Budapest Business Journal 2902

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BUSINESS JOURNAL BUDAPEST

VOL. 29. NUMBER 2

JANUARY 29 – FEBRUARY 11, 2021

SPECIAL REPORT

Office Equipment SPECIAL REPORT

WFH or not, Office Equipment Remains Crucial While it is still early to make long-term predictions on what direction the office equipment market will take in the shadow of the coronavirus pandemic, some recent trends may offer guidance as to how the next decade will shape up. 12 SPECIAL REPORT

COVID Accelerates Changes in how Firms Use Office Space This is probably not the first time you have read that the coronavirus accelerated a transformation that had already been under way and the office is no exception. As the way we work has been changing, the environment we work in was also in need of an overhaul. 14

SOCIALITE

Kékfrankos Continues its Comeback

Asian FDI Grows in 2020

Kékfrankos is Hungary’s most planted grape, yet not so long ago its very mention brought groans from unimpressed wine tasters, used to thin and sharp versions of the variety in past decades. We are now learning to appreciate the wine in its increasingly classy incarnations.  19

N ES BUSI

S

Despite the undeniable economic impact of the COVID-19 pandemic, the award-winning Hungarian Investment NEWS Promotion Agency returned some surprisingly positive figures, with Asian investors Monetary to the fore, CEO Róbert Ésik Conditions Remain says in an exclusive The National Bank of Hungary left interview. 8 monetary conditions unchanged at its latest rate-setting meeting on January 26. The move was no surprise to analysts, who now think that the next few years are unlikely to bring monetary tightening, and the MNB will rather look to help the economy get back on its feet through non-conventional tools. 3

BUSINESS

GE Healthcare Recruits Hungarian AI GE Healthcare leaders tell the Budapest Business Journal how the Edison platform, named for the company’s storied inventor-founder, aims to be a flagship for medical innovations in Hungary. 7

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THE EDITOR SAYS

EDITOR-IN-CHIEF: Robin Marshall EDITORIAL CONTRIBUTORS: Kálmán Béres, Zsófia

Czifra, Kester Eddy, Bence Gaál, David Holzer, Christian Keszthelyi, Gary J. Morrell, Nicholas Pongratz, Gergely Sebestyén, Robert Smyth, Zsófia Végh. LISTS: BBJ Research (research@bbj.hu) NEWS AND PRESS RELEASES:

Should be submitted in English to news@bbj.hu LAYOUT: Zsolt Pataki PUBLISHER: Business Publishing Services Kft. CEO: Tamás Botka ADVERTISING: AMS Services Kft. CEO: Balázs Román SALES: sales@bbj.hu

CIRCULATION AND SUBSCRIPTIONS: circulation@bbj.hu

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What We Stand For: The Budapest Business Journal aspires to be the most trusted newspaper in Hungary. We believe that managers should work on behalf of their shareholders. We believe that among the most important contributions a government can make to society is improving the business and investment climate so that its citizens may realize their full potential. The Budapest Business Journal, HU ISSN 1216-7304, is published bi-weekly on Friday, registration No. 0109069462. It is distributed by HungaroPress. Reproduction or use without permission of editorial or graphic content in any manner is prohibited. ©2017 BUSINESS MEDIA SERVICES LLC with all rights reserved.

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Our Special Report looking into the office equipment market leads inevitably to one of the most debated issues since the first lockdown last March forced the majority of those not involved in manufacturing to work from home: what becomes of the modern office? There have been claims made with absolute certainty that the office as we know it is dead, that the WFH orders have opened a Pandora’s Box. Stripped of the necessity for the twice daily commute, workers have proved they are not only just as effective working in a home environment, but are often more productive: they will not want to return to the office. Employers, who have finally overcome their doubts about whether staff can be trusted away from the direct glare of their managers, will equally welcome the chance to lose the overheads that go with a downtown Budapest office [insert your city of choice here, this is a location-neutral argument]. Just as insistently, developers and facility managers have declared that tenants, far from looking to off-load office space, can’t wait to get back to the work place, once health protocols allow it. They point out that the office is an essential element of brand building and vital for team work, that you can’t create or maintain a company culture when, rather than one central office, your staff are spread across 100 home offices. As so frequently is the case, the reality will lie somewhere between those two extremes. Anyway, the more immediate question is not what will happen to the office, but when. The long-term nature of most leases mean few businesses will have the opportunity to downsize their space requirements until the renewal date approaches. Many multinationals continue to operate a “work where you want” policy, or apply a rotational

