Budapest Business Journal 2714

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BUSINESS JOURNAL BUDAPEST

VOL. 27. NUMBER 14

JULY 19 – AUGUST 1, 2019

SPECIAL REPORT FMCG

SPECIAL REPORT

Tesco Shrugs off Speculation to Remain Hungary’s Retail King Tesco Hungary remained at the top of the local FMCG market with its gross turnover for the last year of HUF 769 billion, placing it ahead of Coop and Spar on the podium. 10 SPECIAL REPORT

Retailers Continue to be Attracted to Hungary The leading shopping centers and high streets are performing well in Budapest in the view of most analysts. Secondary centers and locations are doing less well, reflecting the changing expectations of consumers and tenants. 14

SOCIALITE

Surrealism: a Movement Still in Motion Reflecting the diversity of surrealist approaches to making art, “The Surrealist Movement from Dalí to Magritte” at the Hungarian National Gallery includes works by all the big names, including Hungarians Kertész. and Brassai. 21

For the Love of ‘Grande Dames’

N EW

S

Jean Pierre Mifsud is leaving the Corinthia Budapest to become opening general manager of another ‘Grande Dame’ property, the Grand Hotel du Boulevard Bucharest. He talks exclusively to the BBJ about the NEWS firm's passion for restoring landmark Parliament Approves buildings, and the progress Budapest has made in 2020 Budget BUSINESS four years.5 Next year’s budget is mainly Climate Change the about defending the results the Hungarian economy has thus Number 1 Threat for CEOs far achieved, while also serving Climate change has risen to become the number the interests of families; at least, one risk for the CEOs of the largest firms in the that is how the government world, up from fourth place last year, according to a presented the draft bill to fresh survey by Big Four advisory firm KPMG. 6 Parliament. 3

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Budapest Business Journal | July 19 – August 1, 2019

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THE EDITOR SAYS

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GOVERNMENT INCHING TOWARD GENDER BALANCE

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An unusual thing happened last week, at least unusual by Hungarian standards: a woman was admitted to the Cabinet, having been sworn in at one of the last sessions of parliament before the summer recess. There is a definite hierarchy in government positions. At the top, obviously, sits the prime minister. This is true in all democracies, but perhaps especially so in Hungary. Viktor Orbán sets the tone for all that his government does. Generally speaking, the big three jobs after that are foreign affairs, finance and interior minister. Judit Varga has not been given one of the most senior roles, but Minister of Justice is a position that is of particular importance to business people. (It is not by accident that the American Chamber of Commerce in Hungary has a strategic partnership with the ministry, under which it is invited to comment on upcoming legislation.) Whether you are the CEO of a multinational company, or an entrepreneur heading a local startup, hers is the ministry responsible for ensuring the legislative landscape is fair, open and transparent, that the rule of law is maintained and applied, that the courts function and justice is served. The appointment of any woman to the government is to be welcomed. When the group photo of the then new cabinet was released in May 2018, many commented on the fact BBJ-PARTNERS

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that there was just one woman in the official portrait with President János Áder; Minister Without Portfolio in Charge of State Assets Andrea Bártfai-Máger stood out in her green dress in a lineup of largely middle-aged white men in their dark business suits. The appointment of Varga does not do much to increase the gender balance of the Hungarian government, but it is, at least, a step in the right direction; two role models are better than none. According to the World Bank, just 12.6% of Hungary’s MPs were women in 2018. Pathetic though that number may seem, it actually represents a highwater mark. The World Bank only records figures from June 1997, at which point it says 11.4% of seats were held by women. From 1998-2001, it bumbled along at 8.3%. Varga is the 11th person to hold the position of Minister of Justice since the change in regime and the first democratically elected government was formed in 1990. There has only been one other woman, Ibolya Dávid (in post from 1998-2002), the then head of the MDF, the Hungarian Democratic Forum, one of the junior coalition parties in the of the first Orbán cabinet. Dávid was the only woman minister in government at the time. Varga may be a woman, but don’t expect any sea changes in policy. She was nominated by Orbán, and most recently handled European Union relations in his office (and with her appointment, EU affairs will now fall within the remit of the Ministry of Justice). Varga will represent continuity of policy from her predecessor, László Trócsányi, who is taking up a position as an MEP, and is Hungary’s candidate for European Commissioner. Robin Marshall Editor-in-chief

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Join the Love Revolution! Seven days and nine headliners on the Main Stage, where Dr. Jane Goodall will speak and Al Gore will send Szitizens a video message as part of the Love Revolution. Sziget runs from August 7-13. “Sziget Festival’s budget exceeded HUF 10 billion in 2018, and the company together with all of its other closed a successful year, with HUF 1.5 billion in profit. This year we’ve significantly increased the budget of the festival, especially for performers, but we also want to improve the quality of services,” said Tamás Kádár, CEO of the festival, kicking off the 27th annual press conference. “This year’s Main Stage line-up is outstanding for several reasons,” stated Kádár. “On one hand, following the previously launched growth strategy, we increased the amount allocated to main acts by half a billion forints, thanks to which we were able to bring nine headliners to perform across the seven days of the festival,” the CEO detailed. There will be two days during the festival this year when visitors will be able to see two headliners perform after one another, such as the last day when Twenty One Pilots will precede the

Foo Fighters or on Saturday with The National and Macklemore “combo.” “We are delighted that we were able to bring such top-notch world stars to the festival this year, who have a wide variety of fans in different genres. Just think Post Malone; Ed Sheeran; Foo Fighters,” said the CEO, adding that the latter band will be coming to Sziget with a two and a half hour set. Kádár also highlighted that, for the first time, Sziget will host a new program meant to strengthen the Love Revolution campaign. Special speakers will take over the Main Stage including Dr. Jane Goodall, UN Messenger of Peace and environmentalist, Emi Mahmoud, poet, activist, and UNHCR Goodwill Ambassador, and Al Gore former U.S. Vice President and founder of The Climate Reality Project, will let us know his thoughts on climate change through a video message. “We’d like to draw attention to the most important issues of the Love Revolution in our own way and we sought out ‘influencers’ in these

fields. Although a festival is usually determined by world stars, Sziget stands out from the international field, as there is so much beyond the Main Stage. We offer a variety of diverse programs that everyone’s excited about,” Kádár added. He also discussed that, due to the outstanding programs, there is a great deal of interest in this year’s Sziget. Hopes are that it will be able to draw in the same amount of visitors as last year’s record number.

Attendees can pay with their entry wristband once again, but organizers have made top-ups through the app, which was a huge success last year, even easier this year. It will also be possible to pay with a contactless bank card or a cell phone. New to visitors this year is the Festival Account, which provides a digital solution to use for all Sziget events. This will, for example, make it more convenient and faster to shop online and top-up wristbands ahead of festivals.

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News///macroscope

Parliament Approves 2020 Budget

Next year’s budget is mainly about defending the results the Hungarian economy has thus far achieved, while it also serves the interests of families; that is how the government defined the budget bill, which Parliament approved on July 12. ZSÓFIA CZIFRA

Opposition parties submitted nearly 800 modifications to the draft, all of which were rejected thanks to the huge majority enjoyed by governing party Fidesz. According to the bill, next year’s budget revenue is targeted at HUF 21.426 trillion while expenditures is set at HUF 21.783 tln, making for a HUF 367 billion of budget deficit. That latter figure is 1% of the GDP, calculated according to the European Union’s accrual-based accounting methodology. The target is under the 1.5% of GDP target in Hungary’s updated Convergence Program submitted to Brussels in April. Compared to this year’s budget deficit, the 2020 figure is less than half of that. As for the public debt level, it is set to stand at 65.5% of GDP by the end of 2020, down from 68.6% targeted for the end of this year. The budget sets aside HUF 488 bln in reserves, including HUF 378 bln in the National Protection Fund,

Mihály Varga, Minister of Finance (left), Szilárd Németh, Parliamentary State Secretary from the Ministry of Defense (right) and other MPs vote on the 2020 budget at the plenary session of the Parliament on July 12, 2019. Seated in the second row, at far right, is the DK (Democratic Coalition) leader and former Socialist Prime Minister, Ferenc Gyurcsány. Photo by MTI/Attila Kovács. As Minister of Finance Mihály Varga said after the vote, the goal of the budget is to strengthen families, protect economic achievements and maintain the country’s security, all while pursuing an economic policy based on tax cuts and wage increases. According to the minister, the 2020 budget would channel more resources to all spending areas.

Family Protection

Next year’s budget, like its 2019 elder sibling, will focus on families; Varga insisted all necessary resources will be

According to the minister, extra resources will be channeled to education, culture, leisure activities and tourism without endangering the deficit target of 1% of GDP or further reductions to the public debt.

and

HUF 110 bln

for “extraordinary government measures”, more than double the total of HUF 225 bln of reserves in the 2019 budget. As stated in the draft bill, the Hungarian economy is projected to grow at around 4% in 2020, paired with a consumer price inflation of 2.8%.

put towards implementing the family protection plan. In 2020, support for families will increase to almost HUF 2.228 tln, or around two-and-a-half times the 2010 figure. According to the minister, extra resources will be channeled to education, culture, leisure activities and tourism

without endangering the deficit target of 1% of GDP or further reductions to the public debt. While the draft bill was passed with a vote of 127 for, 58 against and no abstentions on July 12, with not one submitted modification approved, opposition parties were quick to point out the weak points of the budget, as they saw it. The MSZP (Socialist Party) said that all Hungarian economic indicators were worse than in neighboring countries. Socialist MP Lajos Korózs singled out pensioners, saying that the gap between seniors and the younger generations would increase due to the government’s plans to raise

wages by

8.5%

while increasing pensions by only 2.8%. He added that the purchase power of pensions in Romania is higher than in Hungary, adding that pensions worth below HUF 100,000 a month should be raised. In the meantime, the macroeconomic indicators suggest that there is no need to worry about the path of the Hungarian economy thus far. Way above analysts’ expectations, industrial output in Hungary rose 8.7% year-on-year in May according to unadjusted data, the Central Statistical Office (KSH) said, and the second reading of the data confirmed that, with working-day adjusted data showing that production rose by 6.1%.

Rising Production

Within industry, production grew by 8.7% in manufacturing (representing the

decisive weight at 96%), and went up by 15.2% mining and quarrying. The output of energy industry (electricity, gas, steam and airconditioning supplies) rose by 10.4%, mainly as a result of the cooler weather compared to the previous year. (According to the Hungarian Meteorological Service the May 2019 average temperature was 5.5ºC, or 41.9ºF lower than the May 2018 average.) Industrial production grew in every region compared to the same month of the previous year, the KSH said. The largest volume growth (14.4%) was recorded in Pest region; the statistics office measured volume increases of between 0.9 and 14.2% in the other regions. In the first five months of the year, industrial output was up 6.7% from a year earlier. International institutions and analysts have once again expressed that they agree with the path the Hungarian economy is taking right now. The European Commission raised its projection for Hungarian economic growth this year

to

4.4%

in its summer forecast from the previous 3.7%. The growth projection is above the government’s target of 4%. In the first quarter, Hungary’s economy grew by an annual 5.3%. The commission has, however, left its forecast for growth next year unchanged at 2.8%. It believes that average annual inflation will hit 3.2% in both 2019 and 2020. Morgan Stanley analysts are a bit less optimistic, stating that the Hungarian economy will expand by 3.9% this year and slow to 3.2% in 2020. Capital Economics analysts expect annual growth of 4.3% in 2019, although they are more pessimistic about next year’s outlook: according to their projection, the growth rate will fall back to a mere 2% in 2020, mainly due to ongoing weak performance of Hungary’s main partner economies.

Numbers to Watch in the Coming Weeks The macro calendar for the next two weeks will not be jammed with exciting figures. On July 29, employment and unemployment data for the April-June period will be out, followed by earnings for the January-May period the next day. The number of construction permits will throw light on the current state of the construction sector on July 31, based on data from the first half of 2019.

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Budapest Business Journal | July 19 – August 1, 2019

Rising Costs a Challenge to Construction Industry and logistics sector increased in 2019 and this trend is set to continue,” CBRE says in the publication.

Construction and fit out costs are rising as the dramatic labor shortage witnessed in all phases is causing enormous challenges for the real estate market in Hungary, with an insufficient number of both specialized workers and trained engineers.

Rising Demand

GARY J. MORRELL

On top of that, the high volume of construction orders is exerting increasing pressure on development time schedules according to CBRE. “I would define the labor shortage as an overall slowdown circumstance that needs ongoing management and control on the developer side,” comments László Barna Harangi, head of project management and building consultancy at CBRE Hungary. “The availability of the different experts is limited, so significant preparation work needs to be done and capacity checks needs to be conducted prior to securing constructor resources at the right time. As a result of the missing immediate capacity, a separate mobilization time is becoming common in every project before the real on-site activity is started,” Harangi adds. CBRE’s “Cost Guide for Hungary” aims to provide guidance regarding the costs of office space formation. The formerly biennial report is now being updated annually, due to rapidly

CBRE office at Eiffel Palace. changing regulations and circumstances according to the consultancy.

Longer Delivery

“The delivery time of projects is getting longer as general constructors have to face the same phenomenon on every level of the subcontractor market. A possible solution is the creation of reserves not only regarding budget but timewise as well,” adds Harangi. The large price increases are seen as due to two major factors in the construction industry: firstly, the increasing labor shortage: statistics indicate that the labor force in Hungary

fell by

26%

between 2007 and 2012. With a large proportion of the workforce having moved abroad there

annual growth, meaning that fit-out costs could be EUR 1,000-1,200 per sqm by the end of 2020. “Developers are placing more and more emphasis on sustainability issues. It is a complex task to handle as, on the one hand the design and construction activity itself should be organized in a green way to minimize the recovery works afterwards, and on the other hand the built-in materials should be used wisely and the final product should result in a low carbon footprint; in general the legal and regulatory environment is continuously changing based on international agreements,” the expert points out. “Buildings should be able to accommodate different technical solutions and should be ready to react to changing technical demands with low disturbance,” Harangi concludes.

