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BUSINESS JOURNAL BUDAPEST

VOL. 25. NUMBER 14

3

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Budapest Business

JULY 14 – JULY 27, 2017

2017 14 – July 27, Journal | July

ial Report Spec Agribusiness

16 ory Phase Crucial Regulat 17 Deal Entering Bayer-Monsanto ECʼs Proposed Biofuel Targets at on 18 Industry Anger Further Expansi Paves way for Growth 19 Gallicoop Plant Looking to Future Bonafarm Group

once Hungary was breadknown as the Dual basket of the do modern Monarchy. How to take on s aim agribusinesse the world?

SPECIAL REPORT

Agribusiness SPECIAL REPORT

Bonafarm Group Looking to Future Growth Even though 2017 does not necessarily look like being an easy year for Bonafarm Group, the agricultural giant belonging to OTP Chairman and CEO Sándor Csányi, it still has ambitious plans for the future.19 SPECIAL REPORT

Industry Anger at EC Biofuel Targets The EU intends to promote secondgeneration (largely waste-derived) ethanol over plant-based firstgeneration fuels, a decision that has angered some, including the region's largest producer, based in Hungary.17

SOCIALITE

Red Bull Races and Margaret Island David Holzer tries to take in the ultra-modern Red Bull Air Race and instead finds himself transported back in time.21

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Talking Turkey with the Gallicoop CEO

E IAL R SPEC

PORT

Meet the man running a business with a HUF 33.5 bln turnover, and employing more than 1,000 people, all from the countryside town of Szarvas BUSINESS (population 17,000), 160 ‘Be Brave’ Ambassadorkm southeast of to-be Tells AmCham NEWS Budapest.

Hungary’s pick to be its next man in Washington, Deputy Minister of Foreign Affairs and Trade László Szabó, described the chamber as “one of the brain parents” of the “Invented in Hungary” approach the government is now advocating. 10

‘Robust, Broad, and Deep’ Relationship An estimated 1,200 guests enjoyed the U.S. Embassy’s traditional Independence Day celebrations, held at the Ambassador’s Residence one day early on July 3. 9

2017. 07. 12. 19:07

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D

espite the cosmopolitan sophistication and imperial grandeur of Budapest, despite all those Nobel laureates for science and math and the oh-so-clever entrepreneurs, Hungary has always felt like an agricultural country to me.

Indeed, if you treat it as two countries in one, Budapest and the rest, and ignore the capital for a moment, the idea seems to hold even more truth. Think of all those County Seats serving the surrounding countryside, and all those market towns.

Perhaps it is those great swathes of land around the Alföld or the Great Southern Plain. Given the much smaller size of Hungary post-Trianon, these seemingly vast farm landscapes, fields stretching to the horizon under huge skies, still pull off the neat visual trick of appearing both timeless and endless.

Perhaps it is the sheer number of Hungaricums that are linked to the land and its produce. Think of paprika or pálinka, Mangalica pigs or the Hungarian Gray cattle.

Perhaps it is the number of laws that are dedicated to the land and its preservation. Most people know that foreigners cannot own Hungarian farm land. When I first arrived in Hungary in the late 1990s, so-called “pocket deals” whereby Hungarians “sold” land to Austrian neighbors via a verbal agreement were common, but they have fallen out of favor. As recently as January, government spokesman Zoltán Kovács was proudly telling state news channel M1 that only a handful of foreigners (and most of them dual nationals) could buy land under the government’s current land sell-off scheme. The government’s aim is to keep farmland with farmers who actually cultivate it and live off the land, he said, adding that it wants to see more people make a living out of farming. And then there is the Fundamental Law, the country’s Constitution, which forbids the use of GMOs in the country.

Hungarians themselves seem to think of this as an agricultural land. I vividly remember a conversation with my father-in-law, an intelligent man who had assumed that something like 10-15% of Hungary’s GDP came from the land.

When I told him the then numbers (less than 5%), he did not believe me at first. Not much has changed since then; the figures from the U.S. Embassy’s recently updated “Commerce Country Fact Sheet” for Hungary put the economic mix at 71% services, 6% manufacturing, and just 2% agriculture (the figures are World Bank data for 2015).

Perhaps what all of this means is Hungary should be an agricultural country, with its rich soils and advantageous climate.

And, before collectivization and later privatization, took hold, it was. It was regarded as the breadbasket of the Habsburg empire, and in the early 20th century it was responsible, according to some figures, for one-third of Europeʼs total corn production and one-tenth of its flour production. The Ministry of Foreign Affairs and Trade certainly does its bit to push Hungarian agriculture in general, and specific sectors such as water treatment or food processing in particular, on its overseas trips.

And yet, for all that Minister of State for Food Chain Supervision Róbert Zsigó recently declared “Hungarian agriculture, and especially arable crop production, may be regarded as a successful sector of industry in view of the fact that in every past year it has contributed positively to economic growth as well as breaking several historic records in 2016,” there are still hurdles ahead.

Economic research institute GKI expects the farm sector to contract by 10% this year, according to a quarterly forecast released June 28, twice the rate it augured in its previous forecast. It will be a while yet before Hungary can be regarded Europe’s breadbasket again.

Fortepan.hu / Noémi Saly

MTI / Péter Lakatos

The Budapest Business Journal, HU ISSN 1216-7304, is published bi-weekly on Friday, registration No. 0109069462. It is distributed by HungaroPress.

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HUNGARY FAILING TO LIVE UP TO ITS AGRICULTURAL HERITAGE

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THEN & NOW

The beginning of the week saw huge thunderstorms around the country. The color picture taken on July 11 shows lightning striking the ground at Révfülöp and Zánka, photographed from Balatonlelle at the Hungarian sea: Lake Balaton. The black and white picture was taken in 1939, showing the choppy waters of the lake as a storm builds up. Every year people get into difficulties at the lake, caught out by the speed with which storm fronts can move in.

2017. 07. 12. 19:07

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News

1 News | 3

///macroscope

Automotive Sector Boosts Hungary’s Industry

Industrial output increased in May, meaning the slump in April was a passing phase only. As expected, the automotive sector was the main driving force behind the increase.

Inflation fell to below 2% in June, from 2.1% in May. ZSÓFIA CZIFRA

The performance of Hungary’s industry in May confirms the setback in April a temporary one, as there was a 2.3% increase from the previous month. Industrial output rose 6.2% on a yearly basis, according to working-day adjusted figures, while raw data shows an 8.8% increase, following a 3.4% decline in April. Output went up by 5.7% in the first five months, compared to the same period of the previous year.

There was no change in the second release, issued by the Central Statistical Office (KSH) on the very day this issue of the Budapest Business Journal went to print, compared to the first estimates.

Detailed data shows that the output of Hungary’s automotive sector, a key driver of industry in the country, rose by an

annual

10.7% in May, following an 8.6% decline in the sector in the previous month. Of the various industry sections, production grew by 8.8% Numbers to watch in the coming weeks: Only a few important macro data will be released in the upcoming two weeks: on July 14, we will learn how the construction sector performed in May, then get a glimpse of Hungarian salaries in the January-May period on July 20. The second estimates of retail trade figures will be published on July 24. The state of the labor market will be revealed on July 27, followed the release of the number of construction permits in the first half of the year one day later.

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in manufacturing, representing a decisive weight (96%), and by 42% in mining and quarrying (having little weight). The output of energy industry declined by 3%.

Production declined in just two of the 13 subsections of manufacturing and volume increases ranging from 4.3-21% were measured in the other subsections compared to the same month of the previous year.

Higher Rate of Growth The production of transport equipment, representing 30% of the manufacturing output, rose year-on-year by 10.7%.

There was a higher rate of growth in the manufacture of parts and accessories for motor vehicles (12.3%) than in the manufacture of motor vehicles (8.9%).

Analysts pointed out that the May data confirms previous opinions stating that the setback in April only temporarily influenced the performance of the Hungarian industry.

The short-term outlook is still favorable, which is also backed up by a historically high figure for the German purchasing manager index, as the strengthening global environment can positively influence the strongly export-dependent industrial sector in Hungary. Also, several large-scale capacity expansions are in the pipeline, which gives further reasons for optimism.

According to Gergely Suppan, head analyst at Takarékbank, the increase of Hungary’s industrial production exceeded expectations. He expects further acceleration in the coming months, due to the new capacities and the improving European

environment. “As for the whole year, the growth in industrial output could be as high as 7%. A more prominent acceleration can be seen in 2018, with the utilization of further capacities in the automotive sector,” Suppan said, noting that Hungary’s industrial production has grown by 31% since 2010.

The KSH also released the latest consumer price index. Yearly inflation slowed to 1.9% in June from 2.1% in May. The highest price rises over the past year were measured for alcoholic beverages and tobacco, as well as food. In June, food prices rose by 3.1% on average.

Highest Price Rise The highest price rise – of 4.6% on average – was recorded for alcoholic beverages and tobacco, while consumers paid on average 1.4% more for services, 0.9% more for other goods, 0.7% more for electricity, gas and other fuels, and 0.2% more for clothing and footwear. Consumer durables cost 0.4% less for consumers, according to KSH data.

In the January-June period, CPI went up by 2.3% on average, compared to the first half of 2016.

Suppan expects an average yearly inflation of 2.4% in 2017, however, he does not rule out a faster acceleration, due to the growing domestic demand and higher wage costs. As for 2018, the analysts predict a 2.7% rise in consumer prices, stating that the National Bank of Hungary will not, therefore, be forced to start a tightening monetary cycle anytime soon.

Inflation was at its lowest rate in the second quarter of the year, and will start to accelerate

from July, said Gergely Ürmössy, head analyst with Erste Bank. He expects a

2%

inflation rate for 2017, which might accelerate to 3.2% next year, exceeding the inflation target of the MNB, the analyst said, noting, however, that he does not expect the base rate to change before 2019.

Hungary’s industry has come back to life, economic think-tank KopintTárki stated in its recently published analysis. As CEO Éva Palócz said at a press conference, the automotive sector is not the only factor behind the revival, as investments kicked off too, showing an 17% increase this year and 7% growth expected in 2018. The think-tank expects that industrial output will grow 4.7% in 2017 and 5.5 in 2018, and projects a GDP growth of 3.7%, paired with a 2.3% inflation rate for the full year.

Eurostat released industrial output figures for May on July 12. In May 2017, compared with April 2017, seasonally adjusted industrial production rose by 1.3% in the euro area and by 1.2% in the EU28. In April 2017, industrial production rose by 0.3% in the euro area and by 0.1% in the EU28. According to this, Hungary produced the tenth fastest growth rate in May among the EU member states.

2017. 07. 12. 19:07

4 | 1 News

REAL ESTATE NEWS

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Exchange Palace Redevelopment to Start Next Year Renovation and redevelopment of the 50,000 sqm Exchange Palace are planned to commence at the beginning of next year.

The listed eclectic and Art Nouveau building in Szabadság tér is scheduled to deliver around 25,000 sqm of premium office space in addition to 6,000 sqm of retail.

GARY J. MORRELL

Redevelopment of what was once home to the stock exchange (hence the name) and then the Hungarian TV (MTV) is being carried out by Tőzsdepalota Kft., the Hungarian subsidiary of the Canadian Tippin Corporation, which purchased the building several years ago. According to Michael Tippin, founder of the eponymous developer, reconstruction work is planned to start

The listed eclectic and Art Nouveau Exchange Palace.

at the beginning of next year with a projected budget of

circa

EUR 38 million.

The building was completed in 1905 and designed by Ignác Alpár.

The developers and CMA Architects, designers of the project, plan to preserve the historical bourse as part of the renovation. The building was the headquaters of MTV from 1955 until it fell into disuse after MTV relocated. Tippin’s website describes it as “the largest privately owned historic landmark in Budapest”.