approach to who is in the office, in order to maintain social distancing, although “physical distancing” is apparently the preferred term now. Even that change in terminology points to the fact we are all learning how to cope with the coronavirus as we go along. What started as a health disaster became an economic emergency, and in the wake of that could yet become a mental health crisis. Proponents of the office are right when they talk up the social aspects of a central space where all can meet up. I’ve made the point before that I loved the period when I freelanced from home but did not have to juggle the kids’ digital schooling at the same time. Others simply aren’t cut out for working on their own, either because they find it difficult to motivate themselves, or because they miss the comfort of company. Last fall I spoke off the record with the CEO of a major multinational who argued the future will be a hybrid model, with greater numbers employed on a WFH basis full or part time. Apart from anything else, this gives employers a far wider talent pool to draw on. A Budapestbased business services center doesn’t need a satellite office in one of the university cities such as Szeged or Pecs, say, if it can have people working remotely. But that CEO was equally adamant that the office would remain as a point of central contact, for townhall meetings, for team building, for company culture development and branding, and for those who cannot or do not want to work from home. The balance of how you use the space will change, but the need for an office will not. Wherever you work, today and in the future, stay safe. Robin Marshall Editor-in-chief

Photo by MTI/Lajos Soós

Photo by Fortepan.hu/Pál Berkó

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WHAT BECOMES OF THE BUDAPEST OFFICE?

THEN & NOW

To the right, snowdrops (Galanthus) blooming in the garden of an apartment block in Budapest’s District XI on January 25. In the black and white image from the public Fortepan archive, children sell snowdrops, often seen as a symbol of spring, purity, and religion, in the streets of post-war Budapest in 1947.

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News///macroscope

Monetary Conditions Remain in Place, no Tightening on the Horizon

The National Bank of Hungary left monetary conditions unchanged at its latest ratesetting meeting on January 26. The move was no surprise to analysts, who now think that the next few years are unlikely to bring monetary tightening, and the central bank will rather look to help the economy get back on its feet through nonconventional tools. ZSÓFIA CZIFRA

In line with analysts’ expectations, the Monetary Council of the National Bank of Hungary did not change conditions at its rate-setting meeting this week. The key rate thus remains at 0.6%, while the overnight deposit rate is unchanged at -0.05%, and the overnight and one-week collateralized lending rates is kept at 1.85%. In a statement released after the meeting on Tuesday, the Monetary Council said it would stick to its current policy stance but reallocate liquidity from its collateralized lending facility to its quantitative easing program, stepping up purchase volume and standing ready to expand purchases to securities under 10 years.

Investments in the National Economy in Hungary 2002-2020 (Q1-Q3)

2020 Inflation

The Central Statistical Office (KSH) published inflation data for December and for the entire year of 2020 on January 14. Prices increased by 2.7% in December and by 3.3% on average in 2020 compared to the previous year. Consumer prices were 2.7% higher on average in December 2020 than a year earlier.

“The MNB will continue to apply a flexible approach to the amount of its weekly government securities purchases, increasing its direct purchases in the secondary market relative to the past.”

Source:

“In order to use its instruments affecting longer maturities more effectively, the MNB will reallocate liquidity provided under its individual programs from the collateralized lending facility towards government securities purchases while keeping its monetary policy stance unchanged,” the council said. “In addition, it will be ready to extend its government securities purchases to include government securities with maturities of less than 10 years, thereby ensuring continuous liquidity in the government securities market over the middle segment of the yield curve,” the council statement continued.

Flexible Approach

“The MNB will continue to apply a flexible approach to the amount of its weekly government securities purchases, increasing its direct purchases in the secondary market relative to the past,” it added. The council reiterated that the MNB will use the QE program “to the extent and for the time necessary,” in effect “maintaining a lasting presence in the market”. Takarékbank head analyst Gergely Suppan emphasized that inflation is still at 2.7%, core inflation has not changed significantly, and he expects no major change in the coming months. According to him, inflation is likely to remain below the 3% mid-term target,

with a slight and temporary increase in April due to the low base effect. He thinks that this does not justify any monetary tightening in the upcoming two to three years. He also said that the central bank will likely once again deploy nonconventional tools to support the recovery process of the economy. Last year’s increased state bond purchases and the extension of its Bond Funding for Growth program already show its effort to do so. Zoltán Varga, head analyst at Equilor Befektetési Zrt. also calculates with a continuing low inflation rate. An increase in inflation will only be seen if restrictions can be lifted in the second quarter and previously delayed price increases are realized, and consumer consumption picks up again. Varga thinks the annual inflation rate will remain within the central bank’s tolerance band, although slight swings might appear during the year. Gábor Regős, head of the macroeconomics department at think tank Századvég, points out that the central bank can neither ease monetary conditions because of the current forint exchange rate and inflation tendencies, nor tighten it because of the crisis. He thinks that monetary conditions are unlikely to change even once the crisis is over, unless inflation or exchange rates justify it.

