homepage_name! > Editions > Number 098-099 > Interview - Matjaz Vodopivec

Matjaž Vodopivec, Director of Strategic Business Unit Snacks, Atlantic Grupa

Key to Success – Tradition in an Innovative Way

The competition in the confectionery industry is strong, both in Serbia and in the region. The strongest competitors constantly invest in new product lines and product development. Matjaž Vodopivec, Director of Strategic Business Unit Snacks at Atlantic Grupa, explained that in the race against their competition, the strengths of Soko Štark, which celebrates its 95th anniversary this year, are continuity in terms of quality and never failing to fulfill the expectations of generations of consumers, because it is that emotional connection that is their capital, and also their great responsibility in order not to betray the trust that has taken several decades to build.

Mr.Matjaž Vodopivec, Director of Strategic Business Unit Snacks, Atlantic Grupa speaks for Profit magazine.

1.In the first few years of the economic crisis, the domestic confectionery industry was not affected – on the contrary – it achieved significant growth in production, as well as export to other countries. What do you think about the Serbian confectionery industry and which comparative advantages do our confectioners, and especially Soko Štark have, given the record results?

The advantages of the Serbian confectionery industry are the quality of products, incorporation of new technologies, and standards implemented by the world’s leading manufacturers. In the past year, growth was seen in all segments of the confectionery industry: export increased by 20 percent, while import decreased, which clearly shows that Serbian companies keep up with the leading multinational companies in terms of product quality. In addition to its undisputed quality, the strength of the Soko Štark brands lies in their tradition and familiarity which is supported by our willingness to be different, to expand our product portfolio and venture into new categories, confirmed by record business results. Our products are available on all continents, while Serbia remains the primary market with around 60% of the market share and a trend towards growth, especially in the region.

2.What is your explanation for the fact that the privatization and change of ownership did not have a negative impact on Soko Štark’s brand, good results and market position? To what extent does Soko Štark contribute to the development/profit of Atlantic Grupa today?

Soko Štark entered Atlantic Grupa with developed brands and a developed identity, but through successful privatization – through Grand Kafa, Droga Kolinska, and now Atlantic Grupa – it also gained a serious and responsible owner whose goal is to improve its business operations and ensure long term success on the regional market. That synergy enabled the opening of new markets, stronger distribution, and better positioning and placement – which are the basis for the further development of Soko Štark and Atlantic Grupa as a whole. This is supported by continuous income and profit increase, as well as the development of our brands over the past fifteen years. Investing in reputable brands, some of which have a regional, or even global potential, has contributed to the achievement of additional value and business plans, creation of new employment opportunities and improvement of employee standards, which is nowadays considered to be a significant contribution to the Serbian economy. What’s more, record business results in 2016 meant that a historical maximum in sales was achieved – more than 28,000 tonnes of products sold and an income of over EUR 90 million. Thus, it is clear that Soko Štark, as the Strategic Business Unit Snacks, contributes greatly to successful business of Atlantic Grupa as a whole.

3.Over the past ten years, Soko Štark has invested EUR 20 million in modernizing its business processes. How has Soko Štark benefitted from becoming a member of Atlantic Grupa?

As a leading distributor of consumer goods with highly developed know-how, Atlantic Grupa has the expertise and strength to provide adequate positions to well-deserving high quality traditional Soko Štark products and make them available to consumers in the region. From the moment of acquisition, the market share of strategic categories has been growing on all regional markets. For example, a double digit growth rate of Soko Štark’s range has been seen on the Croatian market, mostly due to the increase in sales of the snack Smoki. Moreover, attachment to the system enabled us to achieve significant savings as well, based on common central services and the synchronization of all processes, common distribution and sales teams on every market. Thanks to the investments made in the fields of energy efficacy and modernization of production, we have upgraded everything that is good by introducing new technologies, increasing capacities and ensuring the best system of quality and health safety of products. The quality system is not just high quality equipment and products, it also encompasses all processes and investments in staff, employee training and professional development, and adherence to set criteria through successful collaboration and supplier training, which has been made possible by unique standards which apply to all members of Atlantic Grupa. A common corporate culture and value system, together with the flexibility of managerial communication on every level, give us a chance to leverage all the benefits from the exchange of knowledge and experience. The most important element of our system is creativity, which supports the usual standards and helps us create a dynamic environment that can smoothly be adapted to any change in the business environment.

4.Competition in the confectionery industry is strong, both in Serbia and in the region. The strongest competitors constantly invest in new product lines and product development. What are the strengths of Soko Štark in the race against the competition?