“CMA Architects will rethink the spaces – the two stock halls and the roof will be rebuilt into offices providing tenants with either cellular, open space or loft spaces, green roof terraces, courtyards and a 360-degree imposing panoramic view. Further, we aim to

acquire green certification focusing on wellbeing,” said Tippin.

The redevelopment will provide the possibility for headquarters in separated wings of the building. Asking rents for the development are expected to be in the range of EUR 18-25 per sqm per month.

Great Location “There are not too many better locations to be found in Budapest than Szababság tér in downtown. At this moment in this submarket, there are only a few contiguous office spaces available and due to the land shortage development potential is limited. The steady demand justifies the start of development of the Exchange Palace as the vacancy rate in the CBD office submarket has decreased to 9.7% for the first quarter,” said Ferenc Furulyás, managing director of JLL Hungary, exclusive letting agents on the project.

With the limited supply of suitable development plots in the historical center of Budapest, most office development is now being undertaken in out-of-center or suburban locations. One solution is for companies to redevelop historic buildings, thus providing a building with a use-value while at the same time preserving and maintaining the classic Central European architecture in the heart of the capital.

The Exchange Palace has been at the planning stage for several years.

However, Tippin rejects the argument that redeveloping older historic buildings, with their high renovation costs and often protracted planning and construction process, in large part due to red-tape and bureaucracy, makes such projects unattractive ventures. “High-tech firms, in particular, like historic buildings because they appreciate the sheer space, ceiling height, character and prestige that such buildings provide,” he commented.

He further argues that investment into historic buildings in Central Europe offers a much more solid investment for private equity than many people suppose, an important consideration given that the Tippin Corporation has a policy of avoiding debt finance and working with private equity.

Tippin first began redeveloping older historic buildings in his native Toronto.

The Tippin Corporation entered the European markets with the purchase of a derelict factory in east Berlin. This was followed by the redevelopment of a Stalinera building at Tbilisi international airport in Georgia.

The first tenants are expected to enter the Exchange Palace at the beginning

of

2020.

Work Starts on Rare Central Buda Office Complex

in-house restaurant, roof-top terrace, The Hungarian developer an bicycle parking and charging points for electronic vehicles.

Redwood Real Estate “The state-of-the-art Ecodome office Holding (formerly known building combines modernity with a classic atmosphere.

Our aim is to create as B&L Estates), has an outstanding, super green landmark started the construction of project in this sought-after location,” Bálint Erdei, owner of Redwood Real the speculative 5,000 sqm said Estate Holding.

Ecodome office building, Ideal HQ located in central Buda.

GARY J. MORRELL

The development is a rare office project in the central Buda area where there is low availability of suitable development sites, despite high perceived demand. The central Buda office submarket has been struggling in recent years with no new stock delivered, commented Cushman & Wakefield, exclusive letting agents on the project.

The LEED “Platinum” pre-certified project will provide class “A+” office accommodation according to Redwood Real Estate Holding. Construction is being carried out by Swietelsky.

Ecodome’s on-site services will include

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“We are looking for companies who would like to be located in the central Buda area. It is important for them to be close to the downtown area but in a relaxing area. Ecodome could be the ideal HQ for law firms, consultants and also for financial service providers who could benefit from a ground floor customer care area,” commented Tamara Szántó, head of office agency at Cushman & Wakefield Hungary, letting agents on the project.

Ecodome is due to be handed over in the second quarter of 2018.

Cushman & Wakefield sees a positive office market from the landlords’ perspective with 370,000 sqm of new supply expected to be delivered. For 2018 the consultancy has traced a pipeline of 14 office projects, for which the Váci

Artist’s impression of the Ecodome office building.

corridor and central Pest are the dominant locations.

The largest pipeline projects in central Buda are the 16,000 sqm Buda Palota and the 22,000 sqm HillSide Offices. In another office project in central Buda, HB Reavis has purchased the classic Bem Palace and plans to redevelop the listed building into a 32,000 sqm office

complex. The project located on the Buda bank of the Danube currently has an uncertain delivery date.

“Vacancy for the first quarter in the central Buda submarket was 4.9%, while in 2016 it was 5.7%. We anticipate a further decrease in the vacancy rate in the submarket,” concluded Szántó.

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News

American Air Ace Chambliss Returns to Throne

///in brief

According to a study by the OECD on how “green” various OECD countries are, Hungary’s carbon dioxide emission indices are good, half of the OECD average, reported portfolio.hu. It is also positive that 2.6% of the tax revenue in the budget was related to environmental protection in Hungary. The really negative finding is that 100% of the population of Hungary suffers from exposure to particulate matter over the maximum limit. Hungary’s situation is one of the worst among OECD countries in this respect. According to Eurostat, Hungary had the highest rate of deaths caused by lung cancer in the EU. The causes include using wood for heating, smoking cigarettes and traffic. Both the protection of the climate and of the health of the population show the importance of using clean energy, notes the article.

EIB lends Magyar Eximbank EUR 400 mln for SMEs

The European Investment Bank (EIB) yesterday signed an agreement on a EUR 400 million loan to Magyar ExportImport Bank (Eximbank) which will be used to finance preferential loans for SMEs and mid-caps in Hungary, state news wire MTI reported. Eximbank CEO Zoltán Urbán said the loan agreement would “create a significant funding basis for financing SMEs and mid-caps in the coming years. As a result of recent cooperation, we were able to finance 362 different SMEs and mid-cap companies that employ around 62,000 people,” he added. EIB Vice President Vazil Hudák said supporting access to financing for SMEs and mid-caps is a “top priority” for the EIB Group. About 13% of Hungarian companies consider themselves to be finance-constrained, according to a recent EIB survey, well above the 5%

average for the European Union, noted MTI.

Hungarians outdo Romanians, Poles in summer holidays

Hungarians seemingly deem summer holidays more important compared to Romanians and Poles, booking their holidays one week earlier than last year and appearing to spend more per capita than their regional peers, according to the results of a survey sent to the Budapest Business Journal by Wizz Tours. Online travel service provider Wizz Tours, launched by Hungarian low-cost airline Wizz Air, compared thousands of online bookings by Hungarians, Poles and Romanians in its system, registered by June 30. A year ago, Hungarians, on average, booked their holidays 44 days prior to traveling, which by this year has been extended to 52 days before departure. “The figures could drop by the end of the summer season due to last-minute bookings, but the trend is still expected to linger on by the end of the year,” said István Csanálosi, CEO of Wizz Tours. “Although the summer season is the main season for traveling everywhere, this is especially true for Hungarians, which means that the ratio of the sightseeing type of travel is low here,” the CEO added. As far as per capita expenditure is concerned, Hungarians lead the way once again with more than EUR 400 spent by each person on summer holidays. Romanians spend EUR 330 on average and Poles EUR 300, according to data collected by Wizz Tours.

Hungary’s tourism sector grows further in May The number of nights spent by international tourists increased by 6.9%, and nights spent by domestic tourists by 4.5% in May 2017 compared to the same month a year earlier, Hungary’s Central Statistical Office (KSH) said in a

Photo: LaMography / Moni Lazar

Exposure to particulate matter extremely bad in Hungary

Nine years and 40 races since he last stood atop a Red Bull Air Race podium, two-time series champion Kirby Chambliss won the Budapest event on July 2, beating Canadian Pete McLeod and series leaders Japan’s Yoshihide Muroya and Czech Republic’s Martin Sonka. Chambliss, after flying under the Chain Bridge and in front of the Parliament Building, run nearly six-tenths of a second faster than anything he had managed all weekend. “I love Budapest – I won here in the past and itʼs a great place,” Chambliss said after the race. “I’m super stoked. Iʼd almost forgotten what champagne tasted like. But I can tell you, when youʼre winning, winning is easy and when youʼre not, itʼs not!”

first release of data. International guest turnover grew by 7.6% and domestic guest turnover by 5.5% measured in tourism nights and adjusted for calendar effects, according to KSH data, while gross revenues grew by 17% at current prices in accommodation establishments.

In May, the number of international tourist arrivals grew by 4.5% and that of international tourism nights by 6.9% to 1.3 million. The number of domestic tourist arrivals increased by 6.6% and that of domestic tourism nights by 4.5%, approaching 1.1 million, KSH data shows. Room occupancy in hotels increased by 4 percentage points to 60.5% in May. The total gross revenue of accommodation establishments increased by 17% to HUF 41 billion, the KSH reported. Within this, accommodation fee revenues increased by 18% (to HUF 25 billion), catering revenues by 16% (to HUF 8 bln), and other revenues by 14% (to HUF 8 bln). As of May 31, Hungary

had a total of 3,016 accommodation establishments, one-third of these being hotels and another one-third guesthouses. The number of available beds was nearly 283,000, which was 2.9% less than in the previous year.

Budapest rents climb 9% Rents in Budapest are up 9% from last summer at HUF 155,000-160,000 per month, an analysis by property listings aggregator Otthonterkép Csoport shows. Rents are expected to increase at a slower rate in the second half of the year as newly completed homes come onto the market, said Otthonterkép chief analyst Nándor Mester. Monthly rents are highest in Budaʼs leafy Districts XII and II, averaging HUF 250,000 and HUF 215,000 a month, respectively. Monthly rents in the Pestʼs central District V average HUF 207,000 per month.

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Do you know someone on the move? /// Send information to news@bbj.hu

Scitec Appoints CEO András Gyenes has been appointed CEO of Scitec Nutrition as of July 3, reported profitline.hu. Gyenes is an economist with plenty of experience as a leader, who had worked for Unilever for 22 years in the fields of finance, marketing and sales. Scitec Nutrition is located in Budapest, and produces and distributes sports and food supplements in 90 countries.

The company employs more than 700 professionals and had revenue of HUF 30 billion last year; its main export markets are Germany, France and Scandinavia. In 2016, the African Ascendis Health group became its majority owner.

Vodafone set to Welcome Deputy CEO Gergő Budai will be appointed deputy CEO of Vodafone Magyarország as of September 1, reported vg.hu. He will be responsible for corporate relations and for the legal, regulatory, wholesale, retail, communication and social responsibility departments. According to his LinkedIn profile, since April 2012 Budai has been working as a leader at Invitel Group, most recently as its general deputy CEO. Prior to that he was at Pfizer for more than six years as legal and compliance director for Hungary and from early 2011 served as the regional legal director for Hungary, Czech Republic and Romania. He began his career at White & Case in 2001 as a senior associate.

Infocommunications Authority (NMHH), where he has been head of marketing communications, the company said. Piller started his career in the telecommunications sector, where initially he was involved in sales and marketing projects and later held positions in business, commercial and corporate sales. Among other things, he was responsible for the development of new business product portfolios, the establishment of a corporate and government customer base, and the introduction of a corporate services portfolio. At Samsung Electronics Hungary, he was director of the Enterprise Business Unit from September 2014, in charge of managing the IT and business products of the company. During this time, he also played a major role in introducing new-generation banking, smart classroom and mobile security solutions, according to Telenor. From July 2009, he held a similar role at Vodafone. From January 2000, he was B2B sales director at Invitel. “We offer the same innovative services to Telenor’s business subscribers, helping them in their everyday life, that we offer to residential customers, such as unlimited mobile internet and internet security solutions,” said Petra Stangl, Telenor Hungary’s chief marketing officer. She noted that this customer base also has special needs for which the company has developed customizable products, from mobile management tools to IoT solutions.

Beata Kokeli.

János Görföl.

TriGranit Makes Telenor Hungary Names Number of new Staff B2B Sales and Marketing Appointments Hungarian developer TriGranit, Director

Gábor Piller has been appointed corporate sales and marketing director at mobile phone operator Telenor Hungary. Piller has decades of experience in telecommunications, IT and consumer electronics, and is joining Telenor Hungary from the National Media and

BBJ_2514_news.indd 6

owned by TPG Real Estate, has made a number of new staff appointments across many fields of its operations in support of more efficient workflow.

