Mr.Andrej Bele, Managing Director of the Strategic Business Unit Coffee with Atlantic Grupa speaks for Profit magazine.

1.Another business year – and the 20th anniversary of successful business – lies behind you. What business results did you achieve in 2017?

The anniversary was marked by socially responsible activities that add a final touch to everything we’ve done so far, achieving good business results due to our continuous effort to create a special concept of enjoying coffee within the tradition of giving and caring. The first part of the year was marked by the promotion of the monograph Gospodin Mangup (Mister Rebel) about Dragan Nikolić, which we used as an opportunity to thank this great artist for his friendship and years of collaboration, while familiarizing everyone with his work. We celebrated the anniversary itself by organizing the “Podrška za poverenje” (“Support for Trust”) initiative – we visited, made and donated coffee to the staff of the emergency and other public services in larger cities throughout Serbia. Those are just some of the activities we commemorated this significant anniversary with. However, staying in the lead on the market is even more difficult than it was to reach the top. Both our responsibilities and the expectations we need to fulfill are increased, as the Atlantic Grupa is the leading coffee producer in a region dominated by the consumption of Turkish coffee. Our foundation for the leading position is made up of a broad product portfolio, regional know-how, flexible business organization, and as a high-quality assortment in the categories of Turkish, instant and espresso coffee, with authentic brands carefully created for different consumer structures and needs.

Nowadays, every other cup of domestic coffee consumed in Serbia has been produced at the Grand Kafa plant, which is something we are immensely proud of. When it comes to the Turkish coffee category (Grand Gold, Grand Aroma De Luxe, B&E and Bonito), our market share in Serbia is 53%. For example, in October 2017, Grand Black&Easy had the highest MS since it was launched: 15.8% MS VOL; 12.3% MS VAL. Grand Kafa is number one in terms of the market share in Bosnia and Herzegovina and Macedonia, while Barcaffèis the undisputed leader in Slovenia in the Turkish coffee category with a market share of 71%, which makes it the coffee of choice for 7 out of 10 coffee drinkers in Slovenia. During the period from October to November 2017, Barcaffèhad the highest MS since it was launched on the Croatian market – 16.4% MS VOL; 17.4% MS VAL.

2.What does “successfully conduct business” mean to you? So far, we have always discussed the quality and different kinds of coffee – but let’s not limit our conversation to that topic. Atlantic Grupa is a regional company. To what extent do the changes and events in the EU influence your business in Serbia?

In general, the Serbian food industry is facing a large number of global challenges that call for an evaluation of the current production and sales practices. Those challenges include increased globalization and competition, complex requirements regarding the reliability of quality, production reliability and flexibility, and, of course, maintaining consumer trust. The competition arena is ruthless, so we try to focus on our consumers and quality. Quality is created beginning with the coffee bean itself, by monitoring the yield and selecting the best coffee, because a high-quality product can only be obtained from high-quality raw materials. It is the basic prerequisite for all other activities. On the other hand, once all the duties have been paid, it is difficult to achieve competitive prices on foreign markets. I’m not necessarily thinking of the region, but rather the EU countries we are currently exporting our products to. In addition, regardless of the contemporary professional standards we have implemented at Group level, such as the quality control system ISO 22000, when it comes to Serbian products (i.e. Grand Kafa), we have to offer additional proof for the standards implemented. For example, the certificate for the standard for Barcaffè, produced in our factory in Slovenia, is accepted in Germany. However, the same certification house comes to Belgrade to perform additional checks at our plant where coffee is produced in compliance with the identical standards. It is exactly in this area that Serbia could offer more support to exporters, since our coffee can be found in European retail chains such as ALDI SÜD (Hofer) Rewe Group, Spar and so on, which further proves that we have developed corporate practice concerning process management that is based on top global practices and standards.

3.Since January 1, 2018, coffee producers are required by law to mark coffee products with an excise stamp, just like cigarettes and hard liquor. You have been paying excise duty for ten years already, but now you are obliged to put an excise stamp on each bag of coffee. How far along is this process? Is this law being implemented?

As you already mentioned, the excise on coffee, as mandatory duty paid during import, is not novel and we have been paying it for years. The excise amount is adjusted to the living expenses at the beginning of each year, which is also the case for 2018. Last year, the excise was RSD 85.75 per kg of raw coffee, which means that Grand Kafa paid over EUR 11 million to the state budget via excise and customs duty. What’s new is that excise stamps on coffee bags will serve as proof that the coffee carrying this marking has passed the official import process and all legal procedures regarding excise and customs duty, as well as appropriate quality control. Excise stamps thus create a clear distinction from unfair competition, which is why Grand Kafa initiated the introduction of these stamps in the first place.

