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SPECIAL REPORT:

Report 4Special marketers

BBJ

& innovation Digital markets

ns Youngest generatio

challenge

careful Gens Y and Z are bored with money, easily reach, g to and challengin local according to a payoff expert. But the market for reaching this can be big. levente hörömpöli-tóth

social of internet and Changing use the way marketers seek this is media is altering messages, and build to to spread their of those who want tweens, especially true by reaching lifelong customers adults. lots teens and young grew up with Generation Yers Zers have an even Gen of gadgets. But affinity with technology. more hard-core approach. requires a new a makeReaching them right channel is Mária “Selecting the to start with,” says at the or-break factor of marketing Törőcsik, professor “Of course, social Pécs. but the University of here, Jessica Fejos) the pack Budapest. (Photo: as well media leads communicates in preferred technology, marketing works A young woman towards their grooming brands. so-called ambient are bombarded with to them with technology: personal care and – where the young hang-out places such Talk messages at their other venues for other or as fitness clubs You can’t be serious! ness and the she says. me what the leisure time activities,” in This brand-conscious “Get to the point, tell an expert in attitude of people Recognized as reaching the younger then overall shopping have an impact on of need to know, but challenging field young age groupsas well, according to is a much sought- I really generations, Törőcsik has orchestrated look at older consumers me alone!” who young used to on just leave after speaker it’s the Törőcsik. “The research projects are ones did. Now several in-depth the what the older lessons she shares Society prefers items to the the topic. The other way around. wants to live like trying to sell enough and the good is anyone for the quality useful trendy. “They’re young, everybody 20 and 30 – no longvital youth market. show that successfully on sale are considered those aged between premium products.” about their money The latest findings requires much more savvygrown up at a time term commitment,notes, the young still tweens and teens to because they’ve savvy reaching out to Nonetheless, she to be much more tactics, according they a great deal and have you parents are and when well-planned says. “They rely on their dialogue’ hate to be bored the ‘purchasing ‘Get about money,” the report and looking at Törőcsik. “They at are now part of differently lengthy information: to before. last.” Mária Törőcsik, professor of marketing need looking at value refuse to digest Deep more than ever how long it will me what I really digital agency she how an item is made, up with the University of Pécs. to the point, tell A report by the of parents surveyed just leave me alone!’” be Z is also growing 93% that Generation must know, but then ownership found have and Focus messages associated with said their tween and teen children even the sharing economy explains. “Marketing but products lines.” them than it does on their family’s also be able to talking means far less to Y. Access often beats sells, crafted along these scenes should at least some influence purchases. notes, we are of Gen Authentic, practical, spending and household As Törőcsik ranking: particular latent consumers here: to members an audience. here.” their priority turning into about very pragmaticoffer some benefits, ownership in streamed find interesting are the buzz words they notes. “The young are better the concept of and to be loved and live opinion leaders,” Törőcsik “Advertisers had or at least a gift, together Just think of will have critical in changing The young love too. They they music. This mindset don’t take selfies possibly big ones that of brands shoppers’ relationships of their mind they want to sell, otherwise and are “Parents the expect implications on with what they but in the back self-celebrity” with brands in comment made ignored fully.” level of rooms, in “an era of and engagement are bound to be to an incredible have their daughter’s ‘Come on, Mom, saying, consider accustomed she notes. long-term. the other day wearing that are important to narcissism, These features long for uniqueness. you can’t be serious about an those yet to be Recessionary knowledge 63% The young also brands, but for Cassandra Report, Cassandra Report, even more The influential trends among younger for existing According to the scratch they are a product brand!’”parents listening to the younger of 20 created from to Törőcsik, who notes that of Gen Zers would like to have cannot With annual survey that those under owns. Significant generation, marketers apparently generations, notesrecession as kids or so, according are always out there. no one else to quality. markets one,” that ignore them. of them link luxury experienced the are eager niche just need to spot the right loyalty afford to therefore they “You anything majorities express extreme adolescents and they can. Buying cool Large majorities “In terms of food, such as she says. organic farming or fair trade to save whenever chains to discount running gear at embarrassing at all if linked not Lidl or Aldi is

digital markets, innovation

Business Journal Budapest

Vol. 23. number 23

DEC 11, 2015 – JAN 14, 2016

Hungary’s practical business bi-weekly since 1992 | www.bbj.hu

HUF 1,250 | €5 | $6 | £3.5

Making data pay

focus

Deals of the year: State leads again While state takeovers in banking and energy dominated the market yet again, our review of the year’s biggest deals indicates that private M&A activity is finally showing some signs of life. 8

special report

Teens, tweens and other challenges They are smart, self-absorbed, easily bored and represent the future of consumption. Marketers struggle to find the platforms and messages that will reach this country’s generations Y and Z. 18

news

Photo: Mátyás Pődör

Corruption? There’s an app for that A group of organizations hoping to expose corruption have developed an app that flags dodgy-looking deals in Hungary. Their test of tens of thousands of contracts found issues with about 60% of them. 6

Local Big Data expert Dr. György Bőgel says firms should treat their information as an asset – for marketing and other purposes. 19

special report

BBJ_2323_news.indd 1

news

business

Using the cloud to replace the IT guy

Good numbers spur upbeat predictions

Real estate forecast: Sunny and bright

While he admits that some executives get nervous if their data isn’t nearby, Invitel CEO David Blunck says his firm is making headway in the effort to get Hungarian companies to completely outsource their IT needs. 25

Encouraging figures on production and consumer prices had analysts predicting that Hungary could reach 3% growth this year. They also saw reason for the central bank to maintain loose monetary policies next year. 3

At an annual gathering of regional property market players, the general sentiment was that next year will see even more investment in Budapest than this year, as the fascination with Poland is expected to wane. 17

2015.12.09. 20:26

www.bbj.hu

Budapest Business Journal | Dec 11, 2015 – Jan 14, 2016

SPeCIAl rePorT:

4Special

BBJ

Digital markets

& innovation

Youngest generations

Report challenge marketers

careful Gens Y and Z are bored with money, easily reach, to and challenging local according to a payoff expert. But the market for reaching this can be big. levente hörömpöli-tóth

social of internet and seek Changing use the way marketers this is media is altering messages, and to spread their those who want to build of especially true by reaching tweens, lifelong customers adults. lots teens and young grew up with Generation Yers Zers have an even Gen of gadgets. But affinity with technology. more hard-core approach. requires a new a makeReaching them right channel is Mária “Selecting the to start with,” says at the or-break factor of marketing Törőcsik, professor “Of course, social Pécs. but the University of Jessica Fejos) the pack here, Budapest. (Photo: as well media leads communicates in preferred technology, marketing works A young woman towards their grooming brands. so-called ambient are bombarded with to them with technology: personal care and – where the young hang-out places such Talk messages at their other venues for other or as fitness clubs You can’t be serious! and the she says. me what the leisure time activities,” in This brand-consciousness “Get to the point, tell an expert in attitude of people Recognized as reaching the younger then overall shopping have an impact on of need to know, but challenging field young age groupsas well, according to is a much sought- I really generations, Törőcsik has orchestrated look at older consumers me alone!” who young used to on just leave after speaker it’s the Törőcsik. “The research projects are ones did. Now several in-depth the what the older lessons she shares Society prefers items to the the topic. The other way around. wants to live like trying to sell enough and the the quality is good useful for anyone trendy. “They’re young, everybody 20 and 30 – no longvital youth market. show that successfully on sale are considered those aged between premium products.” about their money The latest findings requires much more savvygrown up at a time term commitment,notes, the young still tweens and teens to because they’ve savvy reaching out to Nonetheless, she to be much more tactics, according they a great deal and when you have and well-planned says. “They are rely on their parents dialogue’ hate to be bored the ‘purchasing ‘Get about money,” the report and looking at Törőcsik. “They at are now part of differently lengthy information: before. last.” Mária Törőcsik, professor of marketing need to looking at value refuse to digest Deep more than ever how long it will me what I really digital agency she how an item is made, with the University of Pécs. to the point, tell A report by the of parents surveyed also growing up just leave me alone!’” be 93% Generation Z is know, but then have and ownership Focus found that messages must associated with said their tween and teen children even the sharing economy explains. “Marketing but products lines.” them than it does on their family’s also be able to talking means far less to Y. Access often beats sells, crafted along these scenes should at least some influence purchases. notes, we are of Gen Authentic, practical, and household As Törőcsik ranking: particular latent consumers here: to members their priority find an audience. the buzz words here.” spending turning into about very pragmaticoffer some benefits, ownership in streamed are notes. “The young are they better the concept of and interesting to be loved and live opinion leaders,” Törőcsik together Just think of “Advertisers had will have critical in changing or at least a gift, The young love too. They they music. This mindset don’t take selfies possibly big ones that of brands shoppers’ relationships want to sell, otherwise of their mind they and are “Parents the expect implications on with what they but in the back self-celebrity” with brands in comment made ignored fully.” level of rooms, in “an era of and engagement are bound to be to an incredible have their daughter’s ‘Come on, Mom, saying, consider accustomed she notes. long-term. the other day wearing that are important to narcissism, These features long for uniqueness. you can’t be serious about an those yet to be Recessionary knowledge 63% The young also brands, but for Cassandra Report, Cassandra Report, even more The influential trends among younger for existing According to the scratch they are a product brand!’”parents listening to the younger of 20 created from to Törőcsik, who notes that of Gen Zers would like to have cannot With annual survey that those under owns. Significant generation, marketers apparently generations, notesrecession as kids or so, according are always out there. no one else to quality. markets one,” that ignore them. of them link luxury experienced the are eager niche just need to spot the right loyalty afford to therefore they “You anything majorities express extreme adolescents and they can. Buying cool Large majorities “In terms of food, such as she says. organic farming or fair trade to save whenever to discount chains running gear at embarrassing at all if linked not Lidl or Aldi is

digital markets, innovation

Business Journal Budapest

Vol. 23. number 23

DeC 11, 2015 – JAn 14, 2016

Hungary’s practical business bi-weekly since 1992 | www.bbj.Hu

HUF 1,250 | €5 | $6 | £3.5

making data pay

focus

deals of the year: state leads again While state takeovers in banking and energy dominated the market yet again, our review of the year’s biggest deals indicates that private M&A activity is finally showing some signs of life. 8

teens, tweens and other challenges

news

Photo: Mátyás Pődör

Corruption? there’s an app for that A group of organizations hoping to expose corruption have developed an app that flags dodgy-looking deals in Hungary. Their test of tens of thousands of contracts found issues with about 60% of them. 6

special report

news

Call +36 1 398-0344, or email circulation@bbj.hu Budapest Business Journal 1 year HUF 27,500+VAT 6 months HUF 13,750+VAT 3 months HUF 6,875+VAT

special report

They are smart, self-absorbed, easily bored and represent the future of consumption. Marketers struggle to find the platforms and messages that will reach this country’s generations Y and Z. 18

local Big Data expert Dr. György Bőgel says firms should treat their information as an asset – for marketing and other purposes. 19

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Laughable legislation is not funny The appearance of corruption has long been a problem for this government, but in the first week of December, officials were so blatant in their efforts to circumvent scrutiny that it was almost humorous. In truth, the way these maneuvers destroy trust in our leadership is not very funny. A law that was pushed through Parliament on December 1, in a special procedure that essentially prevented debate, allows relatives of officials to bid in public tenders. The law contains a laughable safeguard against corruption: Relatives who live under the same roof as top officials cannot bid in these tenders – next door sure, but not in the same house. The defense of the law offered by Cabinet Chief János Lázár was equally laughable. “This is the strictest procurement law in Europe,” he declared on December 3. The prime minister repeated this baseless claim of the law’s strictness a few days later, during a parliamentary question session – which could only take place after the law had already been railroaded through the legislature. Prime Minister Viktor Orbán refuted opposition criticism by saying that no one in his family is taking part in procurement tenders. Everyone knows that Orbán’s sonin-law István Tiborcz left the business of selling public lighting systems this spring – so Tiborcz is probably not taking part in tenders right now. But we also know that, before Tiborcz sold his stake in Elios Zrt., the company won procurements worth a reported HUF 1.2 billion in European Union funding for the upgrade of outdoor lighting in municipalities around Hungary. Tiborcz himself made HUF 470 million in dividends from Elios in 2014, according to reports. Since the law has some “retroactive” elements, it might even be used to defend any improprieties that were

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committed in the past. But it does not appear that the law will derail the on-going EU investigations into Tiborcz’s business with the government. On December 3, just days after passing the “Tiborcz law”, Parliament passed another law that was ludicrously described as protecting people’s privacy. It says that, as of January 1, citizens can no longer ask the tax authority to investigate the wealth and income of anyone, including elected officials. The tax authority can initiate these investigations itself. But since this government has always chosen the head of the tax authority from among long-time associates of the prime minister, it seems unlikely that we will see intensive scrutiny of officialdom. Only days after passage of a law that made it clear they would leave the government alone, tax inspectors were making news: They posed as parents who wanted a St. Nicholas impersonator to entertain their children with the traditional St. Nicholas Day visit on December 6, a service that typically goes for around HUF 5,000. After the inspectors paid St. Nick and he did not give a receipt, they pulled out their badges and charged him with tax evasion. This PR blunder is so pathetic as to be hilarious. But officials obviously did not care. It almost seems that the government no longer feels the need to hide the appearance of corruption. Like the communist government that this country had about a quarter of a century ago, it does what it wants and justifies its actions with flimsy excuses, as if public opinion does not matter. It is hard to tell whether it is insulting our intelligence or we are supposed to be in on the joke. Either way, a government that does not care what its people think is no longer democratic. And that certainly is not funny.

Then and now

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Above, is Deák tér in 1900. At left is Deák tér on December 8, after the unveiling of a 16-meter-tall statue of a Christmas tree that visitors can enter. The tree was designed by Hello Wood architecture and design studio. Following the holidays, the wood is to be distributed to those in need.

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2015.12.09. 20:26

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App identifies questionable government tenders  6

news

Poll shows opposition to Sunday closings

4

Promising numbers as the year closes The latest output and CPI figures have analysts predicting impressive growth for this year and a flat base interest rate for next. zsófia czifra

With better than expected industrial output figures in October, the 3% growth projection for the full year is now becoming increasingly likely, analysts say. Last month, inflation picked up slightly, so the base rate is likely to stay at its current level for an extended period of time. Hungary’s industrial sector recorded double-digit growth in October: The year-on-year increase was a workday adjusted 12.7%, which was helped by the low base, as last October saw poor industrial output figures. Without the adjustment, the growth was still 10.1% this October. This number (which is a first estimate, final figures will follow on December 14) is much better than an average October figure that has been recorded since 2000, and is the strongest October y.o.y. growth rate since that year. It was also significantly stronger than the consensus forecast of 7.8%, and thus resulted in the biggest October forecast surprise since 2001. Industrial output increased by 7.1% in the first ten months of this year compared to the same period of 2014. As seen in previous months, the main drive behind the figure was the good performance of the automotive industry. October was the third month in a row when the growth rate was above 10%. As it now looks like the Volkswagen emission scandal didn’t have a lasting effect on the sector, industrial output might continue to grow in the upcoming two months of the year, reaching a yearly growth rate of 7.5%, thus balancing the poorly performing agricultural sector, said Takarékbank analyst Gergely Suppan. It might result, he predicts, in a yearly GDP growth of 3%.

