FAGE to grow through acquisitions

«We aim to become big globally» is the vision of dairy group FAGE’s Kyriakos Philippou, who continues to categorically reject the idea of a strategic partner. He says, in an interview with Kathimerini, that all the members of the group can stand autonomously, and possess all the attributes necessary to become competitive in the new European environment. The way in which Philippou has chosen to expand FAGE is through acquisitions. «My mistake was that I was late in developing a strategy of growth through acquisitions,» he admits. The first of these were those of the Hellenic Biscuit Company (renamed Elbisco) and EVGA dairy industry in 1988. The number has since grown to more than 30 small and large firms. Elbisco has been the focus of interest in the last two years, due to an extensive restructuring of operations and acquisitions it has carried out. «Between 1988, when we bought it, and 2000, the Hellenic Biscuit Company grew into one of the most significant concerns in foodstuffs. Step-by-step it acquired Elite, Kris-Kris and Vosinakis. This expansion policy made the company industrial, trading and holding at the same time. We had to meet the new competitive conditions and restructure, tidy up. And so we created Elbisco, which has four subsidiaries in Greece: Elbisco Trading, HBC (biscuits and Allatini flour), Elite Bakeries and Vosinakis. It also owns Zito Lucks in the Former Yugoslav Republic of Macedonia (FYROM) and 50 percent of Spain’s Helberica,» he says. Outward-looking Helberica, whose other half is owned by Spanish company Sanchis Mira, is planned to expand across the Atlantic. «Helberica will launch operations in July with two production lines in chocolate snacks. Our target is not just the Spanish market but Latin America. Our Spanish partners already have a sizable presence in these markets. «Most products will come under the Helberica label but some categories will bear our own name,» Philippou says. Zito Lucks proved to be a good investment. «For 2002, which will be the first full year we are in charge, we project to again break even, possibly even make a small profit. But we estimate big profits as of 2003. We have already begun producing goods of our own production, such as croissants and the Greek traditional tsoureki (sweet bread), and are about to start producing the large rusks we had in Greece in the past. From FYROM, we are planning to move into other neighboring markets, such as Serbia. «I would add that Zito Lucks has 200 outlets which we are planning to transfer to employees with an interest and the ability to run them under a franchising scheme. This opportunity alone is a big change for FYROM’s economy. We plan to turn some of these stores into fast-food restaurants and sell FAGE yogurt and some of the group’s other products through them. For us, this development has meant that the Greek market has expanded by 2.5 million people. I may also disclose that we intend to raise our stake in the company. «We have to be outward-looking and it is up to us to tap the opportunities in the wider Balkan market,» he says. Elbisco is not the only company in the group which is expanding abroad. «The group has a structure growing on five pillars. The first is refrigerated products, led by FAGE, which has eight subsidiaries in Greece and two abroad. Bread products, where Elbisco is active with one of the largest distribution networks, is the second. Frozen goods, with EVGA, which has developed operations with Cas Ice Cream in South Africa, is the third. The fourth pillar is that of packaging, with Mornos which controls three subsidiaries in Greece and three abroad. The fifth pillar is the Palas construction company. Our strong characteristic is that we are a fully vertically integrated group and each pillar has an autonomous growth strategy. For my part, I will say what Andreas Papandreou said once, ‘I am merely the chairman.’» For Cas Ice Cream, whose factory in Cape Town was launched late last year, there are diversification plans. «We have bought a plant in Johannesburg for the production of croissants and biscuits. We are now studying the market there; there is a problem with prices, which are too low, while labor costs may be lower but productivity is also lower. Nevertheless, South Africa has a big strategic advantage as you can expand to the north from there, with Kenya the most promising country,» says Philippou. No need of stock market Of the FAGE group companies, only Elbisco is listed and Philippou plans no other listings for the time being. «The Athens bourse is going through a crisis. I don’t know how long it will last. On the other hand, interest rates are low, but at present we have no shortage of capital with which to implement our investment plans. FAGE has no need to be listed, it is a strong company, with products enjoying recognition throughout Europe and now in America. Mornos applied two years ago, but the process is very slow.» The group has been the subject of various criticism in the past regarding its debt burden. «Owing twice the amount of your equity is considered acceptable worldwide. Our short-term liabilities amount to 0.9 percent of our capital. Ten years ago, when we were in a phase of expansion, we had debts of 100 billion drachmas and a turnover of 60 billion drachmas. Today, our debts are still 100 billion drachmas (293 million euros) but our turnover is 210 billion drachmas (616 million euros).» Philippou says FAGE has no need of a strategic partner. «To be competitive today you need three things. The first is quality. I can boast that our products are the best there are in the world market. It’s not just FAGE’s «Total» yogurt. EVGA created a new market worldwide with its 0+0 ice cream. The second is cost. No competitor of ours, anywhere, has a lower cost than us. And the third is to be content with small profits. Our permanent policy is to take small dividends and plough most of the profits back. The profits finance our strength. Big mergers lay ahead in the future and few will survive. I believe I will be among the few to survive.»

Subscribe to our Newsletters

Enter your information below to receive our weekly newsletters with the latest insights, opinion pieces and current events straight to your inbox.

By signing up you are agreeing to our Terms of Service and Privacy Policy.