Traditional Turkish coffee still holds first place in this region, shown by the fact that from a total of cca. 25,000 tons of coffee sold last year, 92 per cent was Turkish. We know that the predominance of the taste we are used to is extremely important here.

Coffee is the largest product category for Atlantic Grupa, providing 20.9 percent of the total sales revenue at group level.

Therefore, it was a real challenge to bring innovation to that traditional sector through introducing sub-categories with functional additives - Aroma Balans and Aroma Dekofe.

Through analysis of the results, it has been established that Serbian customers like to try new flavours, but that they often return quickly to their previously acquired habits.

They always find different flavours an entertaining diversion and essentially a supplement to what they really love.

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

1.Mr. Bele, where were you born, and where did you grow up and go to school?

I was born in 1968 in Celje, which is where I was educated. I grew up in a small town called Rogatec, not far from the world famous health resort and spa of Rogaška Slatina, where my family still resides.

2.What was your career path like before reaching the position of Chief of the Strategic Business Unit for Coffee with Atlantic Grupa?

Owing to circumstances, I was led more than 20 years ago to the ‘’Donat Mg’’ mineral water bottling plant in Rogaška Slatina, where I cut my teeth in the business. Back then it was a company within the Rogaška Slatina health resort, which at that time had more than 1,300 beds for tourists, a mineral water bottling plant, a facility for checking the health of visitors, and many great non-accommodation services on offer.

After the breakup of our formerly united country, in 1997 to be precise, the mineral water bottling plant was bought by "Kolinska d.d." in Ljubljana which was, at the time, the largest Slovenian food company, and very well respected. In Kolinska, I was in charge of the beverage programme and sales for the entire range.

Seeking new challenges, I then spent three years as Commercial Executive in another large Slovenian food company ‘’Žito d.d.’’, from where I came back to ‘’Droga Kolinska ‘’, which was then already established, as Business Unit Beverage Manager.

I remained in this position when Atlantic Grupa took over ‘’Droga Kolinska’’ in 2010, until August 2011, when I took over The Strategic Business Unit for Coffee, and since then, I’ve spent most of my time in Belgrade, moving between Izola, Belgrade, Skopje and Bijeljina, the locations of our roasting plants.

3.In 2010 Atlantic Grupa bought ‘’Droga Kolinska’’, which meant that it owned this company and also ‘’Grand Prom’’, and up to the present day it has achieved better operational results year on year. What operating results did you record in 2013 and what do you have in mind for 2014?

In 2013 Atlantic Grupa achieved sales revenue in the amount of 664.6 million euros, which is, compared to the previous year, an increase of 2.5 percent. Earnings before interest and taxes (EBIT) rose from 6.4 percent to 55.9 million euros, while net profit after minority interests amounted to 25.6 million euros, due, among other factors, to significantly reduced interest costs after successful refinancing at the end of 2012.

So, in the last year we have also been growing, which is a great success in an environment that is stagnant or weakening.

Coffee is the largest product category for Atlantic Grupa, representing 20.9 percent of the total sales revenue at group level, and in this sector last year the most significant growth was seen for markets in Bosnia and Herzegovina, Slovenia and Croatia.

The Croatian market has continued to achieve double-digit growth due to an increase in revenues from the sale of the Barcaffe brand in the Turkish and Espresso categories. In terms of categories, the most significant growth has been witnessed for Turkish coffee: with the Barcaffe brand in Slovenia and Croatia, Grand kafa in Bosnia and Herzegovina, and Bonito in Serbia.

Otherwise, in the last year SPP Kafa, with all of its brands, generally achieved 1.7 percent better results compared to the previous year. And for 2014, for which we can at least say that we expect challenges, we plan to continue to grow according to the best possible model for cost-effectiveness, optimal utilization and the conservation of our available production capacities. We aim to increase production volume, introduce new products and further expand our portfolio in the region. We’re also carrying on with investments, so that the loan of five million euros recently agreed with EBRD will primarily be used to improve the performance and energy efficiency of companies in Serbia.

4.Research shows that every second cup of coffee drunk in Serbia comes from your factory. What is the capacity of the factory in Surčin and do you plan to expand it?

Our business is directed towards active brand and innovation management, which implies ongoing investment. From the production facility in Surčin, we deliver nearly 14,000 tons of finished products annually for all coffee categories, from traditional to instant. In the last two years, we have invested a total of about two million in SPP Kafa - in facilities for manufacturing Grand Kafa, where significant cost savings have been achieved through switching to gas, as well as in the production of Barcaffe in Izola, where with modern technology as a means of production and packaging, we strive to meet all existing and newly created requirements for our key customers in the Slovenian and Croatian markets.

