Ivica Todorić, owner of Agrokor

Ivica Todorić is very satisfied with the purchase of the Serbian frozen food company ‘Frikom’, even though he paid somewhat more than the realistic priceThe Agrokor Concern
Over ten successful companies in the business empire of Ivica Todorić

A few of Agrokor’s articles which dominate the food industry

Over ten companies are included within the Agrokor concern: Agroprerada, Frikom, Jamnica, Konzum, Ledo, Ledo Čitluk, Hunting Grounds Moslavina, Mladina, PIK Vinkovci, Solana Pag, Sojara Zadar and Zvijezda. Agrokor covers 80% of the Croatian market with Jamnica, 85% of the margarine market, 74% of the ice cream market, 63% for mayonnaise and 58% for oil.
It was officially confirmed last week that Ivica Todorić, CEO and owner of Agrokor, one of Croatia’s largest and most successful companies added the Belgrade frozen food company Frikom to his concern. He also signed a contract in Serbia on mutual cooperation with 23 different companies, thus confirming his intentions to not only hold the leading position in Croatia, but to begin expanding throughout the region and shifting the balance of power in the market race on the domestic market with the leading foreign chains. Todorić today is at the helm of a concern which employs over 10,000 people. In addition to Croatia, he also owns factories in BiH, Slovenia and Hungary. And he has succeeded there were many other businessman failed: to turn the negative image he had as Tudjman’s darling into a reputation of a socially aware employer who received high grades even from the unions.

NACIONAL: What does the purchase of Frikom mean for Agrokor?

I believe that this purchase is not only significant for Agrokor, but also for the Croatian economy, because in the production of ice cream and frozen foods, we have become one of the largest producers in Europe.

Regional Expansion

NACIONAL: You paid $11 million for Frikom and are obligated to invest a further $17.5 million in the first year in new investments and $18.5 million in the social program. In addition, you are obligated to cover the company’s debts which are, allegedly, $14 million. How do you plan to finance these investments?

Agrokor perhaps paid a little over the realistic price for the company. We plan to operate in Serbia the way we operate here: we will not pull out a single dollar, we want this to be a profitable company, which will expand regionally, and strategic expansion will be a support to our entire industry. Though a $14 million debt for such an industry is relatively small, I expect that those debts will be eliminated through restructuring alone. Frikom now, after being bought out by Agrokor, already has a higher value, as it has a wide market. I am not expecting any problems, we will easily find the resources necessary to realize this project. After the Frikom purchase, ten of the world’s largest investors congratulated us on the project. There is no reason for concern.

Sensational Opportunity

NACIONAL: In Serbia, you signed an agreement on mutual cooperation with 23 companies on placing their products on the Croatian market. That agreement will certainly arouse harsh reactions by Croatian producers and suppliers.

Some transition countries have succeeded in penetrating onto the EU market, including Slovenia. For those of us who did not succeed, we are left to wait and prepare in order to one day be capable of handing the legalities of a developed market economy – we have to increase competitiveness and the value of our companies. The Slovenians created an excellent model: they opened up to all the other transitional markets, perfected their products, gained profits, conducted restructuring and closed their markets to foreign products. However, this one-way model, which is neither fair nor partnership oriented, has been spent. No one can expect that we will continue to only export to BiH, and that the industries of BiH will not be present on our market. The same goes with Serbia. Agrokor is only one of many companies present on the Serbian market: the members of the Croatian Chamber of Commerce were among the first to visit Serbia, and many of our companies are already present there, including Podravka and Kraš.

NACIONAL: However, Croatia does not have equal relations with BiH and with Serbia. Don’t you fear boycotts on both the Croatian and Serbian side?

That is typical for our region: we would rather sit around and discuss the imports of Serbian products instead of seeing this for what it truly is: a sensational opportunity for Croatia to achieve fantastic results and to prepare for the European Union.

In early 1991, we were in Sarajevo at a meeting of the 30 strongest economists there. At that time, we had the exact same situation we have today. Due to extenuating circumstances, Agrokor transferred a part of its production capacities to Sarajevo, and shut down some in Croatia. Don’t forget that Croatia exports $1 billion into BiH, and we import only $50 million. We exported $160 million into Serbia, and imported $30 million. Serbia supports an open market, but they are insisting that those relations develop in both directions, and who will sell how much to whom will depend on the capabilities of the companies and their competitiveness.

We were not intending to enter into Serbia at any cost: we never would have dared purchased Frikom had the employees not supported that move. The leading businessmen in Serbia presented our concern there, and when they saw that Agrokor is a successful and restructured industry, with a strongly developed social policy, and that we cooperate with the largest world banks, all those problems were quickly resolved. Frikom has to buy products for production there and place their products in those stores.

Partnership Idea

NACIONAL: How do you plan to soften the negative reactions of the Croatian producers, who will certainly oppose the penetration of Serbian products onto our market?

