Forbes reports Levente Balogh, who is the founder of Szentkirályi mineral water and one of the most successful businessmen in Hungary, made a new announcement recently: he and his Italian partner Alessandro Pasquale will become the exclusive distributors of PepsiCo’s products in Hungary. They will purchase all the interests of the American corporation in Hungary.
There are two peculiar questions concerning this business. The first: how come that the small fish eats the big one? The second: how could a company that supports healthy lifestyle enter the market of fizzy drinks full of sugar?
Levente Balogh recognised three years ago that though he made Szentkirályi number one on the market, he is not capable of expanding in the region. He agreed with the Italian Pasquale family, which is a family enterprise and owns the Czech company KMV, the leading mineral water producer in the area. The Pasquale family and Balogh created the Central Europe Mineral Water Holding (CEMW) together. It has purchased Kékkúti Ásványvíz Ltd. from Nestlé, then became the owner of Szentkirályi. CEMW’s majority ownership belongs to the Pasquales, while Balogh is the manager of the company and holds a significant minority.
KMV and Balogh will receive PepsiCo’s interests in Hungary together, while the interests in the Czech Republic and Slovakia will belong to KMW alone.
The complicated nature of the transaction is the reason why a project company executes the acquisition. PepsiCo has two factories in the Czech Republic, while they employ 262 people in Hungary. The American corporation has 189 million dollars’ worth traffic in the three Central European countries last year. However, the prices of the transaction remain secret.
PepsiCo’s withdrawal is not a unique phenomenon: Nestlé departed similarly, and KMV has already bought Quadrant Beverages, which is the collection of PepsiCo’s interests in Bulgaria. The withdrawal had already begun, only the partners were in question. Interesting to mention that Pepsi’s greatest rival, Coca-Cola is still flourishing in Hungary.
Balogh told Forbes.hu that the competition between the candidates was tight.
As he claimed, it was not the price that was critical but the trustworthiness of the new owner.
It is a tendency that the enormous multinational corporations are forced to develop in South America and the Middle East, so they need a significant amount of money. They usually solve this problem by entrusting their interests in Europe to local giants.
Balogh states that this deal could not be achieved without the cooperation with the Pasquales. They could be strong enough for Pepsi only together.
Besides their own funds, they needed a loan from two Czech banks. And what about the controversy with the sugary drinks? Balogh stated the purchase was justified by the strategic diversification of invests. He still intends to focus on mineral water. 90 percent of Kékkúti-Szentkirályi’s income is from mineral water; the rest comes from flavoured drinks. However, the Hungarian mineral water company takes over not just the fizzy beverages (Pepsi, Mirinda, 7up etc.) and sports drinks (Gatorade) production, but also the chips brands (Lays, Cheetos, Fritos).