12-18 month ramp up period according Hilton Hotels has opened the four-star, 214-room to Alexandra Murray, vice-president of Hilton Garden Inn Budapest City Center in Lázár utca Hilton’s focused EMEA serviced operations. in the historic center in District VI. The complex is Staff Recruitment recruitment began in April based located 100 meters from the Hungarian State Opera Staff on radio and social media spots and and rooms offer views of the Basilica. talent acquisition, with a number of staff

The 13,000 sqm hotel complex contains rooms with an average size of 24 sqm and has , spread across eight floors, with an additional five levels of underground parking for 100 vehicles and three meeting rooms with the capacity for 100 people. It also has two courtyards, the Garden 79 restaurant and bar and a roof-top terrace. The complex has been designed by the Romanian Carmen Tanase, who also worked on the Hilton Garden Inn Old Town Bucharest and the Cluj Hilton Double Tree. She describes the interior courtyards as based on the squares in the city, and in the

same way the open lobby bar and restaurant both give direct access from the street-front. The Hungarian Statistical Office traced an estimated Budapest hotel office stock of around 200 hotels with close to 20,000 rooms for 2018. As of the turn of the year, 23 hotels were at the planning stage or under construction. On the demand side, occupancy rates for Budapest for 2018 stood at 78%. Hilton Garden Inn Budapest City Center is aimed at both tourists and business guests reflecting the popularity of the city for business travelers and short-stay vacationers. The hotel brand has average occupancy rates of 75-80% in Europe and the latest addition to the family in Budapest is expected to reach this level after a

returning to Hungary from abroad to take-up positions. Construction work on

further

10-15%

remains a significant shortage of qualified labor. A further factor is that the construction sector itself shrunk significantly in the economic crisis and has yet to fully recover. “One possible solution to help ease the strain on the sector is to train and develop future professionals internally by increasing the level of higher and vocational education training provision,” comments CBRE. The other major factor putting upward pressure on prices is increasing lead-in times as the capacity of suppliers and subcontractor is shrinking. “It is important to point out that the shortage of professionals has now become a feature of all the professions involved, from skilled workers on site to qualified engineers. The situation is further exacerbated by the fact that, in addition to the office segment, development activity in both the retail and the industrial

Hilton Garden Inn Budapest City Center Opens

GARY J. MORRELL

Between 2016 and 2018 the rising demand for and growing cost of construction materials caused a 26% increase in costs, while auxiliary costs are 14% higher. The average cost of a basic fit out is now put at around EUR 890 per sqm compared to EUR 770 in 2018. This includes all construction and soft costs on top of the basic shell and core standard provided by the landlord, according to Harangi. Overall construction activity could fall by 2020 and could stabilize at a lower level by 2023. CBRE expects a

the project initially began in 2015 with the demolition of the existing building at the site. Following a break in construction activity, development re-commenced in 2017, reflecting the difficulties of developing in the historic center in accordance with very strict building regulations. The complex is owned by a group of investors and a 20-year plus management contract has been agreed with Hilton, which operates 65 Hilton Garden Inn hotels in Europe. The company is looking at the possibility of opening further hotels in Hungary, according to Murray.

Hilton Gerden Inn Budapest Center opening.

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Budapest Business Journal | July 19 – August 1, 2019

News | 5

Sharing a Passion for ‘Grande Dame’ Hotels With a Soul Brexit is causing a lot of uncertainty in the U.K. market, however. “That is going to remain until a final decision is made, one way or the other, and the sooner the better. A decision needs to be taken; deal, no deal, whatever.”

As the popular Maltese hotelier Jean Pierre Mifsud prepares to bring his Hungarian adventure to a close (a four year posting he says he cannot believe has passed so quickly), he already has half an eye on his next project, just next door in Bucharest.

Blessed

What will he miss, I wonder. “One thing is the people. I think I have been blessed with an excellent team here. When you have the right people and then train them well, you are halfway to your destination. When you treat them with respect, you get two fold back, if not more. When a Hungarian gives you his or her heart, they do so forever.” Mifsud says one of the benefits of the team is that there are connection points with the hotel’s past. “The beautiful thing is we have people who are proud to work in the hotel; a number have family connections: either their parents or grandparents worked here

“You can feel the history. How many people have visited this hotel, had celebrations in this hotel, had fun being here, made memories here? It is special.”

ROBIN MARSHALL

“I have had a phenomenal time here, really,” he tells the Budapest Business Journal between meetings at the hotel. “Here I spent four glorious years; met so many friends. The people are special, the city, the country, the gastronomy; everything.” General managers, like diplomats, rarely spend more than four years in one location. “We move, we rotate,” as Mifsud puts it. His next project is not just close geographically, though; there are other similarities. As with the Budapest hotel, the Grand Hotel du Boulevard Bucharest is a “Grande Dame” of a building Corinthia is restoring to its former function and glory. This is something of a Corinthia specialty. It has done the same with what was the Grand Hotel Royal in Budapest, of course, but also its hotels in London, St. Petersburg, and a property it is currently developing in Brussels. Grand Hotel du Boulevard, due to open in Q4 2020, is even older than its Hungarian sister, having originally opened in 1867 (the Budapest hotel opened its doors in 1896, to serve the millennial celebrations for the founding of the country), although it has not been put to that use for more than a decade. “It was most recently used as offices; however, Corinthia is bringing it back. That is something we enjoy doing, giving these beautiful properties new life. They are hotels with history, and that historical background gives them a soul.” Mifsud smiles and spreads his arms wide, encompassing the hotel we are sitting in. “You can feel the history. How many people have visited this hotel, had celebrations in this hotel, had fun being here, made memories here? It is special.”

Jean Pierre Mifsud

Settling In

He will hand over the Hotel Corinthia Budapest in the first week of August, before taking a short break and then move to Bucharest to begin the process of settling in. His three children will start school there on September 3. He had known the move would happen for about a year, although staff were told in February. Initially, he had been overseeing the project, as he was based so close, before Corinthia asked him to take on the role of opening GM. “It is an exciting destination. I was very pleasantly surprised the first time I went there last year,” Mifsud recalls. “Here public transport is phenomenal, there it does not exist, everyone drives to work, so it needs some infrastructural investment. And Bucharest needs to market itself as a leisure destination, because it has a lot to offer: gastronomy, places of interest, history.” How would the GM measure his success in Budapest? Statistically, the property has done well. Occupancy has grown to 81%, with 2019 already looking set to beat the record set

since the opening, he says, and average room rate has grown too. The hotel itself has helped. “Because of its size, we can be quite versatile, and I think we have managed that very well; we have a business profile, a luxury profile, a conference profile. I tend to believe we have been very successful in how we have split the business between the various segments. We are not a city center hotel, not a business hotel, not a conference hotel. We are a luxury hotel with all these facilities. That allows you to be versatile, to be more flexible.” He says the hotel has only a few Hungarian guests; most visitors come from the United States and the United Kingdom, with Germany, Italy, Spain and Asia also important markets. “Personally, I think the Middle East has been something of a missed opportunity, and a market we can tap into. Business does come from there, but it could be stronger than it is right now. The U.S. is working phenomenally well. Americans enjoy coming to Europe because of all the history; it is a bonus for us that the hotel itself is historical.”

or were married here, some remember coming here as kids when the Grand Ballroom was a cinema. So they have a special connection, and are proud to work at the Grand Hotel Royal. Even though we call it the Corinthia Hotel Budapest now, it will always be the Grand Hotel Royal. There’s a reason why we still have the name up on the façade.” He will also miss the many friends he has made, he says, and the city itself, which he says has made “tremendous progress” in his four-year term here. “It has certainly become a more trendy, cool destination in my time here. Trendy, but also with a strong culture and all that history. And you can see that from the numbers, here in the hotel and out in the city itself; it is clearly visual to me. It will continue to grow; however, I think it has now got to the stage where Hungary needs to think more about the quality of people it is attracting, and not just about the quantity.” For all that progress, there is one final box Budapest should tick, Mifsud believes. “When I came, everybody was at a high level of excitement about the arrival of a national convention center. Four years later, I am leaving and it still hasn’t arrived,” he says with a laugh. “Personally, I think that should be the next step, to make Budapest comparable with Prague or Vienna, a conference center that can take several thousand, with the guests shared around the hotels. We have 2,000 sqm here at Corinthia; that’s quite sizeable, but it is not enough for really large conference. Build that, and I am sure it will lead to a lot more business.”

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Business

Climate Change the Number 1 Threat for CEOs From fourth place last year, climate change has risen to become the number one risk for the CEOs of the largest firms in the world, according to a fresh survey by KPMG. All companies now see the benefits of communicating the importance of sustainability, but the level of engagement (and need) determines how many resources are committed to it. ZSÓFIA VÉGH

Ten years after the crisis, the CEOs of some of the world’s largest organizations are optimistic. They have some reason to be so, particularly in the Unites States, as this has been the longest period of growth for America since World War II. Their peers in China or in the United Kingdom may be less content but they don’t fear a recession either. In fact, of the company leaders KPMG asked in its 2019 global CEO outlook survey, almost two-thirds (63%, up from 54% in 2018) believe that their organization is going to actively disrupt its sector. That seems pretty confident, but then again that is what a global firm’s CEO is supposed to be, says Robert Stöllinger, CEO and head of advisory at KPMG in Hungary who presented the findings of the report to the press. Being optimistic doesn’t mean you ignore threats. The five biggest risks CEOs identified have remained the same, although their ranking has changed. For the first time, climate change has taken the lead. This may come as a bit of surprise to some, as climate is not really a number one priority for capitalism, the system most of these companies operate in, Stöllinger says. Yet pressure from regulators and consumer demand for products that are less harmful for the environment is concentrating minds. So does the firm’s reputation, which can easily be damaged unless care is taken, Stöllinger adds.

KPMG Robert Stöllinger speakingat the CEO survey press briefing.

Today, not Tomorrow

Incorporating climate policies into business strategies is not about preparing for the future; companies are already feeling a lot of the effects of climate change on their skin today, says Csaba Kovács, a partner at KPMG. Preparation for climate change has been going on for a while. In energyintensive sectors in particular, some serious developments have taken place to improve energy efficiency. Many companies have invested a lot in helping renewable energy expand. To support a transition to a greener economy, many investments have to be made. Capital and financing have the tendency to gravitate towards greater returns, which means only those projects promising a good return are likely to be funded. This is where governments have great responsibility: they need to create conditions and incentives such as feedin-tariffs for renewable energy production or tax breaks for electric car purchase, or energy efficiency projects, says Kovács, partner at KPMG. The countries where the transition is very efficient are usually those that keep social benefits ahead. Instead of focusing on one segment, they create an entire back- economy that supports society as a whole, he adds. If states are lax in creating proper conditions to induce change, consumer demand is now strong enough to put pressure on companies. So much so that it is no longer all about the product; how sustainable it is also matters for consumers. And whether consumers seek sustainable services and products out of conviction or faddism, companies still have to address that.

Communication Channels

Depending on the sector, and the company’s goals, communication varies. For a manufacturing or a retail company, sustainability is a more tangible term, so they can better communicate it, Kovács notes.

For an electricity-generating company, for example, placing more emphasis on what sources it uses for energy generation or on its emission rates makes more sense. These days, retail companies are trying hard to reduce and recycle the amount of packaging they use and reintroduce it in the circular economy, Kovács says. Water usage is a similarly hot topic: how to reduce water use or use grey water more efficiently or use machines that use less energy in general. It is not unusual now for the biggest firms to a sustainability

Threats to Growth

A lot has changed in a year of business, which is reflected by what the leaders of global firms are more

department with a small team of experts who coordinate the sustainability requirements of the various business units and create sustainability reports. “Firms that care will run a really thorough due diligence to check their suppliers. That is, they won’t rely on written statements but will actually check a site or measure the emission rates written in reports provided by suppliers when entering into the contract,” Kovács explains. Should suppliers fail to keep these standards, responsible firms will quickly replace them. One such failure would damage their reputation so much if it surfaced, that it is worth devoting attention and money to being truly sustainable. “For those to whom this is of less importance, they will use it [sustainability] as a marketing tool. But companies that have more at stake in business, will put a lot of effort in it” Although Hungary did not officially take part of the global survey, KPMG Hungary did quiz some local CEOs informally. Many were concerned about competition being threatened by global mammoths, especially the giant tech firms. They also brought up the question of intuition vs. data during decision-making, claiming intuition will continue to play a strong role despite the availability of data. The age of individual CEOs may account for that statement, KPMG experts noted, as most are older and may be less used or willing to rely on data than the younger generation.

concerned about. According to KPMG CEO outlook report, the main five threats to growth in 2019, with their 2018 ranking in brackets, are:

2.

1.

Emerging/disruptive technology risk (3)

Environmental/ climate change risk (4)

Return of terrorism (1)

Yet it is not just the order of risks that have changed; how companies respond in general has also altered. Acquisitions are now being made with a new aim. Unlike before, when companies bought up smaller firms to boost growth, today the key purpose

Operational risk (5)

4.

3. BBJ Infographic

5.

Cyber security risk (2)

is often to bring a new mindset or corporate culture into the company. Also, the CEOs surveyed are not concerned about technology replacing people; instead, they focus on how to create a balance between machine and men.

Building Air Bridges Eastward Air travel issues like congestion and delays are not going to go away; in fact, they are becoming more severe in particular in Western Europe. This is one reason why Wizz Air, the largest low-cost airline in Central and Eastern Europe is focusing more on the East. Helpfully, the airline’s eastern opening also coincides with national economy interests. ZSÓFIA VÉGH

Flight delays, cancellations, long waits at airports are all becoming an everyday routine for frequent fliers. But, according to József Váradi, CEO of Wizz Air, the largest low-cost airline in the CEE by share, it is not always the airlines that are to blame. “We are investing significant human resources to reduce our exposure but we aren’t immune to those,” Váradi said at a recent press event. “We need to prepare for [dealing with] delays and cancellations”, he added. Váradi was responding to reporters’ questions at an event where he and Péter Szijjártó, Minister of Foreign Affairs and Trade, announced a new Wizz Air

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Budapest Business Journal | July 19 – August 1, 2019

and Kazan first started in 2015, and the two countries had to modify their bilateral air traffic agreement, the minister said. The state provided diplomatic support to create the legal framework for the flight, the operation of which was won by Wizz Air in a state tender. Permits for the airline to operate the flight were issued by the Russian party this July. Of all EU member states, only Hungary has a consulate in Kazan, which opened in 2015. It is not by chance: there is a very strong business cooperation between Hungary and the Tatarstan Republic as

20% of Russian

József Váradi, CEO of Wizz Air (left) and Minister of Foreign Affairs and Trade Péter Szijjártó (right) at the joint press conference. destination and more frequent flights to an existing one, both in Eastern Europe. That they made the announcement together should not come as a surprise. “In a country where there is no stateowned airline, it is important to have a pragmatic cooperation with airlines that support the achievement of national interests,” Szijjártó noted. One of those interests the minister highlighted was regular contact with expat Hungarian communities; this goal will be better served by a daily flight to Târgu Mureș (known to Hungarians as Marosvásárhely) in Transylvania as of this October. As a result, annual passenger numbers will

grow to

132,000

from 38,000.

