Source: Seznam Zprávy Date: 13.05.2024 Author: Jan Richter
Jaroslav Strnad expands in the food industry. He bought the marmalade producer Fruta Podivín, is heading for a half share of the mustard market and wants to teach the younger generation to drink traditional cereal drinks.
When Jaroslav Strnad handed over his arms empire CSG to his son Michal six years ago, he set about building a new industrial holding. Today, his company, CE Industries, has sales of around CZK 13 billion. It manufactures freight wagons, operates rail transport, builds energy sources, and also produces food. Strnad's group has big plans for these. This year, it bought the producer of jams, marmalades and baby food Fruta Podivín, bringing the total sales of the fast-moving consumer goods division close to two billion crowns. According to the division's director, Peter Szuma, this year CE Industries plans to bring innovative editions of traditional cereal drinks to the Czech market and to penetrate Czech households with its own line of laundry gels.
At the end of April, the Office of Competition and Consumer Protection approved your acquisition of Fruta Podivín. I assume you weren't too excited about how it would turn out.
Not at all. It was a formal matter and we knew in advance how it would turn out. The Office of Competition and Consumer Protection decided to deal with the matter in a simplified procedure because the companies were not so big that their merger would threaten competition.
So what share do you currently have in the Czech food market?
It depends on the category. We have around 30 percent in marmalades and jams, about 10 percent in baby food, and we already have almost 40 percent market share in mustards. In cocoa we have between 22 and 24 per cent and in the cereal category we have 15 per cent.
Almost all the categories you mentioned are facing problems at the moment. The price of cocoa is rising dramatically and the fruit crop in Bohemia and Moravia has frozen this year. What does that mean for you?
A lot of work. Immediately after we announced to Fruta employees that we were officially becoming the new owners on May 1, we started working with the purchasing department to find a replacement for the frozen fruit for the 2025 season.
Apparently all processors are now buying fruit. How is the market looking?
There's plenty of fruit so far. Fruit growers are now predicting that about half the crop has frozen, but by only having half the fruit on the trees, yields will increase. The catastrophic scenario should not come to pass, because the fruit will be less, but of better quality. Moreover, the frosts have not affected the whole of Europe and we have very good contacts with fruit growers in southern Europe through our subsidiary in Serbia, where our colleagues are already starting to ask for fruit that could be imported in the autumn.
What will this mean for the price of your products?
It is too early to say. Fruit is only 50 per cent of the price of the product, then you have sugar, energy, packaging and the cost of labour, all of which affect the final price.
Except for sugar, everything you mentioned is going up in price.
That's right. If I had said that prices would not change, I would probably be speaking prematurely.
How much fruit do you process a year?
We produce about 11,000 tonnes of produce a year, so we process about six thousand tonnes of fruit.
You're not thinking of having your own orchards?
A vertical is of course tempting, but I can't imagine it at all right now, because today we are integrating three companies into one unit and this project is keeping us busy. Orchards would be an unfamiliar discipline for us, we don't know the subsidy system... I don't think we will embark on such an adventure.
Waiting for a custom made
Where do you buy, for example, chicory for making Melta and other coffee products?
We have a long-standing supplier who grows it for us on a turnkey basis. For more than ten years, the way it has worked is that we tell him how much we need, guarantee him a purchase price and volume, and he plants exactly the acreage we agree on. Now, because of increased production, we have arranged for another farmer to try chicory.
How is the famous and traditional Melta brand doing?
Wait and see what happens this year. Three floors below us, our colleagues are working on a big campaign concept for cereal drinks, because we see a big future in them. We're going to have a really big innovation in this category.
What's new in cereal drinks?
You'd be surprised. You can make cereal drinks from chicory to make them as healthy as possible. You can also add minerals and vitamins to them and make them a truly functional drink. You can add plant or cow's milk and you've got yourself a molasses and milk drink. The big trend is lower caffeine drinks, so we'll probably launch a cereal drink with a coffee component that will taste like coffee, but you can have it in the evening.
You're not going to have your own coffee shop?
I hope not, although I can't speak for all my colleagues. We have two retail outlets and it's a worry. I can imagine more of an exclusive collaboration with one of the coffee chains.
How will you work with the brands? Melta is quite retro, after all.
We'll leave Melta to the older and more mature demographic because it's as you say. For the younger generation, we'll use our other brands. That's also why we bought some of the brands. A certain part of the portfolio will be sold under the Vitakava brand, and we will use Hamanka as well, and most likely the 4Slim brand. We will probably drop retro brands like Karo completely and use only four - Melta, Vitakáva, Hamanek and 4Slim.
