Globus recently announced that it is planning to buy up 59 per cent of Austrian distribution company Austria BAC. According to Globus CEO Istaván Temesföi the purchase is the first in a series of planned investments that will eventually see the distribution company come under total Globus ownership.
"Budapest is only 250km from Vienna, so in geographical terms it is obvious why this is such an important market for us," said Temesföi. "However, investing in this distribution company is the quickest way for us to penetrate the all-important medium-sized retail market. We already work extensively with the major retail players in a variety of markets, but they have their own distribution network, so supplying them does not cause any problems."
Although the company was unable to confirm the exact level of investment it was making in BAC, the company believes that dividends will pay hugely, as the company improves its distribution reach to the smaller, but equally vital food retail sector. Indeed Temesföi estimates that within one year the move will allow it to increase Austria turnover from €6 million to €10 million in the space of a year - figure that could be as much as €15 million by the end of 2006.
"This will serve as an increased distribution platform for all of our products in Austria, including frozen foods, canned foods, sauces and ready meals." said Temesföi. "The Austrian market is very interesting for us, particularly in view of the fact that Hungary is now a part of the EU. Previously our lorries had to wait for hours at the border in order to make deliveries, now that process is far less complex.
But Temesföi says that the company's ambitions do not end in Austria as it is also very keen to tap into the medium-sized retail sector in the even more lucrative German economy.
"We are currently developing a range of 20 to 25 products especially for the German market," said Temesföi. "Once we have received approval for this measure then we will take the next step to form similar distribution channels in the German market through further acquisitions. By doing this we hope to increase our turnover in this market from approximately €25 million to somewhere in the region of €40 million by 2006."
"We already have a well established distribution company in Poland and it is this model that we are hoping to emulate in both Austria and Germany where the market value is significantly higher."Globus currently has an annual turnover of approximately HUF 35 billion (€92.8m) and is the largest food company in Hungary. Recently it announced a quarterly loss of HUF 92 million for the quarter end March this year. This figure came despite a 22 per cent increase in exports, mainly driven by Russia and the CIS countries.
At the time the company attributed the loss to an increase in costs, attributable to the continued shift from canned to frozen foods. Although the cost of processing and packaging are lower for frozen foods, distribution costs are significantly higher.