More cheerful news KSH has also released its consumer price index for November. Hungary’s y.o.y. headline consumer price index rose to 0.5% in November from October’s 0.1%, whereas core inflation moderated to 1.4% y.o.y. (seasonally adjusted) from 1.5%, although this

BBJ_2323_news.indd 3

Industrial production: Shown is the volume index of industrial production. The corresponding period of the previous year = 100. (Source: Central Statistical Office)

“ We view the data releases as good news for the economy ... Clearly, inflation is still well below the target, but if the strength seen in today’s industrial output release is reflective of Q3 real GDP growth figures, the National Bank of Hungary (MNB) may well maintain its monetary policy stance for now.” index has been largely unchanged since April, signaling the lack of inflationary pressures. The annual headline CPI failed to reach the previous market consensus of 0.7%. Analysts took all this news as encouraging. “In spite of the smallerthan-expected rebound, we continue to see inflationary pressure building up within the economy as prices of unprocessed food keep on increasing, which is likely to put an upward pressure on processed food next year,” Vivien Barczel and Gergely Ürmössy, analysts with Erste, said. “In addition, prices of durable goods keep on rising at an accelerated pace. Since the components of the durable goods group consist mostly of imported products, the prevailing demand for the products – which is reflected by the pick-up in retail sales – allow companies to build in the exchange rate changes in their

pricing decisions,” the Erste analysts added. William Jackson from London-based Capital Economics said its forecast was 0.6%. “However, we doubt this slightly softer CPI figure will prompt the National Bank’s MPC [Monetary Policy Council] to take a more dovish stance,” he said in a statement. “To start with, inflation now appears to be on an upward trend – consumer prices rose by just 0.1% y.o.y. in October. Moreover, the economy appears to be strong – industrial production figures showed that output rose by a whopping 12.7% y.o.y. in October. The upshot is that we expect monetary conditions to remain extremely loose into 2017, but for now we don’t see room for additional policy easing.” Barclays, also London-based, saw reasons to be positive. “We view the data releases as good news for the

economy as industrial output growth was unusually strong for October,” it noted in its reaction to the releases. “Clearly, inflation is still well below the target, but if the strength seen in today’s industrial output release is reflective of Q3 real GDP growth figures, the National Bank of Hungary (MNB) may well maintain its monetary policy stance for now.” The MNB will release its latest macro forecast next week, and it is very likely to see significant revisions. In spite of the good figures, some worry about the future of the Hungarian economy, saying that there is no “plan B” in case European Union money taps are turned off for any reason. The Fiscal Responsibility Institute Budapest (FRIB) warned in a presentation that there are serious deficiencies regarding the measurement of capital and labor, which in turn raises serious questions about the official figures on Hungary’s economic performance. In its publication, the institute said investments were falling and employees were leaving the country in ever-greater numbers, therefore potential growth was diminishing gradually. The authors warned that the Hungarian economy is currently “overheated” and if EU funding dries up the budget and the entire economy will be in trouble too.

2015.12.09. 20:26

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04 News

Budapest Business Journal | Dec 11, 2015 – Jan 14, 2016

NEWS in brief Minister: Hungary’s suit over EU quota will set precedent The lawsuit that the Hungarian government launched against the European Commission (EC) to prevent EU countries from being forced to take a quota of refugees, is of “precedent value” and should last one and a half years, Hungary’s Justice Minister László Trócsányi said on December 4 at a press conference, according to Hungarian online daily index.hu. The Hungarian government submitted a 25-page document about the case to the European Court of Justice. It was filed a day after a similar suit by Slovakia. Trócsányi said that legislation cited in the EC’s decision to impose a quota does not justify the legal implementation of such a decision, index.hu reported. He also said that a temporary introduction of such a plan should only last six months and not three years. Trócsányi maintained that the quota system does not work in practice, and Hungary’s lawsuit will set a precedent and make other EU members consider whether ADVERTISEMENT

the system is good or not. In September, EU interior ministers approved the EC plan to impose mandatory quotas for the distribution of 120,000 refugees, despite strong opposition from a number of EU member states, including Hungary.

Report: EBRD optimistic about growth in Hungary The outlook of the European Bank for Reconstruction and Development (EBRD) for GDP growth in Hungary is more optimistic than the market, the bank’s Hungarian board member said in a report published in daily Magyar Idők on December 8. Antal Nikoletti told the paper that the EBRD sees the Hungarian government is committed to reducing the bank levy and is also convinced disputes over how to compensate investors of failed brokerage Quaestor will soon be resolved, which means the EBRD and the state of Hungary could soon acquire stakes in the local unit of Austria’s Erste

bank. The EBRD expects Hungary’s annual GDP growth to reach 2.9% in 2015 and 2.1% in 2016, according to its latest forecast released in November.

MNB: Moderate dynamics of global trade may carry downside risk for Hungarian growth

Net exports were one of the most important components of Hungarian economic growth in the past period and as world trade is falling short of its pre-crisis levels, this may carry a downside risk to domestic growth, the National Bank of Hungary (MNB) said on December 7 in its Growth Report. The average 20% export growth of the pre-crisis years fell to almost 8% in the period of recovery. Hungary’s economic performance was generally surpassed by the export dynamics, but in recent years the difference decreased, in correspondence to international trends. Import dynamics may increase in the foreseeable future with the recovery of the economy. However, because the further expansion of global value chains has reached its limit, the growth of trade may remain below its pre-crisis levels in the coming years, the report says.

Hungarians oppose Sunday closings, says Ipsos Some 68% of adults in Hungary are against the Sunday closing law, which came into effect on March 15, and restricts retailers of more than 400 sqm from opening on Sundays, says a representative survey published by researcher Ipsos in December.

In the fall, Ipsos repeated a survey it had carried out before the law took effect, and the ratio of those opposed to Sunday closings remained 68%. Prior to the introduction of the law, however, 31% believed that their weekend shopping routines would change; now 51% said that their routines over the weekend have changed. Before the introduction of the law, some 53% believed that shopping would become more difficult once the law was passed. Currently 63% believe that it has become more difficult, Ipsos reported. Of those who were used to doing their shopping on Sundays, 71% try to shop on other days, while 18% still shop on Sundays but in shops smaller than 400 sqm (which can remain open), and 6% opt for markets, Ipsos said. Only 10% of adults feel that the retail market has been able to adapt to the new law and say they would accept more opportunities to shop, while 64% feel nothing has changed and 27% feel that conditions have worsened since March 15.

Lázár: Government consults market players on minimum staff legislation The Hungarian government is carrying out consultations with business insiders on a plan to introduce minimum staff requirements at supermarkets of more than 400 sqm in size, Cabinet Chief János Lázár said at an event organized by business association VOSZ, Hungarian news agency MTI reported on December 7. Lázár insisted that a decision on the matter will be made with the involvement of business representatives, MTI reported. The cabinet chief reportedly added that it

Amazons in the Rózsavölgyi Salon Martine, a middle-aged housewife, falls into a deep depression after her husband leaves her. Two of her single friends, Micky and Annie, move to her place so they can all together tide over hard times, and decide to treat all men as taboo in order to avoid pain and disappointment. Yet all is shaken when suddenly arrives the cavalier, the insolently handsome Guillaume. The presence of the young man not only questions the relationship of the three friends, but also their decision based on the exclusion of men... After the premiere in December the show will be played continuously; on the 30th of December the play will be linked with a Pre New Year’s Eve dinner, on the 31st of December the show will be combined with the New Year’s Eve dinner and musical evening. There are limited number of tickets available for these events.

Rózsavölgyi Salon is located in the heart of the city, on the gallery of the oldest shop in Budapest, and since its opening it has been undertaken to present the public with contemporary literature. The theater is unique in Budapest in terms of having the opportunity to enjoy a nice meal or drink before the show in the magic of books around. The Rózsavölgyi Salon introduces to the public Jean-Marie Chevron’s Amazons on the 14th of December. The Amazons’ premiere took place in 2003 at the Théâtre Rive Gauche Jean directed by Pierre Dravid and Olivier Macé. The show was played for more than 750 times, was put on stage in Canada, Poland, Italy, Greece, England, and in the United States. The performance at Rózsavölgyi Salon will be the Hungarian premiere. Jean-Marie Chevron very well knows how to propose and discuss serious issues within the framework of a witty comedy. He is harsh and critical of the age and the world which Rózsavölgyi Salon Arts & Café he lives in. In his play he deftly maneuvers 1052 Budapest, Szervita tér 5. between operating on emotions and of Tel.: +36 1 486 33 38 entertaining. The public gets quickly under Ticket Information: +36 30 463 88 22 the effect of humorous and engaging scenes, szalon@rozsavolgyi.hu and immediately become partakers of this www.szalon.rozsavolgyi.hu infernal game of the quintet. facebook.com/rozsavolgyiszalon

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2015.12.09. 20:26

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Budapest Business Journal | Dec 11, 2015 – Jan 14, 2016

is the government’s practice to consult with industry insiders on issues that impact them. In the beginning of November, it was reported that the government was planning to put forward legislation that would set a minimum staff requirement for stores over 400 sqm, making at least one staff member available to shoppers for every 70 sqm of space during business hours. Later it was reported that the legislation would apply only to supermarkets and other stores that sell fast-moving consumer goods (FMCG). In the beginning of December, government-friendly Magyar Idők reported that supermarkets running full-service meat or dairy counters are expected to be exempt from the planned minimum staff requirement.

Varga calls for joint EU crackdown on tax evasion Hungary’s National Economy Minister Mihály Varga called on European Union members to assist in a joint crackdown on value added tax evasion, the minister said on December 4 at a conference in Prague, according to a report from the National Economy Ministry. Varga and Czech finance minister Andrej Babis, whose ministry organized the conference, urged EU leaders to draft a joint strategy for addressing the issue as soon as possible, Hungarian news agency MTI reported. Varga, citing a study by the European Commission, said that EU members were cheated out of approximately €170 billion in VAT revenue in 2013. In Hungary, the amount is estimated at an annual HUF 500-750 bln (€1.7-2.5 bln) he added, according to MTI.

Government launches anti-refugee ad campaign The Hungarian government has introduced a series of full-page advertisements highlighting the many flaws of the European Commission’s mandatory plan to distribute refugees within the EU, governmentfriendly daily Magyar Hírlap reported on December 4. The ads were launched last week, while a new batch of ads has also been released this week. The full-page ads feature an image of the Hungarian and EU flags and contain such messages as: “The compulsory refugee quota endangers our culture! Illegal immigrants do not respect our laws. They do not share our common cultural values. The compulsory resettlement would change our country’s ethnic, cultural and religious composition.” The ads are part of nationwide campaign reportedly designed to protect Hungarian citizens from the threat of “illegal immigrants” and therefore, the threat of terrorism, but are seen by critics as nothing more than fear mongering. On December 3, the Hungarian government launched legal action in the European Court of Justice, to prevent European Union countries from being forced to take a quota of refugees. It was filed a day after a similar suit by Slovakia.

U.S. ambassador: Refugees not terrorists Refugees are fleeing violent radicals and are not terrorists, U.S. Ambassador to Hungary Colleen Bell said in an interview with state-owned all-news channel M1 on December 5, according to press reports. Asked about Hungarian born U.S. billionaire George Soros and his “support” for migration, Bell responded that she did not know any circumstances in which Soros was linked to immigration. On the subject of the border fences built

Moving on up Above, a crane lowers the new escalator in place on December 7 at Széll Kálmán tér, as rennovation of the north Buda transportation hub continues through the winter months. The escalator will ease the hike up the stairway leading to the eastern-most half of the square. (Photos: MTI/Péter Lakatos)

to stop migrants, Bell said that Hungary, as a sovereign nation, has a right to protect its borders, but that it is important that refugees arriving here are treated properly, humanely and that their safety is guaranteed. Bell was visiting the Air Force Base in Pápa, western Hungary, to view a NATO exercise, when she was interviewed by M1.

Politico nominates Orbán as most influential in the EU Hungary’s Prime Minister Viktor Orbán has been ranked first among the “28 people from 28 countries who are shaping, shaking and stirring Europe”, according to a list compiled by political online daily politico.eu. Editors of the daily chose one person from each European Union member state, and after that they ranked each politician. Orbán, “the conservative subversive”, as the daily calls him, was chosen to top the list given that “Orbán shapes as much as fits the European zeitgeist”. Politico says that his approach to the flow of refugees into the EU “shifted the debate from how to accommodate” to “how to stop it”. “Viktor Orbán is impossible to ignore, no easy feat for a leader of a MittelEuropean state of ten million souls with scarcely any natural resources. Love him or hate him — and most people do one or the other — you have to pay heed to him. Indifference is not an option,” Politico writes about the prime minister. Orbán’s system is compared to Putinism and Erdoğanism by the daily. “His variety is, to be sure, diluted: Not bluntly authoritarian, broadly in line with EU norms. Still, his government has kneecapped NGOs, independent media and the judiciary in ways that Putin and Erdoğan would admire,” Politico says.

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09/12/15 15:49

2015.12.09. 20:26

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06 News

Budapest Business Journal | Dec 11, 2015 – Jan 14, 2016

App helps highlight corrupt tenders in Hungary Total value of contracts per year for each contract type

Three organizations opposed to corruption have developed a system that checks on procurement bids and flags suspicious deals.

Total value (billion HUF)

zsófia végh

Given the frequent appearance of impropriety and insider deals, public procurement has a bad reputation in Hungary, and there are frequent calls for more transparency. In fact, transparency is not the real issue, according to Tünde Tátrai, public procurement researcher and professor at Corvinus University of Budapest: The documents handed over in public tenders can be inspected. But having millions of documents available for public review doesn’t necessarily decrease potential fraud in procurement, Tátrai said. Tátrai was one of the speakers at a press conference held early this month to mark the launch of Red Flags, an app developed by groups seeking to curb corruption in Hungary. With the app, journalists, politicians or, indeed, anyone else who is interested, can identify public tenders that raise a “red flag” because of the appearance of impropriety. The application uses robots that automatically filter procurement documents uploaded on the EU’s public procurement journal Tenders Electronic Daily (TED). K-Monitor Watchdog created the tool for Public Funds, PetaByte, and Transparency International Hungary with the goal of supporting the fight against corrupt procurement procedures. The creators have already tried the app by checking roughly 14,000-15,000 documents from the past three years and found nearly 60% (8,745) of the contracts to be “suspicious”. The highest number of dubious contracts was detected in 2013 Q4, the year with the highest overall value of public procurement – more than HUF 3.3 trillion – during the test period. While the flags raised by the app highlight risks, they don’t equal fraud, developers

5855.79

1737.10

1244.38 1737.10 63.01

90.47

Works

said. They do, however, point out tenders that warrant further investigation. This is important, organizers say, because corrupt procurements are common, despite legislation that is supposed to prevent them.

Legislation not enough For instance, a law passed about a month ago to exclude relatives of public and government officials from entering public procurement tenders was severely weakened by a December 1 amendment, which was pushed through Parliament in a procedure that limits debate. The amendment provides that, as long as they do not live in the same household, family members of officials can apply for public tenders. Since the law does not breach any EU directives or the Hungarian Constitution, hardly anything can be done about it, Miklós Ligeti, legal director of Transparency International Hungary told the Budapest Business Journal. The legislation requires that tender applicants report any potential conflict of interest, but it does not outline any actions that should be taken in the case of such conflicts.

245.76 644.72 2014

356.42 2013

63.01201290.47

Miklós Ligeti, legal director of Transparency International Hungary.

644.72

1244.38 356.42

Supply

325.08

325.08 245.76 2015

Service

A chart produced with the Red Flag app shows that the value of government procurement contracts skyrocketed this year – especially contracts for supplies, which reached a value of nearly HUF 6 trillion. Another attempt to reduce fraud was a rewrite made earlier this year, reportedly as a way to comply with European Union standards. The change stipulated that a price-value ratio, rather than the lowest price offered, must be a key factor in evaluation. “That can be easily circumvented if more weight is given to price than the rest of the criteria”, said László Murvai, public procurement consultant to Saldo Zrt., a tax and financial consultancy. While these concerns are a problem, experts said that projects financed with public money that avoid an open procedure are of even more concern. Such one-bid tenders have been awarded in several procurement deals. In theory, all tenders financed by public funds are supposed to be bound by the Act on Public Procurement, which means contracts should be awarded through tenders. Yet the government has used excuses to circumvent any bidding on several large-scale projects, such as the deal between state-owned MVM Net Zrt. and Chinese telco company Huawei to develop a countrywide mobile telecommunication network, or

the planned expansion of the nuclear power plant at Paks, both of which have been closed without publishing a call for tenders. The European Commission is currently investigating the Paks project due to this lack of tendering. There are many other situations that may give the appearance of corruption but are still not prevented by legislation. Using the Red Flag app, it is possible to monitor tenders by a specific company by, say, setting as a precondition that the tenderer have headquarters at a certain location, or checking firms that employ a head engineer with 12 years’ of experience, said Anita Koncsik, legal expert of K-Monitor. Red Flag can also filter tender procedures that are too short, that are made without public notice, or that screen unnecessary criteria for certain services. The system uses around 40 different indicators and also allows users to browse either documents or organizations. While the Red Flag app can point out potential corruption, it is up to citizens to take action on the problem. According to Murvai, until the mindset changes, the system is unlikely to improve markedly.