I believe those strengths are continuity in terms of quality and never failing to fulfill the expectations of generations of consumers, because with long tradition also comes the great responsibility of not betraying the trust that has taken several decades to build. That emotional connection is strong, but not unbreakable, which inspires us to do better, be more innovative and be completely honest when communicating with our consumers every time, so that we don’t lose our most valuable capital. Therefore, it is important to utilize that strength and familiarity of your own brands and develop them in line with the trends, new behaviors and needs of consumers. Every year, Soko Štark changes almost one third of its complete product range, and these product range innovations are accompanied by innovations in marketing communication. Of course, the most important thing is to establish direct communication between brands and consumers, as well as to develop innovative ways of communicating with target groups. The PRANKS campaign that followed the expansion of Najlepše želje brand’s portfolio with the sub-brand LOL through a video competition is an example of creative interaction with consumers. The experts gave special praise to the campaign “Najlepše želje – reci to čokoladom” (“Najlepše želje – Say it With Chocolate”), which was declared BEST BRAND PR PROJECT by the Public Relations Association of Serbia (DSOJ). The Serbian Marketing Communications Association (UEPS) gave Najlepše želje a high ranking for point of sale promotions, customer relations and direct marketing categories.

5.How do you adjust to the needs of consumers and how much have their tastes and needs changed over the past years? When it comes to tastes, is there such a thing as a “distinctive taste” of Serbia or the region in terms of sweets and savory snacks?

The consumers are starting to pay closer attention to the label and product ingredients. They have a better understanding of nutrition and are conscious of what the product contains and whether the ingredients are healthy or not. All over the world, emphasis is put on the ingredients and the source of raw materials, focusing on simple, locally known natural ingredients. The snacks category is becoming more and more like the gourmet category, where, in addition to snacking, what matters most is the taste, as well as the packaging. The packaging raises awareness of environmental protection, the materials used are recyclable and more natural. For a few years now, Soko Štark has been working on using natural ingredients only and preserving nutritional value through technological processing. By doing so, we have managed to gradually replace artificial flavors with natural ones, we use natural colors and we have replaced hydrogenated oils with non-hydrogenated vegetable oils. We also decided to develop new product categories: Integrino biscuits are a highly successful brand that has managed to gain popularity among consumers very quickly due to its ingredients, exceptional taste and distinctive identity. In the whole wheat biscuit segment in Serbia, it holds an enviable position with a market share of about 12.8%. However, when it comes to sales, chocolate bars and snacks are still dominant, with around a 60% share of Soko Štark’s range. The year 2016 was marked with above average growth of the sweets category, and especially chocolate bars, while savory sticks stood out in the savory snack category.

6.This year, Soko Štark celebrates two important anniversaries – 45 years of Smoki and 95 years of the brand Najlepše želje. In your opinion, what is the recipe for success when it comes to these brands?

If we take a look back, we will see that Smoki has been rightfully named the favorite snack, because it is definitely the most popular snack of its kind in the region, with its total sales surpassing the sales of all other snacks of this kind combined, and it has remained in the leading position on most markets in the region for years. In addition, according to research conducted by the Valicon company, Smoki has been in the top 10 most recognizable brands of Southeast Europe for years and it is one of the main pillars of our company, as well as the basis for our decades-long success. In the last five years, the Smoki portfolio has been significantly extended in order to modernize this brand: Smoki Smokić was designed for children, and for the younger male population, which is the dominant target group in the snack category, we have launched the Mega Hrsker, with a stronger taste and increased the amount of peanuts, whose quality earned it a permanent place in the portfolio last year. The Najlepše želje chocolate brand, together with Menaž, ensured the leading position for Soko Štark in the field of chocolate bar production in Serbia, leaving behind the regional leader Milka. In recent years, exceptional progress was made in this brand’s development by shifting from its exclusively traditional, somewhat conservative image, to a brand devoting its subvarieties to a wide consumer population. In 2016, the focus was on the development of our newest brands PLUS and LOL by developing extensions with new tastes (apricot and crisped wheat). Bananica, one of Soko Štark’s oldest brands, has reached almost a third of the market share in a highly diverse chocolate bar market. In the history of Bananica, the year 2016 will be remembered as the year of its first product innovation – Skroz Čoko Bananica. Sweeet, a modern brand in the category of chocolate bars, has kept a stable position on the market, and lime joined the fruity extensions last year. Redesign, extensions of new tastes (lemon-ginger in 2016) and marketing support have earned Integrino its position as a prominent member of the Soko Štark biscuit family... I think that this information speaks for itself, but if I had to draw a conclusion, I would say that the recipe for long-term success includes continuity, quality, creativity, and courage to modernize the popular brands from time to time, as well as stable ownership as a basis for healthy financial business operations and good strategic reasoning.

7.We are witnessing a major increase in the price of cocoa on global markets. How do you cope with such enormous increases and still manage to make your products affordable for Serbian consumers? Where do you export your products? Do you plan on conquering new markets?

