that runs through people’s minds, has passed and people have returned to their usual consumption habits and routine, and they’ve come back [to Azbuka Vkusa],” he says.

Instead of slashing prices like other retailers, Azbuka Vkusa – which in English means “A-Z of Taste” – stuck to its pre-existing strategy: selling a range of hard-to-find items at a premium price.

“The guarantee of success in the premium segment is the quality level of the food, production facilities, interior, staff and fresh air,” says Mr Sadovin. “People have to understand why they’re paying more. It’s not a secret that a number of the items we sell can be found cheaper somewhere else.”

During the crisis, the company chose to tighten up its business model – securing better terms with its suppliers, for instance – and to take on many of the currency risks itself, rather than alert its customers to the crisis. “For us the main priority was that when a person walked into one of our food halls, he or she didn’t see any sort of crisis there,” Mr Sadovin says.

The strategy worked. The company expects to announce that it was profitable for the 2009 financial year and that revenues rose by 30 per cent from Rbs10.9bn the previous year. Plans are progressing to expand into Yekaterinburg, Russia, and Kiev, Ukraine, next year.

As it continues to grow, Azbuka Vkusa says it will stick to using Waitrose, an upmarket UK food retailer, as a model – the two groups meet regularly to discuss ideas – of how to attract its core customers: people “who value their quality of life … who fly business class on their own dime because they love comfort … and are doing it not to show off but for themselves”, Mr Sadovin says.

In the meantime, Azbuka Vkusa is bringing a little bit of Europe to Moscow, hiring English consultants and designers, and paying for a popular two-week training programme for its employees that teaches them customer service etiquette – including how to smile. “We take our best practices from the west,” Mr Sadovin says. – Courtney Weaver


Krzysztof Olszewski has built Solaris Bus & Coach into one of Poland’s most successful companies by steering clear of politics. But even he is starting to get a little tired of the lack of respect afforded to the entrepreneurs who created Poland’s economic success over the past two decades.

When Mr Olszewski opened his bus factory near Poznan, central Poland, in 1996, he had a positive reception from local bureaucrats.

“If you’re polite to them, then they’ll be polite to you and treat you well. They’re only human,” he says.

The relationship changed in 2005, when the conservative Law and Justice party won power. As a result of the party’s hostility to the business community, Solaris found it harder to get officials to issue permits, as it was safer for them not to take the risk of making an incorrect decision.

In spite of the victory of the pro-business Civic Platform party in 2007, the ties between business and the bureaucracy are still fraught, says Mr Olszewski, adding: “It will take a long time to rebuild trust.”

Outside his dealings with bureaucrats, he has no regrets about returning to his homeland from Germany, where he spent the 1980s as Poland suffered under communist rule.

In Germany, Mr Olszewski learned the bus trade at Neoplan, now a subsidiary of MAN, the German truck maker. Since returning to Poland, he and his wife, Solange, have taken advantage of their country’s skilled labour force and cheap wages, turning a business into an exporting success.

Solaris’s rugged, low-floor buses were aimed at the Polish and Russian markets, but have become a hit in western Europe. It has since expanded its product range and is moving into tramways.

Initially, it was difficult to break through the distrust of local governments in western Europe, who balked at buying expensive equipment from post-communist Poland. But years of effort have paid off, and Solaris remained successful during last year’s severe recession. “What crisis? We didn’t feel anything,” says Mr Olszewski.

The company was insulated because most of its sales went to government transport companies, which did not have to rein in spending as sharply as private firms. Last year, the privately held company made 1,114 buses, up from 1,037 a year earlier, and posted revenues of 1.2bn zlotys (£241m, $347m, €290m). This year, it expects to sell 1,325 buses.

“We had planned a 10 per cent increase for this year, but it will be larger,” says Mr Olszewski.

One potential worry for Solaris is the belt-tightening across most of the EU as countries try to tackle budget deficits and reduce public debt, which could affect mass transit contracts. “We’ll have to see if we’ll have a dip, but for now we have no sign of a slowdown,” says Mr Olszewski. – Jan Cienski

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