Significant price rises were measured over the last 12 months for alcoholic beverages and tobacco as well as food. Consumer prices increased by 0.3% on average in one month and by 3.3% on average in 2020 compared to the previous year. Core inflation jumped to 4% in December from 3.9% in November. According to Takarékbank analysts, inflation could average 3.7% in 2021 and 3.2% in 2022. The bank has also published its revised economic forecast in which it now says that GDP could grow by 6.8% this year, at a slower rate than the 7.2% growth it predicted earlier because of the ongoing coronavirus pandemic. Analyst Gergely Suppan said the bank is forecasting that GDP fell by 5.3% in 2020, a bigger drop than the 4.7% Takarékbank had been expecting. Similarly to 2020, this year will bring volatile inflation data, said Orsolya Nyeste, senior macroeconomic analyst at Erste Bank. Paired with relatively high core inflation, it is likely to result in maintaining a fairly cautious monetary policy thorough the year, she added.

Numbers to Watch in the Coming Weeks On February 4, we will find out what the yearend brought in terms of consumer consumption, when retail trade figures for December are released by the Central Statistical Office (KSH). The next day, the first estimate of December industrial output will be published by KSH.

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Hungary Looking to Spread its Vaccine Net Coronavirus ///roundup Prime Minister Viktor Orbán said it is “unacceptable” for Hungarian lives to be lost because of the “slow” pace of delivery of COVID-19 vaccines that are part of a joint European Union procurement in his weekly interview on Kossuth Rádió on January 22.

NICHOLAS PONGRATZ

By procuring additional COVID-19 vaccines outside the joint European Union order, Hungary could have enough vaccines by March to inoculate as many as two million people, according to TV news channel M1. The government calculates that if Hungary relies only on vaccines from the EU order, fewer than 500,000 people will be inoculated by the end of March and restrictions will not be lifted before the end of September, M1 added. Using a Chinese COVID-19 vaccine, in addition to ones that Hungary is getting through the EU, could mean a sooner end to pandemic restrictions, Orbán told Kossuth Rádió. According to him, Hungary has access to more than one million Chinese vaccines that could

immunized against COVID-19, while 34% say they “are certain” they will, according to respective surveys from the Central Statistical Office (KSH) and Századvég. Despite mass immunization being potentially drawn out, thoughts are already starting to wander to what will happen once it has occurred. European Union leaders discussed “the suitability of a common approach” to COVID-19 vaccination certification at a summit on January 21, European Council President Charles Michel said in an invitation letter to the video conference sent to state news agency MTI.

Chief physician László Bora (right) injects a resident with the PfizerBioNTech coronavirus vaccine at the Heves County Harmony United Social Institution Home for the Elderly in Eger (133 km northeast of Budapest) on January 27, 2021. Photo by MTI / Péter Komka. Accordingly, OGYÉI has issued temporary licenses for COVID-19 vaccines from Russia as well as those developed by AstraZeneca in the United Kingdom. Some 143,184 people have been vaccinated against COVID-19 in Hungary thus far, of which 6,944 had already received their second vaccination, as of January 23, according koronavirus.gov.hu. The majority of those vaccinated to date have been healthcare workers, as well as roughly 10,000 people living and working in Sputnik OK’d nursing homes, the latter of whom Hungarian experts in Moscow received received the American Moderna vaccine, reassuring answers to their questions because it is easier to transport and store. around drug quality and drug safety in So far, 1.755 million Hungarians have connection with the Russian Sputnik V registered for COVID-19 vaccinations, vaccine, Director General of the National State Secretary Csaba Dömötör said in Institute of Pharmacy and Nutrition a message posted on his Facebook page. (OGYÉI) Mátyás Szentiványi told InfoRádió. About 33% say they have plans to be

be made available to people “within days,” but that would depend on how quickly the vaccine can be cleared by Hungarian healthcare authorities “with the necessary circumspection, following regulatory safety protocols.” Meanwhile, Hungary has signed a contract to acquire Russia’s Sputnik V vaccine, Minister of Foreign Affairs and Trade Péter Szijjártó told a press conference streamed live on Facebook from Moscow on January 22.

Some 143,184 people have been vaccinated against COVID-19 in Hungary thus far, of which 6,944 had already received their second vaccination, as of January 23, according koronavirus.gov. hu. The majority of those vaccinated to date have been healthcare workers, as well as roughly 10,000 people living and working in nursing homes. When asked how the introduction of a vaccination card, commonly known as a virus passport, which is expected to be a condition of travel on airlines from March 1, will affect its responsibilities, Budapest Airport said it will comply with the new rules without delay, guaranteeing predictable, epidemiologically safe travel, according to business daily Világgazdaság.