Which is the largest company in your division?
The biggest is Serbia's Beohemija with sales of around 800 million crowns, the second is Fruta Podivín, which generates sales of around 500 million, next is Kávoviny with around 400 million, and the fourth is Kaumy and Heinz Food in Fulnek, where it's up to 200 million.
The key is the fragrance
The Serbian consumer chemicals factory Beohemija produces, among other things, Duel washing gel. Is there any other way to fight against established brands than price?
Price comes first, especially in the Czech Republic. The Czech market is very specific in this respect. Elsewhere, the brand has more weight in customers' decisions. But in the Czech Republic, people tend to try other brands. That's a big risk, but for us it's a big advantage in this situation.
How?
We rely on the fact that we have something extra, something that characterises us, and that is smell. That's such a specific benefit that we're going to try to let customers try it at home as much as possible. We'll probably have a lot of single batches and samples so that people can test it out and then be tempted to buy the product.
I mean, all detergents have a scent.
Yes, but after a while, these products stop smelling. You just get used to it. That happens in regular cycles, and you have to be in the right place at that moment to have a chance of getting a customer who wants to try something new and has already tried your product.
Why would they want to buy your product?
I think we've got that pretty well figured out thanks to our colleagues in southern Europe, where there's more perfuming. That's the difference between a drugstore that is sold in Central and Western Europe and one from Southern Europe.
So we're going to do laundry like in the Balkans?
You'll smell more.
Are you planning further expansion and acquisitions? What's the market situation?
Today we have already said that we will not make any more acquisitions below a certain size. We will avoid small companies, but I can confirm that the market is very lively. I get an offer about once a week. And I have a feeling it's going to get even more dynamic.
So you're planning to expand?
I didn't say that, but we're not afraid of it. We're evaluating offers and I'd be lying if I said we don't have some offers on the table that we're realistically considering, but we're not planning anything anytime soon. At the moment we are mainly focused on taking over Fruta Podivín, after all it is a company with half a billion in sales.
Are you also looking into other food industries?
No. When we think about an acquisition, it will be based on natural products rather in concentrated or instant form, that is, either in the form of a denser mass or powder. We are looking at trends and we see that there will be a big problem with warehousing, with labour and with transport, and anything that is concentrated will be more acceptable to consumers. We don't think that in a decade or more people will want to spend too much time in the kitchen.
Isn't the current trend more towards fresh, locally produced food?
Some people prefer fresh local food, but others want speed, quality and minimum effort. Just pour hot water over it or reheat it, but they'll have a wholesome meal or supplement. That's why we went into baby food, it's concentrated food in a package, you can carry it on one pallet in a large volume and it will meet your daily dietary needs. That's where I think we're going to profile.
Full menu at the fuel station
It sounds almost apocalyptic to have three batches of food in the morning and then pour water over it.
But it'll be tasty, healthy and functional. You'll get a hot dog at the gas station today. What if we offered you a pocketful of wholesome food at the same gas station, plus you won't get dirty in the car and you'll get the calories and nutrients you need? It may sound unusual, but people travel a lot and spend a lot of time outdoors. People who hike are already using food like this, but we want to make it commonplace.
If we look at the whole CE Industries group, how does it work in such a relatively disparate holding company that deals with food, engineering and energy? What holds it together?
Jaroslav (Strnad, ed.) holds it together. There is no question about that. As a visionary, he sees a huge opportunity in food. I myself am surprised at his ability to take a step back in his thinking and to sense which fields can help the group as a whole at a given moment. We are all united by potential.
How does that work within the group?
Interesting. Most of our business is based on big, heavy objects, only our division makes nice smelling things you can hold. But we work well with each other. For example, in addition to buying energy and other things together, we get calls from colleagues who make wagons and ask us to make them a bearing cleaner because the one they have doesn't suit them.
Where are you strategically going as CE Industries? What is the end state?
That's a good question, but you'd have to ask Jaroslav or Adam (Šotek, CEO of CE Industries) how they want to consolidate. But I don't think consolidation of divisions is the order of the day because our broad scope has helped us in many ways.
What kind of boss is Jaroslav Strnad?
I'm fascinated by how he knows the details and how curious he is. He doesn't tell you which way to go, but he's very interested in what you're doing. He actually learns with us and then applies it to other disciplines, so you have to be constantly vigilant and watch what other colleagues are doing because it will probably get to you eventually. Jaroslav is an intense boss who works from six in the morning, routinely calls you early in the morning, and works into the evening.