How Fabris Peruško led the reconsolidation of a CEE retail and food production giant
Fabris Peruško led the reconsolidation of the CEE retail and food production giant Fortenova Group. In an interview with the GDI, Peruško talks about this huge success of his team and about how the company wants to compete in flow commerce.

GDI: Fortenova Group is a giant in CEE’s retail world, yet it is relatively unknown in
the rest of the continent. What does this tell you?

Fabris Peruško: Our significance and impact on the region's economies are manifold. Especially as the Group has evolved from a company that was five years ago one of the region’s major problems and a vast generator of illiquidity to a safe employer and prominent investor today. It has become a significant contributor to growth in the markets where it operates. Under the assumption that we are sufficiently good, financially stable, innovative, agile and productive, we have all the possibilities to enter the broader Central and Eastern Europe territory through classic exports or M&A activities. Moreover, now that Croatia is joining the eurozone, the company will generate more than 80 % of its revenues in euros.

When you compare your markets to others, such as Germany or the UK, where do you see the main differences?

Germany and the UK are large developed markets focusing on full specialisation. In contrast, in CEE markets, where you have local champion brands and smaller market sizes, our food production and retail with an integrated supply chain is more competitive business model. This gives us an advantage over international brands present in our countries.
On the other hand, the region in which we operate still carries the burden of transition and war – with two countries as EU members, Slovenia already in the eurozone and Croatia about to round off its full integration into the EU, while the other countries of the region are at different stages of their pre-accession negotiations.
Nevertheless, partly also due to their shared history and mutual relations of many years, the connections between the local partners and the focus on local suppliers that Fortenova Group strongly supports differentiate these markets from the more developed ones. That had proved to be particularly important during the pandemic when local suppliers and connections through short supply chains were essential factors in maintaining the supply on the markets. Apart from that, unlike the developed markets, the region still provides room for consolidation in many businesses, and Fortenova Group has significant consolidation potential.

You managed an impressive turnaround, for which you have also been awarded. What are the most important learnings for you to share?

The restructuring of Agrokor has to be put into perspective: this was a massive company in a small country – Croatia has a population of only four million, of whom around 30,000 people were employed in Agrokor, with another 30,000 in the region of CEE. The company’s estimated share in Croatia’s GDP was around two per cent. It was hence a systemically important company for Croatia, indeed. By comparison, a company of the same systemic importance in Germany would employ more than 300 thousand people. Agrokor’s bankruptcy, hence, would have been like the bankruptcy of two VW in Germany or five Toyota Motors in Japan. A similar big case happened in Italy, with Parmalat in 2003 ending in bankruptcy with 14 bn EUR debt, while Agrokor in Croatia had almost eight bn EUR debt. Consequently, the bankruptcy of Agrokor would have meant the potential loss of up to 60,000 jobs in Croatia and the region, directly impacting around 2,300 suppliers of our retail chain Konzum.
All this would have happened in countries that had just started getting out of the prolonged 2008/2009 recession and were, measured by some vital economic parameters, weaker than others after all. In that background, the restructuring of Agrokor was one project that went beyond the national and regional borders.
The critical lesson learnt in the process is that it was supported by extensive efforts of many people and institutions, without whom the settlement among the creditors and the successful financial restructuring would never have been possible.

At the GDI’s International Retail Summit, the topic is "flow commerce", i.e. seamless commerce on- and offline. How are you building such a world for Fortenova Group?

Fortenova Group is the strongest regional retail chain both through its more than 2,500 stores and in the online segment. We plan to stay the regional market leader in retail, beverage, oil production and meat processing by improving our business model through innovation in three important subsegments: digital transformation, innovation in food production, and integration of environmental, social and governance factors in our business model. By doing all this, we maintain the capital structure within the Group.
Regarding digital transformation, our priority is transforming from a so-called ‘data rich’ towards a ‘data driven’ company. Advanced analytics based on artificial intelligence and machine learning should help us make decisions based on data, make the customer experience more personalised, and our everyday work more efficient.
The second area of priority is how to fully digitalise the distribution of products to the end customer. We are currently making great strides in further e-commerce improvements and in the introduction of digital services that will eventually make it possible, for example, to automate various in-store operations and direct human work towards jobs with added value.

Peruško will be speaking at the 72nd International Retail Summit from 8 to 9 September 2022 at the Gottlieb Duttweiler Institute. Thought leaders, industry experts and startup founders will discuss on the theme Flow Commerce: How Shifting Boundaries Reshape Retail.

About Fortenova Group:
Fortenova Group, with its business operations in food production and retail, directly participates in six key markets in Southeast Europe, placing over 4,000 products and providing many services in all the markets where it operates. The Group has a workforce of over 45,000, 29 production plants, and more than 2,500 sales locations and distribution centres across six jurisdictions.
The company appeared after Agrokor's bankruptcy in 2017. It is only now that Fortenova Group is ready to make more significant strides to other markets after following several steps over the last four years: from the creditors’ negotiations about the Settlement Plan, legal protection in the US, UK, Switzerland and EU, refinancing of the debt and addressing the capital structure, along with having to cope with the Covid pandemic, earthquakes in Croatia and last but not least also the risks arising from the war in Ukraine.
The Group’s ownership, credit and capital structure have changed today compared to the moment of the incorporation, and its value has increased. In 2022, the company will generate over EUR 5 billion in revenue, making it the largest private employer in the region. Today, Fortenova Group accounts for almost 1 per cent of the region’s GDP, which indicates its strength, size, and impact on the economy.

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