Increasing Trade

The other is related to economy and exports. “Rapid and efficient connections in a foreign trade-focused country always help increase trade volumes,” Szijjártó added, announcing a new route to Kazan in the Republic of Tatarstan, Russia. The flight will operate on Wednesdays and Sundays from the end of October, Szijjártó said. That Wizz Air is turning its eyes eastwards is hardly a surprise either. Considering high traffic and growing

airport fees (one result of which is the highly-criticized barn-like waiting area for low cost airlines at Budapest Airport), it makes sense to go east. Both the launch of the Kazan flight, the airline’s third Russian destination after Moscow and Saint Petersburg, and the daily flight to Marosvásárhely, will further strengthen Hungary’s business and cultural ties, according to Váradi. They will definitely strengthen Wizz Air’s business position as well. Rising congestion at many popular business and tourist routes in Western Europe is making flight delays and cancellations ever more common. “Over-tourism” and the old technologies used to control air traffic both account for that, Váradi says, so, rather than having to share a smaller portion of the market, Wizz Air’s strategy is to go east. “We initiate the launch of ever more eastern flights,” the CEO said. “Europe is running into bottlenecks in terms of Western European flights. Eastern Europe, on the other hand, is an uncharted market. We continually try and add more eastern destinations to our network and are happy to have been able to announce Kazan among our newest destinations.”

Diplomatic Support

It is not a quick process, however; talks about a direct flight between Budapest

oil imports for Hungarian oil company MOL comes from Tafneft, Szijjártó said. A direct air connection will also serve those mostly agricultural companies that are already present in the area and export livestock, plant seed and grafts. Szijjártó also mentioned the West Balkan routes operated by Wizz Air, again via a public service contract, and which now operate with state support. The launch of these routes in 2017 were questioned by many given that neither tourism nor business demand seems high.

“In a country where there is no state-owned airline, it is important to have a pragmatic cooperation with airlines that support the achievement of national interests.” “The West Balkan project stands exactly where we intended it to be when we launched them,” Váradi said answering reporters’ questions. “If broken down by destinations the results are slightly mixed but overall they meets the expectations with flights operating with a load factor over 90%,” he added. National interests will likely keep playing a role in determining at least some of Wizz Air’s new destinations. “Since increasing the number of connections is in Hungary’s economic and political interests, where there is a chance, we will cooperate with Wizz Air in the future as well,” Szijjártó concluded.

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Avoiding the ‘Small Business’ Trap Les Nemethy looks at the challenges of doing a deal with a small company. Running a small business is arguably more difficult than running a large one. I have done both, and that has certainly been my experience. When running a large company, you have resources: specialized staff, better systems, in general, more resources to solve problems as they arise. When running a small company, it is often difficult to afford high-powered staff. A small company might be lacking certain functions altogether, such as controller, HR director or in-house counsel. If a small company loses a key staff member, it usually leaves a gaping hole; where a larger company loses a key staff member, one can usually promote someone from within. In a small company, the CEO often has to be a jack-of-all-trades, chief cook and bottle-washer, filling several operational functions at once. But this article is not so much about managing small companies, rather about doing transactions with small companies, whether raising equity or selling the company or, as will be discussed below, merging two small companies. It is also much more difficult to do transactions with smaller companies than with larger companies, for the following reasons: • The greater difficulty of managing small companies, as explained above, makes them higher risk, and hence less desirable, to investors; • Ironically, it is often easier to find buyers for larger companies than for smaller companies. Strategic investors and private equity firms prefer targets that “move the needle”, that have a certain critical mass. In my experience, this threshold usually kicks in at a transaction

Furthermore, the valuation of larger companies is often more advantageous than for smaller companies, frequently commanding substantially higher multiples of revenues, cashflow, earnings before interest, tax, and depreciation, etc.

Become Bigger

In any transaction involving a smaller company, it is often challenging to obtain timely and quality information, due to lack of systems, specialized staff (such as a controller), etc. This can cause enormous strain on the management team of a small company, as well as in the negotiations between the parties. valuation in the range of ten million euros or dollars; • It takes just as much time and effort, sometimes more, to buy or sell a company valued at EUR 2 mln as a company valued at EUR 20 mln;

• As an owner of a small company (say EUR 1 mln-2 mln revenues), it is often difficult to afford an experienced law firm for a transaction, let alone a good financial advisor, who might be used to earning a success fee of several hundred thousand euros; • For buyers, investing in a small company, that often has a very “thin” management team, can be a high-risk proposition. If one or more members of such a thin management team leave, or turn out not to meet expectations, the entire investment may be at risk; • Small companies often lack audited statements, or any kind of management accounting; • In any transaction involving a smaller company, it is often challenging to obtain timely and quality information, due to lack of systems, specialized staff (such as a controller), etc. This can cause enormous strain on the management team of a small company, as well as in the negotiations between the parties;

So what can a small business owner do in order to improve valuation and the chances of doing a transaction? Become a larger company: Growing the company organically to a larger size, so long as that growth can be done profitably and without endangering the financial health of the company, might be one approach. Acquiring other companies might be another way of growing—obviously, the acquisitions should be value accretive rather than diminishing value. A merger is another option to increase size, one which is perhaps not applied as often as it might be. It is entirely possible to merge two smaller loss-making companies and create one profitable larger company. This requires careful financial engineering, and a good mix of management skills and human resources. Finally, you could qualitatively improve the small company, to have it run more like a large company (e.g. with a high quality management team, better systems, better corporate governance). In a nutshell, doing a first transaction with a small company can be even more challenging than managing a small company. Finding expert legal and financial assistance that is capable of working within the budgetary constraints, is also an important ingredient to success. Most owners will typically attempt such a transaction themselves, with the assistance of legal counsel. Often it ends up being a “learning experience” rather than a successfully closed transaction.

Les Nemethy is CEO of EuroPhoenix (www.europhoenix. com), a Central European corporate finance firm, author of Business Exit Planning (www. businessexitplanningbook.com) and a former president of the American Chamber of Commerce in Hungary.

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Building Partnerships Across the Region philosophy in every country where we operate. When you are in partnership, you share the risks as well, which further increases the stability of the operation. MET has dedicated a lot of energy to TIGÁZ recently, but besides that we are focusing on many other strategic paths too, like investing into more renewable projects for example. Though Hungary is only one of the many countries we focus on, I would say South Europe is at least as important a target area as our Central European region, if not even more so.

With recent investments and transactions, Swissbased MET Group is gradually converting from a non-asset trading company into an internationally recognized integrated energy firm in the region.

“It is also our aim to involve well-capitalized partners from Hungary and neighboring countries in further acquisitions. It makes sense working with partners from the region.”

ZSÓFIA VÉGH

The group has just closed a deal with a new financial investor and sold 50% of one of its local assets, TIGÁZ to Status Energy Group. Not long ago, it also signed an agreement with NIS, a Serbian energy company, to build a 102-megawatt wind power plant in Serbia. It makes sense working with partners all over the region, as Balázs Gábor Lehőcz, CEO of MET Asset Management and TIGÁZ, highlights in this interview. BBJ: Why are assets so important for an energy trading company like MET Group? Balázs Gábor Lehőcz: Prior to the acquisition of the Dunamenti Power Plant in 2014, MET Group was a nonasset based company relying heavily on the gas trade. In order to diversify our activities and also to stabilize our position, we decided to turn to assets just like the biggest energy companies around the world. However, adding assets to our portfolio alone does not guarantee success. Luckily, we could combine our experience in energy with a private equity mindset which aims to operate an asset to achieve maximum efficiency. That is, not settling with what worked in the past, rather constantly looking for ways to improve operations. With that, we added a second pillar to wholesale trade. Assets in general tend to be quite reliable and their profitability is plannable. The third pillar of our operation has become retail sales; not only in Hungary, but in several European countries where the group is present. In summary, by adding two more pillars to the existing one, we aim to have a more predictable, stable and plannable operation. Mostly through assets, which I am responsible for, but also with EU sales as retail is also a less volatile business. These two serve as a counter for the more risky wholesale trading. BBJ: Is there a specific part of the region that MET’s Asset Division is focusing on now? BGL: MET Group is aiming to build a diversified portfolio both in terms of geography and industry in the upcoming years. Renewables are a clear trend: the construction of our first solar park in Százhalombatta was finished last year

Balázs Gábor Lehőcz and we will soon start to build another one in Hungary. We recently signed an agreement with NIS, a Serbian energy company, and we will hopefully soon start building a 102-megawatt wind power plant together in Serbia. It is also our aim to involve wellcapitalized partners from Hungary and neighboring countries in further acquisitions. It makes sense working with partners from the region. As for the other divisions of the group, we also see potential for gas trade in southern Europe. Currently we are in talks with companies in Italy and Spain about potential acquisitions. BBJ: What are your experiences with TIGÁZ and how do you improve efficiency? BGL: We bought TIGÁZ from ENI last summer, a bit more than a year ago. The first year’s experiences are very good, and we are happy to state that we have faced no surprises or impossible challenges. What we focus on is how to further raise the efficiency level of the company’s operation. We identified 165 steps to go through to achieve the level of profitability and costs that will result in the EBIDTA and profit we wish to achieve. We have also converted a very fragmented company structure into a more concentrated one. We launched a mobile workshop service to assist the work of mechanics, and we are building an IT system that will improve the efficiency of our fleet. Aggregating procurements to get more favorable offers, restructuring management, eliminating duplication and asking regulators to switch from paperbased to digital communication with our customers are further methods we use.

Overall, it is the combination of many small steps that improves efficiency. We calculate that these measures will become integrated in our operation by 2020. We hope that, as a result of the above, our profitability will increase by at least 20-40%. But beyond keeping our eye on the savings everyday, we also pay attention to reward our highperforming employees. We have a great team and we are proud of the company culture we have managed to build over the past one year. BBJ: What was the consideration behind selling 50% of TIGÁZ to Status Energy Group? BGL: As I said, it makes sense working with partners in the region. This is our

BBJ: MET Group has organized its strategy into three divisions: trading and wholesale, EU sales, and assets. Which of the pillars will provide more profitability? BGL: Just like on the money markets, margins in energy trading are shrinking. However, the value of assets is increasing. Gas consumption may fluctuate, but people will always buy gas and this infrastructure will serve as a strong fundamental to that. Companies owning assets provide a product the profitability of which can be calculated quite well in the long run. What favors us compared to long-standing utilities is that our operation is not rigid, we are not weighed down by stranded assets. Our flexible approach allows us to streamline operations more efficiently. BBJ: What further plans does MET Group have? BGL: We expect that our three main divisions will operate efficiently in the next 3-5 years, as a result of which MET Group can truly become an integrated energy company. Our overall long-term goal is to take the company public.

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Special Report FMCG

Tesco Shrugs off Speculation to Remain Hungary’s Retail King Tesco Hungary remained at the top of the local FMCG market with its gross turnover for the last year of HUF 769 billion, placing it ahead of Coop and Spar on the podium.

Local Suppliers

CHRISTIAN KESZTHELYI

Although it is facing difficulties in delivering growth in its U.K. homeland, Tesco appears well poised to stay at the top of a Hungarian market that is seeing increasing demand for “freefrom” products from customers who are increasingly eco-friendly. The Hungarian unit of British-based supermarket chain Tesco remained the biggest retail chain in 2018 with an estimated gross turnover of HUF 769 bln, according to rankings by Hungarian retail publication Trade Magazin. The top three was completed by Hungarian-owned franchise Coop and Dutch-based Spar (although the local business is owned by the Austrian branch) with turnover of HUF 627 bln and HUF 617.6 bln respectively. Tesco had started the year faced with speculation about a possible withdrawal from the local Hungarian market, something the giant has categorically denied.

In 2015, the U.K. business reported the worst results in its then

96-year history

with a record statutory pre-tax loss of GBP 6.4 bln (about HUF 2.3 trillion). At the beginning of this year, Tesco confirmed that up to 9,000 jobs of its 300,000 staff were at risk in the United Kingdom. Nevertheless, Tesco said at the end of January that it plans no closures in Hungary; indeed, it said it would continue “intensive investments” in local stores in future.

Regional BSC

In early February, Tesco Hungary said it will raise the gross monthly base salary for its lowest-paid workers. Although that same month it announced it would axe 30 jobs in its Budaörs branch, on the western borders of Budapest, due to reorganization spurred

Top Ten Retailers Company Tesco

Market, Despite Growing Wages on page 13), and experiences high demand from increasingly eco-friendly customers toward local quality and free-from products “Based on our experience, Hungarian customers always look for the highest quality and we compile our assortment accordingly,” Aldi told the Budapest Business Journal.

Home Country British

Estimated 2018 Turn over HUF 769.0 bln

Coop

Hungary

HUF 627.0 bln

Spar

Netherlands

HUF 617.6 bln

Lidl

Germany

HUF 549.0 bln

CBA

Hungary

HUF 527.0 bln

Real

Hungary

HUF 416.1 bln

Auchan

France

HUF 390.1 bln

Penny Market

Germany

HUF 292.2 bln

Aldi

Germany

HUF 256.0 bln Source: Trade Magazin.

by changing customer habits, in mid-March it revealed plans to set up a business service center in the capital covering Central European operations and creating 800 jobs. At the time of publication, Tesco employs 16,000+ people in Hungary. Coop says on its official website that it employs more than 30,000 people in 3,000 stores around Hungary. Spar employs approximately 13,000 people in Hungary, split between 381 its own stores and 174 franchise units. Lidl employs more than 5,000 people in its 181 stores, while CBA, which operates a franchise system, employs more than 30,000 people in more than 3,000 stores and units bearing the CBA logo. Auchan has 45 stores in Hungary, employing a staff of 7,000+ (as of mid2018), Penny Market in Hungary has 210+ stores employing more than 4,000 people, and Aldi operates 140 stores providing jobs for more than 3,300 people. The Hungarian retail sector employs approximately 400,000 and is responsible for 10% of the country’s GDP, with sales worth more than HUF 11 tln, László Krisán, CEO of Kavosz, a company working to support entrepreneurial development, said in an interview with Hungarian publication Trade. Of that total figure, some 45% was realized in the FMCG sector. Nevertheless, the number of retail outlets has been on the decline in the past half a decade, at the end of 2017 the number of stores fell

below

125,000

in Hungary. This resulted in at least 16,000 people losing their jobs, Krisán added. Tesco reigns in a market that sees stirring waters on the labor side (see Challenges Face FMCG Labor

“[Our] consumers also tend to give a preference to food products purchased from Hungarian producers and suppliers. In response to this trend, we offer fruits and vegetables produced by local farmers and seek to cooperate with Hungarian meat suppliers whenever possible. Our wine offering is also focused on the products of local wineries. As a result, we offer our customers an increasing number of products with a high price-to-value ratio exclusively available from Aldi. We have been the first retail chain in Hungary selling only Hungarian milk and Trappista cheese in all kinds of packaging,” the smallest of the top ten retailers says. Customers have also shown a rising demand for “free-from” products to suit their special dietary needs. “The offering of our retail chain includes nearly 70 gluten-free, 50 lactose-free and 50 sugarfree products,” Aldi notes, claiming that it keeps these products at “steadily low prices” in all its 140 stores.

