In 2015, Atlantic Group achieved sales revenue in the amount of EUR 711 million, which is, compared to the previous year, an increase of 5.6 percent. With a 20.1% share in the total sales revenue, coffee stands out as the largest individual category with sales revenue of EUR 143 million. This makes Atlantic Group a leading coffee manufacturer in a region dominated by the consumption of Turkish coffee. In 2015, our key markets were Serbia with 49% of our sales revenue and Slovenia with 29%, followed by Croatia with 7%, BiH with 8%, and Macedonia with a 5% share of the total sales revenue. Analyzed by categories, the most popular is Turkish coffee with 89% of sales, espresso takes 6%, instant coffee 3%, and other coffees 2% of sales.

In the next year, the focus of Atlantic Group is primarily further broadening of distribution to the European markets, new products development, as well as the development of the extensions in the coffee category, and opening new distribution channels. Innovation is the key to success of the Atlantic Group, which actively monitor trends in consumer behavior, at the same time taking care of sustainable profitable business operations. Today, Atlantic Group has almost 2000 employees in Serbia, and the Serbian market with its 24% of share in the total revenue of the Atlantic Group is the second largest market. Along with the companies Soko Štark, Grand prom, Palanački kiseljak, Foodland, and Atlantic Brands, we are a powerful and recognizable local subject, operating as a domestic company, and that’s how we feel.

r. Andrej Bele, the Managing Director of the Strategic Business Unit Coffee with Atlantic Group, speaks to PROFIT magazine.

1. Mr. Bele, you were born and received your education in Slovenia. How did your career develop before you became the head of the Strategic Business Unit Coffee with Atlantic Group?

I was born in Celje, which is where I was educated, and I grew up in a small town called Rogatec, near the famous health resort and spa of Rogaška Slatina, where my family still resides.

As usually happens, a set of circumstances led me more than 20 years ago to Donat Mg, the mineral water bottling plant in Rogaška Slatina, and this was the first job in my career. At that time, the health resort Rogaška Slatina had more than 1,300 beds for tourists, a mineral water bottling plant which was, in 1997, bought by Kolinska d.d. in Ljubljana, which was, at the time, the largest Slovenian and regional food company. In Kolinska, I was in charge of the beverage programme and after that I was the director of sales for the entire assortment of A.D.Kolinska products. Seeking new challenges, I then spent three years as a Commercial Executive in another large Slovenian food company Žito d.d., from where I came back to the already established Droga Kolinska company, as the Business Unit Beverage Manager. I remained in this position even when Atlantic Group took over Droga Kolinska in 2010, until August 2011. Since then, I have been working in the Strategic Business Unit Coffee and spend most of my time in Belgrade, moving between Izola, Belgrade, Skopje and Bijeljina, which are the locations of our roasting plants.

2. Apart from Serbia, where is Grand Kafa the market leader? In which other countries in the region does Grand Kafa have manufacturing facilities? What are the plans concerning expansion to other markets?

The Strategic Business Unit Coffee is the largest within the Atlantic Group and its portfolio is comprised of segments of traditional, instant and espresso coffee, with authentic brands carefully created for different user structures and needs. In the markets of Serbia, BiH, Macedonia, and Montenegro we are represented with the Grand kafa brand which is, in traditional segment, represented by Grand Gold, Grand Aroma, Grand DeLuxe and Grand Black’n’Easy brands. There is also a wide range of instant products under the Grand brand, as well as our brand Bonito.Our biggest roasting plant, in which we produce the mentioned trademarks, is located in Belgrade, in Ledine. The second largest roasting plant is in Izola, where we produce the Barcaffe brand for Slovenian and Croatian markets, while in the espresso coffee segment Barcaffe is the brand with which we are present throughout the region, with different mixtures for each market. The third largest roasting plant is in Glavičice, near Bijeljina in the Republic of Srpska, which also produces Grand Gold, Grand Aroma and Bonito. It is a small roasting plant that supplies the area of Bosnia and Herzegovina. And the fourth is our roasting plant in Skopje with the products Grand Gold, Grand Aroma, Grand Deluxe, Kafa C and Minas for the area of Macedonia. One part of the products from this roasting plant is exported to the Montenegrin market. Annual production is about 24,000 tons and for the purposes of comparison, our first competitor has an annual production of 13,000 - 14,000 tons.