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2015.12.09. 20:26

News 07

www.bbj.hu

Budapest Business Journal | Dec 11, 2015 – Jan 14, 2016

expert opinion

Prompt, convenient, affordable health care now available for expats

We often hear stories where a foreign work assignment ends with a huge medical bill: A sudden injury or illness can undo even the most careful planning. In Hungary, a simple internist examination may cost as

Even adults can feel dependent and helpless when unwell in an unfamiliar environment, especially if they do not have health insurance coverage. So it is highly important to choose a health insurance plan that both you and your family members can truly rely on while staying abroad, since you can no longer depend on the medical advice of your own family doctor.

much as HUF 16 000, and the medical expenses associated with the treatment of a more severe injury, for instance a fracture, I am not a patient – I am a client may be much higher, costing hundreds of “As long as you have your health...” goes thousands of forints. the old saying. But in fact it does matter

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Generali Health Plan has the way to make preventive health care a pleasant experience and to offer compassionate support in medical treatment. At a place where you are always number one – in the waiting area and in the doctor’s surgery alike. At a place where waiting is replaced by caring. At a place where health care is all about you. Where the focus is simplicity and quality. – – – – –

fast and convenient treatment from recognized healthcare professionals high quality services with no waiting lists or facilitating payments access to the 24-hour Generali Medical Helpline high standard facilities with a pleasant atmosphere health assessment and prevention programs

generaliegeszsegprogram.hu

Generali_BBJ_ad_188x239mm.indd 1 BBJ_2323_news.indd 7

what healthcare costs. It is important to feel safe and secure where ever you happen to be: this was Generali’s main focus while developing its comprehensive health insurance plan. The solution has opened up the possibility to make medical care of the highest standards available to a wide range of the public. Under Generali’s Health Insurance Plan anyone can purchase complex coverage for a monthly premium of 5 000-10 000 HUF. (In comparison, a single routine examination may cost more in a private practice.) With the fee-for-service health insurance solution, you will no longer have to wait hours to see a doctor in an unpleasant, crowded waiting room. You can schedule your appointment well in advance, so you can be sure you will get back to the office in time for that important meeting. Calls are answered 24-hours a day by physicians Under Generali’s health insurance plan, you can schedule appointments with more than 200 licensed physicians all around the country, while you may also choose from a wide range of health check-ups, including melanoma (skin cancer) screening, oral health and dental screening, under your coverage. The basic coverage also includes lab tests, diagnostic procedures, and outpatient care, as well as access to the Generali Medical Helpline, where you can get medical advice on the phone every day of the week if you need firsthand information in connection with an urgent medical question. The plan also offers e-psychology counselling, to help find viable solutions to the problems of adults, children or teenagers whether it’s about a career choice or a private life crisis, a workplace issue or stress management difficulties. One of the reasons why the Generali Health Plan is so popular is because it has been developed in response to the customers’ needs. The insurance plan applies no limits to the receipt of covered medical care: in other words, you may see your doctor as often as it is necessary, and the insurance covers all medically reasonable care, including even inpatient treatment if you choose the most complex coverage option. Whether you call in, or you visit the clinic in person, you will be able to talk to English speaking medical professionals. Our experience shows that our clients most often choose the medium coverage option, available for HUF 8 000-16 000, which includes prenatal care, house calls, ambulatory surgeries and patient transport. If your child is ill and you feel that it is safer to keep him/her at home, you may call your GP for medical advice - or request a visit to your home if it is medically necessary. The extra coverage option includes, in addition to the above, inpatient hospital care in a VIP private room: with that you can make sure your health is in the best hands.

NOTE: ALL ARTICLES MARKED EXPERT OPINIONS are paid promotional content for which the Budapest Business Journal does not take responsibility

Have you ever injured your leg while playing sports? Maybe you came down with the flu just a few days before an important presentation. But seeking medical treatment in a foreign country can expose you to perplexity, long waits and rudeness. Wherever you choose to go, nothing is more important than the health of yourself and your family – being assured that you are prepared for any eventuality. Generali Health Plan offers a complex solution to this problem.

2015.12.01. 13:33:12 2015.12.09. 20:26

2Focus BBJ

Deals of the year

State dominates this year’s big deals As with last year, state purchases of financial institutions and other properties made the government the biggest buyer in the country. Zsófia czifra

The state-owned Hungarian Development Bank bought the ‘Paris Grand Department Store’, which includes a spectacular upstairs cafe, shown in the inset.

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This year once again saw a statedominated transactions market. The Hungarian state sealed several largescale deals, many of them at a value that market players could not afford or risk these days, experts say. In what can be called a rather subjective summary, the Budapest Business Journal rounded up the most important deals of 2015. “The M&A activity in the first half of 2015 showed a significant increase compared to previous years in Hungary and based on this growth, without seeing all the relevant databases’ full year information, we expect the number of transactions to increase in 2015 compared to 2014 in Hungary,” Margaret Dezse, partner and head of transaction advisory services at Big Four company E&Y told the BBJ. “As presented in our 2015 half year M&A Barometer, based on the number of transactions the IT and technology sector was the most active, which we expect to remain for the entire year as well,” she said. According to Dezse, the most important transactions include TPG buying TriGranit’s Central and Eastern European portfolio, and Pamplona Capital Management acquiring Partner in Pet Food. As for deals where Hungarian companies bought into foreign ones, she mentioned LogMeIn acquiring Last Pass, OTP buying Bank Findomestic Banka in Serbia, and MOL buying Ithaca Petroleum Norge AS. But besides market transactions, the Hungarian state still had a huge appetite in 2015. “Similar to previous years, the Hungarian state remained active not only in terms of the number of deals, but also in terms of transaction values,” Dezse noted. “When it comes to this year’s M&A activity, there’s no doubt that the most dynamic player of the market was the Hungarian state,” agreed Tamás Simonyi, senior director, head of CEE financial institutions M&A advisory at another Big Four firm KPMG. Hundreds of millions of euros have been moved by the state, no private market transactions came

2015.12.09. 20:26

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Budapest Business Journal | Dec 11, 2015 – Jan 14, 2016

Focus 09

expert opinion

Wrapping up a success story – managing the exit Attorney at law SchOEnherr Hetényi Attorneys at Law

Shown are baked goods made by Fornetti, the Hungarian concern that was purchased by Swiss bakery giant Aryzta, for a reported €60 million. anywhere near to this amount, Simonyi noted. The state sported a huge appetite for energy and financial companies, but the real estate market too saw the state on the buyer’s side in large transactions. As Simonyi says, these deals had clearly been mainly motivated by strategic and political reasons. The state also appeared on the sellers’ side: After spinning off the bad loan portfolios of not-so-long-ago acquired MKB Bank, the new owner now wants to sell a majority stake in the loss-making financial institution before year’s end. According to Simonyi, in selling poorly performing loan portfolios, a whole new market was created, which will have a significant role in the future. As for other important transactions, Simonyi drew attention to the one in which OTP Bank acquired accommodation reservation site Szallas.hu, saying that it was quite an unusual move by a financial institution to buy an online portal. He also thinks that the planned sale of news portal origo.hu will be an important transaction, especially considering that it’s a loss-making operation. When it comes to pricing, Simonyi says that this year’s deals market saw rather depressed prices – except when it came to state acquisitions. “Market players still see serious risks in Hungary. Both domestic and international buyers seek consolidation, and a calm and predictable environment,” he concluded. The transactions market experienced a significant boom in 2015, agreed Ervin Apáthy, director of corporate finance at PwC. “This year finally saw a larger number of market transactions, in addition to the state acquisitions that have dominated the market for the past

“This year finally saw a larger number of market transactions in addition to state acquisitions that have dominated the market for the past few years.” few years,” he told the BBJ, adding that the state still remained a significant player on the deals market. “The years 2014 and 2015 will be marked in history books as the years when the majority of the Hungarian banking and energy sector was taken over by the state,” Apáthy said. As a result of a possible upgrade of Hungary’s sovereign debt, it seemed that investors’ worries about Hungary’s unpredictable economic environment had somewhat decreased, meaning several market transactions took place in 2015. The most important of these, according to Apáthy, were the sales of Hungarian bakery Fornetti, of property developer TriGranit, and mineral water company Szentkirályi. As many of the current transactions will only be closed in 2016, the deals market will surely be lively next year too, Apáthy said. One of the main questions is will the retail and telecom sectors remain in the state’s focus, and also what will happen to the companies already acquired by the state? “We also have great expectations for the new ownership structure of the Budapest Stock Exchange,” Apáthy noted, adding that he hopes the bourse will have an increasing role in the privatization processes in the future. u

Big web deal: OTP purchased popular accommodation site Szallas.hu.

BBJ_2323_news.indd 9

As the Hungarian JEREMIE funds are nearing the end of their investment periods, founders and investors should already start preparing for successful exists. For economies lacking natural resources, innovation can be one of the key factors in attracting attention and investments to drive economic growth. Since the end of the financial crisis Hungary’s unique startup scene has been at the focus of investment activity mainly driven by the European Commission’s JEREMIE (Joint European Resources for Micro to Medium Enterprises) initiative. With the funds winding up their investment activities in 2015, more than 200 companies received first-round investments from JEREMIEbacked funds in between 2010 and 2014, making up 72% of all venture capital investments in this period. Given a typical holding period of five years, divestments are not expected to start before 2017-2019. This timeframe should give founders, management and investors alike ample time to dedicate their resources to the development of the products following a frantic period of investment dominated by networking, roadshows and transaction work. However, as the historical (pre-crisis) average in Hungary is eight to ten exits annually, the market may quickly become flooded with the investors and/ or founders of JEREMIE-backed projects looking to divest. In such a saturated market, with a typical transaction timeframe of nine to 18 months, it is never too early to start preparing for the exit. The first step in achieving a successful exit is identifying the most suitable type of divestment partner. In line with wider European trends, sales to strategic investors remains the leading exit route in the CEE region, with the share of secondary sales and public offerings in the region slightly behind European figures. Hungarian market players generally share the impression that strategic investors present the best exit opportunity for local venture capital investors and founders. Nevertheless, doing their homework to understand the relevant industry segment, the players on the wider market and the competitors will help prospective sellers to appropriately position their company and to approach potential acquirers in a targeted

manner. Naturally, the choice will ultimately depend on the individual strengths and needs of the company, which will vary greatly even between entities in the same growth stage and industry segment. Once the preferred exit route is chosen, founders and management will have to dive into the technical side of the transaction process. While conducting a formal vendor’s due diligence cannot be reasonably expected from a typical Hungarian JEREMIE-backed entity, knowing your business is nevertheless key to the effective management of a divestment. Identifying potential dealbreakers up front and at least being prepared to offer appropriate solutions may prove to be an invaluable asset during the negotiations. Management should be aware of the internal resources they can rely upon (e.g. transaction specialists of the venture capital investor) and should also assess external support needs. Costs of management time and external advisors should be budgeted realistically, and, if needed, be factored into the pricing. Picking the right advisor can be time-consuming, exploring the market in advance will expedite the process and allow a realistic assessment of costs. Internal and external communication and confidentiality aspects are also best assessed and agreed upon early: The ill-timed or uncoordinated disclosure of a potential divestment can create an atmosphere of uncertainty within the company and the counterparty’s loss of trust will have a negative effect on the success of the transaction. Similarly, the flow of sensitive information during the due diligence phase is a risk factor. Clean team, red data room and similar technical solutions can mitigate competition law concerns, but the technical details should be regulated well in advance, already in the term sheet phase. To summarize, preparation is essential in achieving a well-timed, successful exit. Setting up a divestment timeline, identifying tasks and starting the implementation well before the planned exit date may divert certain resources from managing the growth of the company, but will pay dividends in the end in the form of a healthy return on investment and having the company in good hands for the longer term.

www.schoenherr.eu

NOTE: ALL ARTICLES MARKED EXPERT OPINIONS are paid promotional content for which the Budapest Business Journal does not take responsibility

Dr. Gábor Spitz

2015.12.09. 20:26

2 Focus

www.bbj.hu

Budapest Business Journal | Dec 11, 2015 – Jan 14, 2016

Hungarian firms buying outside Hungary

OTP buys Findomestic Banca in Serbia OTP Bank’s Serbian banking arm signed an agreement to buy the Serb business of Italian bank Findomestic Banca S.p.A in June. The business, Findomestic Banka of Serbia, is a retail-oriented bank with 26 branches and ranks 21st in the local banking market with a 0.5% market share at the time of the transaction, OTP said. The deal will increase the current 1.4% market share of OTP banka Srbija (OTPʼs local arm) to 1.9%, the bank said.

MOL sets foot in Norway Hungarian oil and gas company MOL Group completed a deal to acquire 100% ownership of Norway’s Ithaca Petroleum Norge (IPN) from Ithaca Petroleum Inc. in April. The deal doubles the size of MOL Group’s exploration portfolio, adding 600 million barrels of net un-risked best estimate prospective reserves. Hungary’s oil and gas company bought the stake for $60 million and agreed to a discovery bonus of at most $30 mln.

An installation owned by Ithaca Energy, which sold some oil exploration properties to MOL.

State-owned investment firm Corvinus concluded a deal to buy 100% of Budapest Bank by transferring the $700 million purchase price to General Electric Capital Group at the end of June. LogMeIn logs in for LastPass

Remote computing company LogMeIn announced it was buying password management service LastPass for $125 mln in cash. Once it clinches the deal, LogMeIn will merge LastPass’ service MOL spreads in the region with the team password management MOL announced in February that it features of Meldium, the service it had completed the acquisition of ENI acquired last September. Both products Romania, including 42 gas stations, will continue to be supported in the nearthereby increasing the number of MOL- term, but the company plans to integrate owned gas stations in Romania to 201. them into a single offering later on. At the end of July, MOL announced that it had successfully completed the acquisition of ENI’s Czech and Slovak downstream business, including the retail network under the Agip brand. The acquisition includes 125 service stations in Czech Republic and 41 service stations in Slovakia. MOL signed an agreement to buy the Fornetti bought by Swiss bakery giant entire local downstream business of Italy’s ENI International in October. MOL Switzerland’s Aryzta bought Hungarian will acquire the entire share capital of frozen bakery products company Fornetti, ENI Hungaria, a company managing 183 former Fornetti managing director József Agip branded service stations in Hungary Szabó announced in August. According (including dealer owned sites) as well as to Napi.hu, the purchase price was €60 wholesale activities in the country. ENI mln. According to the former head of the lubricants’ wholesale business is excluded bakery, the decision was made because from the deal. In November, MOL signed Fornetti had reached the limits of its an agreement with ENI International B.V. growth potential. Aryzta, the third largest for the acquisition of the entire share maker of frozen bakery products in the capital of ENI Slovenia doo. world and the owner of 60 bakery brands

Foreign companies buying into local businesses

on four continents, said it planned to invest €1 mln in Fornetti before the end of the year and will hire new employees.

the Central European region: It bought Prague-based PointPark Properties (P3) in a deal that included 48 warehouses and development land, in 2013, and expanded that portfolio last year, and it plans a similar expansion with TriGranit, which it will acquire and develop through its real estate arm TPG Real Estate.

Hungarian pet food maker gets new owner

Advent International sold Hungarian pet food manufacturer Partner in Pet Food Hungarian mineral water bottler (PPF) to Pamplona Capital Management Szentkirályi Ásványvíz had merged into in a €315 mln deal in April. The exit a joint venture majority-owned by Italy’s comes four years after Advent acquired Pasquale family, the owners announced Partner in Pet Food – then Provimi Pet in April. Szentkirályi owner Levente Food – in a carve-out from Provimi Balogh, who holds the minority stake Group for €188 mln, through the GPʼs in the JV, dubbed Central European Advent Central & Eastern Europe IV fund. Mineral Water Holding (CEMW), said Pamplona invested via its Pamplona his company had wanted to become a Capital Partners IV fund and will back multinational for years, but had not found PPFʼs current management, supporting the right strategic investor in Hungary. organic growth of the company by The Pasquale family has also acquired providing continued investment. Hungarian mineral water bottler Kékkúti Ásványvíz from Nestlé through its Czech bottler Karlovarské Minerálni Vody.

Szentkirályi merges with Italian peer

State acquisitions

Real estate magnate sells flagship company

Government increases state control of Hungarian bank sector

U.S. private equity firm TPG announced that it was to buy Hungarian real estate developer TriGranit and its more than €500 mln ($547.95 mln) worth of commercial property assets in Central and Eastern Europe, TriGranit said in August. The deal was wrapped in December. TPG is already active in

State-owned investment firm Corvinus concluded a deal to buy 100% of Budapest Bank by transferring the $700 mln purchase price to General Electric Capital Group at the end of June. The deal was funded from forint-based market financing raised by Corvinus’ parent, the Hungarian Development Bank (MFB).