“As part of its action program running under the slogan ‘Remove. Reuse. Recycle’, it [Aldi] will use 100% recyclable packaging materials for all white label goods by 2025.” In addition to this, Hungarian consumers also appear to be increasingly environmentally conscious and willing to make an effort to reduce the quantity of plastic used. “As part of its strategy to reduce plastic consumption, Aldi will phase out several non-reusable plastic items from its offering, including plastic cutlery, cups, plates and straws in 2019,” the business tells the BBJ. The aim is to replace these with products made from renewable raw materials. “It already offers cotton buds with stems made of alternative plastic which has reduced its annual plastic consumption by about 24 tonnes. As part of its action program running under the slogan ‘Remove. Reuse. Recycle’, it will use 100% recyclable packaging materials for all white label goods by 2025. By the same year, it also plans to reduce the number of packaging materials used in Aldi stores by 15%,” the company says.

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Budapest Business Journal | July 19 – August 1, 2019

E-commerce Spreading its Fast Moving Net

Special Report | 11

PRESENTED CONTENT

Green Shoots and Good Food Services in Budapest The Budapest food service scene is full of “green shoots” according to Éva Sréter, the Hungarian head of retail and British-based expert consultant Ian Hanlon, the director of foodservice consulting at JLL.

The fast moving consumer goods category was the fastest growing sector in the e-commerce market in 2018, according to recent market data. ZSÓFIA VÉGH

Online commerce for this sector in Hungary has grown by nearly 20% and reached HUF 41 billion a year, according to a survey by eMAG, an online shopping platform. As a result, the FMCG-category has become the fastest growing sector in the domestic e-commerce market which totaled HUF 425 bln last year. E-commerce in Hungary has been expanding intensely: it now accounts for 4.5% of the entire retail commerce. According to GKI Digital, in 2018 the total worth of Hungarian online orders was 17% higher than a year earlier. At the beginning of this year, 3.2 million people shopped regularly online, showing 6.5% growth compared to a year ago. The average worth of online purchases was HUF 11,000 (net) per visit. Customers placed orders on average 12 times per year and

spent

HUF 133,000

in total. Last year, roughly 1.5 million people paid for their purchase online, which resulted in 7% growth. With HUF 97 bln turnover in 2018, technical goods remain the most popular category online. Yet it was FMCG that saw the biggest growth last year and the sector will continue to expand according to industry forecasts. In 2018 overall, 980,000 FMCG purchases took place, with consumers purchasing an average of 20 products at a value of almost HUF 23,000.

Growth Potential

“We expect further growth in the FMCG sector as ever more products fall in this

category,” Catalin Dit, head of eMAG Hungary tells the Budapest Business Journal. “The ones most in demand are staples for daily life such as diapers, detergents, perfumes and clothing,” she adds. The growth potential of the online FMCG sector currently is significantly higher than in other sectors. One of the reasons is that online shopping is a convenient alternative to personal shopping, backed by secure payment and the presence of more delivery options. On the other hand, customers consider FMCG spending as a basic expense (like food or utility bills), which is not the case with other online products (e.g. electronic goods). Future growth is fueled by the fact that more and more products are becoming available online. More products also makes it more likely that existing users, those most at ease shopping online, will do so more regularly. The most important tool to support the development of the domestic online market is increasing the frequency of the online purchases, since the items in this category – diapers, pet food or detergents – run out fast in any household. The Hungarian e-commerce market is, as yet, relatively small but is constantly developing and growing in a rhythm which is faster than the average. The rate of growth

was

16.9%

in 2018 and it closed its year with a turnover of HUF 1.3 bln, eMag says.

“More plazas are being designed where food will be the key differentiating factor. While what is here in Budapest today is quite functional, there will be significant change in the upcoming five years,” he predicts. Hanlon and his 11-strong team have been in the business for two decades, 15 years of which were as a family firm, before it was acquired five years ago by JLL. Their service is now also available via the Budapest office with a strong cooperation, leveraging the local experience and know-how. “They realized how important foodservice and leisure was becoming as a key part of the retail landscape, and that we could add value to JLL’s existing services,” he recalls. The foodservice team consults on all bricks and mortar food related developments, from shopping centers, to retail outlets, to hotels. And the trends have changed noticeably in recent years. “There has been a significant shift in foodservice space in shopping centers. What was 4%, 5%, 6% of GLA is now 8%, 9%, 10% and even higher in some cases. Westfield London [a shopping center in the U.K. capital’s White City area] has 15% of GLA dedicated totally to gastronomy and foodservices,” Hanlon says. And the reason behind that shift is clear. People might buy more online, but

Ian Hanlon they still like to go out to visit shops, whether to buy or to browse. In this new environment, food is not just another service to add to the mix in a mall; it also has what Hanlon calls a “hallo effect”. “Shoppers who use foodservices spend 15% more on retail than those who do not,” he explains, before citing another metric. “People who use foodservices in a retail environment

dwell for

35%

longer, meaning they are open to impulse purchases for a longer period.” With figures like those, Hanlon says landlords and developers now have a better appreciation of the way in which eateries can act as the “social glue” for a mall, particularly if there are also other leisure time options, such as a cinema.

Millennial Market

Interestingly, Hanlon says Western Europe in particular is now leading the way. American malls have changed very little in the past 15 yeas or so; they are still seen as a meeting place for teens. In Europe, the drive is to serve the Millennial market, to build something more ‘instagramable’, to create more of an experience. According to Sréter there are numerous first generation shopping malls in Hungary which are in the need of a thorough

Éva Sréter repositioning. The modernization of the food service offer of the malls is a crucial tool in their effort which is in fact one of the most effective instrument as well. All the malls in Budapest currently have what Hanlon describes as a “quite traditional” mix of food courts. He says he is working with one developer to create something that will really stand out in the Hungarian market (he is not able to give further details at this stage), but believes the market is anyway moving towards “fast casual” outlets, at a price point midway between fast food and restaurants. “The offer will be a better quality burger, made with passion by ‘local heroes’ such as ZING burger,” Hanlon says, and cites the emerging street food scene in Budapest as a real area of potential. “A perfect example is Karavan [at Kazinczy utca 18, in Pest’s District VII Party Zone], an open air venue with seven or eight street food stalls and a common seating area. It is always lively, it’s about enjoying good food in a community atmosphere and having a good time.” And he also points to the redevelopment of the Belvárosi Piac or Hold utca Food Market, which now boasts a range of highclass casual eateries, often run by renowned Budapest chefs, offering a wide variety of low-priced but high-quality cuisine. “This is what has been happening in Western Europe, old buildings being given a new lease of life.”

12 | 3

Special Report

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Budapest Business Journal | July 19 – August 1, 2019

FMCG///news Retailers Could Take Common Decision to Close Earlier on Sundays

Hungarian retailers could take a uniform decision to voluntarily close earlier on Sundays, if shoppers accept the move, which would benefit businesses, daily Magyar Nemzet reported on its website. The paper noted that the government “flatly refuses” to legally restrict shop hours on Sunday (it had previously passed legislation banning Sunday shopping, but reinstated it after a year as it proved deeply unpopular), but said retailers could adopt a common decision on Sunday hours as a matter of business strategy. Magyar Nemzet said industry insiders concede that keeping stores open from 6 a.m. until 10 p.m. on Sundays has become more problematic from a business perspective because of the labor shortage.

Sales From Retail Shops up 3%

The volume of sales in retail shops increased by 3% in May, according to raw data, and by 2.6% when adjusted for calendar effects ,compared to the same period of the previous year, the Central Statistical Office (KSH) reported in a first release of data on ADVERTISEMENT

ksh.hu. The volume of sales, adjusted for calendar effects, rose by 1% in specialized and non-specialized food shops, by 4.8% in non-food retail shops and by 0.8% in automotive fuel retailing. In January-May 2019, the volume of sales – according to raw and calendar adjusted data – was 5.8% higher than in the corresponding period of the previous year, ksh.hu said.

Lidl to Install EV Chargers

The Hungarian unit of German discount supermarket chain Lidl is to install electric chargers at 106 of its stores, index.hu reported on July 12. The new filling station network will be able to charge 372 EVs. The Hungarian Energy and Public Utility Regulatory Authority (MEKH) has granted permission for the installation of 190 filling stations, index.hu said.

Seasonal Jobs Steal Staff From Trade

Some better paid seasonal jobs, especially in the field of tourism, sweep up workers up from the trade sector, magyarnemzet.hu has reported. The wages of traditional shopkeepers are less in department stores, while the overtime demands are much more compared to seasonal workers. A seasonal job pays an average HUF 15,000-20,000

a day in summer resorts, while monthly trade jobs pay HUF 25,000-30,000 less, overall. Csaba Bubenkó, the president of the KDFSZ (the Independent Union of Commercial Workers), said the need to find a solution to this problem is inevitable. He warned that without professional recommendations, the lawful operation of the entire supply chain could collapse at the end of the year, magyarnemzet.hu added.

Tesco Leads Hungary FMCG Market

U.K. supermarket chain Tesco remained Hungary’s biggest retail outfit last year,

generating an estimated gross turnover of HUF 769 billion, a ranking by Trade magazine shows. Hungarian-owned franchise Coop was runner-up with sales of HUF 627 bln, followed by Austrianowned Spar with turnover of HUF 617.6 bln. German discount chain Lidl was in fourth place with sales of HUF 549 bln, and Hungary’s CBA followed with sales of HUF 527 bln. In sixth place was locally-owned Real with sales of HUF 416.1 bln. France’s Auchan was in seventh place with a turnover of HUF 390.1 bln. German discount chain Penny Market was in eighth place with turnover of HUF 292.2 bln and German peer Aldi was in ninth with sales of HUF 256 bln.

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Budapest Business Journal | July 19 – August 1, 2019

The labor market for the Hungarian fast-moving consumer goods sector has seen a raft of wage increases promised for this year. Some stores are stepping in to train their own talent, worried by the fear of qualified professionals leaving Hungary for better wages and working possibilities. CHRISTIAN KESZTHELYI

continue to release a large number of young talents, but many of these young people leave Hungary,” Aldi says in an official statement it sent to the BBJ in response to put questions. “Since its entry into the Hungarian market, Aldi has been offering competitive wages, often the highest amount paid to those filling the given position in the local market, and attractive career opportunities to its employees,” the statement says. It adds that this approach is essential to retain talented people in the long run.

At the beginning of the year, many big FMCG retailers announced they had plans to put up wages. Penny Market announced average wage raises of 10%, Lidl of 15%, Auchan of 9%, and Aldi of 10.88%; Tesco said it would raise wages in two steps this year. But wage rises are not the only investments being made to stave off the labor crisis; some employers are committed to training their own talent, too. “Spar has focused on high-quality Staff Competition practical training since the beginning,” “Now that there is a skills shortage not Márk Maczelka, head of communications at the local unit of the Dutch-based retailer, only in retail but in all industries, food retailers compete for qualified and agile tells the Budapest Business Journal. workforce not only with each other “The increase in the popularity of the but also with other sectors,” the Aldi retail trade and the high standards of statement says. training of our future staff members The German retailer says it usually allow us to alleviate the lack of available finds the right candidates for its positions, workforce in the retail sector. The success be those shop staff, purchasing, sales or of the corporation depends on our staff; IT professionals. It attributes this to its therefore, the quality of their professional employer attractiveness in general. preparedness is of foremost importance, “We also consider targeted employer and we would like to achieve a wider branding a priority as satisfied employees range of improvement in this regard in the are our most effective promoters. Our future,” Maczelka adds. HR activities aim to introduce the On top of everyday practical training, future generation of employees to retail Spar also focuses on talent management. as an industry – as well as the career To that end, it has been the main sponsor opportunities provided by Aldi – as early of the Szakma Sztár (“Skill Star”) as possible,” Aldi says. vocational competition organized by the “This is why we will organize our Hungarian Chamber of Commerce and Aldi4Excellence career afternoon for Industry for ten years. Shop assistants the third time this year to enable those and retail traders, as well as logistics and interested in retail to meet Aldi managers consignment administrator students have in person and be inspired by people with competed in the trade segment. an outstanding career path. Based on “The retail chain fully supports the objectives our experience, today’s job seekers value of the event: to contribute to the social prestige open and direct communication with their and attractiveness of these trades, and also to present the career models and to promote would-be employer and prefer such events to job ads as a means to gain insight into a specific vocations,” the retailer says. company’s operation,” Aldi concludes. Although talent is out there on the labor market, the fear of the youth leaving the Editor’s note: All ten of the top FMCG retail country is very present. chains were contacted by the BBJ and “Aldi believes that Hungarian secondary asked to comment for this article. schools and higher education institutions

INSIDE VIEW

Taxation of e-commerce Judit Jancsa-Pék Senior advisor, Partner LeitnerLeitner

People spend time daily on the internet for work, study, and entertainment, which calls for life e-commerce, offering a great possibility for businesses, since e-commerce is less costly than traditional methods. Buyers can select any goods without geographic borders, and pay online, which makes it flexible. Regulation and taxation of e-commerce, therefore, plays an important role for businesses nowadays. Determining the governing VAT provisions i.e. taxation at the place of supplier or at the customer, VAT calculation on transport costs, using the proper invoicing routines, rightful application of rules for vouchers are all complex issues surrounding e-commerce, but it’s good news that soon it will be made radically simpler from the aspect of VAT. Through its Digital Single Market Strategy, the European Commission aims at simplifying VAT for companies carrying out cross-border sales of goods or services (mainly online) to final consumers (B2C), in line with the principle of taxation at destination. The first measures introduced in 2015 covered telecommunication, broadcasting and electronic services (TBC-services), the second package was adopted in December 2017 concerning the distance sales of goods and services supplied to final customers in the EU, and this VAT e-commerce package will be implemented gradually. In 2019, simplification became available for microbusinesses and SMEs. First, an annual turnover threshold of EUR 10,000 is applied for intra-EU cross-border supplies of TBE-services, under which supplies remain subject to the VAT rules of the member state of the supplier. Secondly, for an annual turnover threshold of up to EUR 100,000, the vendor must only keep one piece of evidence (instead of two) to identify the member state of the customer. For

invoicing, the rules of the EU country of identification of the supplier remains applicable. In 2021, the extension of the Mini One-Stop-Shop (MOSS) scheme to One-Stop-Shop (OSS) will reduce administration dramatically: the nonUnion scheme for supplies of TBEservices by taxable persons not established in the EU will be extended to all types of cross-border services to final consumers in the EU; while the Union scheme will be extended to all types of B2C services as well as to intra-EU distance sales of goods, parallel with the abolition of the current distance sales thresholds. This is in line with the commitment to apply the destination principle for VAT, and will result in online businesses being able to handle EU-wide VAT compliance from home, directly through their tax administration. Special provisions concerning the obligations of electronic interfaces will enter into force on January 1, 2021 as well. Businesses operating such marketplaces or platforms will, in certain situations, have to collect and pay the VAT on behalf of their users for the supply of goods into the EU. An import scheme will also be created covering distance sales of goods imported from third countries to customers in the EU up to a value of EUR 150. The seller will charge and collect the VAT at the point of sale to EU customers, declare and pay that VAT in the member state chosen for the OSS registration. These goods will then benefit from a VAT exemption upon importation; while the current VAT exemption for goods in small consignment will be abolished. Alternatively, where the import OSS is not used, the customs declarant will have to collect import VAT from customers and pay it to the authorities via a monthly payment. These simplification measures may facilitate more the online sales and going abroad for businesses. However, proper taxation and a sufficient administrative setup remains increasingly important. Good compliance also provides business opportunities by creating the way to analyze business and provide management information for better development decisions. LeitnerLeitner is one of the most influential tax consulting, accounting and auditing companies in Central Europe, with tested cooperation all over the World. Through our experts we provide high quality and practical advice on taxation aspects of both traditional and e-commerce businesses and we open the door for businesses going abroad.

