Zoran Mabic, CSO at Franck – “Brick” returns to Serbian market

(Zoran Mabic) In the year of jubilees, the popular “Jubilarna” coffee brand has returned to the Serbian market. The Croatian company Franck has been selling the popular “Brick” in Serbia and Montenegro again since early March, rounding up its regional offer along with strong positions in B&H, Slovenia and Macedonia.

In addition to its renowned ground coffee, Franck has offered instant cappuccinos and teas to the Serbian market. They can be found in over 1,000 stores in every city. Franck's CSO Zoran Mabic says in his interview for eKapija that that the first reactions in the market are good and that the plan is to further expand the distribution in order to meet the demand.

We talked to Mabic, who points out that Franck intends to work constantly on all three product groups present in Serbia, about coffee drinking habits in Serbia and Croatia, about the innovations they were preparing, their plans for the European market and about whether Millenials still drank black coffee and what its future was.

In the meantime, in early April, it was reported that the account of Franck (one of the main suppliers of Agroor in Croatia) had been blocked, but that it had also been unblocked very quickly. Our interviewee says that the company takes active part in the talks with all the parties involved and that they have several potential solutions for securing a normal continuation of operations.

eKapija: How come the “Brick” is available in Serbia again? How did Franck reach the decision to return to the local market and why do you think now is the right time?

– Along with placing special focus on innovations and development, in the past years, we've considerably intensified exporting activities as well. Serbia is a big market, especially for ground coffee, and, after long research, we concluded that consumers want our products and that they have a very positive perception of our return. There have been plenty comments along the lines of: “Where have you been all this time?”, “We're ordering coffee from our friends in Croatia – it's high time you came back to our stores”... Along with ground coffee, consumers have reacted very well to our teas and cappuccinos, and our return is therefore based on those product groups.

The answer to the question why only now and not earlier lies in the fact that markets are opening more and more and that regulations are being brought in line with those in the EU, so the access to the Serbian market, as in the other direction, has been facilitated. The opening of the market has a positive impact on the trade, which is constantly growing, and the data show that, in 2016, Croatia imported more from Serbia than it exported to it, for the first time.

eKapija: What is your assessment of the Serbian coffee market? How is it different from the one in Croatia or, for example, Bosnia and Herzegovina, where Franck is pretty strong?

– There are plenty similarities, but also differences between these markets. The number of cups of coffee drank per capita is similar, but the types of coffee and drinking habits are different. All these markets consume a lot of ground coffee, with Serbia being the biggest one both in absolute amounts and amounts per capita, whereas Croatia is the biggest consumer of espresso, that is, “the cafe coffee”, also in both absolute terms and per capita. The reasons lie in different habits as well. In Serbia, the morning coffee, drank at home, is mandatory, whereas in Croatia and B&H, a lot of consumers have a habit of starting their day by drinking coffee in cafes. Furthermore, Croatia is a strong tourist destination, so the overall result is not surprising.

eKapija: How does the demographic structure impact the coffee industry?

– The category of coffee is rather widespread, more than 80% of those over 18 consume ground coffee. In Serbia, the younger populace consumes ground coffee slight more than the same generation does in Croatia, for reasons I've already mentioned – drinking the first coffee with the family at home. The division between the young and the old is relatively equal, and the differences are noticeable in frequency – older people consume this category of coffee more often than the young, which reflects the general situation in all the markets of the region.

However, the consumption structure is changing. For example, as the average age of the populace grows, so do consumer habits. One example is the ratio between ground and instant coffee after one turns 40. It often happens that those who used to consume instant coffee switch to the ground variety, for several reasons – stronger and fuller taste, perception of a higher quality drink, affordability... The sales of instant coffee are the biggest in tourist environments, as well as among the young. Our reaction was to introduce our most successful innovation in 2016 – the Franck Crema brand. This is 100% black coffee, which can be prepared by merely pouring hot water over it, thanks to the way it is ground and the quality of the raw materials.

eKapija: What target group are you counting on in Serbia?

– In Serbia, we are counting on the same target group as in all the other markets we are present in – we believe that consumers will recognize the quality, which has so far been confirmed by the positive reactions.

(Photo: Africa Studio/Shutterstock)

eKapija: How do you find the right measure for each country? How different, for example, is Franck's approach in Croatia, B&H and Slovenia?

– In all the markets of the region, with the exception of Slovenia, we face the same demographic challenges due to a negative birth rate and people leaving the countries. We adjust in terms of organization, but also production. The best example of a localized approach is B&H, the most complex state in the region. Consumers there tend to choose national and local brands, but there's also a group of those whose criteria include the price and the added value. Following detailed research into consumer preferences as regards tastes and aromas, we came up with a new brand of ground coffee, meant for the B&H market exclusively – Franck Classic.