Award of CIS Accreditation to Britannica International School, Budapest Britannica International School is delighted to announce that following an extensive school self review process Britannica International has been awarded the status of a fully ’Accredited’ school by the Council of International Schools. The final award of Accredited Status from CIS demonstrates that a school is aligned with the demanding CIS Standards for Accreditation. It shows that the school has achieved high standards of professional performance in international education and has a commitment to continuous improvement. Britannica is the first British style school in Budapest to achieve this quality mark.

BBJ_2323_news.indd 10

CHARACTERISTICS OF A CIS ACCREDITED SCHOOL ACCREDITATION HAS VALUE FOR ALL MEMBERS OF THE SCHOOL COMMUNITY The award of CIS Accreditation demonstrates a school’s commitment to high quality international education to the school community as well as to the outside world: prospective families, educational leaders and teachers as well as universities, embassies, other government departments, and globally-minded companies and organisations. Concerned professionals as well as parents naturally seek a quality education for children. Expatriate parents

in particular face an unfamiliar environment which offers few guidelines on how best to select the Richard Vaughan, Principal most appropriate school for their child’s needs. The fact that a school holds CIS Accreditation can be very important in parents’ choice of school. Located in the beautiful hilly area of the Buda side of the city - Britannica International School is a British style 5-18 international school providing education at the highest standard based on the English National Curriculum. The Cambridge International

Examinations (CIE) Advanced Subsidiary Level (AS) and Advanced Level (A Levels) examinations provide graduating students with gold standard certification for entry to leading universities around the world.

Britannica International School 1121 Budapest, Kakukk u. 1-3. Tel: +36 1 466-9794 Email: contact@britannicaschool.hu Website: www.britannicaschool.hu

2015.12.09. 20:26

www.bbj.hu

Budapest Business Journal | Dec 11, 2015 – Jan 14, 2016

2 Focus

Central bank buys Hungarian bourse bln. And this is not the end of the story: The National Bank of Hungary (MNB) The MNB recently announced that it has boosted its ownership in the Budapest was eying another building for purchase, Stock Exchange to 75.8% by acquiring namely the infamous Bálna (Whale) on The Hungarian government announced expressed its concerns to the government a total stake of 68.8% from Austrian the Pest side of the Danube. in December 2014 it would buy the bank over a top-up fund established to CEESEG AG (50.45%) and Österreichische as part of efforts to increase state control compensate investors who lost money Kontrollbank AG (18.35%) in November. over key sectors of the economy. It did in the Quaestor brokerage scandal. It is The purchase price was HUF 3,550 per not disclose the price at that time. The hoped that a solution will comply with the share (i.e. HUF 13.2 billion (€42.3 mln) minister overseeing the Prime Minister’s spirit of the agreement with the EBRD, for the full package). The government Office, János Lázár said at his weekly he added. The top-up fund sourced by reasoned the move by saying that the In June, three famous Budapest press conference in October that the banks is being contested in court. The Hungarian capital market was weak and buildings were sold for an estimated government planned on selling two banks original deadline for acquiring the stakes the situation required an intervention by HUF 15 bln, online news site napi.hu reported. The portfolio, including the acquired last year, the Hungarian Trade was June 30. the state. Bank (MKB) and Budapest Bank. He said former Divatcsarnok on Andrássy út (also the government would like to sell MKB by State gets wired up on energy market known as the Párizsi Nagyáruház), the State gets rid of OTP shares Váci1 Business Center (the former Stock the end of the year and anticipates selling the Budapest Bank in the first half of State-owned gas distributor Főgáz had The government announced at the end of Exchange building) and the parking lot 2016. Later in October, MKB Chairman- closed the purchase of GDF Suez’s retail October that it had sold its stake in OTP on Szervita tér in downtown Budapest, CEO Ádám Balog said in an interview business in Hungary, the First National Bank. The state raised about HUF 75 bln had previously been owned by troubled with Hungarian daily Magyar Idők that Utilities Company (ENKSZ), a state- ($265 mln) in selling the 5% stake in OTP property developer Orco, and were MKB Bank was planning to list its shares established utilities provider, said at Bank Nyrt. at an auction, four years after taken over by the lending bank, which on the Budapest Stock Exchange (BSE), the end of September. Főgáz signed it acquired the shares in the country’s had planned to get rid of them for quite given that the bank’s value can best be the deal to buy 99.93% in the local largest lender by taking over HUF 3 a while. The buyer of the Váci1 building demonstrated by its participation in an natural gas retail company GDF SUEZ trillion ($10.6 bln) in assets from private and the Szervita tér parking lot is Energia Magyarország Zrt. from GDF pension funds. The state-asset manager Hungary’s DVM Group, while the former open, regulated securities market. International S.A. early September. With MNV Zrt. sold more than 14 million Divatcsarnok became state property. the acquisition, Főgáz has taken over shares; the average price was HUF 5,322 State and EBRD to buy into Erste Bank more than 750,000 retail customers. per share. MFB buys former Divatcsarnok The European Bank for Reconstruction Earlier this year, Főgáz had also reached and Development (EBRD) and the agreements on the takeover of the local MNB builds real estate portfolio The central bank is not the only stateHungarian state would each take 15% retail gas customers of Italy’s ENI and owned financial institution to be active on ownership in Erste Bank Hungary by Germany’s E.ON, making it the country’s An entire section should be devoted to the property market: With the acquisition increasing the capital of the bank, the sole gas provider, supplying gas to the property businesses of the National of the turn-of-the-century Párizsi parties announced in February. The approximately 3.3 million households Bank of Hungary, or, more precisely, Nagyáruház (“Paris Grand Department the former Divatcsarnok) government plans to close the transaction in Hungary. Early December, ENKSZ to the deals nailed down by various Store”, no later than the end of this year, the then announced that it was set to acquire 50% foundations belonging to the central building on Andrássy út in October, the Napi Gazdaság (now renamed Magyar of electricity provider ELMŰ- ÉMÁSZ bank. The appetite of the national bank Hungarian Development Bank (MFB) Idők after a complete overhaul) reported Ügyfelszolgálati on January 1, 2016. seems bottomless, as to date some became Hungary’s second government in August. EBRD spokesman Anthony The remaining 50% of the shares will be nine properties have been bought at an organization to own luxury property in estimated combined value of HUF 27 downtown Budapest. Williams told the paper that the EBRD had transferred by January 1, 2017. DVM Group purchased the Váci1 Business Center, above, which used to house the stock exchange, while the state purchased the actual stock exchange.

Landmark buildings get new owners

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Euronet ATMs offer euro withdrawals in Hungary Some 200 of Euronet’s independent ATMs in Hungary have launched a service offering cash withdrawals in euros, combining the advantages of currency exchange at competitive rates with the availability and convenience of an ATM transaction, according to an announcement by the company on December 8. In addition to the new euro banknote dispensing service, Euronet’s ATMs will continue to offer services such as forint cash withdrawals, balance inquiry, mobile phone top-ups, and more.

OTP Mobil’s platform takes over PayU

As a follow up to internet payment service PayU radically decreasing its market presence from the end of December, OTP Mobil users can continue to make online payments with the help of the bank’s own Simple Online Payment System, according to a press release issued on December 8. PayU announced in August that it will be decreasing its market presence, and that its services will be taken over by OTP Mobil’s platform, the announcement notes, adding that there are approximately 2,500 overlapping users. The Simple Online Payment System handles payments made through MasterCard, Visa and American Express cards or bank transfer, the announcement added.

EMA accepts Richter’s Neulasta pegfilgrastim Hungarian drugmaker Gedeon Richter’s regulatory submission for its proposed biosimilar to Amgenʼs Neulasta (pegfilgrastim) has been accepted by the European Medicines Agency (EMA), Richter announced. Biosimilar pegfilgrastim was developed by Richter and, according to a license and distribution agreement signed by Richter and German peer STADA Arzneimittel AG earlier this year, the medicine is to be launched under both the Richter and STADA labels in geographical Europe (excluding Russia) following the patent expiry of the original product. Richter added that it is seeking approval for the same indications as the reference product.

Bosch Hungary completes HUF 36 bln investment The Hungarian unit of German engineering giant Bosch completed on December 7 a HUF 36 billion capacity expansion at its steering systems manufacturing base in

Maklár, northeastern Hungary, according to a press announcement. The project, which has created 130 jobs, was supported with a HUF 2.7 bln European Union and Hungarian state grant, said Bosch Hungary CEO Javier Gonzalez Pareja (the winner of the BBJ’s Expat CEO of the Year award in early 2015). Robert Bosch Automotive Steering currently has a headcount of 960, Hungarian news agency MTI reported. The unit was earlier called ZF Lenksysteme Hungária but was renamed after Bosch bought out its partner ZF Friedrichshafenin in the 50-50 joint venture.

Lufthansa to launch Debrecen–Munich flights from April Germany’s Lufthansa airline is launching three flights a week between Debrecen, eastern Hungary, and Munich as of April, on Mondays, Wednesdays and Fridays, Ofer Kisch, the company’s regional director, said on December 7 in Budapest. Lufthansa is planning to operate a Bombardier CRJ900 aircraft on the route, the only new destination planned by the airline in the region for 2016, Kisch said. The head of

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Lufthansa’s operations in Hungary, Gábor Antal, said the load factor is expected to come in at around 50%, with more German passengers than Hungarians. Debrecen Airport has spent approximately HUF 7 billion on developments in recent years, mayor László Papp said. During this time, the number of passengers has grown tenfold; it is expected to reach 180,000 this year, and 2016 could see double that number, the mayor added.

Continental celebrates 20th anniversary in Hungary The Hungarian plant of German automotive manufacturer Continental celebrated its 20th anniversary in Makó Hungary last month, according to an announcement issued by the company on December 2. The plant was opened in 1995 as a subsidiary of Phoenix AG, in place of the former Taurus tire factory, and initially employed only 13 people, the announcement says. The plant’s headcount exceeds 2,500, and is the largest employer in the region. The Continental plant in Vác began operations in 1999, and merged with the Makó plant in 2006. Since 2008, the two plants have operated under the aegis of ContiTech Fluid Automotive Hungária Kft., with an approximate headcount of 3,600.

Tesco helps collect 153 tons of food for the poor The Hungarian unit of Tesco helped collect 153 tons of food for the poor, worth approximately HUF 65 million, through its

participation in the Christmas Shopping initiative of the Hungarian Food Bank Association over one weekend, according to a press release issued on December 1. With the help of 2,780 volunteers, Tesco collected 381,888 portions of food, thanks to customers who purchased food for charity in 156 of the company’s stores. Tesco also donated HUF 15 mln to the association. This traditional charity event saw a rise of 27.5% in the volume of food collected this year, compared to last year. The Hungarian Food Bank and Tesco have been cooperating since 2013, during which time the retail chain has been able to collect approximately 580 tons of food for the poor.

Hévíz Airport plans HUF 5 bln renovation The Hévíz-Balaton Airport near Lake Balaton is expected to undergo a HUF 5 billion renovation and could be connected to the M7 highway via a new main road for an additional HUF 4 bln, Hévíz mayor Gábor Papp told government-friendly daily Magyar Idők. The project to modernize the airport is part of a larger plan to renew the Balaton region during the 2014-2020 European Union budgetary period, the mayor told the daily. Passenger numbers at the airport, which is 49% owned by local company SGH Aviation Hungary, rose by almost one-fifth to 33,000 last year from 2013, Magyar Idők said. SGH Aviation Hungary is owned by Gábor Széles, whose holdings include the Videoton group, television station Echo TV and daily Magyar Hírlap among others, Hungarian news agency MTI reported.

Hungary, IT Services sign ‘strategic agreement’ IT Services Managing Director Chris Wilson, left, shakes hands with Deputy Foreign Minister László Szabó during the December 8 signing of a ‘strategic cooperation agreement’ between IT Services Hungary (ITSH) and the government. ITSH, a unit of T-Systems International, is a division of Deutsche Telekom serving corporate clients. It has a headcount of more than 4,000 in Hungary, which makes the company the largest employer in the ICT sector, Wilson said. The Hungarian unit is planning to raise its headcount by 400 next year, he added. ITSH, which had revenue of HUF 44.5 billion last year, has bases in Budapest, Debrecen, Pécs and Szeged. (Photo: MTI/Lajos Soós)

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Former finance minister joins new AmCham board American Chamber of Commerce held its annual assembly and elections on December 1.

“I am told AmCham has provided two ministers to government; I hope I might be the first former minister to join AmCham.”

robin marshall

AmCham Hungary members appointed a new board on December 1, including for the first time a former government minister, at what was an unusually emotional annual assembly. With the death of COO László Metzing just a couple of moths ago, this was an opportunity for the chamber at large to say goodbye, and it did so with a video tribute and an award. First, however, there was the not insignificant business of electing the board. This year the president’s position was not up for grabs, but that of the first VP was, and it went to Márk Hetényi, deputy CEO of MKB Bank Zrt., in an uncontested election. Hetényi is a returnee, having previously served four years as a board member at large before taking a year’s grace period, as AmCham tradition dictates. The role of secretary treasurer did see a contest, however, between Péter Csucska, managing director and general manager of Lexmark International Technology Hungary Kft., and Csaba László, senior

highlights this time round included live musical accompaniment from a pianist, and another candidate who admitted she had enjoyed the wise support of a special adviser since she was five: Winnie the Pooh! The winners, though, were The new AmCham board (from left): Farkas Bársony, Péter Csucska, Márk Hetényi Péter Csucska, whose candidature was (1st VP), Judit Zolnay, Dr. Andrea Jádi Németh (2nd VP), Ferenc Pongrácz (president), carried forward when he did not win the Krisztina Varga, Csaba László (secretary treasurer), Andrea Juhos, Liam Crow, and Írisz secretary treasurer’s position, and Judit Lippai-Nagy (CEO). (Board member at large Bea Előd was not present for the photo.) Zolnay, CEO of MetLife Europe Limited Magyarországi Fióktelepe. partner at KPMG Advisory Ltd. and former to serve in his Socialist government The forum also saw the presentation of Minister of Finance. Csucska admitted as finance minister, which he did from the 11th Dr. Iván Völgyes Award, named there were “people more qualified for the 2002-04.) And he saw a chance to make for the man credited with introducing job” in the form of László, but reminded another first. “I am told AmCham has modern lobbying to Hungary and the audience, “An enthusiast built Noah’s provided two ministers to government; I who brought many American icons Ark, professionals built the Titanic.” hope I might be the first former minister to the country, such as the Gallup For his part, László told the assembly to join AmCham.” In that remark, at least, Organization, Reader’s Digest, and GE. he was breaking new ground, never he proved prescient. The award recognizes an individual’s having run for an elected position before. There were also two board members significant contribution to the work of (A former finance ministry civil servant at large positions to be filled, which AmCham and the strengthening of U.S.turned banker, he said he had never been were contested by six candidates. Hungarian investor relations. For 2015 a member of any party, but was asked by Presentations have become noticeably the award was presented posthumously then Prime Minister Péter Medgyessy more innovative in the past few years; to László Metzing.

Shaping the future together with T-Systems

T-Systems’ Symposium, the biggest event for the ICT sector in Hungary, provided a detailed snapshot of how economic entities are to adapt to new and disruptive technology changes. The cream of the crop of the domestic ICT industry gathered at T-Systems Hungary’s Symposium for the fourth time to discuss major trends and draw up a to-do list for how to stay ahead of the competition. The full-day conference hosted sessions to demonstrate what technology changes enterprises and institutions are expected to adapt to and, as a result, how they must reinvent their methods of operation. Digital frontrunner “Digital services, infrastructure and competences all need to be improved in order to make Hungary a frontrunner in Europe,” Kerstin Günther, Chairperson of the Board of Directors of Magyar Telekom stressed. This can be achieved by close cooperation with the Hungarian government. A crucial pillar of this mutual effort is to reach the objectives set by the European Union earlier than 2020, the date initially set by Brussels. Accordingly, every household should have broadband access of a minimum of 30 megabits/ second by 2018. “A fast network available to everybody is important as people use ever more smart devices and the volume of data is skyrocketing,” Günther said.

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Christopher Mattheisen, CEO of Magyar Telekom highlighted the significance of the capital needed to achieve the digital transformation of society. On a global scale, over-the-top content (OTT) companies have the biggest capitalization, easily outweighing telco firms, broadcasting networks or device

Telekom, therefore, supports an initiative that promotes ICT careers among pupils at elementary and secondary school level. Volunteers give presentations on the subject in order to trigger interest in the sector among the younger generation. As Tibor Rékasi, CEO of T-Systems Hungary pointed out, technology changes

great example, the application of which in certain industries such as agriculture may provoke a breakthrough.