NOTE: ALL ARTICLES MARKED INSIDE VIEW ARE PAID PROMOTIONAL CONTENT FOR WHICH THE BUDAPEST BUSINESS JOURNAL DOES NOT TAKE RESPONSIBILITY

Challenges Face FMCG Labor Market, Despite Growing Wages

Special Report | 13

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Budapest Business Journal | July 19 – August 1, 2019

Retailers Continue to be Attracted to Hungary The leading shopping centers and high streets are performing well in Budapest in the view of most analysts, with secondary centers and locations doing less well, reflecting the changing expectations of consumers and tenants. Allee shopping center in Budapest.

GARY J. MORRELL

Real estate consultancy CBRE noted 15 new brands entering the Hungarian retail market in 2018, and these primarily targeted landmark shopping centers over high street locations. The retail market registered around 7% year-on-year growth in per capita sales last year. Shopping center stock in Budapest and across Hungary remains low by European standards with no new mall completions in Budapest since 2013. The hiatus in development has been largely due to concerns over the economy, and therefore the population’s spending power, and the possible longer-term impact of e-commerce on bricks and mortar retail with an eye on Western European retail markets.

at

Indeed, demand for prime retail space is driving rental increases across the Central and Eastern European region. International brands now consider the markets to be mature and attractive from a consumer demand perspective.

An additional 8% of Hungarian consumers are also planning to purchase goods in the future. Between January and March 2019, the volume of sales in retail shops increased by 6.6%,” JLL notes. The retail market in Hungary is seen as “consolidated” with low mall pipelines. At the same time, shopping center owners in the region are looking to redevelop existing stock in response to changing tenant and retailer demand. Landlords are in a strong position with waiting lists at leading shopping centers putting upward pressure on rents.

Vacancy in the leading Budapest shopping centers has hit an historic low of 1-1.5% with waiting lists for space according to CBRE. The highest achievable rents for Budapest shopping centers is EUR 100 per sqm per month compared to EUR 170 for Prague and EUR 130 for Warsaw, according to Cushman & Wakefield. “The concepts of the newly planned malls have changed to better serve the changed customer demand,” comments Viktória Szabó, head of retail agency at Cushman & Wakefield Hungary.

“There is growing confidence with Hungarian consumers to use online shops to buy goods. At the end of 2018, the proportion of Hungarian shoppers buying online is on the same level as in the EU

26%.

Historic Low

Sectors for new Brands in the CEE Region 2017–2018 Sector Fashion

Czech Republic

Hungary

Poland

Romania

Slovakia

Total

28

8

18

12

5

71

Food and beverages (F&B)

7

3

5

2

8

25

Other

3

1

7

1

1

13

Cosmetics and toiletries

3

3

3

2

11

2

6

2

1

11

2

1

7

1

6

Household and furniture Electronics

4

Shoes

4

1

Jewellery

4

1

1

1

1

3

1

2

Sport fashion Accessories

1

Leisure time

2

Sports equipment

5 4

2

4 3

Supermarkets, hypermarkets Toys

6

1 1

1

4 1 1 Source: Cushman & Wakefield

“For the same reason, a number of existing major shopping malls are also under concept change and re-modelling. The main targets are to increase the food offer within the malls, and secure new, interesting leisure elements. Developers are designing future schemes to have more entertainment and F&B elements. Unique leisure elements are design targets, in order to differentiate them from other shopping centers, attract more customers and increase dwell time,” Szabó says. The next long awaited delivery in Budapest will be the 54,000 sqm Etele Plaza by the Hungarian developer Futureal, with a scheduled handover of the third quarter

of

2020.

Designed by Hungary’s Paulinyi-Reith & Partners and the Portland, Oregon-based Dyer Studio Inc., will include around 180 shops located at a transport hub where the Kelenföld railway station, Metro line 4 and the approach section of the M1-M7 motorways all meet.

Brownfield Regeneration

The hub is used by 165,000 people daily according to Futureal and the mall will be part of a bigger project that also includes the 65,000 sqm Budapest One office park. This is the second brownfield development undertaken by Futureal after the Corvin Promenade urban regeneration scheme that delivered a 44,000 sqm shopping center and 10,000 sqm of street retail, comments Tibor Tatár, CEO of Futureal. Another major planned project is the Central Park project by the Hungarian developer Granit Polus, located in Districts VI and XIII. According to the plans, the mixed-use development will consist of retail, office and residential elements. Negotiations with the planning authorities are ongoing for what has been a longplanned development. One other pipeline project is the 53,000 sqm Bogdáni shopping center by

the German ECE, located in the Óbuda area of Budapest, also at a transport hub. ECE is waiting for new permits on the development, its previous set having expired. “There are not many new shopping centers currently being built; new projects are rare and they are primarily multipurpose schemes combining retail, quality catering, entertainment, office, residential and hospitality uses, all in great environments with top architectural

noted, and representing a total shopping center density of 443 sqm per

1,000 inhabitants.

This compares to Prague with a total retail stock of 1.1 million sqm and only 35,000 sqm of space currently under construction. The average size of a shopping center in Hungary is 30,000 sqm. The leading malls are generally considered to be the 68,000 sqm Árkád center, the 66,000 sqm Arena Plaza (now renamed Arena Mall), Mammut (58,000 sqm), Allee (47,000 sqm), WestEnd City Center (45,000 sqm) and the MOM Park (30,000 sqm). All have waiting lists for tenants and are therefore able to command the highest rents.

“The main targets are to increase the food offer within the malls, and secure High Density With regard to supply, Éva Sréter, head new, interesting leisure of retail at JLL Hungary, argues that the elements. Developers are market has reached a relatively high density level, and therefore refurbishment instead designing future schemes of pure development is becoming more to have more entertainment relevant. She cites the refurbishment of Shopmark by Diófa Asset Management and and F&B elements.” the extensive redevelopment of Campona designs,” says Jan Kotrbáček, head of CEE retail at Cushman & Wakefield. “Older retail schemes on the market are undergoing the inevitable revitalization. Owners are forced to think about the future of their shopping centers and come up with new concepts,” he adds. JLL puts total modern mall stock in Budapest at 722,000 sqm, low by European standards, as previously

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Budapest Business Journal | July 19 – August 1, 2019

by CPI Property Group as examples of this. The strength of the sector is seen by the way it is attracting investors as South Africa’s NEPI Rockcastle, which acquired the 66,000 sqm Arena Mall in fall 2017. This was the first entry of the prolific regional investor/developer into the Hungarian market, and the company also purchased a 22-hectare development plot adjacent to Arena. The company has a policy of redeveloping and extending its acquisitions as a long-term investor

New Brands in the CEE Region in 2018 28

26

14 7 Czech Republic

Poland

Romania

BBJ Infographic

Hungary

5 Slovakia Source: Cushman & Wakefield

and building owner. NEPI Rockcastle followed up the Arena deal with a further acquisition when it purchased the Mammut shopping center a year later. The Czech Republic is the CEE destination of choice for international brands. Of the around

80

brands

that entered the CEE region last year, 28 chose the Czech Republic, with Poland a close second with 26, according to Cushman & Wakefield. Most new bands come from the fashion sector, a trend that has persisted for several years. However the food and

beverage sector is gaining in importance as it continues to bring new concepts to Hungary and the region. “Shopping centers will have to change their position to become closer to the local community by creating an authentic environment and hiring local people,” says Kotrbáček. “Competition will extend from the numbers (i.e. sqm and the number of stores) to the experience. In this regard, architecture will play an important role, because retailers and brands will need to present their product in an exceptional environment. Subsequently, brands will prefer statement and reference shops to be recognized and identified with on the market,” he adds.

ADVERTISEMENT

Downtown Team Building As soon as summer ends, workplace communities need to be shaken into shape once again, as businesses begin their run towards the end of the year. While numerous places offer team building opportunities, it is hard to find real novelties. Szamos wants to offer its help and ideas in this. A dazzling milieu, wall paintings depicting Herend porcelain, great cakes, delicious coffee, breakfast and dinner offers await guests in the heart of Budapest, at the Szamos Gourmet House. This is a place wellsuited for team building due to its size. Its easily accessible, the gastronomic palette is wide and, most importantly, the Szamos Chocolate School operates here as well. As part of this program, participants will not only learn about the history and varieties of cocoa and chocolate, but an expert chocolate master will present the ins and outs of chocolate pouring. Within the framework of this, the chocolate is melted with the help of the participants, before getting finally tempered. Those who wish to gain an insight into the process of making bonbons can learn the techniques of filling and pouring them. Of course, the culmination of the course is the tasting. After that, one only needs to pack the handmade products that each guest can take home in a gift boxes. The courses at the Szamos Chocolate School vary according to the seasons. While in the summer you can take part

in ice cream making, in winter candy making courses are in focus. The latter can, of course, also be supplemented with a festive menu, mulled wine or hot punch. There are also, however, macaron and cakemaking courses that require even more in-depth training, but which are likely to provide an even more exciting experience. English is now the language of communication in many workplaces in Hungary. Our chocolate masters can hold courses in Hungarian, naturally, but also in English. We can accommodate groups from six to 50 people. The duration of a program is between two and two-and-a-half hours, starting at the time of your choice. Szamos’ other unique location is its Chocolate Museum, located in the immediate vicinity of Parliament, which also awaits team building events. The program here is supplemented by a visit to the museum itself, featuring more than 4,500 unique items. Within the framework of this, we guide guests through the spread of hot chocolate across Europe, presenting the locations and original tools of each era.

This private collection is the fruit of more than three-decades of work by the owners, the Szamos-Kelényi family, who found, bought and systematized the unique items. The Kossuth tér location thus forms a great base for a team building event with a similar number of participants and conditions as at the like the downtown

Gourmet House venue. We create unique offers for each inquiry, customizing the program and the services as well. We are awaiting your inquiries via email at info@csokoladeiskola.hu and via phone at +36 30 233 3412.

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Special Report

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Budapest Business Journal | July 19 – August 1, 2019

Hungary on Track for Self-driven Innovation Not more than 20 years ago, technology users and enthusiasts were in awe about companies (or products and services) like CompuServe, AOL, Napster, Palm, Iomega, Altavista, AskJeeves, GeoCities. Some brands, like Corel Draw, Motorola or Blackberry still exist, but are a mere shadow of the giants they once were, buried by ambitious newcomers, selfsufficiency and an inability to keep pace with the changing world. In short, by lack of innovation. BALÁZS BARABÁS

Technology, an area once seen as limited to geeks and nerds typing unfathomable endless codes into the night, now dominates the world. The changes driven by the tech sector in society has accelerated so much that the world today is barely able to keep pace with itself. Everyday life has become ruled by networks, data and digitalization. Consumers rejoice about simpler, faster solutions for spending their money. Regulators are trying desperately to foresee and control the risks and adapt legislation accordingly. Governments are waging endless wars against company giants seeking to minimize taxation. Tensions are mounting among world economic superpowers, while a new financial crisis unfolds.

Prime Minister Viktor Orbán (center), Minister for Innovation and Technology László Palkovics (right) and ZalaZONE managing director András Hári collectively press a button symbolizing the start of operations at the selfdriving test track on May 21. Photo by Gergely Botár/kormany.hu. Recently the U.S. administration announced an investigation into France’s proposed tax on internet giants like Google, Amazon and Facebook. In a nutshell: the French digital services tax would impose a 3% annual levy on French revenues of digital companies with yearly global sales worth

more than

EUR 750 million

and French revenue exceeding EUR 25 mln. The bill aims to stop multinationals from avoiding taxes by setting up headquarters in low-tax EU countries. Currently, the companies pay very low taxes in countries where they have large sales like France. The tax primarily targets those that use consumers’ data to sell online advertising. U.S. Trade Representative Robert Lighthizer has expressed concern that the tax “unfairly targets American companies”. Unfair is also the word Chinese telecom equipment provider Huawei uses to address the hostile position of the United States administration against the company. The U.S. has concerns about certain risks that using Huawei equipment in telecom networks would pose.

Electric Cars: The Answer to the Wrong Question? According to scientists, the question we should ask ourselves is not how to make electric cars more efficient, but rather should we use cars at all. A report compiled by the Center for Research into Energy Demand Solutions (CREDS) and summarized by BBC says: “no”. Electrifying cars and developing self-driven cars will not address traffic jams, urban sprawl and the need for parking spaces, the authors, more than 80 academics across the United Kingdom argue. Yes, there will always be people who depend on cars, especially in the countryside or suburbs. But

in the cities, it is a different story. Here young people are increasingly using public transport, car and scooter sharing services, walking, cycling, taking minicabs or hiring cars as and when they are needed. CREDS says most cars are parked for 98% of their lifetime, with a third of cars not going out every day. Encouraging electric cars is not the solution, the report notes. These will not contribute to less congestion, while another problem arise, such as the need to setting up charging spots, which is a huge challenge in urban areas with no off-street parking.