The existence of our own solid distribution network within the Atlantic System enables, above all, the efficient supply of all sales channels in all markets of the region - from the retail to the HoReCa segment. This also includes more efficient monitoring of sales, inventory and the need for changes in the range offered.

Through successful implementation of our strategy for internationalization, including the strengthening of the sales organization and opening of new western markets, at the end of 2015, Atlantic Group expanded its distribution outside our region so that in the region of German speaking countries it already operates with its own distribution network. New distribution companies were first established in Germany and Austria, and the same is planned in Switzerland and Sweden.On the German market,Atlantic Brands has its headquarters in Frankfurt. This location was chosen after carefully assessing the locations of our key customers and internal and external suppliers, as well as the availability and positioning of our existing sales teams. For the same reason, the headquarters of the Austrian Atlantic Brands are located in Vienna. In order to provide full support to Atlantic’s portfolio, in line with an ambitious plan, significant investments on both markets are planned, as well as investments in our organization and teams, not only in Germany and Austria, but also in Italy and the United Kingdom.

3. Where do you import coffee from, how do you perform control of the origin of the imported product, and on what basis do you assess the quality of coffee?

When the product quality is the strategic value of the company, consumers recognize it. All raw materials used in the production are purchased according to clearly defined standards and origin. Arabica is exclusively from Brazil and a small part is from Colombia, and robusta comes from India, Vietnam, or Uganda. Each year prior to harvest, our experts visit the plantations in these countries, meet with manufacturers, and check the crops. Our coffee experts examine on site whether the coffee has been treated properly, which means that we do four tests for the coffee quality – on the plantation itself, the product is subjected to control procedures before it is loaded onto ships in the port of Kopar, through which all of our imports are shipped (for the roasting plant in Skopje, partly from Thessaloniki too), and finally, we examine the quality of the coffee when it arrives at the location where the reprocessing takes place. Only such strict controls guarantee us that we’ll place only the best coffee on the market. Also, through regular purchasing channels, we always look for opportunities in new countries, and I’m thinking of the African countries that are rich in robusta. I must emphasize that during its import, the coffee undergoes all necessary controls, which differentiates serious manufacturers who pay customs and excise duties for imports of raw coffee from others, and provides an additional guarantee of origin and quality of the coffee we purchase. It is clear, therefore, that quality needs to be managed in all parts of the process, from development through production and selection of raw materials to packaging and distribution.Consumers must be constantly reassured of the quality and therefore it is hard to get to the leading position, but even harder to maintain it.

4. Has the price of coffee on the world market had noticable turbulences in the past few years, and what are the expectations for the future?

After two years of a small harvest in Brazil, this year will be bigger, but, unfortunately, will not reach its full capacity due to repeated droughts in some parts of Brazil. The drought has mostly hit the region that grows robusta and rio minas, so the question is how the price of coffee will move at the moment when the harvest arrives on the market. Besides Brazil, Colombia has also suffered damage from drought, so that their harvest in this year will also be smaller. In addition, all the products that are traded on the stock exchange are subject to changes caused by certain realistic indicators, as well as possible speculations.So when we compare the price of incoming raw coffee, for us, no year is the same as the previous one. The current coffee price level has been reached largely by the rise of the dollar and the fall of local currencies in the countries of coffee manufacturers. On the other hand, the weakening of the euro has led to the annulment of the effect of the price fall in dollars. However, the system of planned purchases of imported raw materials helps us prevent this constant price turbulence on the stock from having a great effect on the end consumer. Arabica, or minas coffee, is traded on the New York Stock Exchange, robusta is traded on the London Stock Exchange, and these are the two types of coffee that we use the most. It should be noted that 80 percent of our Arabica comes from Brazil, where the most demanding and the most important period for coffee is in February. At this point it should be noted that the global consumption of coffee records a constant growth of 2.5% per year (the highest growth is in the countries where coffee originates, India and China), which also requires a steady increase in coffee production. Given that the coffee reserves on the global level are at a historical low point, it will take a few years of increase in coffee production to meet the rising demand. The fact is that the production and consumption of coffee in the next period will be in balance, so we can not expect a serious drop in prices. In the case of any new climatic disasters that affect the harvest, it is very possible that there will be a new rise in coffee prices on the world market.