János Görföl, former deputy chief executive officer for building and construction, has been appointed vice president general for construction and development. His promotion is expected to strengthen the company. In his new position, he will be responsible for all of the company’s development and implementation processes. Over the last two decades, as a member of the management, Görföl has coordinated outstanding developments such as the Budapest Millennium City Center and the Bonarka City Center project in Krakow, the company says. Görföl is a qualified building supervisor and justice technical expert with more than 33 years of experience in real estate development and implementation.

Beata Kokeli, the former head of TriGranit Asset Management, will see her responsibilities extended to include the company’s operation in Poland. Kokeli has more than 19 years of experience in the real estate sector both on developer and agency sites, working in companies such as the Polish Centrum Development & Investments and CBRE. Agnieszka Turowska, former finance head, has been appointed deputy

Agnieszka Turowska.

chief financial officer, who will be responsible for overseeing the finance, accounting and controlling functions of TriGranit in the future. At the same time she is joining the company’s board of directors. Turowska has 11 years of experience in the international real estate sector. She joined the TriGranit Group in 2013 and spent six years in the Polish-based MT Development Group and worked in the auditing department of Pricewaterhouse Coopers in Warsaw and in Robert Bosch’s controlling department in Stuttgart. Turowska is a member of the ACCA International Accounting Board.

Stefan Cuvin, former head of building management, will also be expanding his responsibilities in the near future and will coordinate all the company’s development.

In addition, Balázs Biacs, senior financial analyst, will have extended responsibilities and will strengthen TriGranit as the acquisition manager in the future, the company added.

Balázs Biacs.

Stefan Cuvin.

2017. 07. 12. 19:08

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Budapest Business Journal | July 14 – July 27, 2017

WebEye Sees Enhanced Logistics Security Through Innovation Innovations have reached the logistics sector, and while the industry has always focused on fast and safe shipping of goods, the market is expected to become ever safer.

WebEye, a Hungarian IT solutions provider for logistics firms, navigates the Budapest Business Journal through the changes it predicts in the near and far future.

CHRISTIAN KESZTHELYI

WebEye International Ltd., established in 2006, chiefly focuses on supporting international transportation, making it more

Although it is as yet uncertain how the market will be improved through innovation, the most likely scenario is that a network of automated processes and vehicles will be incorporated into the same transparent system.

“This will give companies total control over their assets, total flexibility with maximum capacity utilization. It’s no longer going to be the dispatchers who choose which vehicle will be attached to a specific consignment order. There will be a fully automated system, which will take into consideration lots of factors when choosing the best vehicle, route and time of dispatch for the goods. There may be parts of the trip where the packages or pallets can even be shipped with other suppliers’ assets for the most cost-effective delivery,” Deszpot believes.

In the long run, automation will restructure jobs, which does not necessarily mean positions will be lost, but rather that new ones will emerge that will focus on added values, instead of simpler and repetitive tasks.

“Digitalization helps companies reach their best selves. Telematics companies such as WebEye help companies reach this by giving them the necessary data to see where they can grow and evolve,” Deszpot concludes.

For a deeper investigation of innovation in Hungary, look out for a special focus on the subject in our next issue, out on July 28.

carriers for such innovations, which should inevitably lead to the further development of the digitalization of logistics.

“In no other time in logistics have we had this much innovation,” Károly Deszpot, CEO of WebEye Magyarország Kft., tells the BBJ. “We can see this growing interest not only in our own customer base, but also in the overall growth of the telematics industry.”

Growing in two Directions Károly Deszpot, CEO of WebEye Magyarország Kft.

direct, efficient and safer. The IT firm’s major product is a satellite-based vehicle tracking system called WebEye, which the company says is a unique development, offering various telematics solutions and supporting the safety of transportation processes.

Currently the Hungary-based group serves 14 countries in Europe through subsidiaries and partners, having fed the region with more than 55,000 active WebEye units.

While a general goal in logistics and has been to ensure the fast and safe transportation of goods, the future lies in visibility, optimization and automation of processes and vehicles. Demand from shippers and third-party logistics companies has already increased towards

In the short-term, demand for digitalization is expected to grow horizontally, which Deszpot describes as more companies starting to use telematics solutions, and vertically, which he says means the expansion of the range of services, such as mobile solutions. In the mid-term, the high demand for data will remain, however it will appear in a more targeted way, which in Deszpot’s view will be aimed at specific areas and sub-processes.

“The Internet of Things will affect more parts of the supply chain and thus more work processes will be channeled into one transparent system. The vast amount of data, which is incomprehensible by human measurements, will contain useful information that can contribute to establishing more efficient processes. We believe that the future will bring more grounded, data driven decision making in the logistics field, even at smaller companies,” the CEO envisages.

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An old companion for the long run

2017.04.10. 14:09:37

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Budapest Business Journal | July 14 – July 27, 2017

Building on Bilateral Trade Links The Budapest Business Journal asked Jennifer Kane-Zabolotskaya, the relatively newlyarrived commercial attaché at the U.S. Embassy in Hungary, to detail the U.S.Hungarian trade story for us.

• •

The U.S. Embassy in Budapest is working through our commercial, economic, defense, agriculture, and other offices to facilitate stronger business and trade ties. Our teams work one-onone with American companies to equip them to enter the Hungarian market; advocate for their continued market access; and ensure they can participate in transparent procurement processes.

In addition, we work with Hungarian firms that are interested in establishing a footprint in the U.S. market of 320 million consumers.

BBJ STAFF

How would you characterize bilateral trade relations between the United States and Hungary?

Hungary is an attractive destination for U.S. investment. The United States is the largest source of non-European investment in Hungary. American investors are drawn to Hungary’s highquality infrastructure, its cost-effective labor force, and its central location.

Hungarian government officials are doing many of the right things to attract more investment. Minister [Péter] Szijjártó, Deputy Minister [László] Szabó, and their team tirelessly travel the world promoting the benefits of the Hungarian economy to foreign investors. Moreover, the Hungarian Investment Promotion Agency (HIPA) is finding creative ways to assist investors that are considering Hungary.

At the same time, we believe there are many investment and growth opportunities for Hungarian companies in the United States, and we are seeing an increasing interest by Hungarian companies in

the United States in 2015 reached USD 59 billion.

Innovation: the U.S. Patent and Trademark Office receives more than a million new applications each year.

The top five companies in the world by market cap value are all American data companies: Google, Apple, Microsoft, Amazon, and Facebook – only one was on the list in 2000 and Facebook did not exist.

Do you expect the current business fields to continue to hold a leading position in future bilateral trade, and are there any up-and-coming sectors to watch out for?

As economies, business, and people become more mobile, we expect that innovative digital services will become more and more important.

Jennifer Kane-Zabolotskaya, commercial attaché at the U.S. Embassy.

exploring and expanding in the U.S. market. The U.S. economy, the world’s largest national economy, is one of easiest places to do business, and ranks first among countries with populations of more than 100 million. In fact, a new business is born every minute in the United States.

This is due to many factors, including: •

•

Our diverse, skilled, innovative, and mobile workforce – with productivity rate at 36% above the OECD average.

Access to capital via banks and private equity –venture capital in

What, if any, issues threaten or restrict bilateral trade?

Hungary has many attractive attributes as an investment destination, but there are some challenges as well, including problems with corruption and transparency and a tight labor market. The U.S. State Department publishes an annual Investment Climate Statement for most countries around the world, including Hungary. These Statements provide countryspecific information on investment laws and practices. The 2017 Investment Climate Statement was released on June 29, and can be found at: state.gov/e/eb/rls/othr/ics/ index.htm

U.S. Embassy’s Commerce Country Fact Sheet: Hungary FOREIGN MERCHANDISE TRADE (USD billions)

2014

2015

2016

Hungary’s exports to the world

7.7

7.4

N/A

Hungary’s imports from the world

8.3

7.1

N/A

U.S. exports to Hungary

1.8

1.7

1.8

U.S. imports from Hungary

5.3

5.7

5.3

U.S. trade balance with Hungary

-3.5

-4

-3.5

U.S. TRADE IN SERVICES (USD billions)

2015

2016

U.S. exports to Hungary

0.9

1

N/A

U.S. imports from Hungary

0.8

0.8

N/A

2014

2015

2016

U.S. FDI in Hungary

6.1

6.4

N/A

FDI into the United States from Hungary

0.1

0.1

N/A

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largest

Rank of Hungary as U.S. export market in 2016: (0.1% of U.S. exports)

42nd

Rank of Hungary as source of U.S. imports in 2016: (0.3% of U.S. imports)

50th

Rank of Hungary in total U.S. trade in 2016: (0.2% of U.S. trade)

largest

largest

2014

FOREIGN DIRECT INVESTMENT (U.S.$ billions)

61st

Principal U.S. exports to Hungary in 2016: nuclear reactors (49%); electrical machinery (14%); vehicles, not railway (8%); optic/medical instruments (7%) Principal U.S. imports from Hungary in 2016: vehicles (30%); nuclear reactors (28%); electrical machinery (18%); optic/medical instruments (7%)

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Budapest Business Journal | July 14 – July 27, 2017

‘Robust, Broad, and Deep’ Relationship An estimated 1,200 guests enjoyed the U.S. Embassy’s traditional Independence Day celebrations, held at the otherwise empty Ambassador’s Residence in the leafy outskirts of Buda’s District II one day early on July 3.

ROBIN MARSHALL

Official Hungarian state guests included Constitutional Court President Tamás Sulyok, Chief Prosecutor Péter Polt, Minister of Interior Sándor Pintér, and Deputy Foreign Minister of Foreign Affairs and Trade László Szabó (Hungary’s ambassador designate to the Unites States). They heard Eric Watnik, Counselor for Public Affairs, jokingly refer to the event as “the 241st anniversary of the original Brexit” before he handed over to Chargé d’Affaires David J. Kostelancik.

“We have a robust, broad, and deep relationship with Hungary that stretches back to the very earliest days of our Republic, when Hungarian officers were instrumental in building up and training the Continental Army of former shopkeepers and farmers,” he said. Kostelancik noted that, through the years, thousands of Hungarians migrants had found a new home in the United States.

“Hungarian-Americans are a quintessential part of the fabric of our society and the story of America. Like every immigrant group that arrived in America [...] they have enriched our society and have made America what it is today.”

The Chargé d’Affaires said U.S. citizens have roots from all around the globe, himself included. “My own family immigrated to Chicago from Slovakia, and I was raised in a community steeped in Central European tradition, culture, and language, but I am also 100% American. I am proud not only of my heritage, but of the fact that, like many officers in the U.S. Embassy in Budapest, we are American children of immigrants who reflect the opportunity and equality that the United States represents.”

Incredible Devotion He thanked in particular guests from the Hungarian Defense Forces “for your incredible devotion to your country, to NATO, and to our collective security”, noting that Hungary has hosted thousands of U.S. troops for

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U.S. Chargé d’Affaires David J. Kostelancik and Deputy Foreign Minister of Foreign Affairs and Trade László Szabó

multinational exercises “including the many exercises going on this month across the country and the Black Sea region”.

Pointedly, given Hungary’s controversial NGO laws that some fear are targeted at undermining critical voices (though the government insists the real aim is to increase transparency by making it clear where funding is coming from), Kostelancik also thanked “the many guests I see here from NGOs and civil society organizations that have inspired us in a wide range of fields, from combatting human trafficking, to organizing the Pride March this coming weekend, to enhancing transparency in governance, and improving access to services for disadvantaged populations.”