‘Actual Risk’

Secretary of State Mike Pompeo addressed these fears during his visit earlier this year to Budapest, suggesting the government should be warry of “actual risks to their own people, to the loss of privacy protections for their own people, the risk that China will use this data in a way that is not in the best interest of Hungary”. Hungary, however, has a different view of what is in its “best interest”. In July, the government signed a memorandum of understanding strengthening the role of Huawei in the development of the country’s ICT sector. Last year the Chinese company carried out successful next-generation 5G telecom network tests with Magyar Telekom and Vodafone Magyarország. The provider of the equipment looks of secondary importance in this matter.

In

2012,

the Orbán administration started building a state-owned mobile phone operator service, but the project failed. Now the government is focusing on the nextgeneration 5G network. “The state must assume a role in the deployment of the infrastructure of 5G networks,” Minister for Innovation and technology László Palkovics said back in June. As he explained, this has importance points far beyond telecommunications; it the catalyst of technology in a host of innovative areas. “These include IoT applications and selfdriven vehicles; we are currently only aware of some of the related opportunities,” Palkovics pointed out. According to the roadmap, the commercial launch of 5G in industrial facilities is expected in 2020, and by 2025 Hungary’s 5G network will cover all major cities and transport routes. A Government Commissioner will be appointed for the coordination of 5G development projects, Palkovics added.

ZalaZONE

The mentioning of self-driven vehicles by the minister was almost certainly not

accidental; only one month earlier, the Prime Minister himself inaugurated the first phase of the ZalaZONE automotive industry test track in Zalaegerszeg. This HUF 45 billion self-driving vehicle test track project includes a 2 km handling course, 300 m-diameter dynamic platform and multi-surface braking platform, plus five hectares of the track’s smart city and a 2,000 sqm garage. The second phase of ZalaZONE will be built by 2020. Other elements will include test track modules for rural roads, highways and motorways and a noise measurement track. All this, however, will not contribute much to bringing Hungarian innovation to a next level without progress in artificial intelligence and robotics. A conference held in Budapest in January this year highlighted some of the current and future issues, as covered by BBJ Online. Taira-Julia Lammi, managing director of the Swiss-Swedish engineering company ABB in Hungary, pointed to the statistics on robot density as an indication of one means to boost productivity. According to data from the International Federation of Robots, Hungary has

57

robots

per 10,000 manufacturing workers, compared to 309 in Germany. While Germany leads the robotic rankings in Europe, it is also true that other countries are ahead of Hungary: in 2016, robot density was highest in Slovakia, at 135 per 10,000 workers, followed by Czech Republic on 101. Martin Wodraschke, a partner with the CMS AutoTech group, expressed concerns over the ability of domestic small- and medium-sized enterprises to cope with the many tasks ahead. “How can the SMEs, out in the countryside, do the same changes? This is not a [subject] only for the international elites, this is a thing which is going through the whole Hungarian automotive industry. I think this will be the most difficult thing in the future,” Wodraschke said.

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www.bbj.hu

Budapest Business Journal | July 19 – August 1, 2019

Special Report | 17

Largest Shopping Centers in Hungary Rank

Ranked by net retail space

1

Company Website

ÁRkÁd ÖRs vezéR teRe bevÁsÁRlókÖzpont www.arkadbudapest.hu

2

aRena mall

3

kÖki teRminÁl

www.arenamall.hu

www.kokiterminal.hu

4

mammut bevÁsÁRló- és szóRakoztató kÖzpont

5

Westend City CenteR

www.mammut.hu

www.westend.hu

6

luRdy hÁz bevÁsÁRló- és iRodaCentRum

7

allee bevÁsÁRlókÖzpont

www.lurdyhaz.hu

www.allee.hu

7

savoya paRk

9

maRket CentRal FeRihegy

www.savoyapark.hu

www.marketcentral.hu

FaCility manageR / pRopeRty manageR, addRess, phone, Fax, Website

ECE Projektmanagement Budapest Kft., 1106 Budapest, Örs vezér tere 25/A, (1) 434-8200, (1) 434-8207, www.ece.com

CBRE Kft., 1055 Budapest, Bajcsy-Zsilinszky út 78., (1) 374-3040, www.cbre.hu

KÖKI FM Kft. 1191 Budapest, Vak Bottyán utca 75/A-C.

Cushman & Wakefield Kft., 1055 Budapest, Deák Ferenc u. 15., (1) 266-1288, (1) 266-1289, www.cushmanwakefield.com

WestEnd Ingatlanhasznosító és Üzemeltető Kft., 1062 Budapest, Váci út 1-3, +36 1 374 6573, www.westend.hu

Lurdy-Ház Kft., 1097 Budapest, Könyves Kálmán krt. 12–14., (1) 456-1200, (1) 456-1209, www.lurdyhaz.hu

Multi Hungary Management Kft., 1117 Budapest, Október huszonharmadika u. 8-10, (1) 279-3520, www.multi.eu

Forum Savoya Park Kft.

White Star Real Estate Kft.

net Retail spaCe (sqm) net oFFiCe spaCe (sqm) total gRoss building aRea (sqm)

no. oF levels no. oF Retail units no. oF paRking spaCes

majoR tenants in 2018

C&A, Zara, H&M, Van Graaf, Hervis, Media Markt, New Yorker, Interspar, Reserved, Libri, Douglas, Sinsay, CCC, Deichmann

addRess phone email

1106 Budapest, Örs vezér tere 25/A (1) 433-1400 info@arkadbudapest.hu

68,000

5 220 1,600

66,000

Ÿ

180,000

1 200 1,800

Peek & Cloppenburg, Media Markt, Sportsdirect, Tesco, CCC, New Yorker, C&A, Zara, H&M, Massimo Dutti, Bershka, Stradivarius, Pull&Bear, Zara Home, Springfield, Humanic, Deichmann, Libri, Michael Kors, Nespresso

1087 Budapest, Kerepesi út 9. (1) 880-7007 info@arenamall.hu

58,000 7,000 200,000

3 180 1,600

Tesco, Müller, C&A, H&M, dm, Rossmann, New Yorker, Libri, Euronics, Hervis, CCC, Deichmann, Reno, Vögele, Pepco, KIK, Telenor, T (Magyar Telekom), Posta, CIB, OTP, Erste, Unicredit, Tamaris, PizzaHut, KFC

1191 Budapest, Vak Bottyán utca 75 A–C (1) 919-1300 info@kokiterminal.hu

Ÿ

105,000

7 330 1,200

Match, Hervis, Media Markt, Mammut Bowling, UPC, Posta, Cinema City, Mango, Spriengfield, Starbucks, Salamander, Humanic, Douglas, Deichmann, Promod, Marks and Spencer, McDonalds, Benetton, Esprit, Libri, Alexandra, Okay Italia, Bershka, Butlers, Mammut Egézszségközpont, Euromedic, Bio Sétány, Lite Wellness Club, Burger King, Nordsee

1024 Budapest, Lövőház utca 2–6. (1) 345-8000 mammut@mammut.hu

51,500 (gross) 16,854 (gross) 194,000 (gross)

4 394 1,930

Cinema City, H&M, CCC, Media Markt, C&A, Spar

1062 Budapest, Váci út 1–3. (1) 374-6573 info@westend.hu

50,000

Ÿ Ÿ

3 400 1,930

Alexandra, Deichmann, Lurdy Rendezvényközpont, Galaxy Játékáruház, Hififutár.hu, dm, KIK, Lurdy Mozi, REÁL Élelmiszer, Office Depot Zoodom, Cosmos City, Háda, Saxoo London, Roland, McDonald's, Cutler Gold Fitness Center, Aegon Biztosító, OBI, Impulse Leasing, Chipcad

1097 Budapest, Könyves Kálmán körút 12–14. (1) 456-1100 info@lurdyhaz.hu

46,600 7,000 118,000

4 150 1,200

Interspar, Van Graaf, Zara, H&M, CK Jeans, Humanic, Salamander, Douglas, Intersport, Cinema City, Libri, Life1 Fitness

1117 Budapest, Október huszonharmadika utca 8–10. (1) 279 3520 info@allee.hu

46,600

Ÿ Ÿ

1 77 2,500

OBI, Möbelix, ALDI, Rossmann, New Yorker, Deichmann, Pepco, Flying Tiger, Fitness5, Hepi HOme, Sport Factory, Líra, Euronics, DIGI TV, Belfrit, Spa Car Wash, Sebastiano, Top Shop, Retro Jeans, KIK, CCC, Biohair, Vision Express, KODAK, Szerencsejáték, Lipóti pékség, IBUSZ, Szamos Marcipán, Mister Minit, Herbária, Dönermix, Vadbarna szolárium

1117 Budapest, Hunyadi János út 19. (1) 887-1330 office@savoyapark.hu

44,652 – 44,652

1 34 1,550

Tesco, Praktiker, Intersport, C&A, H&M, Müller, DM, KIK, Deichmann, CCC, Pepco, Burger King, Jysk

2220 Vecsés, Fő út 246–248. (29) 557-000 info@marketcentral.hu

44,100

1 280 2,500

C&A, CCC, Deichmann, H&M, Humanic, Libri, Media Markt, Pólus Mozi, Reno, Reserved, Sportsdirect, Tesco, Starbucks, Yoyoso

1152 Budapest, Szentmihályi út 131. (1) 268-1288 polus@cbre.com

Ÿ Ÿ

56,000

pólus CenteR bevÁsÁRlókÖzpont www.polus.hu 10

CBRE Kft., 1055 Budapest, Bajcsy-Zsilinszky út 78., (1) 374-3040, www.cbre.hu

Ÿ

58,000

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Budapest Business Journal | July 19 – August 1, 2019

net Retail spaCe (sqm) net oFFiCe spaCe (sqm) total gRoss building aRea (sqm)

no. oF levels no. oF Retail units no. oF paRking spaCes

majoR tenants in 2018

addRess phone email

11

CBRE Kft., 1055 Budapest, Bajcsy-Zsilinszky út 78., (1) 374-3040, www.cbre.hu

41,000 – 53,905

2 160 2,050

Reserved, H&M, SportsDirect, NewYorker, C&A, Intimissimi/Calzedonia, Libri, Douglas, Marionnaud, Cinema City, Tropicarium, Humanic, Deichmann, CCC, Kockapark, Springfield, Regio Játek

1222 Budapest, Nagytétényi út 37–43. (1) 424-3000 info@campona.hu

12

Klepierre Management Magyarország Kft., 1138 Budapest Váci út 178., (1) 577-1100, (1) 577-1101, www.klepierre.com

37,000 11,000 55,800

4 146 1,200

H&M, Reserved, Mohito, Orsay, Promod, Intersport, Media Markt, McDonald's, KFC, Cinema City, Charles Vögele, Libri, Deichmann, CCC, Pirex, Pepco, Príma

1138 Budapest, Váci út 178. (1) 465-1600 dunaplazasc@klepierre.com

Klepierre Corvin Kft., 1138 Budapest Váci út 178., (1) 577-1100, (1) 577-1101 www.klepierre.com

34,603 – 75,039

4 105 840

H&M, New Yorker, Tatuum, C&A, Libri, Euronics, CCC, Butlers, Camaieu, Deichmann, Ecco, Hervis, Müller, Promod, Pupa, Orsay, Reno, Starbucks, I'Style, Tamaris, Cropp, house, Sinsay, Reserved, DM, Mohito

1082 Budapest, Futó utca 37–45. (1) 977-7779 info@corvinplaza.hu

MOM Park MFC Kft., 1123 Budapest, Alkotás u. 53., (1) 487-5501, www.mompark.hu

31,000 18,000 100,000

3 102 1,230

SPAR, Hervis, CCC, H&M, Paulaner, Vapiano, Salamander, Douglas, Reserved, Mohito, Griff, Pirex

1123 Budapest, Alkotás utca 53. (1) 487-5501 info@mompark.hu

BNP Paribas Hungary, 1051 Budapest, Széchenyi István tér 7-8. (1) 374-6333, www.bnpparibas.hu

30,200 – 30,200

1 18 1,253

JYSK, Tesco, KIK, Deichmann, dm, OBI, Fressnapf

6729 Szeged, Szabadkai út 7. (1) 920-2193 info@napfenypark.hu

Boston-Bróker Kft., 4025 Debrecen, Simonffy u. 1/A, (52) 500-210

28,400 – 30,800

3 32 600

Interspar, Praktiker, Euronics, Magnet Divat, G4 Fitness, Háda, M.Posta, Human Bioplazma

4027 Debrecen, Füredi út 27. (52) 483-080 malompark@malompark.hu

24,000

2 80 1,000

INTERSPAR, MEDIA MARKT, HERVIS, dm, Libri, Pepco, Deichmann, CCC, Reserved

1191 Budapest, Üllői út 201. – info@shopmark.hu

4 100 400

CIB Bank, Bijou Brigitte, dm, Erste Bank, Interspar, Magyar Posta, Magyar Telekom, MKB Bank, Orsay, OTP Bank, Telenor, Vodafone, Yves Rocher

1032 Budapest, Bécsi út 154. (1) 437-4600 info-hu@aere.com

2 20 600

Möbelix, C&A, Deichmann, KIK, Pepco, Reno, Office Depot, Kangaboo, dm, WalterLand, Galaxy játék, Eurofamily

2120 Dunakeszi, Nádas utca 8. (1) 268-1288 hungary@cpipg.com

4 95 800

Háda, Deichmann, CCC, C&A, Douglas, OTP Bank, Tally Weijl, Spar, Vodafone, Vision Express, Orsay, Unicredit Bank, Telekom, Telenor, New Yorker, dm, Devergo, Media Markt, Hervis, Invitel, Galaxy Játékáruház, Cosmos City, Alexandra, budmil, Playersroom, Center Mozi, Fun City Bowling Bár, Budapest Bank

5600 Békéscsaba, Andrássy út 37–43. (66) 524-524 csabacenter@csabacenter.hu

6000 Kecskemét, Korona utca 2. (76) 416-274 kecskemet@malom.hu

3525 Miskolc, Szentpáli út 2–6. (1) 577-1100 miskolcplaza@klepierre.com

Rank

FaCility manageR / pRopeRty manageR, addRess, phone, Fax, Website

Company Website

Campona bevÁsÁRló- és szóRakoztatókÖzpont www.campona.hu

duna plaza

www.dunaplaza.hu

13

CoRvin plaza

14

mom paRk bevÁsÁRlókÖzpont

15

napFény paRk bevÁsÁRlókÖzpont

16

malompaRk bevÁsÁRlókÖzpont

www.corvinplaza.hu

www.mompark.hu

www.napfenypark.hu

www.malompark.hu

shopmaRk bevÁsÁRlókÖzpont 17

18

www.shopmark.hu

euRoCenteR óbuda bevÁsÁRló és szóRakoztatókÖzpont www.eurocenterobuda.hu

Diófa Ingatlankezelő Kft.