When we talk about brand power and market positions, it is enough to mention that, in addition to record sales, the last two years will also be remembered for a record number of new products, because under the Grand Kafa brand alone we launched Aroma Balans, Aroma Dekofe, Grand Gold 75g and 375g, Grand Instant Antistress, Grand Instant Choco Orange and Choco Banana. In the espresso coffee field, introducing the Barcaffe brand in Serbia and Bosnia and Herzegovina, over the same period, was one of our most challenging enterprises. With all this in mind, our overall portfolio in the region has been balanced for the HoReCa segment, where we finally have the unique brand Barcaffe in all markets, as well as the same layout, graphics and colours.

5.Apart from Serbia, in which other countries in the region does Grand have manufacturing facilities? What type of products do you produce there?

The Strategic Business Unit for Coffee, with its largest facility in Belgrade where the Grand kafa brand is produced, also has plants in Skopje, then in Glavičice (Bijeljina), as well as in Izola, where Barcaffe is produced. So, Atlantic Grupa is the largest coffee producer in the ‘’Adria Region’’, where Serbia is actually the largest coffee market, and brands like Grand Kafa Gold, Grand Aroma, Grand De lux and Bonito achieve more than 50% of the value market share.

This result confirms our quality, and supports the fact that we adapt quickly to market changes, take opportunities, and are flexible and responsible. We have to be, because we’re aware that we’re involved in a match against ambitious regional players.

We never forget that a consumer’s loyalty cannot be bought; it can only be earned, especially when it comes to coffee - brand loyalty is the most important factor.

Also, in the instant coffee sector, in recent years we’ve recorded an increase in the Serbian market, where we’ve placed different flavours on the market, such as apple and cinnamon, ginseng, slim & fit and freeze coconut. Grand Kafa Instant is getting closer to its goal, which is to hold firmly to second position in this part of the Serbian market.

6.What types of coffee do you offer to our market? Where do you import coffee from, and how do you regulate the origins of imported products?

All raw materials used in our production processes are purchased according to clearly defined standards related to origin. Minas exclusively comes from Brazil, and robusta - from India, Vietnam or Uganda. Every year before the coffee harvest, our experts visit plantations in these countries; they meet with manufacturers, check crops and so on. Also, we constantly monitor weather conditions in the countries in which we purchase raw materials, in order to get an image of what we can expect from the harvest that year. The main assessment is made based on reports from coffee experts, who finally check on the spot whether the coffee has been treated properly, which means that we do four tests for coffee quality – we test samples on the plantation itself, a product is subjected to control procedures before it's loaded onto ships in the Port of Koper, which we use for all of our imports, and in the end we check the quality of coffee when it finally arrives at a processing plant. Only such strict controls guarantee that we’ll place only the best coffee on market. Also, via regular purchasing channels, we always look for opportunities in new countries, and there I mainly think of those in Africa that are rich in robusta. I must emphasize that very strict legal procedures in Serbia represent their own form of guarantee that only high-quality coffee is placed on the market, and indeed our internal company standards raise the bar even further.

7.Which conditions must coffee fulfill in order to be described as high quality? Is our palate alone the measure of quality, or there are some official guidelines for coffee classification?

Coffee trees grow in many countries - on each of the four continents where there are semi-tropical or tropical areas. Robusta is, for example, more resistant to heat, while arabica is affected more by altitude, so it’s planted in areas as high as 2,000 meters.

The overall quality is affected by cultivation methods and the soil itself, temperature and weather conditions, harvesting, as well as different methods for the drying and storing of green coffee.

It is indeed necessary to stress that traditional coffee types, or recipes, differ a lot, even in our very own ‘’Adria Region’’, to say nothing of the wider world. The basic approach to creating a taste for our brands was to come up with distinctive and unique recipes, using a mixture of arabica and robusta.

8.Has the price of coffee on the world market witnessed noticeable fluctuations in the last few years, as a result of the economic crisis? How much can unstable prices on the world market affect the end consumer in Serbia?

In the agricultural season for 2014/2015, the global coffee market seems like it’s going to be facing, for the first time in the last three years, a deficit of this raw material. This is because it has been announced that crops in Brazil will fail to live up to their potential.