He told them: “Your organizations are a vital pillar in every free society and the work you do here is a testament to your love of your country, your commitment to justice, and your compassion for your fellow citizens. We thank you for your commitment to the future of this country, even in the face of difficult challenges, some enduring, some new.”

In response, Ambassador-inwaiting Szabó also recalled those early Hungarian-American relations, typified

by Hungarian nobleman Mihály Kováts, “regarded as the founder of the U.S. cavalry” who had fought and died with the Continental Army. There are now (according to the 2010 census figures)

1.4Americans million who identify as being of Hungarian decent. The two countries remain linked, Szabó said, and Hungary clearly understood President Donald Trump’s stated desire to “Put America First”, as the government here too followed a “Hungary First” policy for its people and the Hungarian diaspora.

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‘Be Brave’ Ambassador-to-be Tells AmCham The American Chamber of Commerce in Hungary was singled out for singular praise by Hungary’s pick to be its next man in Washington, Deputy Minister of Foreign Affairs and Trade László Szabó.

Addressing an AmCham Podium event, Szabó described the chamber as “one of the brain parents” of the “Invented in Hungary” approach the government is now advocating.

ROBIN MARSHALL

Speaking at the Kempinski Hotel Corvinus Budapest on June 29, and sharing the podium with U.S. Embassy

Chargé d’Affaires David J. Kostelancik, the deputy minister admitted to being a fan of AmCham, having been a member in his private sector days through two pharmaceutical companies. “AmCham

A Q&A session was moderated by Dr. Judit Zolnay, CEO of MetLife Hungary.

has had a tremendous impact on economic policy,” he said, referencing the chamber’s advocacy in recent years.

The government’s switch from a “Made in Hungary” philosophy to an “Invented

in Hungary” mind set “could be credited to AmCham from your strategy papers”.

The same could be said, at least partially, about the decision to lower the corporate tax. “I encourage you to be

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Investment Climate Statement

brave, to come up with ideas and make sure the Hungarian government listens to them.”

Speaking about his role as Hungary’s Ambassador to the United States (he is due to fly out with his family in this summer), Szabó said there was much to build on in terms of bilateral trade: America is Hungary’s number one export partner outside Europe, and is number two on the list of foreign investors in Hungary, with investments totaling USD 18 billion creating 93,000 jobs. “I still believe we have a lot to offer each other.

I am very optimistic there is a lot of low hanging fruits in our bilateral trade.”

Energy Security In terms of energy security, he said he would do all he could to help U.S. liquid natural gas reach the shores of Croatia. “If we achieve that one thing I would feel very comfortable about my success [as ambassador],” he said.

Kostelancik praised the choice of Szabó as the next ambassador in Washington. “With his private-sector background in the United States and his experience with trade promotion, László is uniquely positioned to help advance our trade ties. I think his appointment as Hungary’s Ambassador to the United States shows how seriously our Hungarian partners take this issue.”

The diplomat said he had “come to admire Hungary’s sharp focus on strengthening bilateral trade and investment”. U.S. investments in Hungary “are good for both of our countries”, he said. “American

Business

Chargé d’Affaires David J. Kostelancik.

businesses here contribute to economic growth, they introduce good business practices, they pay taxes, they are active members of local communities, and they create well-paying jobs for Hungarians. That is very important.”

He said that U.S. executives he meets in his work compliment Hungary’s business friendly environment, and “appreciate the help they receive from the Hungarian government.

Companies are far more likely to succeed and grow if they can work with

Deputy Minister László Szabó.

a government – which is the case – that cares about competition and innovation and that can help with finding new partners, making sales, and launching investments.”

Talking of the stability and depth of the broader bilateral relationship Kostelancik added “I can say with absolute confidence that the U.S.Hungary bilateral relationship rests on some strong foundations”, the strongest and most obvious of which is NATO.

On the same day that he was speaking, the State Department’s 2017 Investment Climate Statements for Hungary and for the World were to be released in Washington D.C. “I can say the Statement for Hungary will present the significant advantages to investing and doing business in Hungary. [….] It will also present some of the challenges that potential foreign investors face in Hungary – challenges such as corruption or unpredictability,” he said.

“We as an Embassy are committed to doing everything we can to boosting bilateral trade and investment between Hungary and the United States. We have a strong foundation to build on and a shared goal, and I see the potential for many more success stories to occur thanks to the work of Dr. Szabó and you all that will benefit both of our countries in the years ahead,” Kostelancik said.

“These issues are very important to American investors in Hungary – potential or actual, and they are a large part of the reason that we, the U.S. Government, frequently talk about the need for transparency, the rule of law, and effective democratic institutions.

We do that as a friend, as an ally, as a partner. To get there, though, we must be honest and constructive when there are issues to be discussed, and I can say that the United States is committed to working with Hungary to address the challenges as a partner and a friend,” he added.

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Company Auchan Magyarország sales up 3.8% last year

French-owned hypermarket chain Auchan Magyarország recorded HUF 350 billion in sales revenues in 2016, 3.8% more than in 2015, the companyʼs CEO Dominique Ducoux said at a press conference, state news wire MTI reported. Customers made 43 million purchases last year, 3% more than in 2015. Auchan has 19 stores and 18 filling stations, employing 6,500 workers, according to the report.

Net profit for last year was HUF 3.6 bln. Ducoux noted that the company launched its online supermarket service in the capital last November, and by the end of the year aims to expand it to the whole of Budapest and its environs.

The company has been self-funded now for four years in a row. It made HUF 9.8 bln in investments last year, and is planning to invest HUF 12 bln in 2017 and HUF 17 bln in 2018.

Heineken Hungary to restructure operations

Brewer Heineken Hungary’s manufacturing operations will cease at its Martfű plant in the next 12 months and the site will gradually be

///news

transformed into a distribution and logistics center, Hungarian online news portal index.hu reported. At the same time, manufacturing capacity will be expanded in Sopron, and staff numbers will be increased further. Heineken told index.hu it was still unsure how many people would be affected from the Martfű staff of 50. However, Heineken said it is committed to offering people alternative employment opportunities in Sopron or Martfű after the conversion, index.hu reported. The current reorganization is part of a HUF 1.8 billion development in Hungary that the company started in 2015, index.hu said.

Mars to boost pet food production in Hungary U.S.-based manufacturer Mars has announced it will invest HUF 1.5 billion in installing new production equipment at its Hungarian pet food plant, raising the headcount by 70 to around 900, according to Hungarian online news portal index.hu. The plant has been in operation since 1993 in Bokros, southeast Hungary. So far, the plant has produced animal food

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Conference in Buda’s Castle District Held on June 1, the opening ceremony of the Hilton Budapest’s Ballroom marked the completion of the third phase of the hotel’s comprehensive renovation project.

As a result, the first floor of the building now offers a completely renovated Ballroom as well as a modern conference center, satisfying all needs.

For the interior of the Ballroom and the related conference and meeting rooms, British design house Goddard & Littlefair was tasked with creating spaces fully in line with the existing image while also meeting the requirements of Hilton Budapest’s elegance and the business criteria. Another important aspect was that the multi-functional rooms may be used in variable sizes so that they can be suitable for business meetings as well as private events.

The renewed Ballroom is a perfect venue for gala dinners, conferences and other events at 510 sqm and with a capacity of 600 people. Equipped with cutting-edge audiovisual systems such as BOSE audio, professional data transmission devices and high-resolution screens, the Ballroom also has new furniture, curtains and carpets that will match the elegance of any high-key event.

In addition to the Ballroom, the grand meeting room, which can be subdivided into three rooms (Endre, Béla, Levente), the separate conference room (Gizella) and four other Boardrooms have all been renewed as well. With a total area of 104 sqm and a capacity for as many as 106 participants, the Endre-Béla-Levente

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Hell Energy Inaugurates HUF 30 bln Canning Plant

meeting rooms are 35 sqm each. The enormous windows of the rooms offer a magnificent view of Matthias Church.

Ideal for meetings with 10 participants, the renovated Boardrooms provide userfriendly, touch-screen-controlled lighting, projector and audio technology along with window shading designed to fully shut out external lights. Owing to the high technology applied, guests can follow each moment of the Ballroom via the 60 inch smart HDTV sets installed in the rooms. With their views of Parliament or the Dominican courtyard, the elegant airconditioned rooms couple comfort with technical solutions.

Photo: MTI / János Vajda

12 | 2

Quality Pack, a unit of soft drink maker Hell Energy, inaugurated a HUF 30 billion canning plant in Szikszó (northeast Hungary), according to state news wire MTI. The 42,000 square-meter plant can turn out 1.2 billion cans a year.

The headcount at the plant will reach 150 within three years. The investment was financed by Eximbank, UniCredit Bank and Raiffeisen Bank. Minister of Foreign Affairs and Trade Péter Szijjártó announced last year that the government would support the investment with a HUF 7 bln grant. Hell Energy had after-tax profit of HUF 1.3 bln on revenues of HUF 27.9 bln last year, public records show. such as treats; however, due to new machinery the Hungarian unit expects to manufacture chews that improve the teeth condition of dogs. The plant exports 150,000 tonnes of pet food a year to 25 countries in Europe and across the world, Hungarian news agency MTI reported. The company’s Budapest-based trade unit employs more than 100 people, it added. Mars is more than 100 years old, famous not just for the well-known chocolate brand that bears its name, but also for brands such as Uncle Benʼs, Orbit, Pedigree and Whiskas, according to MTI.

MOL stations allow dogs to enter shop Oil and gas company MOL now allows dog owners to take their dogs into the shop when paying, instead of leaving them in the car, according to Hungarian online news portal index.hu.

MOL justified the move by saying that data from PETA (People for the Ethical Treatment of Animal) shows that many dogs suffer in the summer heat from staying in closed cars. During the summer, even if the weather is only around 25ºC, the interior of a car can heat up to 37-48ºC in a few minutes, according to MOL. The company added that a car can heat up to more than 70 centigrade in ten minutes. In response to a question from BBJ.hu, a MOL spokesperson confirmed that the move would be permanent: “Naturally, dogs will be allowed to enter after the summer too.”

Instant noodle maker Nissin inaugurates EUR 33 mln expansion

Japanese instant noodle maker Nissin has inaugurated a EUR 33 million plant at its base in Kecskemét, state news wire MTI reported. CEO Koki Ando said the company decided to expand the base because it expects

sales growth in Europe. Nissin moved its European production from the Netherlands to Hungary in 2004. The plant in Kecskemét supplies the entire European market. Kecskemét Mayor Klaudia Pataki said the investment created 200 jobs.

Tesco commits to double-digit wage rises in 2017

In an apparent response to workers who demonstrated on Saturday and might subsequently call a strike if wages are not raised, Tesco Hungary has issued a press release defending its wage policies in 2017. The press release says that Tesco-Global Áruházak Zrt. has raised the wages of some 13,700 employees this year by an average of 12.4%, the second year running it has effected a double-digit hike. The company says that both its long-term goal and the main tendency of its wage development policy are the same: to remain among the top three best-paying retail supermarket chains in terms of its wage package as a whole, while concentrating on raising the wages of the lowest earners among its workforce in particular. In the past two years, Tesco has spent HUF 7.4 billion on wage hikes in Hungary, the press release claims. It notes that while retail sales volume increased last year by 4-5%, wages expanded by several times this figure. Tesco claims that each year it determines wages based on clear-cut guiding principles. Given its commitment to sustainable and successful operation in the region, and within this Hungary, it indicated that these principles depend on the performance of the Central European market. The company said it is working on developing a pay matrix that reflects the complexity of its positions, and noted that it also takes into account varying conditions on labor markets across the region.

2017. 07. 12. 18:45

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Budapest Business Journal | July 14 – July 27, 2017

Business | 13

Taking the gym Outside (and Making it Free) What if you could train outdoors, away from enclosed and stale gyms? In trying to answer this simple question, Szabolcs Csepregi and Tamás Erdélyi started their business in 2010, bringing an added value to the city of Budapest.