Who can oppose the fact that we export $600 million and import only $200. For Croatia, this will mean several thousand new jobs. And this agreement with those Serbian companies actually creates those opportunities. The ratios will depend exclusively on the success and competitiveness of our products. Agrokor has been selling Ledo ice creams in Serbia for two years, and we are very satisfied with the results. But we noticed that we were not becoming a competitor for Frikom, and at that time we already had an idea about a partnership.

NACIONAL: However, Croatian products could be too expensive for the Serbian market, while the Serbian products are significantly less expensive than domestic products, which could result in conflicts.

I met up with Goran Radman, director of Microsoft Croatia, in Belgrade and he was very satisfied because he achieved excellent results in only a short time. Don’t forget, Serbia is a massive market.

NACIONAL: You plan to pay every employee of Frikom $500 as a gesture of good will, and to invest $18.5 million in the social program, which is worth much more than the actual purchase and business investments?

The social program was a part of the tender. Considering that the employees of Frikom have small salaries, which they received irregularly, we want to improve the standards for those employees and enable them to concentrate more on their jobs and less on how to get by.

NACIONAL: What should the state do to help protect domestic producers and retailers facing massive competition from foreign retail chains?

In Belgium, there is no realistic opportunity for a foreigner to build a store, the permits take ten years to be finalized. In Germany, the construction of foreign retrial stores is limited to 1000 square meters, since the regulation of the market is an issue of national interest. Croatia will have to define what is in the interest of the domestic economy and to secure protective measures within acceptable world standards.

NACIONAL: Some claim that you have built this expansion in part by expanding payment deadlines, using money owed to suppliers.

Those are mere speculations. If you compare payments periods in Croatia and in the world, you will say that payment here is better than in many countries, with the difference being cheaper capital and most secure payments abroad. However, Agrokor still pays better than many of the companies it does business with, which are primarily the big businesses. We are not in debt to anyone.

NACIONAL: How did you take the fact that you were on the verge of buying Sloboda, but at the last second, it signed with Mercator?

We see this failure in a sportsmanlike way. Sloboda was purchased by a regional company. We believe that as part of Konzum it would have progressed even more, but we hope that they will fare well with their new company.

Conception of Growth

NACIONAL: Many are interested to know where the source of conflict is between Agrokor and Lura. Why are Lura products no longer available in Konzum stores and does this not make Konzum overly dependent on Vindija?

I have already repeated one hundred times what we have told Lura’s manager – we are satisfied with our business relations, but obviously they are not. The fact is that we do not sell many of their products, for which we have been reported to the Market Agency. In Agrokor stores, we sell 90% of Croatian products, including Vindija and Kim, and some 15 items from the Lura company, which is in accordance with our concepts of development and profit. In the same way, the Egyptians or Japanese could ask us why we don’t sell their products. It is unbelievable that someone could expect that I would have to seek approval for the products I do and do not sell at my stores. Agrokor’s philosophy is to developed mutual relations. We buy the majority of our dairy products from Vindija, but they purchase enormous quantities of our soy, Kraš buys our sugar, flour, and oil. But we do not sell the entire range of Vindija products, or Coca-cola, or Kraš or Podravka, but instead we assess what works with the interests of our capital and strategy.

NACIONAL: You had some unfavorable loans with high interest rates at Zagrebacka Bank, which you replaced with more favorable loans from the European Bank for
Reconstruction and Development. How did you fend off the bank’s demands that you sell Konzum stores?

Many distinguished economic experts and university professors claimed that I would go bankrupt due to those loans. I don’t intend to insult anyone, but this is perhaps the best indicator on just how well our experts understand business. It was not in my best interests to take out insane loans and to fail. I knew what I was doing and not even the prognoses of our distinguished experts could discourage me. We are always keeping a close eye on the level of indebtedness we can handle.

NACIONAL: Some claim that 70 million DEM for a distribution center at Žitnjak was not a profitable investment.

The Center at Žitnjak is working at 100% capacity, and last year we even built onto the facility. In two years, we are planning to build the second phase. Our company would not expand far if it weren’t for that facility. You only have to look and see how sensational it looks: open 24 hours a day, fully laser operated, the trucks just come and go.

Development of a House Brand

NACIONAL: Do you regret no accepting the project for an oil plant at Čepin, for which the former president gave a state guarantee?

It would have been more profitable if this plant was made in Vinkovci, where it would have been much less expensive. As soon as we learned of the state’s plans, we pulled out of the project. We are now waiting to see if they will merge with Zvijezda, which would be logical, because only in that case can the plant work at full capacity.

NACIONAL: Why did you sell the Hotel Intercontinental?

That is a logical step in the development of Agrokor, which is focused on the food industry. In the beginning we were wandering about, and experimenting with hotels. We backed away from this idea and were very pleased that the sale of the hotel was carried out under the framework of HUP.

