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* 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 (Reuters) - 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 previous life."
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 Serbian.
"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)