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Serbia's Grand Coffee builds profits one cup at a time |
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Serbia’s market-leading Grand Coffee embodies both the potential and the challenges in building the interlinked economies of the western Balkan countries. After working in the coffee industry in the United States for many years the owner of Grand, Slobodan Vucicevic, built his business with $100,000 he brought back to then-Yugoslavia in 1990. He began by selling small Turkish coffee roasting machines sized for household use. In 1998 “I decided to make my own brand of coffee, roasting and grinding it to suit the local taste for Turkish-style coffee,” said Mr Vucicevic on a tour of his plant with EBRD President Jean Lemierre who is in Serbia where the Bank is holding its 2005 Annual Meeting. Mr Vucicevic now sells 15 million kilograms of coffee per year, thanks in great part to advertising campaigns that took Serbia and Montenegro by storm. In 2004 Grand Coffee borrowed EUR 7 million from the EBRD to expand his business, building a factory in neighbouring Bosnia-Herzegovina; EUR 1.5 million of the loan was financed under the Italian risk-sharing facility operated with the EBRD. Asked by journalists Friday about the Bank’s focus on promoting cross-border business links as the key to helping the regional economy to grow, Mr Vucicevic said he has “some ambivalence about this. It’s easy in some ways, in other ways not. We have space to grow here, especially in the retail sector which is not so concentrated, dominated by two or three key players. We brand makers know it is very important to have different smaller retail chains through which we can develop our brands, test our markets.” But he said the company’s expansion into Bosnia has not been straightforward. Initially, the division of the country into two entities -- the Federation of Bosnia-Herzegovina and the Republika Srpske -- caused the company headaches in terms of their different tax regimes. That’s since been resolved, he said: “Fortunately they decided not to have this artificial (economic) border anymore.” But Grand now faces two other problems in Bosnia: it pays tax on importing raw coffee beans into the country, and also on the roasted product. On top of this, he faces competition from coffee smugglers who pay no or fewer taxes on their products. “This is not in keeping with the market principles the EBRD is bringing here,” said Mr Vucicevic. The government has “created a space for black marketers. Our coffee is 1.5 euros more expensive than others not complying” with tax laws. “You see,” said Mr Lemierre, nodding toward the journalists, “smuggling is not just about oil and cigarettes…States are trying to get revenue. That’s fine. But when it causes difficulties for business, this is not the way to do it. It’s not the way to grow an economy. That’s why we in the EBRD engage in policy dialogue with governments. We have a role to facilitate dialogue.” (During the annual meeting Mr Lemierre is meeting with the Prime Ministers of Serbia and Monenegro, Bosnia and Herzegovina, Albania and FYR Macedonia as well as other heads of government from throughout the Bank’s region of operations; the western Balkan Prime Ministers will also address the Board of Governors Sunday.) Mr Vucicevic said the EBRD had brought his company “not just purely financing but also expertise and professional help…In giving support to projects and companies, the EBRD is directly supporting the efficiency and productivity of countries.” “I regret you (the media) cannot capture the smell of this coffee in your microphones,” Mr Lemierre joked. He lauded Grand for “risk-taking, job creation, trade growth. This is a good example of what can be done. Written by EBRD Senior Writer Kate Dunn. 21 May 2005 |
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