CLAUDIA PATRICOLO

With both co-founders coming from a sporting background, perhaps it shouldn’t be a surprise that they targeted their business at opening what was then the first outdoor training park in Budapest.

“Sport is a growing sector in Hungary.

When we started we presented our prototypes at festivals and fairs. We noticed the interest of people and that feedback was enough for us to invest in this dream,” Csepregi tells the Budapest Business Journal. “We invested EUR 10,000 at the beginning. Of course, we got that back, so that we could reinvest a bigger amount from the revenues.”

The almost 20 street workout parks now found across Hungary are made by assembling the various parts, the only limit is your own imagination. The design appears linear and easy to use, and it won the founders the special prize of the Hungarian Design Council in 2014.

“The parks cost from EUR 3,000 to EUR

15,000, and the most common is around EUR 4,500. They are like IKEA furniture; clients can build them based on their needs.” Hard Body Hang was fortunate in being able to attract badly needed European Union funds in its early days, winning several tenders.

“Now we finally get money from the market. People are aware of what we do and nowadays they prefer to invest in something healthy. Our typical clients include youth clubs, sport clubs and wealthy sports fans who like buying something special and unique for their private gardens. Also, universities and, to mention a club, the Hungarian Kayak and Canoe Federation,” says Csepregi.

Never Easy “Starting a business is never easy,” comments Erdélyi. “We had to be strong, trying not to make those mistakes that can be fatal for newborn companies.”

The most important characteristic of

Szabolcs Csepregi (left) and Tamás Erdélyi of Hard Body Hang. these parks is that they are totally free of charge. With a QR code installed on each product, anyone can download exercise guidelines on his or her smartphone, including video tutorials made by experts such as Szilveszter Csollány, a former Hungarian gymnast, winner of one gold and one silver Olympic medal.

But we all know how sport can bring people together, and Hard Body Hang is also playing a charity role, having created the first park for refugees in Austria in 2016. “Furthermore, we have just created the first park in Europe entirely designed for disabled people,” says Erdélyi.

Pioneers they might have been, but in their relatively short time in business, Csepregi and

Erdélyi have already seen rivals come, and go.

“There are many companies in Hungary who also started producing equipment like ours.

I remember there was a big tender launched by the government for around HUF 2 billion.

Anyone could apply, but soon they cancelled the tender. So, now I think the market will support just the most innovative companies and in Europe our main competitors are Russian companies.”

And the business is certainly looking to flex its muscles beyond Hungary, with 150 projects completed across the continent. “Now we are focusing on five different projects: in Germany, Finland, Japan, Norway and Austria. It means we are growing and this is a huge repayment of our efforts,” says Csepregi.

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Energy mix: Renewables, Nuclear and Fossils ‘[I]t is also clear that wind electricity generation is certainly not a winner under these changes, and it is practically impossible to develop further wind farms in Hungary.

István Réczicza, Hungary managing partner at Dentons’ Budapest office, spoke to the Budapest Business Journal about developments in Hungary’s energy market, and the regional picture.

How do EU policies impact on nation states, and how do you see the authorities meeting all these challenges?

Common EU policies work only if everyone aligns with them. In the past years we have witnessed that, in some policy areas, the Hungarian government has been testing its boundaries vis-à-vis the EU. In the context of the energy industry, this is exemplified by the public tariff setting rules. It remains to be seen where this path will lead Hungary, but previous experiences have shown that sooner or later the supremacy of EU policies prevails and member states adjust themselves.

BBJ STAFF

CEE countries within the EU are supposed to meet their national EU-designated renewable energy targets by 2020: Will they?

Generally, most EU-28 member states should meet their national RES (renewable energy sources) targets. With 20% of the EU-wide renewable energy target by 2020, each member state has its own national RES target set in the RES Directive. In the recent EC Renewable Energy Progress Report and according to Eurostat data, Hungary had a 9.4% share of renewable energy in its gross final energy consumption in 2015 vs 13% for its national target by 2020. Some CEE countries, such as Czech Republic and Romania, have already reached their national targets.

Significantly, CEE economies consume much less energy now than 10-20 years ago. Total consumption was further reduced by the global financial crisis. Together with renewable developments already implemented, this means CEE countries already almost meet their renewable targets.

However, with the recent regulatory changes in several markets, it remains to be seen if all CEE countries will eventually be able to meet their national RES targets by 2020.

What are the implications for other fuels?

Most probably, natural gas and, partly, nuclear energy will remain important in CEE. Although certain renewable technologies are growing rapidly, CEE countries will not be able to cover their needs fully or mostly from renewables for a long time yet, so much of electricity base-load will need to be provided by conventional facilities: nuclear and gas.

Gas-fired facilities are also very suitable to balance out fluctuation caused by certain (weather dependent) renewables, so these will certainly remain important in the future energy mix, even if certain renewables are skyrocketing. Clearly, there are incentives in the CEE to include significant coalfiring in the future energy mix. However, the viability of this is uncertain due to increasing CO2 costs and growing social awareness and environmental sensitivity.

BBJ_2514_bus.indd 14

What are the important issues around nuclear power for Hungary (and CEE)?

Disposal of used nuclear fuel, financing and safe operation in general.

István Réczicza Mini-bio What do you think are the key regulatory and policy issues for Hungary?

A key topic nowadays is the amended support regime for renewables. As of Q1 2017, the renewable support regime has been reshaped in accordance with the relevant EU guidelines. Although this kicked off only recently, and its future impact on the Hungarian renewable sector and the various technologies is uncertain, some consequences are already clearly visible. For example, appetite for solar developments increased very significantly in the last months. This is partly because interested large scale solar project developers filed license requests for capacity in excess of 2,000 MW just at the end of 2016 to still be able to benefit from the previous, more favorable support scheme, and partly because smaller scale solar plants (i.e., below 0.5 MW) enjoy a rather generous support under the new

István Réczicza is a partner in Dentons’ global litigation and dispute resolution group and the Hungary managing partner. He focuses on the areas of telecommunications, energy, mergers and acquisitions, and intellectual property regulation, particularly as these relate to transactions involving foreign investment. In the course of representing clients in these fields, he has become one of Hungaryʼs leading figures in the analysis of industry regulation and the drafting of proposed amendments in connection with such legislation.

regime. However, it is also clear that wind electricity generation is certainly not a winner under these changes, and it is practically impossible to develop further wind farms in Hungary.

What does Paks II mean for Hungary?

Critics say it is too expensive, makes the country more dependent on Russian technology fuel sources and expertise, and is not needed, at least so soon.

The communicated aim of the government with Paks II is security of energy supply and energy at competitive prices. Hungary has an aging electricity generating infrastructure (although some old polluting plants were refurbished in the past decade), and, as experts say, some 7,000 MW of conventional generating infrastructure will cease operation by 2030, which must be substituted somehow. It seems rather unrealistic that, even with rocketing solar capacities, renewables alone would be able to deliver such volumes in Hungary, at affordable prices. The potential (weather dependent) renewable capacity is also limited by capacity and the balancing constraints of the grid. Considering that nuclear production does not involve CO2 emissions, it seems like a fair choice. (Of course, nuclear waste disposal must be taken care of in a reassuring manner).

How will Hungary sell Paks II’s base-load capacity if plans proceed? At what price?

Base-load prices will be determined by supply and demand. According to current plans, for a few years after the new Paks II blocks become operational in 2026 with a 2,400 MW capacity, they will operate simultaneously with some of the old blocks of Paks I, until these are ultimately switched off. However, significant delays are likely (as usual for projects of this magnitude in this part of Europe) in commissioning Paks II. As such, the period during which both the old and the new blocks would be operational with a large capacity may not be too long.

Demand for base-load electricity may also grow longer-term due to the foreseeable growth of electricity use in transportation and developments in battery technology.

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Special Report Agribusiness Bayer-Monsanto Deal Entering Crucial Regulatory Phase16 Industry Anger at ECʼs Proposed Biofuel Targets17 Gallicoop Plant Paves way for Further Expansion 18 Bonafarm Group Looking to Future Growth 19

Hungary was once known as the breadbasket of the Dual Monarchy. How do modern agribusinesses aim to take on the world?

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Bayer-Monsanto Deal Entering Crucial Regulatory Phase

The wheels have been set in motion regarding Bayerʼs mooted acquisition of U.S. seed giant Monsanto, but it a series of regulatory approvals will be needed before the deal closes.

LEVENTE HÖRÖMPÖLI-TÓTH

The Monsanto brand is intrinsically linked with the concept of genetically modified organisms (GMOs) worldwide, so any news about the company is set to stir up sentiments around the issue.

The company has been present in Hungary

since

1997,

and its Budapest-based facility also represents the Eastern European headquarters, from which the entire regional operation from Ukraine to Turkey is managed. Hungary is also an R&D hotspot for Monsanto with research centers operating in Szatymaz (160 km southest of Budapest, near Szeged) and Kecskemét (95 km southeast of the capital). The latter attracts R&D projects from other European countries as well.

Hungary’s constitution lays down that no GMOs are allowed in domestic trade, and

Monsanto has adapted its business strategy accordingly. With similar sentiments across much of Europe (unlike the United States), GM products are not part of its general strategy on the continent, either. Monsanto, however, hasn’t been in the news recently for its GMO activities, but because German chemical giant Bayer wants to acquire it as part of a

USD 66 billion deal.

The official reasoning behind the merger is that it would boost agricultural research and innovation and help double the world’s food supply. The companies plan to spend USD 16 bln on R&D worldwide over six years: an average of USD 2.67 bln a year. But publicly available figures show that if you add up their current spending, the total increase in funds is less than USD 500 over the next six years. Farmers, politicians and pundits have all expressed their doubts as to what the real reason behind the merger might be.

Agricultural Supply Consolidation There is massive ongoing consolidation of the agriculture supply industry, with the Bayer deal being one of three mergers on the table. The other deals are Dow Chemical’s USD 130 bln merger with DuPont and ChemChina’s USD 44 bln takeover of Switzerland’s Syngenta.

Together, the three deals would bring the global industry down from six to four companies and transform Bayer into the world’s biggest supplier of agricultural pesticides and seeds. Many believe that this market concentration points towards less competition, and as a result higher prices.

It is now up to competition authorities to give the green light, but it will not be an easy ride for the Bayer-Monsanto project as approval is being sought in 30 countries.

One crucial OK is expected to come from the United States where it is a widelyshared opinion that the Bayer acquisition will close. But some pundits do not rule out the possibility of a block for political

considerations, as Germany has been critical of the Trump administration.

In Europe, approval is pending: European regulators have until August 7 to decide whether to approve the merger now or instead examine it further in greater depth.

Bayer said earlier: “The EU filing is another important step in the overall merger process.

Bayer, with the support of Monsanto, continues to make good progress on the regulatory front. The companies remain committed to working with regulators globally as we continue to target closing by the end of the year.”

However, between then and now Bayer might sell off some of its assets in order to smooth the way for approval. Bloomberg has reported that BASF SE and Syngenta AG are among companies that have allegedly expressed preliminary interest in acquiring some of the Bayer business lines, which include canola, cottonseeds, the LibertyLink herbicide-resistant trait and the glufosinate weed killer.

The Budapest Business Journal did ask Monsanto for an interview, but the company declined to speak with us.

CEU COLUMN

Datafication of the herd Sarolta Márton

György Bőgel

student, MSc in Business Analytics

Professor of Management

CENTRAL EUROPEAN UNIVERSITY BUSINESS SCHOOL

CENTRAL EUROPEAN UNIVERSITY BUSINESS SCHOOL

“Datafication” is a magic world today and we hear a lot about it everywhere. It is a key ingredient of modern precision agriculture, which aims to use data-collecting sensors and smart algorithms to deliver fertilizers, pesticides and water only to those fields and crops that actually need them, enabling farmers to save money and increase output.