Carbon neutral multinational Éva Somorjai, Magyar Telekom’s Chief Human Resources Officer said that generational gaps at the workplace should not necessarily be perceived as an obstacle. Reverse mentoring offers a great way to capitalize on the “In every industry, European companies are assets of people in any age group. lagging behind. The continent’s competitiveness “There’s fierce competition for talent is at stake, so a lot more capital is needed” in Western Europe. Magyar Telekom does its best to meet the expectations of generations ‘Y’ and ‘Z’, who need manufacturers. “However, in every can overwrite entire business models creative tasks and a constant chance for industry, European companies are lagging overnight. However, such disruption development beside fair remuneration behind. The continent’s competitiveness does not only pose a danger; it also and appreciation,” she said. “We are is at stake, so a lot more capital is represents opportunity. Harnessing its further happy to report that the Magyar needed,” he insisted. Further investments power can build new communities, he Telekom Group is the first multinational will be necessary and the ultimate goal reminded. “New business models based corporation in Hungary – and also the can’t be anything less than having a on disruptive concepts pop up that first among leading European telco firms digital single market, he added. require actors to adapt better, which then – to have become fully carbon neutral, leads to product development,” Rékasi meaning that our CO2 emissions are added. Ideas triggering ground-braking zero. We are extremely proud of this ICT career promotion Mattheisen said it is crucial to have technologies often follow a bottom-up achievement and we hereby thank more IT experts in the country in order path by which they ultimately find their our clients who help us in this effort,” to improve competitiveness. Magyar final area of use. Drone technology is a Somorjai said.

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In their words: Discussing MT and T-Systems ÉVA SOMORJAI: “BOOSTING EFFICIENCY BY DISTANCE WORK” What were the milestones that led to the point where Magyar Telekom became a carbon neutral corporation? Sustainability has a decade-long tradition within the group. Since we wanted to comply with the principles of tackling climate change, very tough targets were set to cut our own emissions. Huge energy savings were achieved by, among other things, modernizing our networks. Our car fleet has a growing number of hybrid and e-cars and our products are sold in a sustainable manner. Further, Magyar Telekom uses only energy generated by hydropower. What we cannot neutralize through our own activities we compensate by supporting green projects. Our new headquarters, to open in 2018, is built on the same principles. Distance work is gaining popularity especially with younger staff. How effective has it proved to be and what trends are you expecting? The Magyar Telekom Group started a pilot program with distance work last year. According to our statistics our colleagues prefer to be away two days a week. Right now 20% of our total workforce has the opportunity to do remote work. There are departments where the rate is 100%; others need to catch up. Actually, research shows that working from home can boost efficiency by up to 10-12%. However, certain positions will not be eligible by definition, since a physical presence is simply a must. You have recently recruited a 70-year-old person to join the team. How can you get the most out of the presence of different generations? Everybody is responsible for his or her own future, but we support people in their career development efforts. In the case of reverse mentoring we help those interested find their match. We won’t force anybody to participate though, of course. Efficiency is key within the group, that’s why its structure has been reorganized many times. We have learned along the way that building yourself boosts efficiency at the group level, which leads to ultimate success.

CHRIS MATTHEISEN: “WE ARE BRINGING HIGH SPEED INTERNET TO EVERY HOUSEHOLD IN HUNGARY” One of the EUʼs ambitious goals is to have 50% of households with broadband access of 100 Mb/second by 2020. What incentives do T-Systems have in order to achieve this objective? Telekom’s partnership agreement for Digital Hungary with the government could be a real success story. The country ranks well already on international lists of broadband coverage and data transmission. Our plan is to increase the number of households with Telekom fixed-line broadband access by 440,000 and as a result by the end of 2015 our high-speed internet (HSI) network should be available to more than 2.2 million homes. In Europe there are too many providers, especially compared to the United States or China. Do you think that market consolidation could lead to cheaper service rates for consumers? We believe in competition and that we can be successful if our clients are offered a wide range of top quality and best money-for-value services. However, price is only one factor in the telco sector. Customer satisfaction is strongly influenced by the overall quality of experience. In our case both the value-for-money factor and quality fare well in international comparisons, too. In Hungary, what is at stake most is who is going to be able to build the best quality mobile network. The average speed and quality are far better at any Hungarian provider than in many European countries. Your initiative encouraging kids to become ICT specialists has been welcomed. What measures do you have to attract the best talent in the country? Unfortunately, there are not enough ICT experts on the market, even though this career has some of the best prospects. The ICT industry must react to this problem, that’s why our “Become an IT Expert!” program was initiated. We would like to introduce the digital world to the pupils in their own language, and we also want to end misperceptions about the profession. Telekom’s SmartDigital program has further taught 60,000 students how to use the internet safely.

TIBOR RÉKASI: “DISRUPTION IS ALSO AN OPPORTUNITY” Disruptive technologies are part of the startup “weaponry”. How can T-Systems use their inherent advantages for its own good? Disruption is a weapon for those who know how to use it. Groundbreaking technologies offer opportunities for new services to come into existence that were previously beyond imagination. The cloud is a great example of that. For that matter, in the case of SaaS solutions, a fast internet connection can deliver the same functions as a CRM system of five or ten years ago. Our job is to gain an oversight of what processes are unfolding. We can operate as a true transformation partner only if all the challenges that individual industries face are clear to us. Radical changes in business models in the past decade have normally been based on opportunities provided by technology, so if you are familiar with technology trends you are less likely to be caught by surprise. How can your participation in achieving the objectives of Digital Hungary, the nationwide program to make high-speed internet available everywhere in the country, help boost your reputation or market share? The digitalization of cities is an unstoppable process. The question is rather at what pace digital services will come to life and into what system they will be organized. T-Systems strives to draw the attention of cities to how they can get the most out of their existing digital urban development projects, and how they can be integrated into one single system via development concepts that are at the drawing board stage at best.

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Real Estate news

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Duna Tower office complex sells for €52 million

The Duna Tower office complex.

GTC added to its diverse portfolio of properties in the region with the purchase of one of Budapest’s tallest office complexes, which is located next to the Danube River in the Váci út corridor business district.

completion of the investment transaction for both parties,” he said. CE Land represented the seller throughout the investment transaction, having acted in an asset management role for Duna Tower, signing 6,000 sqm with new tenants.

Diverse development strategy

GTC has been a prolific developer in CEE for several years and its Budapest portfolio consists of Center Point, GTC Metro and Spirál. The company is pursuing a diversified regional development strategy, with projects in the ever-popular Poland office market and – at the opposite Gary J. Morrell extreme – the undersupplied Belgrade office market. GTC is close to completing The Warsaw stock exchange-listed the first 10,000 sqm phase of Forty-one developer and investor GTC has in Belgrade, its fourth Belgrade office completed the purchase of the 31,500 project. The 27,000 sqm project will be sqm Duna Tower office complex for delivered in three phases and is the first approximately €52 million. This is the certified LEED Gold office building in latest significant transaction in what is Belgrade, according to GTC. The Duna Tower deal forms part of a widely seen as a rejuvenated Budapest investment market. GTC see value-add trend of increasing Budapest investment potential in Duna Tower, a complex that volumes that is expected to continue into next year. Although the fundamentals in was originally delivered in 2006. Duna Tower is arguably the highest the Budapest office sector are generally office complex in Budapest at 60 meters, regarded as favorable, with falling vacancy with 16 floors of space overlooking the and limited pipeline that is putting Danube close to Árpád Bridge in the pressure on rents, there remains the Váci út corridor business district. “The problem of a limited supply of well-located, purchase price reflects a circa 7% yield on fully-leased class “A” office developments current rent income with an actual 80% to meet the needs of potential investors. occupancy. We will invest in upgrading A further issue with regard to market the building’s specification and amenities development is the lack of transparency. “A major concern on our market is the to improve the service and comfort level for new and existing tenants,” said regulatory environment. Authorities are more focused on small issues, and in Thomas Karman, CEO of GTC. Csaba Széll, managing director of most cases the big picture considerations CE Land Holding Asset Management are sacrificed,” said CE Land’s Széll. “I Ltd., which worked on the transaction, also think that our real estate market has commented that the deal is important lost its cutting edge for investors, with for the Budapest investment market a few exceptions. In my opinion, the as it reinforces its recovery after more major obstacle is the small size of the than six years of depression. “Based Hungarian market and its lack of growth on a fully transparent public tender in every means. Along with that, you process, a significant number of hardly find any transparent investment prime investors analyzed the building deals unfortunately. The recent Duna technically, financially and legally. After Tower deal that we concluded was a very the completion of this thorough process rare positive exception as all participants the asset was still attractive for many experienced a fully prepared and preinvestors, which resulted in a successful defined tender process.”

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Investment anticipated at year-end meet

Participants at the Portfolio Property Investment Forum were bullish on Budapest, Bucharest and Belgrade and down on traditional competition, such as Warsaw. Gary J. Morrell

Investment interest is turning away from the overbuilt neighbors and more toward Budapest, judging by the sentiment gauged at a November 24 conference on regional real estate. The annual Portfolio Property Investment Forum provides a barometer of the state of the investment market in Budapest, and the mood at the gathering was more positive with regard to the coming year, with increased investment volume forecast and improving fundamentals in the office and industrial markets. However, obstacles to further development continue to be a limited supply of investment grade product, the difficulty and expense of sourcing both development and

investment finance, and the inherent unpredictability of the legislative and local planning processes. “Budapest, Bucharest and Belgrade could be seen as the engine of CEE investment,” said Cristian Ustinescu, CEE transaction manager at Immofinanz. In the CEE context, Warsaw is seen as increasingly expensive and the office sector is showing signs of overdevelopment as developers and investors look to secondary cities. Although Warsaw and Prague remain the favored destinations for institutional investors, they are considering investments further south and east. With regard to the investment mood, a poll of the more than 300 real estate professionals saw a downturn in the German economy as the biggest risk in the CEE investment market in the next 12 months. As to the choice of investment sectors, 38% of the audience chose office, followed by 23% who chose hotel, with 12% and 11% for logistics and retail respectively. Some 41% of the delegates said a lack of finance was the main barrier to growth in the Budapest office sector, with developers commenting that it is not easy to source debt finance as banks are still very selective in Hungary.

“Property in Warsaw has become very expensive to buy and very cheap to finance, so it does not make sense for us to finance. Czech Republic is very similar, although the market is smaller and a little more favorable for us,” said Péter Számely, head of CEE real estate finance at HYPO Niederösterreich. “Hungary is an interesting market and I hope we will become more active as we have already started discussions with clients. I would mainly focus on office, as with the lack of delivery the risk-return relationship is good from the perspective of lenders. If a project is good, then financing can be found and in this way it becomes competitive. With regard to the LTV ratio, I would probably go up to 65% for a well-built, well-leased property in a good location,” Számely added. When it comes to the residential market, the 27% VAT on new purchases is regarded as a brake on market development. An estimated 38% of new residential purchases are done for investment purposes, with an average of 70% of this in cash and around 30% leveraged. In general, participants agreed that Hungary needs to promote itself more effectively with a presence at international expos such as Expo Real in Munich and MIPIM in Cannes.

Recognizing achievement Barbora Dermeková, left, a valuer at JLL Bratislava, center, became the inaugural recipient of the “Chris H. Bennett CEE Memorial Award” – an annual prize to reward a significant display of professionalism by a successful RICS candidate in the region. The nomination process was controlled by RICS CEE country manager Anna Orcsik and overseen by John Verpeleti, right, of Colliers International, a former colleague and friend of Chris Bennett. The award was created by RICS to honor Bennett’s substantial contribution to the CEE real estate industry over many years. The first president of RICS in Hungary and one of the region’s most experienced and highly acclaimed property professionals, he died in 2014. (Photo: Portfolio)

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2015.12.09. 20:27

4Special Report BBJ

Digital markets & innovation

Youngest generations challenge marketers

Gens Y and Z are careful with money, easily bored and challenging to reach, according to a local expert. But the payoff for reaching this market can be big. levente hörömpöli-tóth

Changing use of internet and social media is altering the way marketers seek to spread their messages, and this is especially true of those who want to build lifelong customers by reaching tweens, teens and young adults. Generation Yers grew up with lots of gadgets. But Gen Zers have an even more hard-core affinity with technology. Reaching them requires a new approach. “Selecting the right channel is a makeor-break factor to start with,” says Mária Törőcsik, professor of marketing at the University of Pécs. “Of course, social media leads the pack here, but the so-called ambient marketing works as well – where the young are bombarded with messages at their hang-out places such as fitness clubs or other venues for other leisure time activities,” she says. Recognized as an expert in the challenging field of reaching the younger generations, Törőcsik is a much soughtafter speaker who has orchestrated several in-depth research projects on the topic. The lessons she shares are useful for anyone trying to sell to the vital youth market. The latest findings show that successfully reaching out to tweens and teens requires well-planned tactics, according to Törőcsik. “They hate to be bored and they refuse to digest lengthy information: ‘Get to the point, tell me what I really need to know, but then just leave me alone!’” she explains. “Marketing messages must be crafted along these lines.” As Törőcsik notes, we are talking about very pragmatic consumers here: “Advertisers had better offer some benefits, possibly big ones or at least a gift, together with what they want to sell, otherwise they are bound to be ignored fully.”

Recessionary knowledge

The influential Cassandra Report, an annual survey of trends among younger generations, notes that those under 20 experienced the recession as kids or adolescents and therefore they are eager to save whenever they can. Buying cool running gear at discount chains such as Lidl or Aldi is not embarrassing at all if

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Talk to them with technology: A young woman communicates in Budapest. (Photo: Jessica Fejos)

“Get to the point, tell me what I really need to know, but then just leave me alone!”

towards their preferred technology, personal care and grooming brands.

You can’t be serious!

This brand-consciousness and the overall shopping attitude of people in young age groups have an impact on older consumers as well, according to Törőcsik. “The young used to look at the quality is good enough and the items what the older ones did. Now it’s the on sale are considered trendy. “They’re other way around. Society prefers the much more savvy about their money young, everybody wants to live like because they’ve grown up at a time those aged between 20 and 30 – no longwhen you have to be much more savvy term commitment, premium products.” about money,” the report says. “They are Nonetheless, she notes, the young still looking at value differently and looking at rely on their parents a great deal and how an item is made, how long it will last.” Mária Törőcsik, professor of marketing at are now part of the ‘purchasing dialogue’ Generation Z is also growing up with more than ever before. the sharing economy and ownership the University of Pécs. A report by the digital agency Deep means far less to them than it does even to members of Gen Y. Access often beats sells, but products associated with Focus found that 93% of parents surveyed ownership in their priority ranking: particular scenes should also be able to said their tween and teen children have Just think of the concept of streamed find an audience. Authentic, practical, at least some influence on their family’s music. This mindset will have critical and interesting are the buzz words here.” spending and household purchases. The young love to be loved and they “The young are turning into latent implications on shoppers’ relationships and engagement with brands in the expect that of brands too. They live opinion leaders,” Törőcsik notes. in “an era of self-celebrity” and are “Parents don’t take selfies in changing long-term. These features are important to consider accustomed to an incredible level of rooms, but in the back of their mind they have their daughter’s comment made for existing brands, but for those yet to be narcissism, she notes. The young also long for uniqueness. the other day saying, ‘Come on, Mom, created from scratch they are even more so, according to Törőcsik, who notes that According to the Cassandra Report, 63% you can’t be serious about wearing that of Gen Zers would like to have a product brand!’” niche markets are always out there. With parents listening to the younger “You just need to spot the right one,” that no one else owns. Significant she says. “In terms of food, anything majorities of them link luxury to quality. generation, marketers apparently cannot linked to organic farming or fair trade Large majorities express extreme loyalty afford to ignore them.