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WHO’S NEWS

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

Danubia Legal Announces Partner Promotion

Danubia Legal has announced the appointment of Nikoletta Bial as its latest partner. Bial first joined Danubia Group in 2004, as a junior lawyer. Since 2007, she has worked as an attorney in IP-related matters, initially dealing with copyright matters, but now mostly involved with trademark law.

Nikoletta Bial She has extensive experience in trademark registration, revocation proceedings, and infringement litigation, as well as in the field of customs measures for the protection of industrial property rights and criminal law infringements. Bial also represents clients before the Hungarian Intellectual Property Office, the European Union Intellectual Property Office (EUIPO) and in litigation proceedings before the court. “She has worked and is working with the Danubia Legal trademark team on matters of high importance and complex trademark law issues, which has contributed to her gaining a very broad knowledge in this area of law, and now as a newly appointed partner,” comments Judit Lantos, managing partner of Danubia Legal.

Lodge & Partners Becomes Limehouse Partners, Names Managing Partner Lodge & Partners Investment Management has rebranded to Limehouse Partners, with Benjamin Perez Ellischewitz becoming a managing partner of the firm.

Benjamin Perez Ellischewitz Perez Ellischewitz spent the last 10 years as head of capital markets at JLL, during which he led significant real estate transactions on the Hungarian

market and transacted more than EUR 3 billion of business. He started his career at J.P. Morgan, working in Paris, London, Seoul, and Singapore before joining JLL in Hungary in 2007. For Limehouse Partners, the arrival of Perez Ellischewitz marks an expansion beyond asset management and the recently integrated property management service lines, the company told the Budapest Business Journal. “We are delighted to welcome Ben as a Partner. We had the pleasure to work with him on several deals in the past and always valued him as one of the best in his sector. His significant transactional expertise and track record will play a pivotal role in our growth and expansion into new business lines,” managing partner Jake Lodge comments.

Anita Orbán Becomes Vodafone Hungary’s External Affairs Director Anita Orbán has been named the external affairs director of Vodafone Hungary, also becoming a member of the board, effective from January 4.

She replaces Gergő J. Budai, who left the position on November 1, 2020 and continues his career as CEO of newly established Vodafone subsidiary Vantage Towers Hungary.

News | 5

solution but also the most obvious, easiest, and most reliable way for both consumers and merchants,” he adds.

Mastercard Picks Hungarian Specialist for Global Management Position

Milán Gauder has been appointed head of global card acceptance at Mastercard. His new responsibilities include expanding and developing in-store and online card acceptance, including new generation solutions such as softPOS, tokenization, Milán Gauder Click to Pay, and developing payment structures in emerging markets such as QR code payment. “We had come a long way since the Gauder has been working at Mastercard 2000s, when card payments were the since 2005 and had been country privilege of urban people and we could manager for Hungary since 2008. Under only pay by card in supermarkets, fancy his leadership, contactless payment was restaurants, and petrol stations. Today, introduced in Hungary, and the first in Central and Eastern Europe and most premium Mastercard Lounge opened at parts of the world, contactless payment Budapest Ferenc Liszt International Airport. is more common, and cash-only stores From 2010, he had also been responsible have become the exception. Online card for the CEE region, and in 2014 he became payments rose tremendously during the executive vice president of payments pandemic,” Gauder says. and solutions for Middle East and Africa. “We are working to make it possible for Since 2017 he had worked as people to pay anywhere with Mastercard, executive vice president of solutions be it a small store in a remote corner of for Mastercard Europe, while also the world or even online shopping from managing the Mastercard Advisors unit home. Whether it’s card, mobile, or Pay in London. He was also responsible for by Account payment, our goal is to be the security of online payment, PSD2, not only the safest and most convenient and loyalty solutions across the region. ADVERTISEMENT

We are delighted to announce Anita Orbán Orbán began her career as financial controller at what was then Matáv (now Magyar Telekom), after graduating from the Budapest University of Economics. She then moved to the United States, where she earned two master’s degrees in history and diplomacy, and continued her master’s studies at the Fletcher School of Law and Diplomacy. In 2008, her book on the energy sector in Central Europe was published in the United States. After moving back to Hungary, she worked at the Ministry of Foreign Affairs for five years, specializing in the energy sector. She also worked as Ambassador for Energy Security and as chairperson of the Danube Region Energy Cooperation Committee. After holding positions in the public sector, she continued her career as senior advisor for Cheniere Marketing Ltd. in London. She joined Vodafone Hungary from Tellurian LNG London, where she held the position of vice president of international affairs, performing commercial duties in several countries. She is the winner of “The Woman Energy Executive of the Year” 2018 award, granted by an international Jury at the Budapest Energy Summit. She is also member of the advisory board of several international professional organizations.

that, the Budapest Business Journal’s new website has been launched for clients and readers, offering additional content and an enhanced design and layout. We have striven to develop our platform in a way that fits current market demands, the rapidly changing digital environment, and the dynamic evolution of our services. Besides the bbj.hu website, our online content can also be accessed now via www.budapestbusinessjournal.com.