By means of central procurement, continuously monitoring rises and falls in cocoa prices, and planning purchase at the best possible moment, we manage to avoid great price movements and we always try to comply our production price with the optimal ratio of quality and price competitiveness in such a way that it does not fall on the consumer’s shoulders... When it comes to markets, Serbia is still number one with around a 60% share in sales, with a growth tendency primarily in the region. The regional retail panel shows an increase of the market share of strategic brands: Smoki master brand is improving its market share on every local market in the region. Najlepše želje is establishing its status in the chocolate category on the Serbian market, and Bananica is becoming an ever larger part of the consumer basket, not only in Serbia, but in Bosnia and Herzegovina as well. Our plan for Croatia is to continue the development of all categories of our products with the exception of chocolate, due to the strong competition from domestic manufacturers, as well as multinational and private brands of foreign hard discounters. Regardless of the generally ambitious approach, we try to be maximally rational on every market, because it is the only way for us to move forward. Non-regional markets have achieved an 8% growth compared to last year, even though their contribution to the business results is still only 2% and is mainly based on the so-called ethnic channels around the world.

8.What are the strategic and the primary plans for the next period, and are your expectations still based on investing in research and development?

The strategic axis for Atlantic Grupa business development is the internationalization of brands and total business by entering new markets and potential M&A processes, with a parallel organic growth of business and innovations in product categories, active brand management, and cost optimization with fulfillment of financial obligations by meeting the current needs and observing the current market state as much as possible. When it comes to Štark, Soko Štark’s medium-term plan is to increase export so that it surpasses domestic sales on the Serbian market, i.e., which means that in the next couple of years, we will continue with the planned investments in the development of chocolate and snack products, assortment innovations, as well as investing in our employees, partners, and suppliers, based on market feedback above all. We recognize that digitalization, analytical competences, and a structured approach to marketing and sales, which include not only an internal view, but the influence of the environment as well, undoubtedly lead to better results.

9.What are the leading global trends in your industry? In which fields do you recognize the opportunity for further development and what does the process of creating new products look like?

The key challenge is to achieve continuous improvement in all business segments, i.e. motivating the employees on all levels to think about improvements and the implementation of innovations every day. At the company level, we came up with the Fast Forward program, a corporate strategic project with the multiple level goal of ensuring that Atlantic Grupa becomes focused on the consumer by 2018. In 2017, this includes the implementation of 10 Fast Forward projects which have been carefully designed and defined in 2016 by 80 innovative project team members. The essence of the idea is the orientation towards the consumer. This implies higher flexibility of all our processes so that we can incorporate market feedback as soon as possible, as well as the possibility of observing each consumer individually, and a form of communication in which we can offer to each individual the thing that he/she considers the greatest additional value. More specifically, one of the F2 marketing projects is meant to use analytical tools to model marketing and sales activities so that we can use our resources as efficiently as possible to achieve the greatest possible additional value. These analytical methods and tools are used in many European FMCG companies, and Atlantic Grupa joins them in this way.

10.Which consumer target groups are the easiest or the hardest to please and how do the approaches in communicating with them differ?

The loyalty to our brands is based on communication with families, because our brands are a part of the family tradition. However, the biggest challenge for us is the younger generations, who like to try everything that is new and as many different products as possible, so they are harder to establish as regular consumers. The specific nature of communication through social media and applications makes this target group the most demanding in terms of creativity, as well as investing in marketing activities. By using new digital tools, we keep up with technology and optimize the time necessary to process information and make decisions at the same time. Besides, limited editions of popular brands with new tastes, which we do not think will be on supermarket shelves for a long time, are also designed for the younger generations. However, if the sales exceed our expectations, the products can always be included into the permanent portfolio. When launched, Čoko smoki surpassed the planned sales threefold and therefore remained part of the permanent portfolio.

11.Soko Štark has its own retail network. Will you be working on broadening the store network and is it a trend in our country for manufacturers to have their own retail network? We have also mentioned that the franchise and B2B sales are becoming more relevant. How will these kinds of sales develop further?

Soko Štark is paying more and more attention to the development of its retail network (3% share in sales), by developing a direct relationship with the consumers and a respectable corporate image. The network currently consists of 12 stores in Belgrade, but it is our ambition to expand it throughout Serbia through direct and franchise business types, and our idea is for the Soko Štark stores to reflect our brands and consumers’ desires. Most of our stores have been completely renovated to get this emotion across through interior design and to create a cozy environment for consumers to be able to sort and pack the products themselves according to their own wishes. In accordance with our assortment, B2B is oriented towards the baking and dessert industry. Along with research into this market segment, cooperation with several partners with a similar profile has already been ensured, and we have yet to work on this sales channel more intensively.