2015.12.09. 20:31

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Budapest Business Journal | Dec 11, 2015 – Jan 14, 2016

Big payoffs seen in using Big Data As the volume of data explodes, businesses need to assign serious resources to make sense and gain value out of an asset that they are building every day. levente hörömpöli-tóth

Executive, financial and information officers at the ‘C-suite’ level are soon to get a new companion. Apart from CEOs, CFOs and CIOs, recruitment firms now need to prepare for a constant headhunt for CDOs, Chief Data Officers. Since up to 90% of all data in the world was created in the past two years, it is little wonder that whilst the CDO position virtually didn’t exist back in 2011, by 2015, 9% of corporations employ one, according to a new study by the Economist Intelligence Unit (EIU). Data strategy has become a top corporate priority and now there is a clear correlation between good data management and financial success. But companies’ attitudes have also changed towards data. They are less focused on its quantity or the speed of its accessibility. The value it can provide for their business counts a lot more now. As an important center for computer science, Hungary has its share of Big Data experts, and more companies here are understanding the value of their own troves of information. They realize that the reams of data they collect can be analyzed in different ways to understand their markets and their customers – and to gain other types of knowledge that can serve their businesses. “Company executives must realize that accumulated data makes up an integral part of their assets,” Dr. György Bőgel, professor of management at CEU Business School tells the Budapest Business Journal. “It needs to be looked after, somebody must be put in charge of it and an expected yield needs to be assigned to it. You need to know where to find it, what to use it for, what answers it may give and who can provide expert assistance in relation to it. No smart enterprise can exist without it today.” As Bőgel points out, senior managers are generalists and they are supposed to have some basic general knowledge about every area the company deals with. “But I’m afraid many CEOs lack this knowledge,” he observes. According to IBM, around 2.5 quintillion bytes of data is created worldwide every single day, which is equivalent to a storage space of 2.5 million hard discs of one TB each. “The volume of data is ballooning. There is enough processing capacity around; data scientists, however, are a rare breed,” Bőgel says. In fact, even today relatively few businesses rely on Big Data solutions and tools, and this also applies to countries more developed than Hungary.

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“Big Data can give excellent answers to questions such as how to make e-commerce more successful, cut maintenance costs, streamline the supply chain or where product innovation is needed. It would be a shame to leave Big Data unused. But we are only at a learning stage.” respondents labeled risk-aversion as critical, communication had to be made in such a way as to include the fact that Aegon’s pension insurance offered guaranteed yield. Different messages were drafted for people with different saving patterns, risk-taking attitudes or for those who would primarily expect the state to provide pensions. “This is how you can draw up main target groups and Dr. György Bőgel: Accumulated data is an asset. (Photo: Mátyás Pődör) address everybody with the argument that is most important to them. How much more effective is that than simply repeating three slogans?” E-commerce expert Csaba Zajdó confirms that data-centric, real time personalizing methods are becoming widespread in the case of webshops. “Nearly all of them are based on the analysis of visitors’ behavior and they try to draw conclusions from past preferences, for example what products they have viewed and bought before, or from realtime behavior, like how much time they spend on a given page or how far they scroll down it.” There is a wide range of techniques to choose from when it comes to tailoring the buying process. “The so-called recommending systems attempt to guess buyers’ taste and recommend them products that they are likely to feel positive about. The intention to leave a webshop can be projected with software such as the one our startup, OptiMonk uses that detects real-time behavior by mouse movements. But personalization based on location or weather is nothing new, either. In the latter case, different offers are shown if the sun is shining or if Tímea Kádár: It helps to have a scientist. Csaba Zajdó: OptiMonk follows your mouse. it is raining,” Zajdó explains. The biggest obstacle is represented On the other hand, Big Data provides A message made just for you by the lack of data. For webshops with an opportunity to build smart systems Using Big Data in everyday marketing small traffic flows or for new customers, such as cities, health care, agriculture can be particularly challenging and, recommendations cannot give exact and so on. Building them requires as Tímea Kádár, head of the online predictions. “The more data is available, well-defined steps: Problems must be marketing department at Aegon the better projections are provided by this translated into data, which must then be Insurance notes, it helps to have a good kind of software,” Zajdó highlights. stored, transmitted and analyzed. In the data scientist on board. “He or she keeps As Professor Bőgel notes, the end, recommended actions are worked an eye on the targets first, on what we opportunities inherent in available data out and implemented. actually try to get out of something. Then are tempting, but enterprises must ask “Elements of such Big Data ecosystems, the way to get there must be planned. themselves certain ‘how-to’ questions. as I call them, like companies, experts Data accumulation cannot be an end in “And Big Data can give excellent or schools, deal with one or several of itself,” she says. answers to questions such as how to those activities in one or more industries,” Kádár mentions a recent campaign make e-commerce more successful, cut explains Bőgel, who has written several where Aegon surveyed people’s maintenance costs, streamline the supply books on the subject. “The ecosystem perception of having private pension chain or where product innovation is is functioning if all of its elements exist, plans. “Big Data can definitely help fine- needed. It would be a shame to leave they are all highly developed and smooth tune such campaigns, especially when Big Data unused. But we are only at a communication prevails between them.” setting priorities,” she says. Where learning stage.”

2015.12.09. 20:31

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Marketing goes digital – but not completely We may live in the cyber age, but it would be a mistake to give up traditional marketing methods, according to local experts. They recommend an integrated approach where online and offline toolkits are both used to keep your campaign in motion.

SpringTab seeks to know customers better

levente hörömpöli-tóth

With 3.2 billion people now online globally, some might mistakenly conclude that marketing now has a present and a future only in the virtual world. True enough, online campaigns can easily be measured and are often more costeffective than techniques originating from the pre-digital era. But according to a local professional in digital marketing, success involves taking advantage of both types of toolkits. “You need to have an integrated approach in terms of marketing tools. First you need to make it clear what business results you want to achieve and what your most dedicated clients want. This is the 80/20 principle, 80% of the profits come from 20% of the customers. The common denominator of the two will provide the integrated strategy,” Péter Szántó, digital business development expert tells the Budapest Business Journal. Step one is always getting to know your target audience better. Szántó’s latest project, SpringTab, helps brands do this by analyzing and tracking the digital footprint of would-be customers and providing them a personalized experience in an innovative way (for a case study of how your brand could use this new solution, see story in the box opposite). “The buzz word O2O still has substance in today’s digital word, meaning either Online to Offline or Offline to Online,” Szántó says. “Great examples can be mentioned for both how customers can be drawn into a brick-and-mortar store through internet activity, and how people can be inspired by the in-store experience to communicate with your brand on Facebook or Instagram. This must be treated as part of a heterogeneous process,” he explains.

Péter Szántó: ‘You need to have an integrated approach.’

“Great examples can be mentioned for both how customers can be drawn into a bricks-and-mortar store through internet activity, and how people can be inspired by the in-store experience to communicate with your brand on Facebook or Instagram.”

base every day,” Weiler says of priority number one in his business strategy. For brand building, he sees outdoor and television as ideal channels, especially now that TV advertising rates have slumped so much that even smaller companies can afford them. A recent international survey by Regalix provides a more differentiated result. According to that, television ranks very low, with face-to-face gatherings such as speaking engagements, seminars, and trade shows and the like judged most effective by B2B Never underestimate the power of marketers. guerilla campaigns “We also believe in PR. Therefore we Péter Weiler, president of Dating Central create valuable and relevant content on Europe Zrt., has 20 years of experience dating related issues. The best way to in online advertising and couldn’t agree make clients click is by first convincing more. “You need to get the right mixture, them that we are experts in the field,” that’s what counts.” To operate a top Weiler says. A favorite tool of his is dating site you need a very marketing- conducting guerilla campaigns. A year intensive approach, as it tends to be new ago to support its new casual dating site, people who join to search for the right it put a giant banner up on a balcony on partner. “You need to expand your data Madách tér – an epicenter of the Budapest

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party scene – that read: “I know you are registered on that dating site. Go to your lover, you bastard!!! I’ve changed the locks!” The ad went viral within minutes and generated invaluable publicity.

It all comes down to psychology

Szántó stresses the importance of psychology when harmonizing tools such as data driven marketing, remarketing, personalization or augmented reality. “One dimension is strategy and knowledge, another is the tool used and the specific activity,” Szántó says. “We always have to shift points of view between customer needs, business goals, and technology.” With the above in mind, you may wonder how the domestic e-commerce sector compares according to global standards. Weiler is very positive in this regard. “The Hungarian e-commerce players do a great job. Foreign competitors have a harder time to compete because the domestic market is well protected by the option of payment-at-delivery and personal collection of goods. Up to 80-90% of Hungarian consumers prefer paying at delivery, and competitors from abroad can fight that comfort feature only by offering very low prices.” According to Szántó, Hungary is not Silicon Valley, but small innovative firms run by executives with international experience – for whom the only true benchmark is globally competitive quality – work hard to be part of the game. “There’s a great organization called Alliance for E-Commerce (SZEK) in Hungary that supports the active players with special events and a strong network.

The hottest marketing methods all have the ultimate aim of personalizing content and promoting offers to a specific target audience. SpringTab seeks to raise that to a whole new level by measuring and analyzing customer activities and targeting digital content on websites and mobile apps based on social data – the same way Facebook ads do for advertising. “Understanding our visitors on a deeper level is like shaking hands with everyone on our site and figuring out what is the greatest value we can provide for them,” says Péter Szántó, founder of SpringTab, as well as the local startups B Creative and TouchCo. “This is what the mission of all digital vendors and content providers should be. Once they know what the customers want, they just need to give it to them in the best possible way – and this is what SpringTab is for.” The following case study reveals how astonishingly such a method could create a tailor-made experience for precision-guided advertising: “Mark joins our brand in February and among other information we find out that his favorite team is FC Barcelona and he loves the music of Oasis. So right after he registers with our brand, a video clip of Wonderwall is posted on Mark’s Facebook page just to cheer him up. In our welcome e-mail there is further reference to our brand’s big promotion in March where a long weekend can be won. Since the destination can be anywhere in Europe, Mark would get a special message with images of Barcelona via any of our channels, including our mobile app. Though Mark didn’t win, he started a relationship, so his status changed. On this occasion anything can be offered. For instance it is traceable that he and his girlfriend have both liked scuba diving content before, so we can offer them related products or services. “Mark has friends, too, and it would make sense to collect more information on them. Instead of investing in costly market research, SpringTab can reach them by asking them to fill out a quiz on, say, their favorite smartphone app, which can then be utilized as a promotion as well. This way a lot more people can be reached, since in social media channels one person has 130 friends on average, meaning that a webpage with 1,000 fans can reach 130,000 relevant users. “Mark makes his first purchase in August, which places him into a different status and gives an occasion to send him SpringTab infographics about his activities in the previous six months. The infographics can be paired with a promotional voucher, which Mark uses, and a special Christmas promotion campaign should be launched to tempt Mark and his friends one last time this year to buy something connected to our brand.”

2015.12.09. 20:31

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Budapest Business Journal | Dec 11, 2015 – Jan 14, 2016

Hungarian e-payment firm promises cheaper transactions Barion says it can charge much less than bank cards because its source of revenue is the purchasing data that customers generate in using the payment system.

“Payment to us is like search for Google. The payment service itself is offered for free or very cheap; in return we get the data of users who can then be targeted with advertisements.”

levente hörömpöli-tóth

Local startup Barion Payment Zrt. is aiming to become a leader in mobile payment solutions through a unique business formula. Rather than trying to make money from the transaction fees, the firm is seeking to be a cheaper alternative to bankcards, offering transactions at little or no cost. The company makes its income instead by gathering data on the purchasing Tamás Bíró, co-founder and director of marketing at Barion Payment Zrt. behavior of its customers and using this to target users with tailor-made come up with new ways of advertising accounts and users can send money to that we are not even aware exist. And each other inside the system. There have advertisements. Tamás Bíró, co-founder and director of retailers’ needs are also changing, which been companies that paid the VAT this way or made an agreement with their marketing at Barion explains the formula, we must adapt to. suppliers to apply the payment method, and how his company plans to succeed. since no transaction fee is charged for Are you currently looking in-system transactions. for an investor? Bankcards in Hungary can be used at 70,000 points of A: Our “ticket round” sale. How can you convert investment is closing just now, where ADVERTISEMENT stores and users to take up your smart around HUF 100 mln was raised. The -phone and online bankcard payment next “A” round should follow in 2016 with system? a few million euros. We are counting A: We could charge a transaction fee for on exponential traction in Hungary. For moving money. PayPal’s commission for one thing, the largest second-hand swap international sales is a 3.9% transaction platform, jofogas.hu with its 800,000 fee, plus a fixed fee based on currency users should join the scheme. Of course, received. But that’s not what our main we won’t expect everybody to pay revenue stream should be based on. electronically overnight, but one e-mail Our ultimate objective is to push as and a password will do for any seller many users as possible to use online to get their money electronically and bankcard payments in web shops. By without any transaction fee. This should registering users, Barion will trace their be a great incentive. purchasing behavior, which is invaluable for e-commerce purposes. On the basis What if Barion becomes of such information, an advertising the target of a hostile acquisition? system can be built where products – with or without promotional offers – can be A: It’s no secret that our ambition is a recommended in any web shop, even if lucrative exit. In order to do that our activity must reach a level where a big it’s the first time you ever visit it. provider feels its territory is threatened. How much do you expect to The years 2015/16 will be about market consolidation and by 2020, at the latest, be able to charge for such there should remain only a handful of activity? A: The business whose products top players. I’m not saying it’s going to or services are the subject of this be a cakewalk, since both retailers and recommendation will be charged a fee. Of consumers in Hungary still prefer hard course, there are stages in this respect. cash upon delivery. Experts refer to tax You can charge by clicks or purchases. evasion and lack of trust as reasons. If the fee works like a commission, it could reach rates normally charged by What about your crossborder ambitions? distributors. In beauty care and insurance this rate is easily 10-20%, with other A: We wouldn’t stop at the verticals it’s different. This way, basically border. Our development team is working a whole new sales channel comes into on extending the system to use it with existence. Payment to us is like search different currencies, starting with the for Google. The payment service itself is euro. offered for free or very cheap; in return we get the data of users who can then be Do you have anything to offer to businesses targeted with advertisements. as well? Online advertisement has its A: Barion functions as a bank account own problems, though. and it takes one minute to register. You A: We are confident that we’ll can make a transfer to conventional bank

How would you summarize the range of solutions Barion has

to offer? A: Ultimately our concept bases itself on three major pillars. Apart from cheap bankcard payments, payment options optimized for the sharing economy are offered. If you buy, say, vegetables and fruit from ten different organic farmers, you can do it under one transaction. On top of that, our Bluetooth-based near field payment provides the opportunity to pay at our contracted POS. The Barion software is easy to integrate, but we are aware that the latter function will be exciting for retailers only if there are enough users. We are confident that this will happen, thanks to our business plan.

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Promising apps come up w The Central European Startup Awards provide a great platform for hot startups to seek the limelight and network for investment. Two Hungarian award winners are ready to take their project to the next level. levente hörömpöli-tóth

Helpy CEO Timur Csillik.

Two local startups have been enjoying increased attention since garnering prizes this October in the Central European Startup Awards (CESA), a series of events organized in a different country in the CEE region each year. Helpy, which finished in the top ten, is a sharing economy app focusing on house-cleaning, while Shoka App and Bell, a digital visibility/bell/anti-theft device that comes in the form of a bicycle bell, is an internet of things application that won “Best UX (user experience) Startup of the Year” at CESA.

The awards are an honor, but according to Péter Kovács, one of the masterminds behind CESA, being awarded is not the only point. “Our mission is to bring together the local ecosystems. All attention is directed to the global startup centers like London, New York or Singapore. Only by working together on the local level can we gain weight,” he tells the Budapest Business Journal. The grand finale serves as a perfect networking spot. “This year 300+ influential decision makers came to Vienna and all ten CESA countries were represented, which is a great sign,” Kovács notes. “The whole point is to exchange information and learn from each other. The so-called startup safari scheme has the very same purpose. In around a dozen European cities you can sign up for a sort of guided tour and you will be introduced to key startup figures of the local ecosystem from founders to investors to accelerators.” Another aim is to organize similar contests in other parts of the world. “CESA is a ‘chapter’ of a global brand, Global Startup Awards, that we are building continuously. In fact, alongside the Nordic Startup Awards that takes place in Iceland next May, we have managed to penetrate into Asia as

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“We know how important it is to trust fully the person you are letting into your house, that’s why candidates wishing to work for us are subject to a multiple-stage selection process.” well. Thus, the ASEAN Startup Awards final is coming up in March 2016 in Bangkok. But we aim for more. That’s why we have started preparations to introduce the brand in India; however, since it’s a time-consuming process, it’s unlikely that it will be up and running before 2017.”