Manhattan Real Estate Management Kft., 1032 Budapest, Bécsi út 154., (1) 437-4600, (1) 437-4650

Ÿ

30,500

22,059

Ÿ

35,900

buy-Way dunakeszi

http://dunakeszi.buyway.hu 19

CBRE KFT. 1055 Budapest, Bajcsy-Zsilinszky út 81. (1) 374-3040, office@cbre.com

20

Csaba Center Invest Kft., 5600 Békéscsaba, Andrássy út 37–43., (66) 524-530, (66) 524-525, www.csabacenter.hu

Csaba CenteR bevÁsÁRló- és szóRakoztatókÖzpont www.csabacenter.hu

21

malom kÖzpont

22

miskolC plaza

www.malom.hu

www.klepierre.com

21,600

Ÿ

22,350

21,000 12,000 82,000

Malom Ingatlanhasznosító Kft., 6000 Kecskemét, Korona utca 2., (76) 416-274, (76) 320-504, www.malom.hu

20,000 3,000 46,000

10 95 463

H&M, New Yorker, Douglas, Deichmann, Hervis, Promod, Springfield, Takko, OTP Bank Regionális központja, Provident Zrt. Regionális központja, Calzedonia, Intimissimi, Triumph, GAS, Vision Express, Orex, 576 Kbyte, McDonald's, Swarovski

Miskolc 2002 Kft, 3525 Miskolc, Szentpáli út 2-6 (46) 503 000 www.miskolcplaza.hu

19,926 340 35,855

2 81 420

H&M, CCC, Deichmann, Rossmann, Orsay, Humanic, Skechers, Parfois, Calzedonia, Vision Express, Telekom, Telenor, Vodafone, MKB, KFC, Pizza Hut, McDonald's, Retro, GAS, Libri

3

www.bbj.hu

Rank

Budapest Business Journal | July 19 – August 1, 2019

Company Website

23

agRia paRk

24

koRzó bevÁsÁRlókÖzpont

24

sugÁR ÜzletkÖzpont

www.agriapark.hu

www.korzo.hu

www.sugar.hu

Special Report | 19

FaCility manageR / pRopeRty manageR, addRess, phone, Fax, Website

net Retail spaCe (sqm) net oFFiCe spaCe (sqm) total gRoss building aRea (sqm)

no. oF levels no. oF Retail units no. oF paRking spaCes

majoR tenants in 2018

addRess phone email

WPR Alfa Kft., 1095 Budapest, Máriássy u. 7., (36) 512 401, (36) 515 156, www.agriapark.hu

19,313 2,448 46,702

2 100 520

Agria Mozi, C&A, CCC, Charles Vögele, Deichmann, dm, Expert, Hervis, KFC, Libri, New Yorker, OTP Bank, Pepco, Springfield, Unicredit Bank, Tesco

3300 Eger, Törvényház utca 4. (36) 515-401 info@agriapark.hu

SES Magyarország Kft., 2060 Bicske, SPAR út, (42) 799-111, www.ses-european.com

19,000 3,000 46,000

10 90 430

SPAR, New Yorker, Expert, Hervis, Camaieu, Humanic, Deichmann, Douglas, Orsay, dm, Swarovski, Springfield, Women’s Secret, Triumph, Libri, Roland

4400 Nyíregyháza, Nagy Imre tér 1. (42) 799-111 korzo@korzo.hu

Székhely 2007 Kft., 1126 Budapest, Nagy Jenő utca 12. (1) 469-5339, (1) 469-5330

19,000 – 35,900

4 90 400

Sugár Mozi, Sugár Fitness, Spar, Libri, Háda, EURONICS, Vodafone, Telenor, Unicredit Bank, Telekom, Raiffeisen Bank, Galaxy Játékáruház, CIB Bank, dm, SUGÁR Játszóház, SUGÁR Bowling & Pub,

1148 Budapest, Örs vezér tere 24. (1) 487-3746 sugar@sugar.hu

17,688

Ÿ Ÿ

1 22 537

Interspar, Charles Vögele, Humanic, Takko, C&A, New Yorker, Orsay, Fressnapf, Brendon, dm, Intersport, Deichmann, KIK, Hervis, Pepco

16,500 400 42,429

1 19 685

Aldi, Intersport, dm, Deichmann, Centervirág, Ugripark, Eurofamily, Speedfitness, KIK, Mentavill, Aqualing, Fisch, Pepco

9025 Győr, Csipkegyári utca 11. (96) 314-746 info@dunacenter.com

16,064

Ÿ Ÿ

1 62 862

ALDI, Cinema City, H&M, Gym Class Fitnesz, CCC, Pepco, Libri, Rossmann, Retro, Playersroom

6724 Szeged, Kossuth Lajos sugárút 119. (30) 551-1034 info@szegedplaza.hu

Klepierre Management Magyarország Kft., 1138 Budapest, Váci út 178., (1) 577-1100, (1) 577-1101, www.klepierre.com

15,881 186 20,159

1 57 455

Cinema City, Auchan, Euronics, Libri, PEPCO, Deichmann, CCC, Rossmann, Orsay, HÁDA, REGIO JÁTÉK, Cosmos City, Casino Win, Vision Express, KFC, Pizza Hut, budmil, Sportfactory, Yves Rocher

9024 Győr, Vasvári Pál utca 1/A (1) 577-1100 gyorplaza2@klepierre.com

Mall Management Kft., 1148 Budapest, Kerepesi út 52.

14,971 304 20,252

1 64 450-85

C&A, Deichmann, Hervis, Rossmann, Humanic, KFC, Intimissimi, Calzedonia, Orsay, Office Shoes, Takko, Promod, Cinema City, H&M, Tally Weijl

8000 Székesfehérvár, Palotai út 1. (22) 513-300 info@albaplaza.hu

Mall Management Kft., 1148 Budapest, Kerepesi út 52.

14,672 100 33,000

2 73 436

Cinema City, ALDI, DM, Líra, Cosmos, Takko, Retro, McDonald's, Raiffeisen Bank, Pepco

4026 Debrecen, Péterfia utca 18. (30) 738-1780 info@debrecenplaza.hu

14,307

Ÿ Ÿ

2 17 405

Spar, Media Markt, C&A, Pearl Harbor restaurant & bowling, Mountex, Deichmann, dm, H&M, Fressnapf, Kangaboo

1032 Budapest, Bécsi út 136.

13,850 200 19,500

2 63 659

H&M, Amnesia, Saxoo London, CCC, dm, Onyx Casino, Pepco, Pepe Jeans, Devergo&Friends, Tally Weijl, Libri, Gas, Cinema City, Cosmos, KIK

4400 Nyíregyháza, Szegfű utca 75. (42) 508-620 info@nyirplaza.hu

13,783

2 54 288

ALDI, H&M, TallyWeijl, CCC, Libri, Deichmann, Cosmos City, Kultik Cinema, Telekom, Vodafone, Telenor, MKB Bank, Devergo&Friends

1211 Budapest, II. Rákóczi Ferenc út 154–170. (30) 739-2598 info@csepelplaza.hu

stop shop veszpRém www.stop-shop.hu/en

Immofinanz Services Hungary Kft., 1134 Budapest, Váci út 45., (1) 236-0435, (1) 236-0436, www.immofinanz.com

26

27

duna CenteR

Mall Management Kft., 1148 Budapest, Kerepesi út 52.

28

szeged plaza

Mall Management Kft., 1148 Budapest, Kerepesi út 52.

29

Győr Plaza

30

alba plaza

31

debReCen plaza

www.dunacenter.com

www.szegedplaza.hu

www.klepierre.com

www.albaplaza.hu

www.debrecenplaza.hu

8200 Veszprém, Dornyai Béla utca 4.

Ÿ –

stop shop óbuda www.stop-shop.hu/en

Immofinanz Services Hungary Kft., 1134 Budapest, Váci út 45., (1) 236-0435, (1) 236-0436, www.immofinanz.com

32

33

nyíR plaza

34

Csepel plaza

www.nyirplaza.hu

www.csepelplaza.hu

Mall Management Kft., 1148 Budapest, Kerepesi út 52.

Mall Management Kft., 1148 Budapest, Kerepesi út 52.

Ÿ Ÿ

Ÿ –

Rank

20 | 3

Special Report

Company Website

www.bbj.hu

Budapest Business Journal | July 19 – August 1, 2019

FaCility manageR / pRopeRty manageR, addRess, phone, Fax, Website

net Retail spaCe (sqm) net oFFiCe spaCe (sqm) total gRoss building aRea (sqm)

no. oF levels no. oF Retail units no. oF paRking spaCes

majoR tenants in 2018

addRess phone email

CBRE KFT., 1055 Budapest, Bajcsy-Zsilinszky út 81. (1) 374-3040, office@cbre.com

11,800 – 12,300

2 9 420

Media Markt, Mountex, Brendon, Office Depot, Eurofamily

1231 Budapest, Bevásárló utca 8. (1) 268-1288 hungary@cpipg.com

11,500

2 35 586

Spar, CCC, McDonald’s, New Yorker, dm, Deichmann, KIK, Galaxy Játékáruház, Victory Fitness, Pepco

1 15 531

Müller, H&M, Kedvenc Szakáruház, Intersport, Kangaboo, Deichmann, New Yorker, Pepco, Takko, CCC

10,064

1 42 300

SPAR, Kultik Cinema, H&M, Rossmann, Hervis, Cosmos, Raiffeisen, Libri, Tally Weijl, Playersroom

10,045

1 16 298

Müller, C&A, Hervis, KFC, H&M, New Yorker, Fressnapf, dm, KIK, Euronics

1 13 421

Müller, C&A, CCC, Pepco, Euronics, KIK, Deichmann, Takko, New Yorker

6,500 1,500

Ÿ

5 43 160

dm, Játéksziget, Kormányablak, Líra, Neckermann, OTP, Príma, Szamos

1124 Budapest, Apor Vilmos tér 11–12. (1) 951-0578 info@hegyvidekkozpont.hu

Cushman & Wakefield Kft., 1052 Budapest, Deák Ferenc utca 15., (1) 268-1288, (1) 268-1289, www.cushmanwakefield.hu

5,719 – 5,719

1 9 226

ALDI, CCC, DM, Kangaboo

1095 Budapest, Soroksári út 138-142. – –

CBRE KFT., 1055 Budapest, Bajcsy-Zsilinszky út 78., (1) 374-3040, office@cbre.com

5,500 – 6,500

3 18 300

Müller, H&M, Deichmann, Yves Rocher, Telekom, Pizza Me

1088 Budapest, Blaha Lujza tér 3–5. (1) 225-6600 hungary@cpipg.com

buy-Way soRoksÁR http://soroksar.buyway.hu 35

stop shop éRd

www.stop-shop.hu/en Immofinanz Services Hungary Kft., 1134 Budapest, Váci út 45., (1) 236-0435, (1) 236-0436, www.immofinanz.com

36

Ÿ Ÿ

2030 Érd, Budai út 13.

Ÿ –

stop shop debReCen www.stop-shop.hu/en

Immofinanz Services Hungary Kft., 1134 Budapest, Váci út 45., (1) 236-0435, (1) 236-0436, www.immofinanz.com

37

38

kaposvÁR plaza

www.kaposvarplaza.hu

Mall Management Kft., 1148 Budapest, Kerepesi út 52.

11,133

Ÿ Ÿ

Ÿ Ÿ

4031 Debrecen, Kishatár út 34/B

Ÿ –

7400 Kaposvár, Berzsenyi D. utca 1–3. (30) 739-0501 info@kaposvarplaza.hu

StoP ShoP Gödöllő www.stop-shop.hu/en

Immofinanz Services Hungary Kft., 1134 Budapest, Váci út 45., (1) 236-0435, (1) 236-0436, www.immofinanz.com

39

Ÿ Ÿ

2100 Gödöllő, Bossányi Krisztina utca 2.

Ÿ –

stop shop szolnok www.stop-shop.hu/en

Immofinanz Services Hungary Kft., 1134 Budapest, Váci út 45., (1) 236-0435, (1) 236-0436, www.immofinanz.com

40

41

hegyvidék bevÁsÁRlókÖzpont

42

illa bevÁsÁRlókÖzpont

www.hegyvidekkozpont.hu

–

WPR Nonus Kft.

9,320

Ÿ Ÿ

5000 Szolnok, Felső Szandai rét 3.

Ÿ –

euRopeum bevÁsÁRlókÖzpont www.europeum.hu 43

Ÿ = would not disclose, NR = not ranked, NA = not applicable

This list was compiled from responses to questionnaires received by July 17, 2019 and publicly available data. To the best of the Budapest Business Journal’s knowledge, the information is accurate as of press time. While every effort is made to ensure accuracy and thoroughness, omissions and typographical errors may occur. Additions or corrections to the list should be sent on letterhead to the research department, Budapest Business Journal, 1075 Budapest, Madách Imre út 13–14., or faxed to (1) 398-0345. The research department can be contacted at research@bbj.hu

4

www.bbj.hu

Budapest Business Journal | July 19 – August 1, 2019

Socialite

Exploring Surrealism

Surrealism at the Hungarian National Gallery: a Movement Still in Motion Peering at Salvador Dalí’s “Dream Caused by the Flight of a Bee around a Pomegranate a Second before Waking”, one of the works on show at “The Surrealist Movement from Dalí to Magritte” exhibition at the Hungarian National Gallery, I had a revelation. DAVID HOLZER

I’d been thinking how technically skilled Dalí was and also how kitsch his paintings were. Then it struck me how revolutionary this work must have been in 1944, when it was made. That title alone is an eye-opener. It’s important to remember that surrealism developed out of Dada, a response to the appalling violence of World War One. The central premise of Dada was that if reason, politics and science pressed into the service of bourgeois society could wreak such havoc,

it was better to go looking for beauty in chaos, chance and the unconscious mind. Surrealism’s aim, according to the first “Manifesto of Surrealism” published in 1924 by the poet André Breton, was “to resolve the previously contradictory conditions of dream and reality into an absolute reality, a super-reality”. While the artists who defined themselves as surrealists were all stylistically very different, their work has a dreamlike quality. This manifests itself in the use of juxtaposition, as in Dalí’s work, to create an unsettling effect that can be everything from silly to somewhat disturbing. The subtitle to the exhibition at the Hungarian National Gallery is “Crisis and Rebirth in 1929”. This was a year abounding in changes as well as personal and artistic conflicts for the surrealists. More specifically, Catalan artist Salvador Dalí burst onto the Paris art scene in 1929 and collaborated with Luis Buñuel, another Spaniard, on the film “Un Chien Andalou” (“Andalusian Dog”), described as “the first masterpiece of surrealist cinema”. It was also the year of the first major split in an especially fractious group.

