Absolute live and Power fruit: Hungarian success in sport drinks and vitamin drinks 

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Ervin Nagy has had to scrape together his company, which he founded in his father’s soda factory in Akasztó, twice in thirty years. The Coca-Cola price war didn’t stop him either, and with the help of online research he made a complete profile change in 2008. He set up R-Water, replacing carbonated soft drinks with sports drinks and then vitamin drinks. Not only did it become a major player at home, but it also established itself on international markets, now supplying 11 countries. Company profile.

“I am sometimes surprised myself at how few of the post-change of regime business people are now doing what we started out to do,” Ervin Nagy, who has been an entrepreneur for 30 years, producing sports drinks for 15 years, told Index, while his company, R-Water Ltd., grew out of a soda business in Akasztó. Although the business has been near bankruptcy on several occasions, he says, a change of profile has now made it one of the few SMEs in the Hungarian SME sector that can claim to be an “international champion” – writes index.hu.

HE BELIEVES THAT SUCH PRIVATE COMPANIES ARE CHARACTERISED BY THEIR ABILITY TO OUTGROW THEIR COUNTRY’S BORDERS ON THEIR OWN STRENGTHS AND TO STAND UP TO FOREIGN RIVALS.

It is a basic economic thesis that the more such firms strengthen a country’s economy, the greater its disruptive strength.

There is hope even in a difficult situation

Each of these businesses has a unique story, but this is by no means a fairy tale, rather a story of how to make a company in difficulty succeed through thoughtful yet courageous strategic decisions. Ervin Nagy’s father was a winegrower, a fruit grower, and ran a small soda business in Akasztó. His son started working here after his military service. “I was more in the mood for making soda than working in the vineyards,” he explained.

An important detail to remember is that in the early 1990s, a Hungarian family from the south of the country fled to nearby Kerekegyháza to escape the South Slavic war and started producing a carbonated soft drink called Bambino. They had everything from pineapple to mango to the most unexpected flavours. The Nagy’s idea of selling the product themselves was a hit. They used the family Barkas minivan to commute between Akasztó and Kerekegyháza, which could hold 250-300 bottles of soft drinks.

„We sold the first load in a week, the second in a couple of days, and most of the third was sold out before I even got home from Kerekegyháza.”

The Hungarians loved flavoured sparkling soft drinks, but it is worth remembering that after the fall of communism, with the collapse of the state-owned farms and the cooperatives that produced the drinks, the big brands such as

• Gyöngy,
• Sztár,
• the Márka
• or Traubisoda

disappeared one by one from the shelves. This paved the way for small businesses like Ervin Nagy’s.

“We felt that this was a much bigger business than soda, but we simply couldn’t sell more because the people in Kerekegyháza couldn’t produce more. Sometimes they couldn’t even supply the quantity they had negotiated because they were almost overwhelmed by customers. After a while, even the greengrocers in Pest started to buy the drinks, and everyone was hooked.”

The Nagy family – Ervin’s brothers joined in – decided to take their fate into their own hands: they bought three or four machines from Kerekegyháza, bought the recipe from KecskemétVin and started producing the flavoured, sugary drinks by hand in the soda factory. In one day, 2,400 bottles of soft drinks were produced in two shifts by a dozen people. Today, they make more than double that in an hour. “We were the third or fourth small business soft drink company in the country. Two of them were in Kerekegyháza. There was such demand that we reached maximum production capacity in two months. We were at exactly the same point as the Kerekegyháza company: we couldn’t produce enough. And sometimes I went to bed at 2 o’clock in the morning and two hours later I was back at the plant mixing the product.”

NOT ONLY THE COMPANY WAS BOOMING, BUT ALSO WILD CAPITALISM: WHEN THEY WANTED TO LOAD THE PET BOTTLES BOUGHT FROM THE AMERICAN CONSTAR, THE SUPPLIER OF PEPSI AND COCA-COLA, ON THE ISLAND OF HAJÓGYÁRI, THE WAREHOUSE CLERK REGULARLY HAD TO SLIP THE 100 FORINTS TO GET THE SHIPMENT GOING.

