* CEO says pursuing acquisition in western Europe
* Open to bidding for Podravka if government cuts stake
* May develop new sports bars for Herbalife
By Georgina Prodhan and Igor Ilic
BELGRADE/ZAGREB, Dec 28 Croatian consumer group
Atlantic Grupa is seeking an acquisition in western
Europe as it outgrows a former Yugoslav market it has pieced
back together with iconic communist-era brands after almost a
decade of wars.
The food group makes 80 percent of its revenue in southeast
Europe with products such as Cockta - former Yugoslavia's answer
to Coca-Cola - but wants to reduce that to 50 percent in the
medium term, Chief Executive and majority owner Emil Tedeschi
told Reuters at the group's headquarters in Zagreb.
"Because our brands have such high market share here
locally, room for growth is limited," he said. "We are looking
for growth in northwest Europe - organic and inorganic."
Tedeschi said Atlantic was currently working on an
acquisition in western Europe for a double-digit million-euro
(dollar) price. He declined to elaborate.
Atlantic is active in 12 countries including Britain,
Germany, Italy and much of ex-Yugoslavia.
It is a rare example of a firm that spans the western
Balkans, thanks in part to a portfolio of brands ranging from
soft drinks to coffee to sweets and snacks from the era of Josip
Broz Tito, president of the former Yugoslavia from 1953 to 1980.
It owns four of the top 10 consumer brands in the former
Yugoslavia, according to regional market research group Valicon:
Cedevita vitamin drinks, Argeta fish and meat spreads,
peanut-flavoured corn snack Smoki, and soft drink Cockta - which
dates from the 1950s when Coca-Cola was not sold in the country.
"They've reached sort of a peak in this region with the
current portfolio," said Divo Pulitika, an analyst with
InterCapital Securities, who rates Atlantic "buy".
Tedeschi said Atlantic was also open to consolidating its
home market further. It was rumoured last year to be eyeing
Croatian arch-rival Podravka, in which the state owns
a 25 percent golden share that allows it to block key decisions.
"If the government is willing to sell part of its stake in
Podravka we would be interested to explore the opportunity to
bid," Tedeschi said, adding he saw many synergies.
Such a move could be on the cards as Croatia privatises more
companies to reduce public debt. In May, the government removed
eight firms including Podravka from a list of companies with
strategic interest, making it eligible for sale.
Tedesci said he was not only interested in non-Yugoslav
markets: "One dollar of sales in Bosnia is equal to $1 of sales
in Germany. I don't want anyone to think Germany or Sweden are
more sexy - not at all."
Atlantic group took a hit when a 10-year contract to make
sports bars for U.S. nutrition-supplement multinational
Herbalife came to an end early this year.
Group sales for the first nine months of the year fell 5
percent, core profit fell 7 percent and Atlantic restructured
and slimmed down its sports and functional food division.
Tedeschi said Atlantic may develop new sports bars for
Herbalife. "We will bring back part of the business through them
and the rest with other partners."
With a market value of $400 million and more than 5,000
employees, Atlantic is one of the region's larger companies and
unusual in that it did not start as a state-owned firm.
It was founded by Tedeschi in 1991 as Atlantic Trade, a
distributor of products including Wrigley's chewing gum, and
began buying brands from 2001.
Tedeschi listed the firm on the Zagreb stock exchange in
2007, and still holds a share of just over 50 percent.
In 2001, six years after Croatia and Serbia ended a
four-year-long war, Atlantic established a unit in Serbia, which
now accounts for 22 percent of group sales.
"It was not easy," said Dragomir Kostic, who set up the
business and was Atlantic's first employee in Serbia, citing
bureaucratic difficulties and social awkwardness. Today he is
general manager for distribution in the country.
Kostic said the nostalgic appeal of some of Atlantic's
brands helped the company be seen as a local player, not a
Croatian one. "Our products are the ones that were breaking
barriers," he said. "They're very strong brands from our
Shoppers at a downtown Belgrade supermarket largely
confirmed that impression.
"All these brands are linking me with my life before 1991,
when everything was bigger and better and happier," said Snezana
Djordjevic, 54, a nurse.
"I don't care if the owner is Croatian or Congolese," said
Branka Vasic, 39, an administrative clerk from Belgrade.
But 40-year-old mechanic Aleksandar Vukovic was dismayed to
learn the chocolate-covered banana sweets he was eyeing were not
"I was unpleasantly surprised... Although I like the candy,
I will think twice whether I should buy them from now on. We
should support Serbian businesses," he said.
(Additional reporting by Aleksandar Vasovic in Belgrade;
Editing by Alexandra Hudson)