So as to remind you, last year the price of arabica coffee fell by about 23 percent. It’s obvious that lower crop estimations and a deficit this season have affected arabica’s price growth on the world market, from as early as the beginning of the year.

So, if the forecast deficit of raw coffee for this harvest is fully realized, prices on the stock market can only continue to grow, which is exactly what’s been happening.

If there’s only an indication of rain coming late in Brazil, meaning worse condition for the coffee,prices on the stock market start to climb automatically.

I’d say that another challenging year’s ahead of us, where we, as producers, have to balance the costs of imported raw materials and the price of coffee on the shelf, in the best possible way and with the already weakened purchasing power of our customers in mind.

We are very serious about monitoring daily events on the stock market, and we’re in constant touch with our partners in the countries where coffee is produced, because that’s the only way to respond in a timely fashion to all the hurdles that present themselves in form of these fluctuations on the stock market.

The information that we’ve received so far already hints that prices in 2014 and 2015 could easily reach those from 2012.

9.What changes, in your opinion, could be made to Serbia’s legal system to make the coffee market business more efficient and profitable?

What’s important to note is the fact that the country has two important administrative factors affecting the costs associated with imported coffee, and consequently the retail prices. These are excise duties on raw coffee, as well as the final product, and customs. Then there’s a VAT rate of 20 %, making it the second highest in the region. As the largest coffee producer, we respect all of the standards, such as ISO, HACCP, etc. Accordingly, we have an organized means of production, as well as offering goods of a quality that accords with the highest food safety standards and production safety principles. In contrast, small roasters sometimes place coffee on the market when its quality is uncertain. Finally, in cases where imitations of our brand are sold, which was a common occurrence last year, we are helpless without the adequate reaction of the competent authorities, which tends, unfortunately, to be lacking.

10.On our shelves there’s a wide variety of Turkish coffee from different manufacturers. What is it that distinguishes Grand Kafa from the rest?

From the moment it was created in 1997, Grand Kafa’s managed to build on the entire concept of taking pleasure in coffee. This is something that’s now recognisible about Grand, and it’s been achieved through continuous investment in technology, respecting current trends in the global coffee market, and paying careful attention to the desires and expectations of customers.

Thanks to its originality, always achieved while respecting traditional values, Grand Kafa has gained the trust of millions of coffee lovers and has become a leading brand in the region, and we are proud to say that it has consistently held a leading position in the Serbian coffee market. A key idea when it comes to building customer loyalty to Grand Kafa is the respect that comes from providing unswerving product quality, modern business methods and a refined approach to consumers and the market.

The trust that Grand Kafa enjoys from its consumers is the result of continued fulfillment of promises, based on careful monitoring of their desires and expectations. And we’ve also shown, through our own demonstrations of loyalty, how important our customers are to us. In the last two years we have given away hundreds of thousands of coffee mugs, tins, teaspoons and a variety of other gifts.

With the ‘’Laguna’’ publishing house, we have also designed a special edition of a ‘Cookbook for All Time’, and via interactive communication on Facebook we continue to collect recipes. It is people such as those involved that are our best source of recommendation and our bridge towards new customers. In addition, it should be noted that the Serbian consumer is, on the one hand, very demanding, and on the other extremely loyal, so it’s understandable that we create additional value through our specially designed gifts.

11.What are the marketing strategies you use when positioning your products on the Serbian market?

First I have to say that we know our customers very well. Through constant and thorough monitoring we’ve long been researching the habits, attitudes and beliefs of consumers in order to gauge and try to influence their behavior. Also, it’s necessary to have a broad knowledge of marketing channels and customers, and in this field we rely heavily on the expertise we draw from the partnership we enjoy with our distributor. And finally, there’s the inevitable competition and, if you constantly monitor other firms, analyse, and view them as worthy rivals, you’ll grow stronger and more powerful on the market, as well as in the eyes of your customers. Our marketing strategy’s based on covering all sectors using separate marketing combinations. For example, Grand Kafa gold meets the needs of those consumers who recognize the added value that this brand delivers across the board, and so its slightly higher price is justified. This is the same cross-section of the population, from 30 to 55 years of age, that is oriented more towards traditional values. When it comes to Grand Aroma, then we communicate with a different target group, the younger female population. They tend to follow trends and are driven by different values, so the tone and the message we communicate is adapted to them. When we have a product that meets the specific needs of consumers, like the decaffeinated coffee Grand Aroma Dekofe, then we define the target market, and according to that we also determine its appearance on the shelves.

