Serbian juice maker Nectar eyes expansion with EBRD finance

By Mike McDonough

Serbian juice maker Nectar expands

Ongoing EBRD support is enabling Serbian juice maker Nectar to expand and develop in new territories. Nectar's success is poised to create jobs and boost the Serbian economy.

It is a clear, bright October morning and Bosko Bosanac is delivering Nectar fruit juices to a mini-supermarket on the outskirts of Belgrade, the Serbian capital. By the end of the day, he will have driven his distinctive green and red Nectar van to some 40 different shops, as he does every day except on Sundays.

Bosko, 30, is just one of Nectar’s growing team of delivery workers who regularly visit more than 10,000 stores throughout Serbia. The company’s products are also delivered to thousands of retailers across the border in Albania, Bosnia and Herzegovina, Croatia, FYR Macedonia and Montenegro.

The scale of Nectar’s distribution exercise is testimony to how fast the company has developed in the last 10 years. From a modest start-up in the northern Serbian town of Backa-Palanka, the fruit-juice maker has become the domestic industry leader. At the same time, it has established a strong presence in neighbouring countries where, until a few years ago, many shops were reluctant to even stock Serbian-made goods.

And now, with the help of the EBRD, Nectar is planning to expand even further. “The Serbian market is small so we have to expand abroad,” says Nectar’s managing director Bojan Radun. “We already have 50 per cent of the market in juices and nectars in Serbia and it is very expensive to grow market share more than this, so it is much more profitable to develop market share externally.”

Investment project

In 2007, the EBRD agreed to lend Nectar €10 million as part of a €50 million investment project aimed at further developing the company’s direct distribution network, strengthening its brand identity in Serbia and abroad and solidifying the business’s financial structure. The loan was disbursed in 2008.

“The EBRD loan will strengthen areas where we are leaders: our distribution in Serbia and our marketing and branding in Serbia and in neighbouring countries,” says Mr Radun, whose father Slobodan founded the company in 1998. “We also hope to use the EBRD finance to enter the Romanian market and our ambition is to pursue an acquisition in Bulgaria.”

As well as being good news for consumers, Nectar’s expansion plans will provide a boost to the local economy.

Nectar sources some 90 per cent of its raw materials from local suppliers and only relies on imports for tropical fruits. With more than 100 collection stations, the juice maker provides Serbian farmers with a stable source of income which is likely to increase as sales at home and abroad rise.

Nectar’s direct distribution network in Serbia, meanwhile, ensures that even the smallest village shops are able to stock Nectar’s high-quality juices, squashes, energy drinks and other fruit products. And supplying more of these retailers means the company will need to employ more delivery staff like Bosko, as well as other workers.

Good for locals, good for business

Buying locally and distributing directly also make good business sense, says Miljan Zdrale, a principal banker in the EBRD’s Agribusiness team who is the operation leader for the Nectar deal.

“Nectar’s long-term relations with farming cooperatives in Serbia – and increasingly in Montenegro and FYR Macedonia too – enable the company to control costs and prices. This is especially important with the current financial crisis, as consumers are more likely to go for less expensive products,” Mr Zdrale says. “Meanwhile, having its own distribution network in Serbia gives Nectar much more control over the way its products are sold in-store and over how the Nectar brand is promoted.”

Inter-regional connection

Nectar’s success also has other, less tangible benefits. “In Bosnia and Herzegovina you have people of various backgrounds working for Nectar, which 10 years ago was unthinkable,” says Mr Zdrale. “And I’m happy when I go to Skopje in FYR Macedonia and I can order Nectar juice."

“The region shares the same language, the same mentality and used to be part of the same country, so it is natural for Nectar to establish a presence in these markets. These business links create far more inter-regional connection and have an influence on the political sphere, as leaders are keen to promote their mutual economic interests.”

For a company that began life making apple vinegar on the site of a former swamp, Nectar has come a very long way. It produces more than 110 million litres of fruit juice and other goods every year and boasts an annual turnover of some €75 million. It already ranks as the sector’s leading player in several countries in the Western Balkans – including Serbia – and has ambitions to start operations beyond south eastern Europe.

“Our success comes from the fact that we have a stronger commitment and a better focus than our competitors,” says Bojan Radun. “We try to strike a balance between branding, marketing, costs and vertical integration and our results come from that.

“As we look to expand further afield, a loan from the EBRD is very good for the company’s image. It is proof of Nectar’s stability in the eyes of the business community and of officials,” he adds. “You have more credibility if you are working with the EBRD.”