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More Developers Moving Into Logistics Sector With logistics looking set to be a clear winner in the post-coronavirus period, developers who have traditionally been active in other mainstream sectors such as office and retail have undertaken industrial projects with an eye on the Budapest agglomeration, regional Hungarian cities and even a Central and Eastern European role. GARY J. MORRELL

Perspective industrial demand is strong, with Hungary having the lowest vacancy rate in the region. ConvergenCE has moved into the industrial market with the preparation of a ready-made product in Tárnok, just 27 km southwest of central Budapest at the junction of the M7 motorway. Construction of an 8,000 sqm logistics or light industrial facility can be started immediately once a tenant has been sourced, the company says. The share of retail e-commerce has increased significantly, driven in

A 46,000 sqm facility is being built on a 46-hectare site as part of the first phase of the project, located in the vicinity of M4 and M5 highways and Budapest Ferenc Liszt International Airport. The complex is scheduled to be handed over by the year end. The EUR 40 million industrial and logistics center has the capacity for a total area of 193,000 sqm of BREEAM accredited space. This follows the undertaking of development of HelloParks Fót,

some

26 km

Hello! Parks, the new logistics venture by Futureal. great part by the epidemic, generating elevated warehouse demand in the domestic logistics market according to the developer. “As changing needs require quick reactions, not only do we have a valid building permit, but munitions clearance and archaeological excavation of the development area are completed and all utilities installed, so that construction works may start immediately,” says Csaba Zeley, managing director of ConvergenCE. CBRE has traced a strong pipeline of 200,000 sqm for the Budapest area with no real developer-led market in the countryside. Logistics development could set a record with a completion of

150,000 sqm plus,

according to Eston International. “In Hungary, site selection, acquisition, public works, other

infrastructural development and building permitting procedures take an average of 12-18 months,” says Zeley. “That is why a fully prepared project like this, where all these have already been taken care of, is a huge time saver for any owner occupier or tenant looking for a quick build-to-suit logistic warehouse close to Budapest and the M0,” he adds.

New Player Expanding

A newly established Hungarian industrial developer, HelloParks, a member of the Futureal Group, is continuing its expansion with preparations for the development of HelloParks Maglód (38 km east of Budapest).

northeast of the capital on a 76-hectare site adjacent to the M0 highway, providing the potential for 330,000 sqm of warehouse and industrial space. “HelloParks aims to increase Hungary’s regional competitiveness with highly competitive and efficient megaparks that also focuses on sustainability. The developments can strongly support Hungary in becoming a real logistics center, as these facilities can attract new customers with regional outreach to the domestic market,” comments Rudolf Nemes, CEO of HelloParks and former Hungary country manager of CTP. “By the preparation of the development in Maglód, we have thus taken another important step towards HelloParks’ aim to become one of the key players in the dynamically growing industrial and logistics market, first in Hungary and later on in the region,” he continues. “The rapid development of e-commerce and the relocation of production capacities have started a new trend of establishing regional EU centers. We are constantly exploring further expansion opportunities in the Budapest agglomeration as well as the catchment area of large rural cities,” Nemes adds.

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GE Healthcare Recruits Hungarian AI to Support Medical Infrastructure

GE Healthcare leaders tell the Budapest Business Journal how the Edison platform, named for the company’s storied inventor-founder, aims to be a flagship for medical innovations in Hungary. CHRISTIAN KESZTHELYI

The last of seven children, Thomas Alva Edison had a world-record 1,093 patents issued to him in the United States and an additional 1,500 worldwide. In his early years, Edison would sell his patents to raise some capital. One of the most notable was the Quadruplex telegraph, which he invented in 1874, sold to Western Union for USD 10,000, an impressive sum in its time. Edison saved enough money to turn his innovations into a business and founded the Edison General Electric Company, which would later become General Electric (GE). A century and a half later on this side of the Atlantic, Edison’s zeitgeist seems to linger on. GE Healthcare has just launched an artificial intelligence research project at its Hungarian research and development center in Szeged, 170 km southeast of Budapest. The

Globally, healthcare infrastructures are overburdened by a lack of millions of professionals, a shortage thought likely to grow further to around 18 million by 2030, according to World Health Organization predictions. The hope, however, is that dynamic growth of innovative and intelligent solutions may serve as a remedy to the most severe symptoms of today’s infrastructures. One area that will inevitably boost healthcare efficiency is the predictive analytics software solutions that run on GE Healthcare’s Edison platform.