They loaded their upgraded tractor-trailer IFA so full that they had to drive in the middle of the lane on the Pest quay to fit under the bridge.

And then came Coca-Cola

There was a huge boom of similar soft drink producers in the area, a process that was finally brought to an end by Coca-Cola’s price war. While the Nagy’s and other retailers were selling their 2 litre soft drinks for 52 forints, Coca-Cola was charging 128 forints for its own product. According to Ervin Nagy, a cross-industry agreement between Coca-Cola and Pepsi led to a steep price cut, slowly ‘pricing out’ the small players. The entrepreneur from Akasztó was the first to go under, closing the shop for two years and moving on to other business interests, but when the big players started to raise prices again, he got back in.

By then, most of the old retailers had thrown in the towel, so the entrepreneur had to deal with the retail chains that were emerging in Hungary at the time (such as SPAR, Auchan and Tesco). However, the company did not have a forklift truck for packing, and their IFAs could not be parked at the truck ramps of the storage facilities. They simply did not meet the changing requirements. In the meantime, with the spread of multinationals, the small shops that used to sell their soft drinks were closing down. He and his wife, Tímea, who is now one of the company’s directors, had their first child and decided to start something new. They had a major production line, a warehouse, a mineral water well, so they had grown too big to sell everything. The only thing that came to mind was a change of profile.

„At that time I had a lot of free time, I used the internet a lot. I read statistics on American websites about how much the production of carbonated soft drinks was expected to fall and how it would be replaced by functional drinks such as sports drinks.”

They looked around the market and found sports drinks linked to three manufacturers in the gyms. Each bottle was half a litre, contained 500 mg of L-carnitine, came in different colours and sold for 400-500 forints, a horror price for the wallet at the time.

Absolute live: It was time for big changes

The Nagy family possessed the necessary technical equipment, they had to figure out where to get the basic ingredients for sports drinks, such as L-carnitine. And, of course, how to build up their network of contacts, as the company had never before been involved in the production of functional drinks. R-Water was born, and they eventually launched Absolute Live products, which are free of potency-enhancing colours, in a litre pack in a white foil sleeve.

“We started from our own old pricing, so we sold our litre drink for almost the same price as our competitors’ half-litre, plus double the carnitine content of 1,000 mg. Consumers didn’t understand it at first.”

BUT IT WAS SIMPLY THAT THE NAGY FAMILY DID NOT WANT TO WORK WITH HUGE MARGINS BECAUSE OF PREVIOUS EXPERIENCE.

Power Fruit: the lifestyle change

After a range of products for lifestyle change and regular exercise, Power Fruit was launched in 2012. The product is made from a wide variety of fruit types, and for a few years now carrot and beetroot drinks have also been produced.

“A fit, health-conscious lifestyle is becoming increasingly trendy, and sports drinks are very fashionable in our country, where we are perhaps even beating many Western European countries. At the same time, more and more players are entering the market. In 2008, we already had enough revenue from sales to make it worthwhile to invest in a new production facility, laboratory, machinery and technology. Today we produce 6,000 soft drinks per hour and we need four people directly to produce them.”

Akasztó is also a curiosity at European level

The factory in Akasztó stands up to international comparison: the company’s food engineers test products in their own laboratory. Ervin Nagy says that what he saw in the beer and spirits lab at the Budapest Agricultural University, they have it too.

„In the liquid house, a closed air exchange system operates that exhausts the air in little more than two minutes, creating a completely sterile environment and preventing product spoilage. The bottles are rinsed with ozonated water for the same purpose.”

The company continues to expand, supplying to many countries in the Central and Eastern European region, as well as Iceland, Ireland and Malta. It regularly tries to develop new products, for example, it recently launched a chewable tablet containing L-carnitine. The company has 20-25 employees and sells 5.5 million bottles of soft drinks a year. Last year, their efforts won them a MagyarBrands award, but Ervin Nagy is even closer to his heart with the Factory of the Year award from a professional jury.

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