4.This law was adopted in 2017 and the producers were given one year to adapt and obtain the necessary equipment. What exactly does this mean for you as a producer? How large an investment was required?

We are well aware that the strengthening of the state budget is one of the major weapons in the fight against the gray economy. We invested around EUR 300,000 in the required equipment, which is quite a large amount, in addition to EUR 1 million for excise stamps that we as the producers put into the state budget. However, this can also be viewed as another step in the process of decreasing the gray zone in trade which has, according to some estimates, reached a volume of over 4,000 tonnes of raw coffee per year. In terms of value, we are talking about some four to five million euro, while both the country and renowned producers are affected by unfair competition that does not respect the basic consumers’ right to quality. In general, if the goal is to efficiently articulate the interests of all parties – the producers, the state and the end customers – in order to make and sell a high-quality product, then everyone in the country has to do their job. This is what we, as the largest renowned coffee producer in the region, are fighting for.

5.Will the enforcement of this law, in your opinion, bring about adequate results? In what way do you – as a large system – generally fight unfair competition?

This is not something that can happen overnight, but since the beginning of the year, we have already witnessed the confiscation of coffee without excise stamps. However, we are expecting more tangible results by the end of the second quarter, once the stocks of coffee and finished products purchased before December 31, 2017 have been used up, since, according to law, only those finished coffee products that were imported after January 1, 2018 need to be marked. Certainly, there will be no actual results without proper monitoring and systematic sanctioning in the framework of consistent enforcement of the excise policy and responsible conduct of all responsible state authorities. For instance, it is estimated that if the gray economy in Serbia were decreased by just 3%, EUR 1 billion would be returned to legal circulation in the next five years, which is quite a significant amount. Therefore, we support the wide state initiative and the decision of the Government of Serbia to keep organizing activities with the aim to fight the gray economy in 2018 as well. In addition to the better functioning of state authorities, inspections, customs and tax authorities, the government is also introducing stimulation measures to motivate both business entities and citizens to facilitate a decrease in the gray economy in their immediate surroundings.

6.Are unfair competition and the fight for the market represented and felt in the media?

A firm attitude and honest communication have been and always will be the only way to protect the integrity of all parties in the dialogue. Therefore, as a company, we still believe in fair market competition and dignity in communication. Such an attitude may well be the only way for us to distance ourselves from the media that choose to disseminate new and different “truths”. The market is obviously becoming too tight – not only for companies, but also for the media. In the race for placement, instead of relying on positive promotion of their own business, some companies, sadly, choose to attack the competition and start anti-campaigns via the media, attempting to degrade their competitors by means of bad publicity for personal gain. We believe that a company should consistently show good business manners, while maintaining maximum business transparency, and open and honest communication with all stakeholders and the media that seeks relevant information. This became really obvious, for example, in reports regarding the introduction of excise stamps for marking coffee – there were claims that excise on coffee was being introduced in Serbia and that the price of coffee would be increased because of that, etc. This was far from the truth, since excise on coffee has existed in Serbia for over 10 years. The only change is the fact that coffee bags will carry excise stamps, which will not increase the price of Grand products.

7.The introduction of contemporary digital technologies, together with the digitalization of services and procedures, should simplify the communication between the economic sectors and the state, as well as between the companies at the national and regional level. Will this reduce the amount of administrative barriers and increase the efficiency of the public sector? Will it improve competitiveness and cause faster economic growth and development?

The West Balkans region and former Yugoslavia represent a territory with a high growth potential. These people share similar consumer habits and experiences...The administrative barriers we come across today certainly hinder the growth of trade and income throughout the entire region. Digitalization is one of the fundamental means of easier and faster connection. In line with that, when representing the business community interests in the dialogue with regional governments, we should insist on the elimination of barriers, simplification of administrative procedures, compliance with regulations, phytosanitary and veterinary certificates, and the synchronization of customs administration and inspections... Undoubtedly, the benefits regarding the shortening and simplification of customs procedures through digitalization represent a means of easier connection and more successful trade, and we also believe that this will bring about a more efficient flow of goods, more dynamic trade and ultimately facilitate business as a whole, especially for food companies such as the Atlantic Grupa. Our system consists of 17 production plants for established brands in 6 countries. Coffee is the largest business segment with a 20.1% share in the total sales revenue and roasting plants in Serbia, Slovenia, Bosnia and Herzegovina, and Macedonia. Consequently, for us as the largest raw coffee importer in the region (30,000 tonnes per year), almost half of which is distributed in Serbia, simplified procedures would mean faster import, which is the key precondition for planned supply and quality, and thus end consumer satisfaction.