Predictive Future

“Predictive solutions will provide a new approach to analytics compared to the currently available systems. While Business Intelligence (BI) and Clinical Decision Support System (CDSS) solutions offer retrospective and descriptive analytics, GE Healthcare Hungary’s solution would serve predictive, forwardlooking functions based on already available data and trained artificial intelligence models,” Attila Ferik, senior director of software engineering at GE Healthcare, tells the BBJ.

project,

around

400

software engineers, who work in the forefront of GE Healthcare’s Edison initiative. “We are proud that the biggest GE Healthcare Data Science team in Europe is located in Budapest and Szeged; all high-level professionals with a diverse background, including programmer mathematicians, physicians, software engineers, biomedical engineers—even medical doctors,” the vice president says.

Strong Relationships

HUF 3.35 billion

part-financed by the Hungarian government, aims at sparking AI-based solutions developed for global markets. “Hungarian knowledge has played an important role in the fight against the coronavirus worldwide, and this announcement reaffirms that Hungarian knowledge in the field of medicine and diagnostics is globally competitive,” Minister of Foreign Affairs and Trade Péter Szijjártó said when the project was announced on January 14.

necessary resource requirements and possible additional capacities. This could deliver not just a financial advantage, but also reduced waiting lists. Beyond predictions, AI can play a significant role in diagnosing. “We believe that the adoption of digital health technologies, from workflow management to AI-based solutions embedded on healthcare devices can support healthcare providers to deliver better outcomes to patients,” Endre Ascsillán, vice president at GE CEE, tells the BBJ. Hungary brings significant knowledge to this arena. “GE believes in partnership and common growth, and we are proud of our partnership that spans more than three decades and has enabled Hungary to become a key GE location in Europe. Hungary is well known for its digital capabilities worldwide and we can trustfully build on the Hungarian investmentfriendly economy and the innovation capabilities of the highly qualified researchers and developers available locally,” Ascsillán adds. GE Healthcare opened its first software development center in Hungary in 2000. Today it employs

“What would have previously taken the industry years to implement is now taking months only. When we talk about AI, we talk about big data. The amount of data that is being developed in healthcare is just enormous, and AI-related research has the potential to process all this data to enable precision health, that helps healthcare professionals to deliver more precise and efficient care,” Ferik adds. Data, AI and connectivity are central to helping those on the front lines deliver intelligently efficient care. Digital solutions based on AI in can increase healthcare efficiency, improve patient outcomes, and expand access to care, the software engineering director insists.

Attila Ferik Such predictions could well be vital; patient no-shows cause a significant financial burden to healthcare institutions, as medical equipment and staff are allocated unnecessarily, and capacities cannot be planned efficiently. GE Healthcare Hungary’s new solution would not only predict these missed care opportunities but also signal the expected load in real-time with the

Over the years, GE has built strong relationships with its academic and clinical partners in Hungary, across Europe and in the United States, who are actively involved in projects, product and algorithm validation and testing processes. “This cooperation provides multidisciplinary teams with broad access to data and clinical expertise enabling our teams to develop revolutionary healthcare products and services in Hungary to global markets,” Ascsillán explains. The coronavirus pandemic has accelerated existing intelligent and dynamic research trends and highlighted the need to build an intelligence-based health system.

Endre Ascsillán “Let me give you two examples of GE Healthcare’s great solutions to support the fight against COVID-19, where our Hungarian teams have significantly contributed to their success. The recently announced industry-first AI algorithm developed in Hungary helps clinicians assess the endotracheal tube (ETT) placements for critically ill COVID-19 patients,” he says. “Another great example is our Command Center technology, that is using AI and advanced analytics to help coordinate patient care and is used by more than

200 hospitals

around the world. Systems give realtime data on critical information, such as availability of hospital beds, of the right staff required, of available equipment, directing ambulances to hospitals where there is appropriate availability,” Ferik adds. It seems the future of AI-driven healthcare may well sit right her in Hungary.

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COVID Does not Halt Growth of Asian FDI in Hungary Automotive continued to play an important role, though mainly through expansion projects. Notable among these was Mercedes Benz, which at the beginning of the pandemic announced it was investing in a new press shop at its Kecskemét factory (98 km southeast of Budapest). Towards the end of the year, it further announced it was bringing production of the EQB, a fully electric sports utility vehicle, to Hungary. That will represent a milestone for the automotive industry here when it becomes the first fully electric vehicle put into serial production, perhaps as early as the fall of 2022. “We only had one major automotive greenfield project, which was China’s Chervon-Auto, which is setting up a facility in Miskolc [186 km northeast of the capital],” Ésik says. The third significant sector was the food industry, which has grown in strategic importance because of the pandemic. “We have seen that approximately 10% of the entire volume and 10% of all projects are related to the food industry.” One of the major projects here was the expansion of the Nestlé facility in Bük (208 km west of the capital).