Help from Helpy

Budapest households have been enjoying the comfort of having a home cleaner in mass numbers for quite a while now. According to the European Federation of Cleaning Industries (EFCI), the sector has been constantly expanding over the last 22 years, at an impressive annual rate of 9.1% on average. However, services for individuals amounted for only 2.8% of the sector’s €64.5 billion turnover in Europe in 2012. The main reason for such underrepresentation is clearly the fact that home cleaning is done almost exclusively off the books. But this is also where trust is a must; therefore people rather rely on informal channels to find the right person and they do not turn to a cleaning contractor. Helpy, a newly launched cleaner booking platform, aims to overcome these barriers by offering a customercentric strategy and backgroundchecked staff. “We know how important it is to trust fully the person you are letting into your house, that’s why candidates wishing to work for us are subject to a multiple-stage selection process,” CEO Timur Csillik explains to the BBJ. “After admission, their work quality is constantly monitored, not least thanks to client rating. Permanent negative feedback results in dismissal.” Surprisingly it’s not men, but rather women aged 25-40 who are among the most interested. But oldies sign up in unexpected numbers as they can be targeted on Facebook well, their favorite online hangout place. The concept popped up in Western Europe only one and a half years ago, but Helpling, the biggest player, is already pursuing an aggressive growth strategy, and bought a major rival, Hassle, for €32 million. “Our priority is to build a strong CEE presence and unify a fragmented market in the region within 2-3 years. If it comes to an exit at some point, we want to have a system that can be integrated easily,” Csilli says. All it needs is €200,000 to enter the Romanian and Polish markets, two

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expert opinion

Small and big energy customers welcome Márton Szépfy Head of Sales MET Hungary Ltd.

Shoka CEO Dániel Falus. crucial steps to achieve its abovementioned goal. “Demand is huge, orders are expected to skyrocket. But we are ready,” Csilli insists.

Shoka for a 21st century biking experience

“Startup awards are all about creating buzz for the concept and it reassures founders that it makes sense to carry on. But, after all, it’s the market that decides your fate,” says Dániel Falus, CEO of Shoka. CESA’s “Best UX Startup of the Year” promises to turn your bicycle into a ‘smartbike’ through its special bell. “The bell is the most important safety feature for a cyclist in the daytime; it has the same function as a lamp at night. While Shoka Bell is twice as loud as standard bells, it has different ringtones for cars and pedestrians and it navigates you with its led light and audio system,” Falus explains. Statistics support the idea that there is no such thing as enough safety. According to European Road Safety Observatory (ERSO) figures, the number of cyclist fatalities dropped by a third in the EU in the 20042013 period. However, in 2013 still around 2,000 people were killed in bike accidents, and they make up 7.8% of the total number of road accident fatalities. An app enhances the user experience as its anti-theft function alerts the biker if the vehicle is taken away, but also sends a signal if an acquaintance is riding nearby. “We are committed to utility cyclers, and we are bringing them the product they deserve. By 2017, Shoka will be widely available with possible features like a camera add-on,” Falus says. Growth projections couldn’t look better. In large European cities, bicycle penetration is 20% on average and in Europe alone 17 million new bicycles are sold every year. No wonder Shoka is about sign an agreement with a Singaporean investor that, along with a crowdfunding campaign scheduled for next March, should give the ultimate push to get Shoka Bell going for real.

Servicing smaller or larger customers of the energy market requires completely different skills, as energy trader MET Hungary has learnt from its own experience. But how does a new joint venture, established with Magyar Telekom, will affect all this? MET, founded in 2007, is now going back to its origins. In the first years, the company’s focus was on large clients from energy-intensive industries and from the energy wholesale market. Later, its portfolio was gradually expanded, from a few dozens to a few hundreds of customers. This meant that the way of functioning had to be adapted as well, recruiting more key account managers for instance. After the “wholesale era”, 2012-2013 was a genuine expansive period, driven by the retail segment. Although MET Hungary was already present on the public procurement and the SME (small and medium-sized enterprises) markets as well, these were not predominant parts of its activities. Another change occurred with the acquisition of the retail electricity business (2014) and the retail gas business (2015) of GDF Suez. After dealing with natural gas for years, selling electricity was a new challenge for MET. This was not the only change as the number of clients increased significantly too. GDF also sold its 74,8 percent stake of Dunamenti Erőmű – the largest gas fired power plant in Hungary – to MET Group. New developments did not stop there. Sales channels, so far based on the activities of key account managers, were complemented with two new teams based on former GDF employees: mass sales and public procurement. New colleagues and members of the MET sales department together constituted an even more effective team.

A new structure has been formed in which the whole retail portfolio is covered, from small enterprises through public procurement clients to big VIP partners. MET widens is present on the entire public procurement market, seizing every single opportunity. After natural gas, electricity trading has also become a MET specialty bringing outstanding results. However, working with different clients requires completely different skills as well. The cooperation with large industrial clients is based on complex, tailor-made products and a highly professional approach, while in the case of SMEs the main goal is to reach as many partners as possible. Besides, smaller enterprises are keen to minimize risks, so they usually opt for fixed energy prices instead of more complex indexed formulas. Reaching and servicing a great number of clients will be the main objective of E2 Hungary, a new joint venture of MET and Magyar Telekom that will start operations on the 1st of January 2016. The equally shared joint venture will provide natural gas and electricity services for business customers. The two parties bring their own sets of strengths that will complement each other – in the case of Magyar Telekom, the experience it has gained in customer servicing, matched by MET’s comprehensive knowledge of the wider energy industry. As mass sales and public procurement activities will be transferred from MET to E2 Hungary, MET will continue to efficiently service its larger clients, in a way going back to its origins. At the same time, the energy trading company will look at further acquisition opportunities – not only in Hungary, but also in other countries of the region – since the acquisitions of recent years have produced favorable results. At present, the Hungarian energy market is characterized by a strong consolidation process, with trading companies leaving and others entering the market. This consolidation helps maintain the intensity of competition, certainly a good news for customers.

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New laboratory awaits Hungarians with ideas Ericsson offers its Innovation Garage as a place where entrepreneurs and students can turn interesting ideas into commercial products. Zsófia végh

Got a good idea? Ericsson will let you pursue it in its “Innovation Garage”, an R&D lab open to developers, startups and students, who can get the space, equipment and other support they need to develop good ideas so that they can become commercially viable. After opening its first such facility in Stockholm last year, Ericsson chose to set up its second innovation hub in Budapest. Sándor Albrecht, director of IP and transport at Ericsson Research, talked to the Budapest Business Journal about the project.

Why did Ericsson choose Budapest as the location of only its second “garage” in the world? A: It was the combination of a series of fortunate coincidences. We knew we wanted something innovative in the region – obviously, there had to be demand from

the CEE and Hungary. We were already on good terms with the Central European Business School and were discussing potential partnerships. Setting up an Innovation Garage at the firm’s headquarters in Stockholm was my idea but we were also aware that more physical spaces are necessary to make it work.

people the opportunity to pitch the product to the group CTO.

How much has the potential of Hungarian IT startups affected the decision? A: It has impacted it a lot. Ericsson already has a research lab in Budapest, we have strong ties with universities and a high number of inventions have come from here. We have also followed the progress of startups like NNG, Ustream, BalaBit, and Prezi that have been able to grow and attract investors. People’s willingness to start new things and pursue an idea also mattered.

Who can work in the garage? Who is it open to? A: You need an idea; it doesn’t have to be a business case, yet it should be verified for potential customers. Graduates are also welcome – we are about to launch a global call for teams of university students to come up with ideas for our cloud and cloudbased network services. The garage is also aimed at Ericsson staff – to give them the opportunity to grow besides daily software development and have their ideas incubated. [These people will stop working for the

Sándor Albrecht: ‘You need an idea.ʼ duration of their project.] We would like to see firms like Magyar Telekom or Vodafone as our partners, and Hungarian firms too like MOL.

How does Ericsson benefit from it all? A: By learning a lot and sizing up what is needed and what is not: Fail fast or succeed fast. I like to call it the second operation system of Ericsson, which may help find innovative projects. Big tech firms usually design something, test it and then try to find out what it is for. We flip it and first learn, then test and create a minimum viable product to show its potential – we want to verify a hypothesis – only after that can come the business decision. We then give

What experience do you have so far at the Stockholm garage? A: More than 25 Ericsson employees and at least the same number of Swedish university students have worked on a garage project so far. Employees like it and enjoy breaking away from everyday tasks. They also like the fact that they can work with a potential customer right away. In Stockholm, Ericsson partnered with Universal Music to create Streamr, a 5G-ready tool to enhance the concert experience through real-time sharing of live videos. Another project is to give remote financial advice to SMEs with Swedish financial group SEB as a partner.

What will be the main difference between the work of the Budapest garage and the one soon to be opened in San Jose, California? A: Our generic strategy is the same in all regions and cities. We would like to foster co-creation and open innovation among academia, small and big enterprises, and different industry segments. The difference between Budapest and San Jose is that Ericsson has a stronger relationship with engineering and science universities, like BUTE and ELTE, so we might get more projects from students than startups here.

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Curing IT headaches with cloud services Invitel, a major Hungarian telecom, is building its B2B activities by allowing firms to completely outsource their data, software and communication needs. CEO David Blunck explains that activity, as well as his firm’s consumer-oriented services. bbj staff

When it comes to business services, Invitel CEO David Blunck keeps his head in the clouds. “You can get safer, cheaper computing using cloud services,” he says. “CFOs should pay more attention to the cloud, as a way to save costs and improve security.” The fourth-largest telecom in the country, Invitel is the largest firm in the sector that is not part of a multinational. It was built up through mergers of companies that “have been around since privatization”, according to the CEO. While Invitel is a major provider of Invitel CEO David Blunck: ‘We are bullish about both of our business units.ʼ TV, broadband and voice connections to households, roughly half of its activities are in the business-to-business field of providing connectivity and IT solutions: David Blunck, CV: Invitel offers to connect its customers to David Blunck has been the Chief Executive Officer of Invitel since January. Before that, he was the company’s Chief Financial officer, a position he had held since a secure remote network, and to provide September 2012. Prior to joining Invitel, Blunck held senior finance positions with all the necessary data and software Colt Technology Services, Delta Air Lines and American Airlines in the United services that a firm might expect from Kingdom and the United States. He earned an MBA from Indiana University and an IT department. “We can install it completed his undergraduate studies at Georgetown University. and maintain it. We are their IT guy. By taking on a company’s day-to-day IT operations, Invitel can free up the CIO’s time to focus on key strategic IT adding that staying competitive means existing networks, according to Blunck, challenges,” said Blunck. In one recent example, his firm agreed keeping that network up-to-date. “Our who notes that “Invitel owns infrastructure to provide the IT needs of Alteo Group, TV strategy requires us to invest heavily in the biggest 100 cities in Hungary.” a Hungarian company that is involved in network upgrades.” Using its own networks, and other existing in trading energy and producing energy Along with the classic co-axial cable, infrastructure, Invitel can connect firms from sustainable sources – and that the firm has been adding a lot of higher- to a robust cloud computing system that reported more than HUF 6 billion in speed fiber cable to its original copper can allow them to completely outsource revenue in 2013. Alteo Group announced infrastructure. It has also developed all their IT needs, providing them with on November 13 that it had hired Invitel extensive content packages, so that its systems that are better and cheaper than to provide IT-outsourcing services for HDTV subscribers can get the widest the ones they would develop in-house. the next three years. Alteo Group said selection of channels available in the With the possibilities provided by cloud the deal came after Invitel successfully country, as well as services like language computing today, it only makes sense handled the IT fusion needed when Alteo selection, an electronic program guide for customers to take advantage of the acquired Sinergy Energiaszolgáltató Kft. and video-on-demand. And by offering technology, Blunck says. complete packages, it is able to sell this summer. “In the early days of computing you internet and telephone services along had the dumb terminal, and the brains were all in the mainframe. In the PC era, with its TV services. HDTV for consumers “Our TV strategy is working,” Blunck the brains moved back to the desktop,” The consumer-oriented end of Invitel’s says. “Nearly one-in-two Invitel according to Blunck. “Now the pendulum business is a natural outgrowth of the residential customers take a TV product is swinging back to the cloud world.” firm’s history as a telecom. In certain from us today.” Still, he adds, countrywide, Blunck says that the trend is toward segments of the country, Invitel and the Invitel has captured only 4% of the market, a convergence of all our data and companies it came from were always which means “we have plenty of room to communication. the leaders in cable networks for high- run”. “We are moving to an all-internetprotocol world, where there is one pipe, definition television and internet. As Blunck explains, this is a very Selling the cloud to business with bits going through the pipe, whether robust infrastructure. “TV requires a voice or data,” Blunck says. “IT services speedy network, which is faster than an Invitel’s business-to-business services are wrapped around that.” internet or telephone network,” he says, have also been built upon the company’s Given that all the computing power

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“We can install it and maintain it. We are their IT guy. By taking on a company’s day-to-day IT operations, Invitel can free up the CIO’s time to focus on key strategic IT challenges.” a firm needs can now come through a connection to a cloud, it should not be an issue to users whether the information and processing power are local or remote. “If I’m having a problem with my CRM, it doesn’t matter if that system is local or not,” he says. “Why should our customers care which is which?”

‘Near cloud’ vs. ‘far cloud’ In fact, the CEO says, many customers still make a distinction between the data they store in-house, in the “near cloud” of a local data center and in “what I would call the ‘far cloud’, which is a remote server that could be anywhere in the world”. He suggests that some of these concerns are logical – because security, legal provisions and costs can be reasons for keeping some data closer to home – while others are simply due to a need to develop trust in the new technology. “We find that there are many IT directors who are understandably conservative,” says Blunck. “Some IT directors, if they could, would put their servers at the end of their bed.” Actually, Blunck says, data stored with Invitel is likely to be much safer than data kept in-house. “Usually, a server room is just a storage room, maybe with a lock on it,” he explains. “Invitel’s data center in Budapest has 24-hour armed security, 24-hour staff, redundant power connections, redundant cooling systems, temperature and moisture control, fire prevention and other important measures. It is a ‘top-tier’ data center in Budapest.” Still, because of customer concerns, Invitel often sets up a “hybrid” cloud system, in which clients use a combination of the cloud and local storage. “The hybrid cloud is a big part of our approach,” says Blunck. “A hybrid solution provides a migration path to the cloud.” For now, it would seem the way forward for Invitel’s business-to-business service is deeper into the cloud, and the way forward for its consumer business is through HDTV. While the two types of activities grew naturally from the infrastructure that was owned by Invitel and its predecessors, Blunck says that they now require a different focus, with their own separate units. For instance, he says, each unit has its own IT department. “We have moved away from the traditional synergies in order to serve customers better,” he explains, adding that the firm is seeing healthy growth in the business-oriented and consumer-oriented activities: “We are bullish about both of our business units.”

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WHAT’S

ON Catching Flies December 11, A38 Catching Flies is a 23-year-old musician, DJ and record producer who also produces remixes for artists such as Wilkinson and Rainy Milo. His music has been characterized as a sound on the “smooth, mellow side of electronic music” somewhere “between Flying Lotus and Bonobo.” Gelka of Warp, Om Records, Ministry of Sound and 17 Café del Mar compilations will also perform on the boat this evening. a38.hu Yves Robert Trio December 12, Budapest Music Center After completing his studies of flute and trombone at the Music Conservatory of Vichy, Yves Robert quickly gained a reputation by playing with such wellknown groups as Chris McGregorʼs Brotherhood of Breath, Bernard Lubatʼs La Compagnie Lubat, and the first edition of the Orchestre National de Jazz in 1986. He went on to form his own projects and reached international fame through his highly acclaimed ECM releases, especially “In Touch”, released in 2002. His music ranges from electronica to hip-hop flavored jazz to contemporary improvisations. bmc.hu

Fun things to d o in Budapest for the nex t t wo weeks.