8.You constantly invest in the development of your brands and their promotion, as well as communication with your consumers. What is the basic idea behind your projects?

A leader must also be an innovator, always one step ahead of the competition. In essence, you have to not only follow, but also set trends through your original approach and by developing innovative products which inspire consumers to adopt new habits. That’s why we continuously and very thoroughly observe research on our consumers’ habits, their attitudes and beliefs, so that we can influence their behavior. It is also necessary to be familiar with the market channels and the customers, as well as the inevitable competition. If you analyze it, but also regard it as a worthy rival, you will become stronger and more powerful both on the market and in the eyes of your consumers and customers. Thus, investing in research and development is an important budget factor for us. We allocate 50 percent of our total investments towards the development and maintenance of quality, since we are constantly developing products that will meet the needs of contemporary consumers. For instance, we were the first to introduce instant Turkish coffee Black&Easy, which can be made anywhere by simply pouring hot water over the coffee. Just over a year and a half ago, this was quite a revolutionary concept. Since then, we have sold as many as 19 million cups of this coffee. Being innovative within the framework of a segment as traditional as Turkish coffee is not an easy task, but the key is to be able to respond to everyday challenges imposed by the dynamics of modern living. Last year, Grand Black&Easy won the Effie Award in the New Local Products or Services category.

9.Over the past twenty years of business operations on the Serbian market, Grand Kafa has earned the loyalty and won the hearts of its consumers through constant quality, innovations, care for the environment, and numerous projects. How is this achieved? Do you believe you can still increase your market share in the traditional coffee segment, in which you are the leader?

Honest and direct communication with the consumers is one of the key factors that enables us to understand their needs and habits. We realize that competitive advantage is increasingly based on intangible assets which cannot be obtained or successfully imitated within a short period of time. The assets I’m referring to are accumulated within the company over the years and we call them “Learning by Doing”. Atlantic Grupa continually invests in the education and development of all the staff members involved in the production, planning, development, and distribution chain, as well as the education of the end consumer. The consumer must be aware of the brand and its quality, but they must also know how that quality has been achieved. This requires a great deal of effort, knowledge and investment. A brand is not recognized by quality alone, but rather a network of associations that ties each and every consumer to a brand, and this is that added emotional value which is undoubtedly recognized by consumers. Our modern brand communication strategy has brought us much recognitions by experts, as well as the organic growth of our company.

10.What are your general plans for 2018?

We will continue to develop brands and new products. In that sense, espresso –which we are putting forward in the entire region – will be given more attention. Espresso was introduced in this region in the 1990s, and it makes up between 6 and 7 percent of our portfolio under the Barcaffèbrand. However, over the last two or three years, there has been an expansion of espresso in Serbia. At the end of the year, we launched a new product – BarcaffèD.O.T. capsules (New Dimension Of Taste). The new dimension of taste, created for pleasure, originates from carefully selected coffee varieties from Brazil and Ethiopia, Colombia and India, prepared in ideal conditions in order to ensure premium quality and a perfect balance of taste for every cup. This new and sophisticated product line is a result of years of searching for the perfect cup of coffee at all times that is capable of transforming relaxation into a magical at-home experience. BarcaffèD.O.T. capsules are compatible with widely available espresso machines. In addition, we will continue to strengthen the on-the-go consumption trend, which we are already working on within our Barcaffè&Go segment, a modern and popular concept that offers mobility in combination with the superb quality of Barcaffèespresso. In the on-the-go segment alone, we sell more than 12 million espresso drinks per year. New ways of enjoying coffee and the close relationship with our consumers continue to inspire us and lead us towards even more interesting innovations, which will certainly make our consumers happy.

11.Leading business experts agree that successful leaders must have the capabilities and skills that guarantee success for all employees. The results of your work speak for themselves – you are a successful leader. What advice do you have for young people – future leaders?