Even though Nestlé will officially take over Centroproizvod in September, many have already called this merger one of the "cleanest" acquisitions in the Serbian market. This big global player has taken over a smaller one from the same industry, which is not a common case in Serbia. We are talking with Cedric Boehm, member of the Managing Board of Nestlé Adriatic Foods, about the reasons for the takeover, the company's plans in Serbia, whether Maggi will replace C soups on the market shelves, and the chances for the acquisition of another company in Serbia.
eKapija: Besides positioning in the Serbian market, what made you opt for acquiring Centroproizvod
Main reason is that Nestlé is confident in the Serbian market potential. Here we have a smaller market share than in other regional countries – e.g. Bulgaria or Romania, as a result of higher purchasing power of consumers in these countries, but we believe that we can grow. Not only that we believe in the Serbian market potential, but also in the potential of the whole Adriatic region. Secondly, we are importing our products to Serbia - Nescafe, Crunch chocolates, Maggi soups, and that is the “phase 0” of our presence in Serbia. After the Delta Ice Cream acquisition, we had our first production, so we are aware of the production process in factories here. That was the beginning of our greater presence in the Serbian market. Now, with the acquisition of Centroproizvod, we are moving on to the higher level of development because with this acquisition we are getting production plants and strong local brands. And it is extremely important for Nestlé to be associated with local brands.
On the other hand, Centroproizvod is in compliance with Nestlé's global strategy. Until now, our work in Serbia has been relying on Nescafe brand. Centroproizvod will give us a chance to develop products from culinary sector, having in mind that this sector is very important for Nestlé on the global level.
eKapija: What are your plans in Serbia upon the takeover of Centroproizvod?
First and most important is to integrate these two companies. Upon that, we will continue to develop C brand and, of course, the plan is to start producing in the Surcin factory most of Nestle’s products that we have been importing to Serbia.
The plan is to place those products from Surcin into the Serbian market, but also to export them to Montenegro, Bosnia-Herzegovina… Furthermore, in the next phase of development, we plan to produce in Surcin some products that will be exported to Greece, Bulgaria, Romania...
eKapija: What can Centroproizvod's suppliers expect?
I cannot tell you their “destiny” in general because there are so many of them. We will contact them and get familiar with the way they work. We at Nestlé have a very strict policy regarding the cooperation with suppliers. But, certainly, one of the reasons we are planning to have a production here is to have the source of raw materials here in Serbia.
eKapija: Could this takeover than be a direct chance for our suppliers to work more in the region, in the markets where Nestlé is present?
If suppliers comply with our standards, there is no reason to replace them. In the future, if the factory grows, so will they. But I have to stress that today our ice-cream factory in Stara Pazova has gained a permission to export to the EU. That is, actually, a result of the improvement of all standards after the Delta Ice Cream takeover. In the same way, we intend to take over the whole value chain of Centroproizvod – from suppliers to production, to raise them on a higher level of quality, in order to export those products to the EU countries.
eKapija: By taking over Centroproizvod, you became the owner of that factory in Surcin. Do you plan a new investment in it and can we soon expect creation of new jobs?
First, I must say that it is a very good factory- it has good machines, infrastructure. However, we have to bring it in accord with Nestlé standards. That harmonization with our factories worldwide will be one part of our investment. The second part will be to create the conditions to produce our brands (e.g. Maggi soups) in Surcin. We will invest as much as necessary to accomplish that. What does that mean for the workers? Well, as we grow, the need for more employees will grow too.
eKapija: Can we expect implementation of any of these plans by the year's end?
No. We are first waiting for the Serbian government's consent to close this deal. We expect that to be done by the end of August or early September. The process of integration of Nestlé and Centroproizvod I have mentioned will last until the end of 2012 so the plans I am talking about are for the period of next two to three years.
eKapija: Nestlé achieved the largest sales volume in Serbia through Nescafe and confectionery products sales, which are not the core products of Centroproizvod. However, you will now be the owner of brands from the same product lines such as Maggi and C soups. How will you position such products in the market?
C brand has much bigger market share than Maggi. Maggi in Serbia is perceived as an imported product. For us, it will not be complicated to determine the price, position the image of both product lines. Specifically, we want both brands in the market and I believe that there is enough market demand to make both brands attractive and to leave it up to consumers to decide what to buy. I cannot say, for example, that Maggi is more superior brand. Simply, some consumers will still be willing to pay more for Nestlé premium brands such as Maggi, although we consider that C soups are of very high quality as well.
eKapija: Does Nestlé have some new acquisition in the Serbian market in the plan?
Nestlé in Serbia is now focused on the takeover and integration of Centroproizvod and the development of the ice cream factory business. This does not mean that we will not consider new possibilities and take advantage of every opportunity. We are always interested in the acquisition of products helping to increase the portfolio of Nestle segment that is underdeveloped in this market.J.Dj.