5. What needs to be changed in the legal system of Serbia to make business operations in the coffee market more efficient and more profitable? We know that the largest manufacturers of coffee in Serbia demand that the state allows them to highlight excise stamps on their products. How far have you come with these negotiations and how do you fight against the gray economy?

The data that appear in public, suggest that over 2,000 tons of coffee enter Serbia without the control of the official authorities. Also, there are more and more (coffee) products with the addition of a surrogate that is not put on the labels, which requires measures to be taken by the authorities, since our company annually pays more than EUR 11 million of excise and customs duty into the state budget.

I believe that the introduction of excise stamps would enable the market to immediately recognize unfair competition, namely excise stamps would become a means for differentiating serious manufacturers who pay customs and excise duties for the imports of raw coffee, which has gone through all the tests, and it is also a logical argument for the difference in price in relation to the low-priced roasters whose products may contain different substitutes. We believe that this practice could help reduce the gray market, and people would be confident in the quality of the coffee they buy.

6. We have a wide selection of coffee from different manufacturers on the shelves. What is it that distinguishes Grand kafa from the others, and what are the habits of the consumers in Serbia and the region?

Since it was established in 1997, Grand kafa’s constant investment in technology, respect of the current trends in the world coffee market and attentive monitoring of the desires and expectations of its customers has helped create the whole concept of enjoying coffee. Thanks to this originality, while respecting traditional values, Grand kafa has gained the trust of millions of coffee lovers and become the leading brand in the region, which sovereignly holds the leading position in the coffee market in Serbia. The key factor for building customer loyalty for Grand kafa is the respect arising from the constant product quality, modern business operations and refined approach to consumers and the market. This trust that Grand kafa has gained from its customers is the result of the constant fulfillment of the promises made on the basis of carefully listening to their wishes and expectations. We have demonstrated, through ourloyalty, how important our customers are to us; in the last two years on the market we have given away hundreds of thousands of coffee mugs, tins, teaspoons and various other gifts. It should be emphasized that a consumer in Serbia is very demanding on the one hand, and loyal on the other, so it is understandable that we create additional value through specially conceived gifts.

7. Grand kafa is a leader in innovations. Which are the new products that you offer to the consumers both in Serbia, and in the region? In your opinion, how is a new brand created?

As a leader in the region, Atlantic Group, and therefore Grand kafa, also has the obligation, as well as the pleasure of constantly introducing new products and new tastes to its consumers, and motivating them to adopt new habits. Based on that, an idea emerged for a product that we launched on the market a year ago, which is Grand Black’n’Easy, or Barcaffe Black’n’Easy in Slovenia. Due to very fast pace of life and lack of time, the category of traditional coffee has reduced slightly, which was the basis of our adjustment to this new trend and the reason for developing a new product. That is why we named Black’n’Easy “Easy to prepare Turkish coffee”. This is not instant coffee. This is Turkish coffee, which is quick to prepare.

From the initial idea until the beginning of sales, less than 10 months went by, and what is important to point out here is that this is solely our product, made by our team. This product is not a copy and not a plagiarism. In this way, we showed that we are a company which not only follows, but also dictates new trends. We have another brand new concept with which we enter HoReCa sector, and it is revolution number two - Jazzva, the concept of preparing top quality domestic coffee from a capsule, without using a Turkish coffee pot, perfect to serve, and perfect enjoyment.

The first sales results show that Black’n’Easy was revolution number one. Since last year, when we introduced the new product, Black’n’Easy has already won over the consumers, not only in Serbia, but also in Bosnia and Herzegovina and Macedonia (Slovenia and Croatia). It is necessary to emphasize that, in less than a year, the consumption in the region was more than 7.5 million bags, which means that 7.5 million additional cups of coffee were drunk. This year, Black’n’Easy entered HoReCa segment, and now you can drink a real Turkish coffee in cafés, but you can also prepare it yourself – this is our original Make it Yourself concept. Besides that, we are also strongly developing the segment Barcaffe’n’Go, an espresso coffee machine, a modern and popular concept which offers freedom of movement along with the top quality Barcaffe espresso coffee.