And to reach targeted consumers in the right way, when it comes to communication, we're not just talking about the traditional media, TV, radio, newspapers, billboards and so on, which we might freely categorise as monologues. Apart from them, the message is also successfully transmitted by the appearance of a dedicated shop, as well as the behavior of our sales representatives, and these means involve dialogue to a far greater extent. It’s true to say that these interactive channels are becoming more and more important.

Also, an important link in the chain of product promotion is a strong and well-developed distribution channel. It's not easy to survive and be the best player in a large region with a very dynamic and unstable coffee market. We’re aware that a competitive advantage is more and more based on an intangible asset, which cannot be obtained or imitated successfully or quickly. We have been cultivating this within the company for years, and we call it ‘learning by working’.

12.Grand Kafa has been recognized for the quality of its TV advertisements, and has even been handed several awards for their design. Is an effective and continuing TV ad campaign key to the success and strong sales of Grand coffee in Serbia?

As a leader, Grand Kafa has an obligation to continually introduce its consumers to new products and flavours, but also motivate them to adopt new habits, and we take pleasure in this process. Our success is the result of a marketing combination and a well executed STP process, which is to say segmentation, targeting and positioning.

We strive to respond to market demands and move beyond boundaries in the sea of business opportunities. We look around, see the world of diversity that exists around us, and merge the best of it into the unity of Grand’s flavour and aroma. The results we’ve achieved and the consumer confidence in evidence confirm that we've succeeded in this, as well as the prizes we’ve won, and the recognition within the expert community that we’ve received. The Grand Kafa campaign: ‘’Flavour and aroma brings us all together’’, and our video ‘’Cups’’ won four gold medals in December 2012 for ‘best Integrated campaign’ and ‘best TV and radio advertisement’, and a special prize for the best commercial when the audience chose at the Night of the Ad Eaters exposition.

13.How are your products positioned in markets in the region?

SPP Kafa achieves more than 50 percent of its value in terms of market share from Serbia. I’m talking now about traditional coffee and the Grand Kafa brand, with our sub-brands Grand Aroma and De luxe, developed in 2013 and now achieving 35 percent of the market share. Then, in the traditional coffee segment we have the Bonito brand, achieving over 14 per cent in terms of market share value.

Bonito has positioned itself in the economic segment, and its task is to win as many consumers who care about price as possible. The share for instant coffees is much lower, but still significant, because we’ve achieved rapid growth for that market in Serbia, and indeed won more than 14 percent of it. Otherwise, Grand brands make up around 60 percent of the total production within the overall structure of Atlantic Grupa’s coffee business.

In Slovenia, with Barcaffe, we hold about 75 percent of the market, and in order to justify this leading role and meet new consumer needs, in 2012 we launched two new products, Barcaffe Selection, in the premium segment, and Barcaffe Bio, also in the premium segment, designed for those consumers who follow world trends. The existence of our own strong distribution network within the Atlantic system allows us to supply all sales channels more efficiently in all the markets of the ‘’Adria Region’’ – from the retail to the HoReCa segment, and this is key. This also includes more effective tracking of sales, stock and needs when it comes to changes to our range.

1.Atlantic Grupa is a multinational company. Do you share, and how often do you share experiences while cooperating with your counterparts from the region? What aspects of the business do you usually talk about?

For each market Atlantic Grupa builds a local organisation, where highly competent people are employed - from production, through sales and marketing, to finance, corporate activities and management, because this is the only way you can do a serious job. However, within the company, we continually share experiences and exchange knowledge.

This is the basis of our cooperation, as well as the advantage of the Atlantic Grupa as a regional, respectively multinational company, in which various opinions are respected. Open and honest communication is the cornerstone of any good team, and responsibility is expressed through the results achieved and the sense of belonging to the company that we actively nurture through our corporate values. Success, it has to be said, is the greatest motivator, especially if you know your role and can develop together with the company. It’s then that people know what they aspire to.

We also try to, whenever possible, to celebrate our achievements together. We take pride in a job well done and offer praise and recognition where it’s due. This amounts to something of a magic formula guiding us forward on the road to success.

2.How many employees do you have in Serbia, and how many work for Grand? How do you educate your employees?

Atlantic Grupa has nearly 1,600 employees in Serbia today, and the Serbian market is our second largest, accounting for 24 percent of the total revenue for Atlantic Grupa. We are here with the following companies: ''Soko Štark’’, ‘’Grand prom’’, ‘’Palanački kiseljak’’ and ‘’Atlantic Brands'', a strong and distinctive local entity; people sees us as a domestic firm, and that’s exactly how we feel.