Fields and crops are clearly subjects of datafication, but is it possible to “datafy” a cow or a whole herd? Yes, and datafication may even help dairy farmers understand their livestock in a manner never done before.

Hungary’s Moonsyst and Austria’s SmaXtec are both working hard on transforming cattle into data streams

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to support livestock monitoring and decision-making. Moonsyst has developed a new technology that collects data by implanting a small gadget into the rumen of the livestock.

This system has different parts: the VetAsyst Bolus, the VetAsyst Receiver, the VetAsyst Relay and the MoonCloud.

The Bolus is placed in the rumen of cows and it measures the pH and temperature values every ten minutes.

It transmits the data to the receiver located in the barn via radio signals.

The VetAsyst Relay makes it possible to increase the reception range of the receiver. The heart of the whole system is the MoonCloud which processes and stores data, meaning its users have easy access to any necessary information.

Immediate Feedback By getting immediate feedback on rumen conditions, farmers can optimize cattle feeding. Sub- Acute Ruminal Acidosis (SARA) can be detected in time, therefore veterinary expenses might decrease. At the same time, the quality and the quantity of milk yields can increase.

Moonsyst has several active projects in Europe and is rapidly moving into overseas countries as well. The Austrian SmaXtec launched a similar service six years ago. Since that time, according to newspaper reports, its devices have been implanted in approximately

15,000 cows

on 350 farms in almost two dozen countries.

Their rumen-sensor is equipped with a battery that lasts four years; enough to cover a dairy cow’s productive life. A base station installed in the barn picks up the signals providing information on the actual pH of the rumen, the cow’s temperature, the amount of water consumed by the animal, how much it moves, etc. The base station monitors the stable’s temperature and humidity as well.

Farmers also get an early warning system: the computer sends an e-mail to the vet sometimes days before the animal is visibly sick. This can be especially important when infectious diseases threaten the herd.

Ever more factors of an animal’s physical conditions and behavior will be turned to data. Data management will influence competition through the whole supply chain; it is highly possible many farmers will share the data with their partners and buyers, opening a window into the quality of their products and the reliability of their processes. Datafication generates new opportunities for automation; smart robots will pop up in stables.

Agriculture’s future is digital.

This column is part of a series of opinion pieces from experts at the CEU Business School in Budapest. The opinions stated here do not necessarily reflect those of the BBJ.

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Industry Anger at ECʼs Proposed Biofuel Targets

the Budapest Business Journal. Producers and investors criticized the modifications sharply as they have invested in the development and expansion of the technology and facilities suitable for the first-generation of biofuels. Should the proposed changes be accepted, the expected returns will diminish greatly.

Following the announcement of the proposal, the European renewable ethanol association (ePURE) said in a statement that a reduction of the limit on conventional biofuels used to 3.8% would fundamentally undermine the EUR 16 billion invested in European biofuel production facilities since 2003 as a result of EU biofuels policy.

The EU intends to boost the percentage of biofuels used in the fuel mix across the bloc. But its desire to promote second-generation (largely wastederived) ethanol over plant-based firstgeneration fuels has angered some manufacturers.

Renewable Share

Demeter Héjj, president of the Hungarian Biofuel Association.

SONJA BENCZE

The intention to halve the contribution of conventional biofuels by 2030 is strongly opposed by industry players who have invested large sums in the development in their existing facilities. Hungarybased Pannonia Ethanol, the largest producer in the region, believes the EU’s decision will undermine the future of the industry.

Last November, along with the Clean Energy Package for all European Citizens (commonly known as the Third Energy Package), the European Commission proposed introducing a cap on the contribution of food-based biofuels

towards the EU renewable energy target, starting at 7% in 2021 and going down progressively to 3.8%

by

2030.

In the revised Renewable Energy Directive (RED), which currently sets the rules for the industry, the Commission promotes the use of second-generation biofuels, as well as electromobility.

The aim of the legislation is to compel producers to use second-generation biofuels, refined from waste and residues, Máté Zöldy, an oil-industry expert, told

EUROPEAN COMMISSION BIOFUELS PROPOSAL

The legislation currently in force says that the share of renewable energy in transportation between 2020 and 2030 should account for 10%. The contribution of corn or other feedstockbased biofuels is maximized at 7%.

These ratios, effective from 2009, has spurred investment and the development of production facilities, Melinda Zsolt, a spokesperson for Pannonia Ethanol told the BBJ. The proposed reduction, however, would basically mean the phasing-out of the sector, she added.

Pannonia Ethanol maintains that scientific facts, climate policy goals and economic rationale all contradict the Commission’s stance. While the EC is right in saying the plants that go into first-generation biofuels can be used as feedstock, it fails to take into account that the process also produces a GMOfree premium feedstock with high protein content, she said. Since Europe suffers from the protein deficiency, which is substituted with imported soy of unidentified sources, this ought to be of high importance for the EU, she added.

The impact on Hungarian agriculture, on employment in the country, on local business tax and global climate is more important than the effect on biofuel producers, Demeter Héjj, president of the Hungarian Biofuel Association told the BBJ. The organization would make the use of E10 fuel (a blend of up to 10% ethanol and 90% unleaded petrol) mandatory in the European Union by 2020. It also proposes a carbon-footprint based target, with the aim of decreasing the CO2 intensity of vehicles. It supports a

15% share

of renewables in the transportation sector, in which first-generation biofuels would have a significant role, Héjj said.

The association also believes a separate target figure should be set for gasoline at 6.5% from 2020 onwards for every member state.

Complex Processes

2021

SOURCE: EC, EPURE

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2030

2001

2017

The quality of the fuel is dependent on the technology rather than the raw materials used, industry expert Zöldy said. The major difference between technologies is in the process that leads to the intermediate or semi-final product. Ethanol is made from sugar,

so the plants used (mostly corn) are broken down to get the sugar. A more complicated process is when starch is used as a base product, as it has to be broken down to sugars to be able to produce ethanol. This technology is already available in the industry – some factories in the United States use it – but it is yet to make a breakthrough, Zöldy said. The most complex procedure uses cellulose: breaking it down to sugar is costly and requires more time, the expert said. Complexity, however, widens the portfolio of potential raw materials.

The starch and cellulose technologies may become more widespread when the enhanced share of waste-based biofuels is forced by legislation.

Co-processing technologies, when waste-based and oil-based products are processed together to create an alternative fuel, may also become common. As technology advances, the use of waste-based components is becoming ever more widespread.

“Technology allows for more effective production from waste – something that is supported by legislation as well,” Zöldy noted.

Operating as a bio distillery, the Pannonia Ethanol factory at Dunaföldvár has the potential to produce not only fuel, but a range of other side-products from electricity, heat, and bio chemicals.

As long as traditional ethanol production remains alive, the company will have the opportunity to explore promising technologies not yet available at an industrial scale, Zsolt said when asked about future plans. However, if firstgeneration technology is phased out, there will be no market players able to finance such research and create products. But second-generation technology could also become trapped by this process – these developments require a predictable legislative and market environment in the long run, she added.

Pannonia Ethanol The largest renewable ethanol producer in Central and Eastern Europe, Pannonia Ethanol makes bioethanol and highquality animal feed at its plant in Dunaföldvár, Tolna County (100 km south of Budapest). The facility currently utilizes more than 1,000,000 tons of corn annually. The plant produces as much animal feed as renewable ethanol during the process and has output of up to 450 million liters of renewable ethanol, and 325,000 tons of Dried Distillers Grains with Solubles (DDGS), a high protein animal feed. The facility also produces 10,000 tons of corn oil.

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Gallicoop Packaging Plant Paves way for Further Expansion

No turkey receives a presidential pardon in Hungary as happens in the United States, but consumption of the meat is an important driving force of the local meat processing industry. Gallicoop is leading the charge to sweeten that appeal even more.

“We are talking about a very capital-intensive industry,” Erdélyi adds. “In order to survive you need to improve efficiency and upgrade technology continuously.” currently, the Chinese authorities will not authorize transport. The representatives of Hungarian trade diplomacy have been doing their best, but a real breakthrough is yet to come. Relations between the two towns are good, regardless, which gives hope that one day a positive turn of events might be realized.

Technology Upgrades

LEVENTE HÖRÖMPÖLI-TÓTH

Gallicoop Zrt. is no newcomer to the meat processing market. It has been around for 28 years and quickly became market leader in the turkey segment. Slaughtering 42,000 tons of turkey per year, Gallicoop carves out for itself a 42% of the turkey pie in Hungary.

“Some three million animals finish their ‘career’ in our plants annually,” István Erdélyi, CEO tells the Budapest Business Journal. He says he is proud of the fact that his company, seated in a small countryside town, Szarvas (160 km southeast of Budapest), gives work to more than

1,000 people

and has a turnover of HUF 33.5 billion a year. In 2017, a new packaging plant will be built with an investment of HUF 1.6 bln, from which HUF 800 million comes from government funds.

“The goal is to speed up serving our partners and to meet volume-driven and quality demand,” Erdélyi explains. There is a lot to make up for. The recent wave of bird flu indirectly affected the company as well, and as a result important markets in Japan, South Korea and South Africa were quickly cut off. As Erdélyi says, it took very hard work to build a reputation there, but now they must start all over again from scratch. The possible date of market reentry is September.

Permits the Real Hurdle Luckily, things could hardly look better in the CEE region. In Slovenia, Croatia, Romania and Czech Republic basically low quantities of turkey are being processed, so with consumer demand growing, the opportunity presents itself to gain a foothold there. By now, these

BBJ_2514_special_report.indd 18

István Erdélyi, Gallicoop Zrt. CEO. places are of equal importance to Western European markets.

The list of countries where Gallicoop exports is very long. Three years ago, it totaled as many as

47

countries

worldwide, among them exotic destinations like the Seychelles or Taiwan.

“The only factor that still restricts our opportunities is our size,” Erdélyi notes.

“We might be large by Hungarian terms, but by European standards we count as mid-sized only.”

That said, Gallicoop is certainly big enough to prevail on super-sized markets like Russia. “We liked supplying our Russian partners with our goods; the problem is that as a result of the embargo we were excluded from this market,” the CEO says. Russia has been forced to take measures and it will become selfsufficient in terms of poultry by next year.

Another giant, China could be an even more promising target. If every one of its 1.4 billion residents would like to have a slice of turkey breast, this would represent a challenge even for the United States.

However, for Hungarian companies to enter the Chinese market is not easy, mostly because of the administrative hurdles.

“Szarvas and the Chinese city of Wushi are twinned towns, and if we could start delivering only to Wushi with a population of eight million, we would be doing great,” Erdélyi notes. But

If that scenario does play out nicely, Gallicoop must be prepared, and that, in part, is what the building of the new packaging plant is also meant to serve.

“We are talking about a very capitalintensive industry,” Erdélyi adds.

“In order to survive you need to improve efficiency and upgrade technology continuously.” Delaying such upgrades might work for two or three years, but during that time you would lag behind so much that it would be impossible to catch up later on.

Of course, skilled labor is key to making ambitious plans come true.

Gallicoop cannot complain for now, but it has been increasingly difficult to find the right candidate for the right position.

The labor shortage is apparent regardless of skill sets: it is equally problematic to recruit IT experts or plant managers as people for manual labor.

The industry is confronted with a double problem. Prior to 2010, vocational training was neglected, while the older generation of experts had retired. Now there is a delay while the young graduate, but even when they do, there will be hardly anyone to learn from.

Mid-term plans still look truly ambitious. “The packaging plant will enable us to use every opportunity, and we can invest those

30,000 tons

of meat with more added value,” Erdélyi says. “In the case of breaded meat, our maximum capacity is 5,000 tons. An additional extension of production is based upon realistic market demands.

