Globus completes Austrian acquisition
expansion, taking a stake in Austrian food distributor Vital Food
this week, part of its new strategy designed to tighten is grip on
the route to market.
Globus has taken a 49.9 per cent stake in Vital Food, which has long been the Hungarian company's licence holder in Austria and which will now change its name to Globus Konzerven und Tiefkuhlproduktions. The price paid was not disclosed.
At present, Globus' sales in Austria through Vital Food are around €3 million, but the company is confident of lifting total turnover there to as much as €15 million by the end of 2006.
The Hungarian company has made no secret of its desire to move into western European markets - a rare reversal of the usual investment route.
The company is already the second-biggest seller of canned and frozen corn in Germany, and is keen to build on this solid base through acquisitions there, but Austria's proximity to Hungary makes it the logical place to start, according to Globus' CEO Istaván Temesföi.
"Budapest is only 250km from Vienna, so in geographical terms it is obvious why this is such an important market for us," said Temesföi earlier in the year when Globus first announced plans to move into the western EU.
"Investing in a 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," he said back in June.
"This acquisition 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 said 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."
The canned food industry in Hungary is estimated to be valued in excess of HUF120 billion (€475m) and produces around 400,000 tons of produce a year, and while this is second only to France within the EU, the opportunities for growth there are minimal, Temesföi said."In Hungary right now many of the smaller canning firms have big problems as they don't have developed distribution channels to help them increase their business reach out of local and domestic markets. Because domestic demand is relatively small and demand for canned produce is being overtaken by frozen produce, the Hungarian market alone will not prove big enough for many canning businesses."