Last year, we had about 50 new employees in sales, logistics, manufacturing and marketing, and this year we plan to hire more, primarily in sales. Experts and dedicated individuals work in Grand coffee production, and speaking generally about the development of employees within Atlantic Grupa, our key role is to create and maintain a flexible organisation and a high level of engagement, as well as to strive to properly unleash the potential of each employee.

Atlantic Grupa often runs special staff training programs, in addition to the aforementioned practice of sharing experience, as well as providing opportunities to put new skills to good use in a variety of markets. In addition, I especially want to point out that each of us personally proposes and plans for our own needs in terms of learning and development. Our goals are then achieved with the approval of our direct manager, and by means of planned internal and external training. In such a way, we create a dynamic and creative working environment, where teamwork is fostered, professionalism is encouraged and appreciated, and a sense of openness and responsibility is paramount.

3.Social responsibility is also an important facet of business strategy within Atlantic Grupa. What projects have you already implemented, and which ones are you preparing for the next period, when it comes to engaging in corporate social responsibility?

For every company, the basis of socially responsible action is an awareness of its potential to have an impact by improving general social conditions, promoting the right values, and finally, investing some of its profits in the community. That's exactly why Atlantic Grupa, as part of the wider society in which it operates, meaning 11 countries across the region, seeks to systematically adapt its strategic orientation towards socially responsible operations in all aspects. This involves regional conditions and the needs of those countries in which it operates, and achieving results that involve all the members of Grupa, which of course means Serbia as well. Here, we're part of the forum of socially responsible companies, whose mission is to establish permanent and stable CSR practices in the business sector, as well as connect the business sector to non-profit organisations, institutions and citizens' initiatives for solving specific social and ecological issues, with the voluntary contribution of employees. Apart from that, we also act at the level of each brand, so Grand Kafa has helped various social categories with its campaigns and donations, and in the last year alone it has supported more than 15 organisations and projects, including ‘’School Without Violence’’ and a children’s hospice, and then it has also built parks for small children... Alongside which it has sponsored cultural, artistic, scientific, educational and sporting events and programmes. All this is done because we want to be a good partner to the community in which we operate, whenever we can. Atlantic people have their Day of Values, when we dedicate one day to community service efforts, and in that way we remind our employees that our business needs to go the extra mile in terms of performance and satisfaction, so that we can pride ourselves on doing something good and beneficial for the environment in which we live and work.

4.What do you do in your leisure time in Belgrade? Where do you like to go out? How do you manage to overcome everyday stress?

Leisure has become a category relative to others, and it’s essential to plan your schedule well, so stress has basically become an integral part of the times we live in. The important thing is to know what your priorities are, and then you can easily overcome sudden developments and unexpected situations. There are also years of experience to draw on, of being part of the business scene, as well as trust in co-workers and employees.

This is a very important element, as is the possibility to talk frankly within Atlantic about mistakes, so that all possible problems are solved together and in the shortest possible time, which grants you a welcome psychological relief. But the best anti-stress for me is spending time walking by the river, or in the countryside, meeting colleagues and friends, sometimes going to the movies, and certainly the most beneficial time is that spent with family and those closest to me.

5.If you were able to, what would you change about your career so far?

Believe it or not, I wouldn’t change a thing!

6.How do you see the coffee market changing in the region over the next 10 years?

Let's not project that far, but let's think about the next five years. Consumption of traditional coffee in Serbia shouldn’t drop. One of the main reasons for such an assessment is data from our studies, according to which more and more young people turn to the consumption of traditional coffee. The aforementioned survey was conducted among students, who often prepare it while studying for exams. It’s a habit that sticks, and economic trends certainly shouldn’t be neglected either, because traditional coffee, as measured by the cup, works out cheaper than other preparations.

Precisely because we think consumption levels for traditional coffee will remain steady, and not be greatly affected by the expansion of the instant coffee market, we’ll work on speeding up the process of preparing traditional coffee, in order to make it more attractive to consumers, which is especially important in the HoReCa sector.

Regardless of what we’ve achieved so far, as the largest producer in the region we have to create and innovate, which means that our development department is constantly working on searching out new opportunities. These may come in the form of novel recipes, fresh preparation methods or the latest manufacturing technology that will bring its own new benefits.