I think that we are one of the few companies which has a so called development budget each year, not only for market research, but also for innovations. In Slovenia, we launched, for instance, Barcaffe selection, 100% arabica, for home use. We introduced this coffee in Croatia as well, in slightly smaller quantities, but it was received well in both countries. We haven’t launched this premium coffee yet in Serbia, because we are preparing some other extensions for this market.

8. Which marketing strategies and communication channels do you use while positioning your products on the Serbian market? How are your products positioned on the market in the region?

Our placement strategy is based on covering all the segments with their own particular marketing mixtures. For instance, Grand Gold coffee meets the needs of those consumers who recognize the additional value that the brand delivers in every aspect, thus justifying a slightly higher price positioning. This is the same population between 30 and 55 years of age that is more oriented towards traditional values, from urban and rural Serbian households. When it comes to Grand Aroma, we communicate with a different target group, the younger female population that follows trends and is driven by different values, so the messages and tone of the communication are tailored to them. In order to properly reach our target consumer, our communication is not restricted only to the traditional media; we communicate with consumers directly as well, which is a sincere, interactive relationship that is increasingly gaining in importance.

9. In the last year, Grand kafa has received many acknowledgements and awards, and one of the significant ones is the UEPS Golden Award for Black’n’Easy, the coffee of the new generation. In your opinion, what is the key of a good and successful campaign?

This success is a result of the marketing mix and a well created STP process (Segmentation-Targeting-Positioning). At the last UEPS award ceremony, Grand Prom was given the award of advertiser of the year and presented with 13 more medals: three gold medals, four silver medals and six bronze medals. The new Grand Black’n’Easy, the coffee of the new generation, received the most acknowledgements.The awards we won are the best proof that joint enthusiasm, positive energy, creativity, and a meticulously planned strategy always win. We are proud of this result, as well as of all our associates.

10. How do you see the coffee market in the region over the next five years? What are the long-term, primary, and strategic goals and expectations for the next period?

In the next five years, the consumption of traditional coffee in Serbia should stay at approximately the same level. One of the basic reasons for such an estimate is the data from our research, according to which more and more young people are consuming traditional coffee, especially students, who often prepare this drink while studying for exams. This way, long-term habits are created, and we should not ignore an economic moment here either, because traditional coffee, measured per cup, is cheaper than the other types. We introduced the already mentioned novelties, Black’n’Easy coffee and Jazzva, in order to speed up the preparation process for traditional coffee, to make it more appealing to consumers, which is specially important in the HoReCa sector. Regardless of all these products, as the biggest producer in the region, we must continue to be the creators of novelties, and so our development department is constantly working on finding new possibilities, whether through new recipes, new preparation methods, or new technologies that will provide new benefits.

11. Tell us something more about the “Aroma Night” loyalty program? What does this project actually represent?

The Aroma Night is a unique loyalty program, by which Aroma wants to thank to its consumers, I would say - mostly female consumers, with the Vlado Georgiev concert, in Kombank Arena, at 8PM on April 23. The concept of the concert is simple, by buying 1.5 kg of Grand Aroma coffee, which is far less than the price of such event, you will get a ticket for the concert of your favourite singer, where you will certainly have a great night out. Grand Prom is the first company to rent Kombank Arena in order to delight its consumers and give them the opportunity to enjoy the music of one of the most popular singers-songwriters from this region. So, see you on April 23 in Kombank Arena!

12. You are a Slovenian temporarily working in Belgrade. How do you spend your free time? What are your leisure activities? What do you do to relieve everyday stress?

I personally do not like stress as an expression. Essentially one should know one’s own priorities, and then any sudden and unexpected situations can be easily overcome. Of course, it is important to mention my years of experience on the business scene, as well as the trust I have in my associates and employees. But the things I find most relaxing are long strolls down by the river, spending time in the countryside, meeting with the colleagues and friends I have met here in Belgrade, those who are not exclusively associated with the business, and occasional, but unfortunately rare time spent on Ada. However, what certainly, has the best effect on me is spending more time surrounded by the right company. I must mention that Belgrade is a metropolis which I have started to love during this short period, and that I feel very good in this city, and among these people.