Győr Ballet: Balance Ballet recital in two parts December 11, Palace of Arts This is the Budapest premiere of choreographer Cayetano Soto’s work to the score of minimalist composer David Lang. The piece deals with people’s instinctive fears, unjustified revulsions, inexplicable anxieties and everyday phobias. László Velekeiʼs choreographic interpretations of Soto’s work reveal the humorous and satirical side of these themes. mupa.hu Nigel Kennedy December 14, Budapest Sportaréna British violinist Nigel Kennedy will make a stop in Budapest to promote his latest LP “The New Four Season” which features revised renditions of Vivaldi’s “Four Seasons”. Kennedy’s strengths lie in the most popular tunes of Bach, Beethoven, Berg, Brahms, Bruch, Mendelssohn, Sibelius, Tchaikovsky and Walton, and his mission has been to familiarize as many people as possible with classical music and its modern renditions. ticketa.hu Tchaikovsky: The Nutcracker December 23, 27, Palace of Arts Premiered on December 18, 1892, “The Nutcracker” contains many musical

Ennio Morricone performs in Budapest in January. numbers, which rank among Tchaikovskyʼs most beautiful works. Deservedly enjoying huge popularity, the work continues to be performed around the world during the Christmas season. Today, the Christmas performance of The Nutcracker remains an indispensable fixture of the Hungarian National Philharmonicʼs concert season, as does the tradition whereby the work is presented not as a ballet, but in a dazzling production with the collaboration of the Budapest Puppet Theater. This performance promises to be a memorable experience for the whole family. mupa.hu Saint Ephraim Male Choir December 28, 29, 30, Budapest Music Center After wandering around Notre Dame two years ago and touring in Westminster last year, the Saint Ephraim Male Choir visits Rome, virtually, in the period between Christmas and New Year. Over the course of three evenings the choir will select compositions with sacral and secular themes from the extensive musical treasury of the Eternal City. bmc.hu Amadinda and Gábor Presser December 31, Liszt Ferenc Academy of Music A longstanding New Year’s Eve tradition in the capital, Hungarian percussion ensemble Amandinda will perform with singer-pianist Gábor Presser and star

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guest, pop singer Magdi Rúzsa. Due to popular demand for the 10:45 p.m. show, another performance at 7 p.m. has been added to the bill. lfze.hu Random Trip to 2016 December 31, A38 Take in the panoramic view as you enjoy a grand feast bookended by two Random Trip performances in the A38 ship’s Main Hall. The dinner consists of five courses with wine pairings and more goodies at midnight. Random Trip is a collective that features some of the coolest musicians from Budapest’s hip-hop, nu-jazz, dub and rock music scenes often performing in jam-session style. a38.hu New Year’s Folk Eve – FONÓ20 December 31, Fonó Music Hall This unforgettable New Yearʼs dance house celebration features folk talents Téka from Transylvania and the Szászcsávás Band. Dance house celebrations, especially this one, tend to go late and are accompanied by plenty of food, drink, singing and dancing. fono.hu Budapest International Circus Festival January 7-11, Capital Circus of Budapest Held every two years, the Budapest

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Tchaikovsky’s ‘The Nutcracker’ performed by puppets. International Circus Festival features world-class artists and acrobats. This celebration of circus arts is also a platform to launch the careers of the many gifted acrobats, fire eaters, jugglers, gymnasts, dancers, clowns, stilt walkers and other artists performing at the event. The fiveday festival showcases more than 30 performances by artists from 18 countries. fnc.hu

Ennio Morricone January 17, Budapest Sportaréna Internationally renowned Italian film composer Ennio Morricone will visit Budapest as part of his “60 Years of Music World Tour” to mark the anniversary of his very prolific career as a composer of dramatic film scores including renowned pieces from many of Sergio Leone westerns to “The Mission”. ticketa.hu

Budapest International Circus Festival.

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Commerzbank shares internet e At a ‘Business Salon’ a math professor and computer expert discusses survival in the digital world.

There is no need to fear the impacts of the internet – it is improving our lives, and enhancing our communication. This was the message of Professor László Mérő, a mathematician with Eötvös Lóránd University, who gave a talk entitled “The Internet Dependent Future”. Sponsored by Commerzbank, with media sponsorship from the Budapest Business Journal, Mérő’s talk was part of a “Meet the Expert Business Salon”, held November 26 at the Budapest Hard Rock Café. Mérő promised to address some key questions: “What affect does digitalization have on our everyday life? How can a company adhere to this process?” and “How shall we ‘survive’ the digital world? Mérő’s main argument was that, instead of trying to fight against digitalization and regarding it as something bad, one should consider it as part of evolution, and see the potential in it. “People have the tendency to make presumptions for thousands of years based on temporary phenomena – like the idea that the internet is ruining personal relationships, which is not true. It only changes our social practices,” the professor said. The professor maintained that the evolution of humankind has not stopped yet, and said humanity has now evolved to a stage he likes to call “homo informaticus”, in which the changes brought on by evolution are not so much physical but Klaus Windheuser was appointed President-CEO of Commerzbank in Budapest, as of November social and financial. 1. He has worked with Commerzbank since 1988. After receiving his degree, he filled in various Mérő maintained that humanity must rely on the wealth of knowledge and positions at Commerzbank AG predominantly in the field of Corporate Banking. In the last years development to solve our problems. he headed Cash Management, International Business and Financial Engineering as Global Head. “We have been able to solve our crises Commerzbank has been present in Hungary since 1993. Beyond their headquarters in Budapest, because we had the wealth needed to solve them, thanks to the knowledge of our the bank is present in three other cities in Hungary: Kecskemét, Miskolc and Győr. ancestors,” he said. He added that, for the future, we must A word from the CEO more smartphones than toothbrushes in “I’m here, you can see me, I am physical make sure to pass on our wealth of capital The “Meet the Expert” Business Salon also developed countries. and I can tell you we are here to stay and knowledge to our children, so that featured discussion from Commerzbank Just eight years ago, before smartphones and to serve you with creative solutions they can handle crises. President-CEO Klaus Windheuser, who became ubiquitous, Windheuser said, one to your needs, and we wish to grow our The younger generation is already said he believes digitalization is going needed a separate map, camera and phone business together with your businesses evolving and adapting well to the to usher the “next industrial revolution”, for carrying out different activities. Now, using as we strive to grow in Hungary,” he said. information society, according to Mérő. He changing not just Hungary but the world, a smartphone, one can arrange anything. He noted that his bank had organized noted that youth today are even able to while posing “really big challenges for “What will be in ten years?” the CEO asked. the event to provide an opportunity for think of money in digital terms. society”. “We think digitalization will change the world, the Commerzbank’s “partners” – a term “While the older generation spends Windheuser said that every fourth adult which is definitely a challenge, however, at that Windheuser prefers to the word money more quickly on a digital platform, spends more time on social media than the same time, it is a new chance to adapt “clients” – to meet with one another and as they cannot relate to money without they do talking to their partners, which your business model along with it.” their banker. It was also an opportunity touching it, the younger generation can we can see for ourselves if we just look On the topic of his own firm, CEO for Commerzbank to preview their think of money when seeing a string of around at public places to see people Windheuser said Commerzbank is strategy for the future, and to discuss their numbers on the screen, and value it more,” being occupied by their phones. He noted committed to staying in Hungary and expectations for the future of Hungary’s the professor said. that, according to statistics, there are growing together with businesses here. economy – and society.

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CLOCKWISE FROM TOP: Klaus Windheuser, President-CEO of Commerzbank in Budapest, talks with Professor László Mérő during the November 26 event at Hard Rock Café. Professor Mérő giving his talk. Budapest Business Journal Publisher Tamás Botka, left, chats with guests at the event. Windheuser delivering his address to the assembled guests.

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Wine: A good year follows a challenging one Hungarian vintners showed their mettle by making good products out of a tough year in 2014. Thankfully 2015 was kinder on the grapes. rob smyth

The 2015 vintage looks set to be an outstanding one for Hungarian wine with the conditions having been ripe at the crucial times of the grape growing calendar, enabling concentrated but rounded and potentially complex dry whites and reds to be made. However, a distinct lack of botrytis or ‘noble rot’ in Tokaj means that we can’t have everything and that Tokaji Aszú from this vintage will be in very short supply. While the stellar, sun-drenched 2015 has been the polar opposite of the cool and rainy year that proceeded it, the Hungarian winemaking fraternity showed how far it has come by succeeding in putting out some excellent wines when the weather literally rained on the Hungarian printMAURI Hird-Turkish-124x77-2015.pdf ADVERTISEMENT

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wine parade in the supposed annus horribilis that was 2014. They worked with what the vintage gave them and learned the importance of rigorous scrutiny of grapes on the selecting table, not allowing any rotten eggs through to spoil things for the rest of the bunch. Indeed, they learned to take a cut in quantity on the chin in the defense of quality and seemingly proved the adage that “there are no bad vintages, only good vintages and better vintages”. This is in sharp contrast to 2010, which was the last time when the weather was seriously against Hungarian vintners, and when there were far fewer good wines put out. Hungary continues to make impressive inroads in producing unique wines from its terrific terroirs and exciting indigenous grape varieties, which are thankfully increasingly coming into focus. If you’ve got them, use them! Among them, the Olaszrizling grape has gone a long way toward shaking off its negative image as a grape capable only of making bulk wine, with some very serious examples now hitting the market. The animated and youthful crowd at the Grand Olaszrizling Tasting, the centerpiece event of Olaszrizling Október, certainly served to show that this pan-Central European grape is continuing to shed its once lowly reputation. While Olaszrizling, which is still Hungary’s most widely planted white 1

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András Takler pours at the ‘Great Bordó Wine Tasting Event’, held at the Corinthia Hotel Budapest on November 21. wine grape, is no relation to the noble Riesling (Rajnai rizling in Hungarian) that’s especially associated with Germany and Alsace, it is notable that in the cool vintage of 2014 it has somehow made wines to rival the great Riesling grape. While Káli Kövek and Frigyes Bott put out very nice Rieslings from 2014, their Olaszrizlings are every bit their equals. To find the ideal balance in 2014, Gyula Szabó of the Káli Kövek cellar in Köveskál skillfully blended his Olaszrizling from Szent György Hill, where the acidity had dipped off but the flavor was intense, with the more marked acidity of Fekete Hill. The result is a wine of firm body and an enticing combination of stony, nutty, fruity (pear and green apple) and floral notes, with vibrant tension throughout. Incidentally, Olaszrizling often has a touch of almond about it, which some consider a winemaking fault, but a tiny amount can add complexity to the wine. It should come as no surprise, however, that it is Furmint that continues to be the most talked about Hungarian grape. Christopher Burr MW, who was in town in the fall to launch the 2011 vintage of Sauska Cuvée 5, got so carried away with the grape that his presentation was as much about Furmint, due to its

uniqueness, as it was the big red, which is only launched in outstanding vintages. Burr extolled the virtues of Furmint in particular, as well as Hárslevelű, for their capabilities in making dry wines. He commended the former for: Its extractive quality (i.e. concentration); its sense of place; its ability to ripen nicely while simultaneously retaining good acidity; and for the way it can take on winemaking additions like the use of oak and lees stirring to enhance the resulting wine. In his opinion, the only thing holding Furmint back and being compared with some of the world’s greatest wines like white Burgundy or Chablis, is that Hungarian wine is burdened by history, a lack of marketing and the fact that there is not so much good Furmint around. The sense of place was evident in Sauska’s Furmints from the Birsalmás and Medve single vineyard Furmints, which nicely captured the characteristics of different sites and vintages. Furmint has received all the attention as Tokaj has sought to create serious dry whites to rival and partner its great sweet wines – which in themselves are a must for festivities – not just at Christmas but at any other time of year. Furmint’s partner in the great Tokaji Aszú blends, Hárslevelű, has

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Budapest Business Journal | Dec 11, 2015 – Jan 14, 2016

Christopher Burr MW talks about the importance of balance. tended to be somewhat overlooked when it comes to making dry wine, but some stunning dry wines have been coming out from this grape for several years now. While Hárs’ acidity is more restrained and ironically less “harsh”, it does, however, seem to be able to age very gracefully, which is not always true when it comes to many Furmints. Sometimes Furmint’s driving acidity can be a little sharp on the palate and it can also be a tad neutral on the nose, while Hárslevelű can be both more aromatic and plusher on the palate. But why are so few putting the two grapes together in dry blends? Well, those that have done so have been getting terrific results. Gizella’s Szil-völgy Hárslevelű-Furmint Cuvée 2013 comes from a gorgeous spot near Tarcal on the slopes of Tokaj Hill and is 60% Furmint and 40% Hárslevelű. This wine has a lovely lightness of touch combined with depth of flavor. It’s both floral and fruity with notes of white flowers, peaches and pears, plus some green herbs and lime zest zip. It’s as lively on the palate as the nose, and delivers generously on the aromatic promise. Also from the Tokaj town of Tarcal, Királyudvar Sec 2012 (85% Furmint and 15% Hárslevelű), was recently named as Jancis Robinson MW’s Wine of the Week for being so “utterly autumnal” and for its “combination of nerve, density and strong quince flavor”. Holdvölgy’s Vision 2013 has vibrant but not pointed acidity with great purity of fruit and zesty freshness. It’s actually a blend of Furmint, Hárslevelű, and Kabar (a fruity

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and aromatic crossing of Hárslevelű and Bouvier that is permitted in Tokaj). It was recently the only Hungarian wine to win a gold medal at the Decanter Asia Wine Awards (DAWA). Incidentally, Holdvölgy’s dry Hárslevelű is sublime and sophisticated with great balance. Tasted this summer, Holdvölgy’s 2009 dry Hárslevelű offering from old vines from Mád’s Betsek vineyard was still a fairly pale lemon in color and as fresh as a daisy but also picking up serious complexity with green herbs, candied citrus fruit and a touch of butterscotch on the otherwise dry finish. Holdvölgy’s Betsek 2012 was still in the first flushes of youth and was appealingly aromatic, smooth but structured, generous and inviting with a touch of honey and melon along with citrus fruit. Both these wines were fermented and aged (for six months) in used oak barrels, with the oak subtly integrated; complementing rather than bullying out the deliciously fruity juice.

sync then the whole plane will plunge. The 2011 Cuvée 5, a blend of 34% Cabernet Franc, 34% Merlot and 32% Cabernet Sauvignon, was balanced indeed – even more so than the world-beating 2009 – despite the heady 15% alcohol, thanks to the lashings of black and red fruit and body to take the bite out of the boozy edge. It has big but ripe tannins that still need to soften a touch. With its purple tones and fragrant fresh red and black fruit, the 2011 Cuvée 5 is still very much a baby with a long life ahead of it. Sauska’s Villány wines are sometimes criticized for being too international in style but this wine and the 2009 definitely had the region’s trademark and pronounced tannins. The previous vintage of Cuvée 5, which was 45% Merlot, 35% Cabernet Sauvignon and 20% Cabernet Franc, won a highly coveted international trophy in the Red Bordeaux Varietal Over £15 at the 2013 edition of the Decanter Word Wine Awards (DWWA). It had a touch of alcohol burn in comparison to the 2011 but plenty of layers of richness and excitement going on. “Cabernet Franc works very well down in Villány despite the heat and Merlot can be really interesting and vibrant from slightly cooler sites,” said Burr. Sauska’s wines always deliver and usually give great value for money, although the ultra rare Cuvée 5 itself hits the super premium price point. A great value Sauska red for Christmas sipping is the Cuvée 11 2012, which puts local grape Kékfrankos (32%) in pole position, alongside Syrah (22%),

Cabernet Sauvignon (20%), Merlot (15%) and Cabernet Franc (11%). I personally like to see some of the indigenous Kékfrankos grape slipped in alongside international varietals in the big red blends, and not just because it’s local. Kékfrankos also plays a great role in making heavy wines more lively thanks to its refreshing acidity. Two of Szekszárd’s leading cellars, Takler and Heimann, have used Kékfrankos to great effect in their flagship blends Regnum and Bárbar, respectively. The 2007 Regnum is now in its prime.

Szilveszter sparklers Furmint is also fuelling some sophisticated sparklers, which are particularly exciting from Tokaj’s Királyudvar and Somló’s Kreinbacher, and are just the ticket for seeing in the New Year. While so many sparkling wines seek to impersonate Champagne, few get anywhere close but these wines at least conjure up the Champagne experience with Furmint providing that edgy acidity you expect. Kreinbacher has imported the technology, yeast and expertise directly from Champagne to outstanding effect. Its Future Classic range of traditional method sparkling wines are made with the help of consultant Christian Forget, who is the cellar master of ultra premium champagne house Paul Bara. They are now available at the Opera Café before and after performances at the Budapest Opera House, should you be there in the holiday season.

The great balancing act The inimitable Burr came up with a novel way of explaining balance in wine at the launch of Sauska’s most premium Villány wine, Sauska Cuvée 5, from the 2011 vintage. Stepping up onto his seat, he compared wine to an airplane and extended his arms out to form wings: One representing the acidity, the other the fruit, with alcohol the fuel and his body, well, the body of course. If one is out of

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2015.12.09. 20:34