Diverse Approach

Reflecting the diversity of surrealist approaches to making art, the exhibition includes works by all the big names. Hungary is represented by André Kertész and the Hungarian-Armenian Brassai, born in Brassó, then part of the Hungarian kingdom. Mercifully, because there’s a lot to take in, the exhibition is split into seven sections. The first focuses specifically on 1929, Paris and turmoil within surrealism. Dadaism and other precursors to surrealism are dealt with in the second section. Max Ernst and

Joan Miró, two radically different artists who share certain characteristics are the mainstays of the third section. Dalí, whose opportunism was at least the equal of his ability, is the hero of the fourth section. The activities of the Grand Jeu (Great Game) group which helped precipitate the crisis of 1929 are covered in the fifth section. René Magritte is the focus for the sixth section, while the seventh section looks at the artists involved with the “Documents” periodical. It’s worth setting aside an hour or two to do the entire exhibition justice. The Hungarian National Gallery is a fine space. It also offers a pleasant, cool sanctuary from the intense heat of a Budapest summer’s day. Before World War II, surrealism didn’t get any kind of purchase in Hungary. This might have been because artists in this country looked to Austria and Germany and surrealism didn’t take hold in either of those countries either. The remarkable István Farkas (18871944) is sometimes linked to surrealism because of the unsettling, dreamlike mood of his best work. But the truth is his art is pretty unclassifiable. His astonishing “Madman of Syracuse” from 1930 is unlike any other Hungarian art I’ve ever seen. Fortunately, the Hungarian National Gallery will be mounting an exhibition of Farkas’ work before the year is out.

“The Surrealist Movement from Dalí to Magritte” runs until 20 October 2019. You can learn more about the Hungarian National Gallery via its English-language website: en.mng.hu,

Hungarian artists began to explore surrealism after 1945. Under drab conformist communism with its championing of tedious socialist realism, surrealism offered a way for countries like Hungary to celebrate the inner worlds of the imagination and feel like they were maintaining a connection to the West. The European School, established in Hungary in 1945, unabashedly saw surrealism as art liberated from rules and a sane response to the lunacy of war and totalitarianism. Perhaps this is why surrealism still resonates with us today. It’s no coincidence that some of the most powerful art of recent years has been made by artists in the lineage of surrealism. David Bowie used surrealist strategies all his life. He often used the cut-up method, partly derived from the surrealists’ Exquisite Corpse practice, to rearrange his lyrics and see what possibilities arose. Bowie made his debt to surrealism even more explicit on his 1976 tour when he showed “Un Chien Andalou” before taking the stage as the Thin White Duke. The videos he made for some of the songs on his last ever album, “Blackstar”, had a disconcerting but beautiful flavor of surrealism. The work of David Lynch – especially TV series “Twin Peaks” and his photography – is clearly in the surrealist tradition. In his book “Catching the Big Fish: Meditation, Consciousness, and Creativity”, he writes of the unconscious: “Ideas are like fish[…]. Down deep, the fish are more powerful and more pure.” Because it’s drawn from the unconscious, the work on display at the Hungarian National Gallery can never date. For as long as it exists, audiences will find paintings by Dalí, Miró and the rest to be playful, beguiling and sometimes disturbing. But there’s a more immediate reason for surrealism’s continued impact.

We live in a world where supposed reason, science and politics cause chaos and catastrophe. While Europe may not be tearing itself apart through outright war, ours is a war-torn planet. Retreating into dreams and the imagination makes a strange kind of perfect sense.

which includes a section dedicated to the surrealism exhibition, a behind-thescenes video and a link to surrealismthemed gifts. You can also purchase tickets to the exhibition itself.

22 | 4

Socialite

www.bbj.hu

Budapest Business Journal | July 19 – August 1, 2019

An estimated 800 people, most notably guest of honor Viktor Orbán and his wife Anikó Lévai, and Acting Assistant Secretary of European and Eurasian Affairs Philip T. Reeker, attended the annual U.S. Embassy event marking the Independence Day holiday this year, though it took a different form from the usual garden party. ROBIN MARSHALL

Instead, the invitation-only party was staged at Budapest Congress Center on July 9, with the formalities of Marine honor guards and flags, speeches and anthems followed by an exclusive concert by AmericanCanadian legend Paul Anka, a longtime friend of Ambassador David B. Cornstein

Attila Németh/U.S. Embassy

800 Guests Celebrate U.S. Independence ‘My Way’

and his wife, Sheila. In his speech, Cornstein thanked “everybody in this country” for making his wife and him “feel so comfortable. The love and warmth you have showed us will stay with us for all our lives.” Noting that the two countries had made “tremendous progress” in their bilateral relationship, he welcomed to the stage “my partner, and my friend, Viktor Orbán”. The Prime Minister said that in the 243 years since America gained independence, the two countries had experienced both highs and lows. “The relationship is always determined by whether there is an overlap between the values promoted by the Unites States, and

those protected by Hungary.” He believed performance that saw him working the that was certainly the case now. floor almost as much as the stage and The PM said the two countries respect by the end he had guests up on their feet each other’s patriotic positions and believe and dancing in the isles. that “guaranteeing the security of our Highlights included a fresh arrangement citizens’ is an obligation of the state”. of Cole Porter’s “I’ve got you Under my Hungary has a vested interest in Skin” to mark the Cornstein’s wedding peace and stability in the region, and the anniversary this month, and new best way to achieve this is through its Hungary-inspired lyrics to “My Way”, membership of NATO, “the world’s most which he gifted to the Prime Minister. successful military alliance”, he said. (Anka was just 25 when he wrote the “May God bless America, and may God original English lyrics for Frank Sinatra save Hungary,” Orbán concluded to applause. and put them to the French song Backed by a 12-piece band, Anka “Comme d’habitude”, the melodic rolled out many of his hits in a structure of which he also changed.)

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St. Stephen’s Day Wine Festival The Saint Stephen’s Day Wine Festival will be held for the fifth time in Nagymaros, where more than 20 wineries from 11 wine regions will await visitors just 50 km from Budapest on August 18-19. A “Wine Street” will be built on the panoramic Béla Király sétány, right next to the Danube at the bottom part of Fő tér (Main Square). The two day event will feature concerts by Feró Nagy and Beatrice, Midlife Crisis, and several operetta, musical, rock, blues, and jazz performances. On the afternoon of August 19, there will also be a boat trip with wine tasting, followed by fireworks the same night. Both days will feature additional programs such as dance demonstrations and a street ball. The variety is even greater among the wines; visitors will be able to try champagnes,

sparkling wines, whites, rosés, and reds, and also award-winning fruit wines. Naturally, there will also be a wide selection of food offered, be it lunch, dinner, or just something to go along with the wine. Trains from Nyugati pályaudvar (the Western Railway Station) offer a convenient means of transportation from the capital, with the last trains leaving for Budapest at midnight. On August 18, the Wine Street will be open between 10 a.m.-1 a.m. The next day, the opening hours will run from 10:30 a.m.-1 a.m. Festival goers can cast their vote for the

best red and white wine of the event. Festival entry is free of charge, but rent of a festival glass is compulsory for HUF 1,000. The event is dog friendly, but use of a leash is required. Participating wineries include: Áts Károly Tokaj, Balla Géza Erdély, Borgarázs Manufaktúra Heininger Pincészet, Dóka Éva pincészet, Jekl Pincészet Villány, Koch Borászat, Laposa Borbirtok, Lingvay Pincészet, Lunczer Pálinkaház, Mokos Pincészet, Molnár Pincészet Mór, René’s Wine Heaven, Sanzon Tokaj, Sauska Pincészet, Sápi Gyümölcsborok, Sebestyén Pincészet Szekszárd, Teleki Pincészet, Varsányi Pincészet, VinArt, and the Abasári Olaszrizling Wine Fiends Circle.

Special Programs

For the first time ever, there will also be a “Warmup Day” on August 17. Special programs include a farmers market,

a bicycle tour organized by Cédrus Foundation, a whole-day kayak tour with wine tasting organized by BTZ KayakCanoe boat rental, and V4 bistro, an exhibition by artists living in and near Nagymaros, and a Scottish-Irish folk concert by Dagda Együttes at Sigili Gallery (tickets available from HUF 1,500). The Saint Stephen’s Day Wine Festival receives state support as a result of a tender called “Rendezvénylánc” submitted by the Börzsöny-Duna-Ipoly Countryside Development Association, together with events by five other towns. The goal of the event series is promoting the maintenance of traditions at the municipalities and their vicinities, and showcasing the gastronomic and touristic values of their regions. The event is organized by the Municipal Library and Community Center of Nagymaros, and the Nagymaros Wine Friends Association. The municipality of Nagymaros is the main sponsor. More information is available at facebook.com/ NagymarosSzentIstvanNapiBorunnep

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Budapest Business Journal | July 19 – August 1, 2019

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Summer Wines can be Complex Too Although many wine purists look down their noses at it, the rosé revolution has also painted Hungary pink, with many nice Magyar offerings now being made. ROBERT SMYTH

Making rosé is no walk in the pink park as the winemaking has to be spot on and precise at every stage. If a mistake is made, then it’s impossible to go back and correct it; the winemaker has to be at the top of his or her game. As such, this makes rosé a suitable test of a winemaker’s talents. Pannonhalmi Tricollis Rosé 2018 (HUF 2,150), from the winery of Pannonhalma’s Benedictine Abbey, has been nicely crafted by winemaker Zsolt Liptai. It comprises three grapes (50% Merlot, 30% Pinot Noir, 20% Cabernet Franc) from three vineyards, and was made utilizing two rosé methods to excellent effect. The Pinot Noir grapes was grown with the sole intention of only being used to make rosé and picked early in order to capture acidity and restrained elegance. It was destemmed and given four to five hours on the skins before pressing and was made in much the same way as most white wine is. The Merlot and Cabernet Franc grapes started as fledgling red wines before being bled off early from the fermenting, giving a rounder, fuller style. The wine was given brief ageing before being blended. This combination of methods has resulted in a wine that exudes ripe raspberry and wild strawberry flavors with good body, depth, structure and refreshing acidity, while the 4.8 g/l of residual sugar gives it a soft landing on the back of the palate. Liptai has been there since the Pannonhalma Abbey winery was brought back to live in the early 2000s and was recommended by the late, great, internationally active and acclaimed Tibor Gál. He (Gál) was consultant to the project that saw the abbey make wine after a break of half a century due to the

collectivization of the former system. (None of the monks possessed the relevant winemaking skills any longer, so they went for Gál’s protégé, Liptai.) Sándor Méresz (Liptai’s great friend, with whom he attended winemaking school in Gyöngyös) is the winemaker at Etyeki Kúria and makes another of Hungary’s finest rosés. The Etyeki Kúria 2018 rosé (HUF 1,790 from Bortársaság) is a blend of Kékfrankos, from the winery’s Sopron vineyards, and Pinot Noir. Kékfrankos, with its lively acidity and crispy red fruit, is a great grape for making rosé, and this wine is nicely polished off with Pinot’s precision and elegance.

Wild Fermentation

Méresz has also mastered Sauvignon Blanc, and Etyeki Kúria’s Sauvignon Blanc 2018 appears to have already flown off the shelves. For something a little different, try his Etyeki Kúria’s Mérész Sándor Project Wild Fermented Sauvignon Blanc 2018 (HUF 2,950). While the grapes, which came from three separate limestone-dominated plots, were fermented from wild yeast with half of the grapes receiving skin contact, it still keeps the grape’s varietal notes of green pepper, cut grass and tropical fruit, yet with more creaminess than is typical. The 5% that was aged in new French (Seguin Moreau) barrels gives it a nice rich twist. Meanwhile, Liptai’s Pannonhalmi Sauvignon Blanc 2018 was made by blending across two vineyards, the cooler Széldomb (literally “windy hill”), which brings crispy acidity, and the warmer Tavaszó, with its juicy tropical notes. The 15-20 hours of skin contact and the addition of a portion of wine fermented via whole berry fermentation, combined with ageing on fine lees, have given a fuller mouthfeel than usual and an

appealing herbaceous character to add to all the usual gooseberry and green fruit goodness. Despite the Pannonhalma wine region’s relatively cool climate in the northwest of Hungary (although the climate sure appears to be changing), Pannonhalmi makes what is for me one of the most impressive Bordeaux-style blends in Hungary. The limited-edition Infusio (80% Merlot, 20% Cabernet Franc), the 2016 vintage of which costs HUF 8,250 from abbey website apatsagipinceszet. hu, has a welcome cool, zesty streak cutting through its concentrated and smoky core.

Fruit-forward

Pannonhalmi’s Tricollis Vörös 2018 (HUF 2,790) is a cheaper and more fruitforward alterative, (Pinot Noir, Merlot and Cabernet Franc) that’s only made in the tank, and is ideal for summer imbibing, and can be chilled a little. Indeed, full-bodied red wines, with their inky tannins and high alcohol, can be hard to stomach in the summer, but lighter reds can make for delicious drinking. Lighter Kékfrankos and Kadarka can also come into their own as the mercury rises. Jani Márkvárt’s fresh and ultra-fruity Ezerötös Cuvée 2018 (HUF 1,500 from Bortársaság), a totally tank-made blend of Zweigelt, Kékfrankos and Merlot is made for warm summer evenings. Another good summer option, this time from Eger’s Jani Bolyki, is his Indián Nyár 2016 (a spontaneously fermented blend of Kékfrankos, Portugieser and Blauburger that is aged in used 500-liter barrels and costs HUF 2,350). Staying in Eger and with the same winemaker, Bolyki Egri Csillag 2018 (HUF 1,750) is a tank-made blend of Királyleányka (a somewhat underrated indigenous variety with fine aromas and good structure), Sauvignon Blanc, Hárslevelű and Riesling from the

Középbérc and the Hajdúhegy vineyards. This is a fun, fruity and floral summer white that gives a good deal more than its price suggests. Another favorite Egri Csillag – Eger’s white wine equivalent of its famous Bikavér red – comes from the cellar of Tibor Gál. The son of the aforementioned late Tibor Gál, he has done a sterling job in bringing the winery back to its former glory. His nickname is Titi, which is tagged onto the name of the winery’s 2018 Egri Csillag Titi (HUF 2,250). This super blend of Királyleányka, Viognier, Pinot Gris, Tramini, Pinot Blanc, Zenit and Cserszegi fűszeres is usually my go-to Csillag in the classic category, but it has come out a bit fuller, softer and rounder in the warm but balanced 2018 vintage.

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Paloznak, Hungary

1-2-3 August 2019