Despite the undeniable economic impact of the coronavirus pandemic (in its latest report, the World Bank estimates Hungary’s GPD will have fallen by 5.9% in 2020), the awardwinning Hungarian Investment Promotion Agency (HIPA) returned some surprisingly positive figures. ROBIN MARSHALL

Up to and including 2019, HIPA had broken records in each successive year. The investment volume for 2020 was still the third best, and the number of new jobs created only 579 fewer than in 2019. 2020 had started well, before the pandemic hit, and border closures and lockdowns threatened to deliver a year without significant foreign direct investments. “But then we started to realize that there are projects and investments that are resilient to the crisis, there was an economic action plan initiated and we launched COVID-specific investment subsidy programs,” HIPA CEO Róbert Ésik tells the Budapest Business Journal in an exclusive interview. “Finally, towards the end of the year, specific sectors of the economy started to recover really fast. All in all, that resulted in many new projects, and of course a lot of work for us, but we were able to close a year that was close to being our best ever.” Indeed, in one metric, the number of projects handled, HIPA did set a new record at 907, a huge increase from the 101 managed in the previous year. That is slightly misleading though, as in addition to its usual work with multinational foreign investors (who contributed 97 projects, only one behind the 2018 total), HIPA also administered two COVID-specific subsidies (see separate box).

Future Trends

Róbert Ésik Around 80% of the 810 projects that fell under this category were Hungarian SMEs. As Ésik puts it, these do not represent “typical business for us, but again 2020 was not a typical year and we tried to contribute with our activities to the economic recovery. Even without the COVID-specific programs, we were close to EUR 2.5 bln of capex, all told, those 907 projects resulted in investments worth almost EUR 4.1 billion, creating over 12,900 new jobs,” Ésik says.

Big Spenders

Looking at the details of the 97 large investment projects that were not related to the COVID-specific subsidies, interesting trends can be identified. In 2019, South Korea became Hungary’s biggest foreign investor for the first time. That is a trend that has developed further this year.

“In 2020, four Asian countries, China, Korea, Japan and India, represented approximately 50% of the investment volume and 35% of new jobs.” But traditional long-term partners were still highly visible, the CEO says. “The German investment community played an important role because, in terms of number of projects, they are in first spot with 20 different investments worth EUR 438 million, creating close to 1,500 jobs. And the American investors ranked number one in the total number of new jobs, which was close to 2,500.” The growing importance of electromobility to the Hungarian economy was also underlined in 2020. Electronics/battery manufacturing was the number one sector in terms of investment value, job creation and number of projects, giving one-third of volume and one-third of jobs, over all. “We had major reinvestments, such as Doosan, which was the biggest project in terms of investment value with EUR 206 mln. And we had new entrants such as Semcorp, from China, with its investment [in Debrecen, 231 km east of Budapest] of EUR 184 mln.”

There have also been some important new trends among the figures, Ésik points out, including the rise of futureproof jobs. “I am really happy to report that high value added services projects represented the highest proportion ever. If I take into account business services center-related, ICT-related, and R&Drelated projects, altogether these represent more than one-quarter of all investment projects at 25, and these created more than 3,000 new jobs.” The next trend could potentially be even more significant in the long-term, and is a first in the seven-year history of HIPA. “2020 was the first year where we were able to record significant greenfield investments from China. In fact, China was number one in terms of investment volume, representing almost 30% of share in capital expenditure.” China aside, electromobility and Korean investments (both from new players and major reinvestments) continue to be significant elements of the Asian dominance. One final trend last year saw HIPA help to plug gaps left by some multinationals reducing capacities in the country. “We are also very proud that we have been able to contribute to the development of regions that have been negatively affected by previous factory closures or headcount reductions.”

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Examples include German company Bock investing EUR 1.7 mln and creating 100 jobs in repurposing a closed factory in Nemesvámos (121 km southwest of Budapest, relatively close to Lake Balaton) and Korea’s Sangsin EDP spending EUR 28.8 mln creating 150 jobs in Jászberény (87 km east). In Gödöllő (30 km northeast), Korea’s Iljin Materials is spending EUR 11 mln and creating 19 jobs, and China’s Shenzhen Kedali (KDL) is investing EUR 40 mln and adding 330 jobs. Hungarian “whirlpool” bath and garden spa maker Wellis is creating 800 jobs in a EUR 24 mln investment into a shuttered factory in Ózd (156 km northeast). Wellis is the largest manufacturer of such equipment in Europe, and Ésik describes this as perhaps the most unusual project of 2020.

