Podravka savours accession prospect

Listen to this article

00:00
00:00

Podravka – the spice maker at the heart of Croatia’s biggest corruption trial to date – hopes to bounce back to rapid growth, boosted on the country’s imminent accession to the European Union.

With Croatia seemingly poised to become the EU’s 28th member state in July 2013, the resuscitated company plans to spend up to €100m on expanding and upgrading its factories.

Croatian awaits approval from member states on June 24, after EU commissioners recommended wrapping up long-running accession talks and making the membership offer. The ex-Yugoslav republic of 4.5m people has adopted rapid judicial reforms to meet EU conditions, while pressing ahead with high-level corruption probes.

Podravka allegedly suffered €54m in losses because of a secret management buy-out scheme and subsequent cover-ups involving senior government officials. Yet even with the judicial spotlight on the so-called ˝spice affair˝, the processed food company has returned to profitability in the past year.

Ljubo Jurcic, an economist and former prime ministerial candidate from Croatia’s centre-left opposition, heads the post-scandal supervisory board, under a pragmatic political trade-off that appears to have kept government officials at arms length from business operations.

Podravka is among the biggest Croatian food producers and exporters. It also has a factory in Poland, for EU markets. The group’s flagship spice brand, Vegeta, has been popular around Central and Eastern Europe since communist times.

But when Croatia enters the bloc, another non-EU site might be useful. Mr Jurcic talks about more investment in Russia and Turkey.

Podravka, based in mainly rural northern Croatia, is worth around 400m kuna, or nearly €60m, local analysts say. The state remains the largest shareholder, with 26 per cent. Earler plans for full privatisation fell by the wayside in the global crisis, even before the corruption scandal boiled over.

Damir Polancec — Croatia’s deputy prime minister and economy minister until September 2009, and previously a senior Podravka manager – is on trial with former board members over an alleged scheme to siphon off company money to buy a controlling stake for themselves.

The trial opened on June 6 with prosecutors bringing 42,000 pages of evidence to the Zagreb county court. Mr Polancec’s lawyer denied any conspiracy. His seven co-defendants include four other ex-Podravka executives. All defendants have pleaded not guilty.

Mr Polancec was already convicted last year on lesser abuse of office charges and sentenced to 27 months in prison.

As leaked US embassy cables confirm, prosecutors have also tried to tie the Podravka affair to Ivo Sanader, the former prime minister who resigned abruptly in mid-2009.

Mr Sanader, in custody in Austria since December, will seek faster extradition to Croatia at a hearing on June 21, his lawyers said. He is charged in other Croatian corruption cases and is under investigation for money-laundering in Austria.

Related reading:
Croatian shipyards: sink or swim, beyondbrics
Croatia & the EU: final set, beyondbrics
Croatia gets serious on corruption, beyondbrics
European Commission progress report on Croatia
Croatia in baulk, FT
Former Croatian PM arrested in Austria, FT

Copyright The Financial Times Limited 2017. All rights reserved. You may share using our article tools. Please don't copy articles from FT.com and redistribute by email or post to the web.