NACIONAL: You intend to develop your own brand in Konzum?

We don’t want to endanger any Croatian products which is why we will not develop our own brand products in sector where there is already a market leader. We already have an excellent Franck and we have no intention of parallel development.

NACIONAL: Were the investments in the hunting grounds at Moslavina propagandas or a profitable business?

We received an award for the world’s best hunting ground in 2000 for Moslavina. I think this helped to contribute to promoting Croatia, as well as to the development of hunting. Perhaps the hunting ground does not bring Agrokor great capital, and we expect that upon expiry of the concession we will be break even, but it is virtually impossible to calculate the value of investments in the development of hunting.

Business is cruel

NACIONAL: Are you truly one of Croatia’s best hunters?

I have been hunting for many years, and I spend my spare time hunting and breeding game. I am attempting to permit certain animals to develop in as natural an environment as possible. The value of a trophy caught at Moslavina used to be 200 points, now its 250.

NACIONAL: Today Branko Mikša, former mayor and Economy Minister, is one of your advisors. Did you get to know him while hunting?

Branko Mikša and I are friends from childhood, our parents were friends and one has nothing to do with the other.

NACIONAL: How do you comment on the Miroslav Kutle case? You both started from about the same position, but Kutle lost everything, is under investigation while you are undergoing expansion.

It is difficult for me to asses to what extent politics, because it certainly did, sealed Kutle’s career. I know that he had good solid plans and it is a shame that he didn’t realize them. When a large company falls into difficulty elsewhere in the world, it becomes a state problem, because every state will attempt to protect its large companies. On the other hand, business is cruel.

NACIONAL: Do you consider yourself to be a rich man?

In America, rich people are respected. In Croatia, those values are completely turned around. People consider me to be rich.

NACIONAL: And you’re not?

I am not running from that. Furthermore, I work to earn
money. However, many people don’t realize that I never took a single kuna of dividends, and that I reinvested it all into Agrokor. Over the past 20 years, we have not built or bought a new home, we have been living in the same home for 25 years, with almost all the same furniture, nor have I bought apartments for my children or bought new cars. When I had to buy a new car for my wife, I didn’t have the money. Considering that my wife also works at Agrokor, we bought a new car on the company. I am well aware that most people cannot afford to do that. But God forbid that Agrokor goes bankrupt, we would lose everything. I have no other income other than my salaries and memberships in supervisory boards. Those earnings are not small, nor are they enormous. My tax card looks much like any other citizens.

Nature of the Business

NACIONAL: Are you not the owner of the estate and castle of Count Kulmer in Šestine?

Kulmer was purchased by Agrokor, and that project is slowly under development. I know that someone could say that Agrokor is mine. I have no idea what Agrokor shares are worth and how much money I would get if I sold them. But I believe it is not fair to get rich in a transition country. One day I will likely take something for myself, but up to now, I have worked towards reinvesting every dollar into new production capacities and creating new jobs. We didn’t buy Frikom out of megalomania, but because the nature of the business dictated we must do so.

NACIONAL: What was your relationship with the former president and do you have any contacts with the current one?

I saw Tudjman some 7 or 8 times and I have known President Mesić since the 1970s, but I haven’t seen him more than 10 times, and Premier Račan much less. I think that companies like Agrokor, next to INA the largest in Croatia, deserve political attention due to the overall economy. It would be wise for our politicians to deal more with business.

Hard work and progress

NACIONAL: How would you describe yourself as an employer?

In Croatia, everything can be forgiven, except success. I respect people who are capable of creating new values and I knew how to recognize them. I admire innovators, because I know what a thorny path it is to make something new and place it on the market. The inventor of tetrapak packaging, who became one of the wealthiest people in Europe, looked for an investor for his product for a long time. Later, he went on to purchase all those he had asked for help, he increased the value of his country by creating a strong multinational company and he employed a lot of people.

NACIONAL: Those who are not fond of you claim that you have not separated management rights from ownership rights.

My shares in Agrokor make me more cautious towards capital. Throughout my 27 year career, I have managed businesses, and I know that everyone has their own business language. But I am still in good shape, though I think that one day I will have an heir to take over, and I will pull back into the supervisory board. I have already prepared the field for some members of the management board to move to the supervisory board, and replace them with young experts with potential. I respect hard work and those who can find solutions.

NACIONAL: What are the advantages and disadvantages of having your entire family work for your company?

My friends were amazed when I invested everything I had in the middle of the war into production. I bought Jamnica, which was destroyed, when we began rebuilding, it was destroyed again. But we didn’t give up. I consider myself and my family to be honest people and I am sure that I was always capable of earning my living and being respected in my job. Which is how I raised my children. They are very hard-working and they know that they have to be better than the others if they want to get ahead.