Our current strength is attributed to the fact that we have always been reliable partners,” the CEO concludes.

“Quality, service and the ability to deliver on time have a strong value which is appreciated on every market, and this is what we are planning to maintain.”

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Bonafarm Group Looking to Future Growth

Even though 2017 does not necessarily look like being an easy year for Bonafarm Group, the agricultural giant belonging to OTP Chairman and CEO Sándor Csányi, it still has ambitious plans for the future.

LEVENTE HÖRÖMPÖLI-TÓTH

Business is fluctuating at Bonafarm Group, but since it is present in the entire spectrum of the industry, from fodder to meat and milk processing and wine production alike, this is anything but surprising. Given that it is the largest agricultural conglomerate in Hungary, how the Bonafarm companies fare does have industry-wide significance.

The past year was better for the food

industry companies within the group, so well-known names like Pick Szeged Zrt. and Sole-Mizo Zrt. saw more handsome results. This year, by contrast, will probably not be particularly promising in terms of grain production volume, Tamás Éder, director for corporate relations tells the Budapest Business Journal, even though it might be premature at this stage to make exact predictions.

In the animal husbandry sector, pork and dairy should see more positive figures than last year thanks to the fact that the prices of live pigs and raw milk are at a two-year heigh. The reduction of the VAT rate on pork to

in Mohács, where cutting-edge technology has been installed with the goal of maintain competitiveness on a global scale. There are also several ongoing research projects in cooperation with universities, especially in the area of food processing. Recent innovations include salami and snack products with a new alginate coating at Pick, as well as a new coffee drink series at Sole-Mizo.

Other efforts target pig fodder for the purposes of efficiency improvement.

Particular attention is devoted to export markets, with around onethird of all revenues stemming from such sales. “Our milk products are primarily meant for the Balkans and the Middle East, while Pick is present in not less than

5% played

a big role here. Éder further hopes that a new range of products will become eligible for the reduced tax rate soon which could help push the industry further out of the grey zone.

Efficiency Improvements Existing problems are connected to rising raw material and wage costs, as it is increasingly difficult to build them into pricing mechanisms. “Our answer to the wage-related challenge is a parallel improvement in efficiency,” Éder says. He also mentions that recruiting

Bonafarm Factoids Land under cultivation: Close to 27,000 hectares.

Total head of cattle: More than 4,000 Fatting pigs: 500,000 processed each year Broiler hatching eggs: 15 million

40

countries,

Tamás Éder, director for corporate relations at Bonafarm.

with Germany and Hungaryʼs neighbors being the key destinations,” Éder adds.

Export Permit “We hope that our slaughterhouse in Mohács will get its own export permit fairly soon to gain access to our key markets in the Far East, because its capacity enables us to produce quantities that are deemed as substantial by Chinese standards as well.” skilled labor for the new slaughterhouse in Mohács (about 200 km south of Budapest), proved to be especially difficult. “It was a great success in the end that we managed to employ many people who had worked in Western Europe before,” he notes.

Size has its obvious advantages, but not in all cases, as Éder notes. “Large food industry corporations like the subsidiaries of Bonafarm Group have hardly any access to development funds, and what is available is also a lot lower than for middle-sized companies,” the director explains.

“However, the ROI of modern food industry investments falls into the generally expected eight-ten yearinterval only with substantial grants.”

Innovation continues, despite that, however. The latest manifestation of this is the aforementioned slaughterhouse

Bonafarm further aims to boost sales in the Far East, namely in Japan and China. But in those cases, it all comes down to how fast administrative hurdles can be dismantled. “We hope that our slaughterhouse in Mohács will get its own export permit fairly soon to gain access to our key markets in the Far East, because its capacity enables us to produce quantities that are deemed as substantial by Chinese standards as well,” the director says.

Unfortunately, another important market, Russia, seems to have gone for now due to the embargo. Huge investments have been started over there in agriculture and food processing, so even if the embargo is lifted, Éder believes it will be extremely difficult to get back in.

“Our edge lies in integration,” Éder explains. “From the production of fodder to the manufacturing of readymade foodstuffs everything is done in a well-coordinated system.” Production is organized in accordance with consumer needs and production stages are optimized with regard to the quality of the end product.

However, global competitiveness demands further substantial developments, that much is clear, primarily at the food processing companies. “It is no secret that we have plans to set up a state-of-the-art meat product plant,” Éder says. “We hope that we will be able to find a way to access government funds that can help us to get this huge investment going within a few years.”

Bonafarm Group

Fish farm network: Spread across 220 hectares

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Four agricultural companies: Bóly Zrt., Dalmand Zrt., Fiorács Zrt., and Bonafarm-Bábolna Takarmány Zrt. Three food processing companies: Pick Szeged Zrt., Sole-Mizo Zrt. and Csányi Pincészet Zrt.

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Agribusiness ///briefing

2016 a Record Year for Hungarian agriculture “Hungarian agriculture, and especially arable crop production, may be regarded as a successful sector of industry in view of the fact that in every past year it has contributed positively to economic growth as well as breaking several historic records in 2016,” said Minister of State for Food Chain Supervision Róbert Zsigó, according to a report by kormany.hu, the government’s website.

He added that cereals represent the greatest proportion within agricultural production, with a share of 16.6%, followed by oil seeds at 12.4%. These two sectors provide almost 40% of total agricultural production. Hungary is

Good Businesses Growing Well Bonafarm Acquires Agro-Invest Kft. Food industry magnate Sándor Csányi’s Bonafarm has acquired an indirect majority stake in Agroprodukt, which grows crops on more than 10,000 hectares and has a herd of almost 7,000 cattle, reported vg.hu. The acquisition must still be approved by the Competition Office (GVH). Agro-Invest Kft. has an 89.57% stake in Agro 22 Zrt., which owns Agroprodukt Zrt. Agroprodukt sells milk and beef among other activities. It rents more than 8,000 hectares of the farmland it uses from the state. (For more on Bonafarm, see separate story on page 19.)

Owner of Cerbona Snaps up Agrimill-Food The owner of Hungarian snacks and breakfast cereals producer Cerbona has acquired AgrimillFood, reported state wire service MTI on June 15. Cerbona will install a HUF 100 million production line at Agrimill-Food’s plant in Kalocsa (140 km south of Budapest), further automating production as well as broadening its product palette, said Cerbona managing director Tamás Mészáros. Agrimill-Food will remain a separate legal entity and continue to sell its Ham-Let brand of puffed-wheat squares alongside Cerbona’s own products. Cerbona had revenue of more than HUF 3.4 billion last year, and pre-tax profit of HUF 251 mln, reported vg.hu.

The company recently spent HUF 200 mln on a production line in a factory in Székesfehérvár (65 km southwest of the capital) for glutenfree products, and it will also start making energy bars in August to attract new customers.

BBJ_2514_special_report.indd 20

a major exporter of cereals, and on average a large exportable surplus is generated, with plenty to spare for export even in the least productive years. Despite frosts in January and February and the wave of cold weather in April-May, the prospects for this year’s cereal production may currently be regarded as favorable, Zsigó said.

According to a survey back in April by the National Chamber of Agricultural Economics, 42-48% of fall-sown arable crops were given a “good” rating, while 35-40% were “average” and just 13-17% “poor”, meaning a somewhat higher than average yield is achievable.

German Consumers Love Hungarian Apricots The area of land in Hungary set aside for apricot growing is slowly increasing, and while locals like to consume the fruit, it is exports to Germany that has lately been significant, Hungarian online daily portal vg.hu reported.

Last year apricots were grown on 5,214 hectares of land, which is 6% of the approximately 90,000 hectares that the country dedicates to growing fruit.

In better years, some 40,000 tons of apricots can be harvested. In the past five years, the annual apricot harvest has been between 18,000-34,000 tons.

The most important export market for Hungarian apricots is Germany, which buys 4,000-6,000 tons of the fruit.

year in Hungary, compared to 2-2.2 kg in Western Europe, NAK said.

Dairy Producers sell 13% More raw Milk

According to the representative organization of dairy producers, milk processors have purchased 13% more raw milk in the last six years, reported vg.hu. Zoltán Harcz, managing director of the organization said that average dairy product consumption has increased steadily in the past six years, particularly of milk, butter and cheese. At the same time the quantity of imported milk has decreased, while exports of processed products have increased. Hungary has exported 43% more cheese and cottage cheese. Harcz added that his organization is optimistic as consumption of Hungarian milk is increasing; it is now more than 80% of the total.

GKI Sees Contraction in Farming Economic research institute GKI expects the farm sector to contract at a faster rate this year, while construction sector growth picks up, a quarterly forecast released June 28 shows. GKI now projects the farm sector will contract by 10% this year, twice the rate it augured in its previous forecast.

Szijjártó Discusses Vietnam-Hungary Agribusiness Cooperation

Minister of Foreign Affairs and Trade Péter Szijjártó and Chairman of the People’s Committee of Ho Chi Minh City, Nguyễn Thanh Phong, met in Budapest on June 23 to discuss cooperation between Vietnam and Hungary, reported the government website kormany.hu. The minister said Ho Chi Minh City is Vietnam’s economic center and generates one-quarter of the country’s GDP. The city’s population has grown to 13 million, meaning there is significant demand for water management and food processing technologies. A EUR 440 million tied-aid agreement between the two countries will provide an opportunity for Hungarian enterprises to expand within these fields, the minister stated.

Food Exports Grew 37% in Past Five Years The fact that food exports grew by 37% in the past five years means that government policies have been working, said Minister of Agriculture Sándor Fazekas, according to a report

by Hungarian news agency, MTI. In the 2014-2020 funding period, the European Union has transferred HUF 180 billion more than before from the agricultural funds to be spent on livestock rearing, and the government is doing its best to ensure that Hungarian farmers get as many of the resources as possible, he insisted.

Cucumber Crop set to Reach 18,000 Tonnes Hungary’s cucumber harvest is expected to reach almost 18,000 tonnes this year, the Hungarian Chamber of Agriculture (NAK) told Hungarian news agency MTI on July 10. Salad cucumbers are grown on around 100 hectares in Hungary, while pickling cucumbers are produced on another 500-600 hectares. The annual harvest is usually around 13,000-14,000 tonnes.

Hungarians’ cucumber consumption is increasing, although it still lags behind those of Western Europeans, according to a market survey by NAK. Per capita consumption of salad cucumbers amounts to 1.6-1.8 kg a

Kosher Slaughterhouse Opens in Great Plain A kosher slaughterhouse and poultry processing plant has been built in the Csongrád County Town of Csengele (150 km southeast of Budapest, on the Southern Great Plain) through a greenfield investment of some HUF 2.8 billion (EUR 9 million); the new facility was officially inaugurated July 6, reported kormany.hu. At the inauguration ceremony, Minister of Agriculture Sándor Fazekas said that the new plant, which will create 80-100 new jobs in its first phase, is one of the most significant investments for Hungary’s waterfowl sector. The project by Quality Poultry Limited (QP Ltd.), which is majority owned by the Unified Israelite Congregation of Hungary (EMIH), is in harmony with the government’s agriculture policy, the minister declared.

Fazekas highlighted the fact that the sector still provides jobs for many people today, and particularly in the Southern Great Plain region.

“The new plant will contribute to enabling the waterfowl industry to once again embark on a growth trajectory,” he declared. The Minister of Agriculture told reporters that the Hungarian Export-Import Bank had provided a loan of HUF 1.75 bln towards the slaughterhouse’s first phase of construction. The next phase will involve the expansion of the plant and an increase in the number of new jobs to 280, towards which the government will be contributing funding of 15%. The new facility in Csengele will be the second plant in Hungary after one in Jászberény (about 85 km east of Budapest) to specifically cater for the production of kosher goose liver and fattened goose products.