On the other hand, there's the example of Slovenia, the only country in the region not to be experiencing a negative demographic trend, where ground coffee consumption per capita exceeds even that of Croatia, primarily due to the fact that VAT amounts to 9.5% and that there's no special tax on coffee. In Croatia, VAT is 25%, along with a special coffee tax of HRK 6 per kilogram, despite the fact that Croatian producers hold more than 85% of the market. Why is the category of coffee in Slovenia such, or why is the Czech Republic the biggest consumer of beer per capita? Because the state has recognized the importance of local production and consumption and therefore minimized the taxes.

The approach in Serbia is different than in other markets, as younger generations are very interested in hearing and learning about their favorite drink. Therefore, in the Serbian market, we focus on stories about coffee, our field of expertise, but we also take a wider, more detailed, more educational and more fun approach. The approach to quality is the same as in Croatia, the product is identical and of top quality. We see added value there, as we've learned from the consumers through research that the quality of existing products oscillates throughout the year in the entire Serbian market.

eKapija: What makes the “Brick” such a special brand, the one which generations of people, including those in Serbia, used to start their day with?

– We have always boasted top product quality and we do not compromise there. The “Jubilarna” brand, the so-called “Brick” has loyal consumers precisely because it guarantees quality, which has become synonymous with Franck's products. This has been the case for 125 years. This year, Franck marks a special anniversary – 125 years of existence, rich experience and expert knowledge.

eKapija: Along with the countries of the region, you are also expanding your operations in Europe?

– We've initiated operations in Austria and Slovakia through our companies in Vienna and Bratislava. We've recognized good opportunities for expansion in the countries of Central Europe, especially in the HoReCa sector, a field in which we have the knowledge and experience necessary to penetrate even the most complex markets, as well as the quality of our portfolio. We aim to have a bigger turnover in the HoReCa sector outside Croatia by 2020 than we have within it at the moment. This used to be inconceivable, but now we're getting closer to the goal.

We export to Germany, Holland, Romania, Ireland, Canada, USA and the Czech Republic. We've “shaken up” the distributors, so we will expand the export to the Scandinavian markets as well in 2017, and the special “Jubilarna” ground coffee brand recently found its way to 150 Walmart stores in the US. In Vienna, we are already present in over 350 stores...

eKapija: Is interest in ground coffee waning? Do you believe that new generations will stop drinking traditional black coffee at one point?

– Ground black coffee is still the strongest category in Croatia, in both scope and value, and Franck is the undisputed leader in the field. At the same time, this is still the strongest category in other markets as well.

In the past years, Millenials have been consuming ground coffee, even though they also consume espressos, instant cappuccino and instant coffees in considerable amounts as well. We've recognized great potential in this generation's consumer preferences and we are actively working on developing a category of instant cappuccino, in which we've positioned ourselves as the leader in Croatia and Slovenia with our two brands – Franck Cafe and Gloria, ahead of the strong, remarkably dynamic foreign competition. We believe that we could do the same in Serbia and B&H. Furthermore, I believe that ground black coffee won't lose its popularity relative to other types in our lifetime. We are witnessing the world trend of going back to the roots, that is, to a healthier way of consumption, so there's an increase in consumption of ground coffee even in California, Australia etc.

eKapija: What was the past business year like for Franck?

– Remarkably successful. Our market shares grew in key categories in the three biggest markets – Croatia, B&H and Slovenia, but also in other, smaller markets in the region. We are satisfied, as the Franck group grew by 8.5%, placing us among the companies featuring the biggest growth.

eKapija: How has the situation in Agrokor, one of whose main suppliers in Franck, reflected on your operations?

– The Agrokor crisis has created great difficulties in our operations, as is the case with other suppliers as well. We are taking active part in the talks with all the parties involved, so that the issue of the suppliers' exposure would be solved as soon as possible, and we have prepared several potential solutions securing a normal continuation of our operations.

eKapija: Are you preparing any new products for 2017?

– Along with the freshly launched Franck 125 Years Edition Espresso, we are constantly working on innovating and developing new products. In the past two years, we have launched around 30 fully new products in the hot beverage category in Croatia, such as the already mentioned Franck Creme, or premium teas Franck Superiore Tea, designed exclusively for the HoReCa sector. Of course, the pre-requirement for innovations is constant enhancement of production processes and capacities. To that end, in our latest investment cycle, we invested HRK 20 million (around EUR 2.7 million) in full reconstruction of our tea production facility in Zagreb, which is currently one of the most modern facilities in this part of Europe.

M.M.

Franck d.d. prehrambena industrija Zagreb

Franck

Zoran Mabic

brick

Jubilarna coffee

instant coffee

espresso

cappuccino

import of coffee

Franck coffee

ground coffee

black coffee

Millenials

Franck Classic

coffee tax

coffee VAT

Franck 125 Years Edition Espresso

Franck Crema

Franck Superiore Tea

HoReCa

Zagreb

coffee production

tea production

sale of coffee

sale of tea