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Those Magnificent men in Their Flying Machines…

David Holzer tries to take in the ultra-modern Red Bull Air Race and instead finds himself transported back in time.

According to its founders, Budapest is the spiritual home of the Red Bull Air Race. The race, which took place on the afternoon of Sunday July 2 is certainly popular. By the time we got down to Margit híd (Margaret Bridge) to watch the daredevil air aces, its entire length was lined with spectators.

Watching acrobatic aircraft trailing plumes of smoke appear from underneath Széchenyi lánchíd (Chain Bridge) and then dart in and out of markers floating on the Danube was certainly thrilling. For about five minutes.

The thing is, if you treat the race as a race, the pilots’ artistry in the air becomes boring very quickly. I’m sure I wasn’t the only spectator who secretly wished that a plane would crash. Not in a bad way, of course.

I pictured one of the gaily colored aircraft catching a marker with the tip of its wing and cartwheeling down the Danube past the spires of the Hungarian Parliament building. We spectators would hold our breath as rescue teams hurtled to where the plane floated upside down on the water.

Then, of course, the brave pilot would surface. He – or even she – would be plucked out of the water and wave to the crowd. We would be overwhelmed with relief and, in my case, guilt. Within seconds, the film we took of the pilot crashing would be up on our Facebook pages.

Once I realized there was no chance of this happening, I leant on the parapet

Photos: Gabriella Kiss

DAVID HOLZER

of Margit híd and enjoyed the spectacle as a kind of art. And I remembered how important planes were to the early

20th century

Futurist movement as a symbol of terribly exciting modernity. I’m sure one of the Italian Futurists even choreographed an aerial ballet for biplanes inspired by World War 1 dogfights, but I can find no reference to it online.

Seduced by Acceleration Futurism was an artistic response to the arrival of modern technology. It started with Italian painters, poets and musicians seduced by the sudden acceleration in movement and freedom made possible by all those speeding shiny cars, motorbikes and airplanes.

When the Futurist Travelling Exhibition stopped in Budapest in 1912 it had a profound impact on Hungary’s avantgarde artists. The great poet, painter and activist Lajos Kassák was especially influenced by Futurism. Unlike the

Italians, however, Kassák and other Hungarian artists who responded to Futurism were sickened by the atrocities of World War 1 and wanted no part of the ridiculous Italian celebration of war.

Now, it’s hard to imagine the art made

by Kassák and the Futurists who inspired him as at all shocking, revolutionary or provocative. Compared to modern conceptual art, their work is more elegant, even charming, than anything else.

Which, no doubt, would irritate its makers enormously, were they around to pull their pointy beards.

Musing on the Futurists and their love of light, color and motion, I realized why Budapest probably is the spiritual home of the Red Bull Air Race. The gleaming white spires of the Hungarian Parliament and solid majesty of Budapest Castle are the perfect backdrop to flimsy planes raced by air aces, themselves a kind of throwback to a golden era of bravery.

I was so absorbed in the aerial ballet being performed above the Danube – even the fluffy white clouds seemed to have come from another, more innocent time – that my partner had to nudge me in the ribs to get my attention. “Shall we go to Margitsziget?” she said.

An Island out of Time The sense of going back in time continued as we drifted from the bridge down onto Margitsziget (Margaret Island). This was despite the fact that everyone had tattoos, even some babies, and a smartphone glued to their face. Even some babies.

We headed for Champs sports bar where we’d been told we could watch the Tour de France. Champs is an enormous outdoor bar, its wooden walls lined with TV screens. Unfortunately, these were all either showing an obscure football match

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or one of the sláger (hit) music shows. Still, the sound was turned down to leave audio space for thumping techno music – all beat and no rhythm. Forgetting about watching the Tour de France, we headed over to a set of banquettes that lined the river.

Above us, an airbus performed stately aerobatics. This was followed by a scream past by a couple of fighter planes. After this, the sky became empty and quiet.

If you’re looking for a simple, friendly place for a mellow Sunday lunch, Champs is perfect. The food is nothing special but it’s not expensive and there’s a good choice of vegetarian options. My partner had a Szarvasi Tudok craft beer which, being fruity, was pink. She said it was delicious.

The afternoon was cooling as we made our way towards the musical fountain.

This, if you didn’t already know, is a copy of one of the first ever musical fountains built by Hungarian Péter Bodor in the Transylvanian town of Marosvásrhely between 1820 and 1822. Bodor’s original used the force of water to chime at every hour. The Margaret Island version,

restored in

1992,

uses mundane electricity to play music.

Just as we were passing, the fountain sprang to life. To the sound of a frankly spooky child’s voice singing something or other over perky music, water rhythmically pumped and jetted.

My partner turned to me and beamed.

“It’s the song from Vuk,” she said. “The Little Fox. Every Hungarian knows this song.” [And every expat with a halfHungarian child – ed.] And, it seemed, they did. All around the fountain, Hungarians were singing along with big smiles on their sun kissed faces. Even the men.

2017. 07. 12. 18:46

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Elegant Etyek so Much More Than Just Close to the Capital

Wine country can be reached easily from Budapest, with the village of Etyek some 30 km west of the capital providing a quick and fine fix for vine junkies.

ROB SMYTH

There’s usually a strong breeze blowing in Etyek and add on the white calcareous soil that dominates the region, then the conditions are ripe for making vibrant (mainly white) wines with tongue tingling acidity and fresh aromas. It comes as no surprise that the Etyek-Buda region has a strong sparkling wine tradition.

Etyeki Kúria, up on Öreghegy overlooking the village, has grown steadily over the years from a tiny boutique outfit to a state-of-the-art winery of medium size without a bad wine that I can recall ever leaving the cellar. It offers a range of usually winerelated teambuilding opportunities and the conference room juts out into the vineyards, while you can see the winery below under the glass floor.

A nice starter for summer from the winery is Pláne Frizzante White FN, a light, crispy, fruity and floral sparkling blend of Királyleányka, Zenit and Szürkebarát (Pinot Gris). It is made via the simplest of sparkling wine techniques, whereby the bubbles are injected into the wine via the “bicycle pump” method, but this is very enjoyable and slips down a treat in the warm weather. The bubbles may dissipate as quickly as they were injected but this tasty wine is unlikely to stay in your glass for very long anyway.

Kúria winemaker Sándor Merész pays great attention to detail to deliver wines that stand up well to international comparison, but is also allowed a little

scope to experiment, such as with the “wild fermented” Mérész Sándor Project Sauvignon Blanc 2016.

Complexity Incidentally, the winery’s regular Sauvignon Blanc always contains a spontaneously fermented element to bring more complexity to complement the zesty freshness and perhaps even subdue the pungent aromas typical of the grape, which can be overpoweringly opulent.

Etyek has long been associated with Sauvignon Blanc, even though Chardonnay appears to be beginning to eclipse its fellow French varietal as the flagship grape with some taut and focused expressions of the grape.

However, I’d personally love to see more of the Austrian Grüner Veltliner grape (Zöld Veltelini in Hungarian) not only because it can almost be considered local, but also due to the varietally

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pure citrusy and peppery notes, as well as the balance between freshness and intensity that can come through here.

Etyeki Kúria’s 2015 is a case in point.

This particular wine was made from bought in grapes, as the winery doesn’t have the grape among its 32 hectares of vines, and sadly a 2016 has not been made.

In the red corner, it is Pinot Noir that thrives in Etyek’s terroir and Kúria’s is one of the best, if not the best example of the Burgundian grape in Hungary.

To branch out further into red wine, the cellar owns vineyards in the Sopron region in the northwestern corner of Hungary. From there, Etyeki Kúria Red 2016, a blend of Kékfrankos, Merlot, Zweigelt and Pinot Noir, is an absolute steal at under HUF 2,000 a bottle and oozes red fruit and plum notes. The Zweigelt 2015 has the juicy sour cherry that is typical of this Austrian grape, which is a crossing of Blaufränkish (Kékfrankos) and St. Laurent, and this one with is worthy of being served on the same table as its Austrian counterparts.

Another good and contrasting choice up on the same hill is Hérnyák, a bijoux family outfit whose wines make it onto the wine lists of Michelinstarred restaurants.

While the wines are rich and often exciting, it can be hard to identify the grape variety.

Most of the wine is made here via wild, spontaneous fermentation i.e. from the naturally occurring yeast that is present on the grapes and in the cellar, which can lead to more complexity due to more in the way of flavor interactions occurring during the fermentation process.

However, the character of the grape variety can be lost as the wine goes off in a direction of its own.

Commercial, cultured yeast generally makes a cleaner and quicker fermentation, with more pronounced aromas and it was a joy to taste Hérnyák’s Királyleánka 2015; this is an exception due to it being made from a controlled fermentation with cultured yeast in order

Etyek has long been associated with Sauvignon Blanc, even though Chardonnay appears to be beginning to eclipse its fellow French varietal as the flagship grape with some taut and focused expressions of the grape.

However, I’d personally love to see more of the Austrian Grüner Veltliner grape. to maximize the fresh fruit and floral character. It was half fermented in tank and half in oak and has great freshness and fruitiness but also some depth.

Two Kúria classics: Etyeki Kúria Sauvignon Blanc 2016 Matured for two months on the fine lees, this wine is nicely restrained and gives as much on the palate as it does on the nose.

All too often Sauvignon Blanc can seduce the taster with its aromatic attack and let them down where it matters, in the mouth. Grassy and herbal with gooseberry, grapefruit and elderberry notes throughout, all held together with impressively edgy acidity. 60% from Etyek’s Szent Orbán and 40% from Nagy Látóhegy in nearby Alcsútdoboz.

HUF 2,590 from Bortársaság.

Etyeki Kúria Pinot Noir 2016

From Nagy-Látó-hegy in Alcsútdoboz with its loess topsoil and occasional deep brown forest soil, all over limestone subsoil.

Aged for ten months in 300-liter and 228liter oak barrels, 30% of which were new and 70% used, the oak is handled perfectly, allowing the delicious red fruit to come through, while bringing spice, weight and texture without losing the wine’s elegance.

HUF 4,650 from Bortársaság.

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Cocktail Boat Will Make you Sway

Although marimba rhythms might not necessarily be playing on board the Dry Martini Boat, things will definitely start to sway if you and a few friends get together for French breakfast or a Budapest sightseeing trip on this party boat.

CHRISTIAN KESZTHELYI

Cruising up and down the River Danube in the heart of Budapest in front of the beautiful Parliament building, this eight meter long and a bit more than two-and-a-half meters wide pontoon boat with its 250-horse power Suzuki engine stirs up waters ADVERTISEMENT

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“It is a super cool party boat…[a] luxury water cruiser born from the love of a bar and a leather lounge couch.”

‘The Love of a Bar’

and revs up the party experience.

The boat was manufactured in 2015 and was placed on the water in Budapest for the first time in

April

2016.

It can accommodate a maximum of ten passengers. Its Jensen premium sound system with eight speakers and 900 Watt output accompanies a full bar with four seats and a lounge couch in the front of the boat. Passengers can

choose the music they would like to listen to from the selection on board or even plug in their own smart devices.

“It is a super cool party boat,” the owners, the Galambos family, tell the Budapest Business Journal, adding that it is a “luxury water cruiser born from the love of a bar and a leather lounge couch”. The family insist that, despite the power that is encapsulated in the engine, it operates quietly and smoothly.

“The boat is not only good for evening sightseeing, but also for daytime events as well, during which ten people can gain a luxury water experience in a floating living room,” they add.

For rental details see the boat’s official website at budapestboat.com.

The hourly rental fee is EUR 235, but if a group of ten book a cruise, that becomes a much more wallet-friendly EUR 23.5 each. Drinks from the bar are on top of that.

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