“2020 was the first year where we were able to record significant greenfield investments from China. In fact, China was number one in terms of investment volume, representing almost 30% of share in capital expenditure.” “As a result of our negotiations, we were able to guide them to Ózd, where they have decided to invest. The other option would have been for them to expand in the area of Dabas [53 km southeast of the capital], where they are based, but I think this was a win-win scenario for the country and the company. This was HIPA’s first ever project in the massage pool sector. I do not know whether this will become a trend, but it was certainly unusual for us.” Hungary remains an unusually capital-centric country, which makes HIPA’s efforts to match investors with suitable countryside locations such as these all the more important. Looking at the regional distribution of the 97 investment projects, Ésik says Budapest and the surrounding Pest County remain the most successful areas. “But immediately behind them we find Borsod-Abaúj-Zemplén County [in the

Business | 9

HIPA results 2016-2020 2016

2017

2018

2019

2020

Number of projects

71

96

98

101

907

Investment volume (million EUR)

3,243.02

3,512.27

4,311.61

5,350.41

4,078.76

Number of new jobs created

17,647

17,021

17,024

13,493

12,914 Source: HIPA

northwest, on the border with Slovakia], where one-eighth of all projects in 2020 went, and we had at least one successful project in each county of the country,” the CEO explains. “Reducing regional differences continues to be one of our priorities, and [.…] we will continue to focus on our university cities for business services type of investment. We will be announcing two new R&D centers in the countryside relatively soon.” One area which had been of concern was the relative lack of mobility of the Hungarian workforce, especially that based in the countryside. One perhaps surprising side effect of the pandemic is that some of the pressure here seems to have eased. Partly that is due to the fact that, following the inevitable lay-offs that came with the economic downturn triggered by COVID lockdowns, as well as the return of many Hungarians who had been working abroad, there are more workers around. But it also stems from the fact that, having been forced to embrace the idea of remote working, many nonmanufacturing employers have found the potential workforce has increased. “Previously, labor mobility was about how people get to the office, how we can find housing solutions near the office; this has been replaced with how we can provide flexible work conditions and potentially recruit people who do not necessarily come to the office on a daily or weekly basis.” Ésik emphasizes, however, that the office continues to be important to build company culture, team spirit and efficient communications.

COVID-specific Incentive Programs “In 2020 we were able to launch two COVID-specific investment incentive programs, both of which have become an important element of the economic action plan of Hungary, which was put in place to facilitate the relaunch of the economy,” HIPA CEO Róbert Ésik explains.

2

The first program was based on a temporary framework agreed by the European Commission, and allowed HIPA to give a maximum of EUR 800,000 in financial support to companies that have committed to maintain staff and carry out investments. The second is a compensation scheme that aims to support firms

“Maybe they will invest more in common areas, and there will be less space required for office desks, but the elimination of the common office is not on the agenda of any of the major companies we work with,” he says.

2021 Expectations

What, then, are the expectations for 2021? The short answer is HIPA expects another busy year. The agency will target projects “that require a high local value added, no matter whether in manufacturing or services sector, and we try to position Hungary successfully, especially for those projects that represent future proof technological solutions,” Ésik says. “Our expectation is to position Hungary as an attractive investment location and maintain our leading position in the region. Our aspiration is to try to contribute to the relaunch of the national economy, through the successful completion of the already initiated COVID-specific subsidy programs.” On that first point, the CEO says HIPA is constantly in consultation with companies looking for investment locations in the region. “We are currently talking to 78 companies who are thinking about larger investments, either in excess of EUR 50 mln or excess of 250 people. These projects represent more than EUR 13 bln and close to 32,000 new jobs.” The dominant sector is again electromobility but the healthcare

that have suffered financial losses because of the pandemic but are still ready to commit to additional investments and maintaining jobs. “Altogether, 1,338 companies have applied under these two programs: 810 have already received the financial support from us or have a signed agreement.” The remainder are still being evaluated.

industry and medical technology are also important contributors, as well as the services industry. “Interestingly, three-quarters of the volume and half of the jobs are related to Asian investors. Based on this, I do expect that the dominance of Asian investors will continue in 2021, although we are still at the beginning of the year.” Why does HIPA believe it is having such success with Asian investors? Is it down to the country’s “Opening to the East” policy, launched in 2010, which saw it deliberately court new markets further East, or is something else at play here? “It is partly word of mouth because, especially for the Asian investors, reference is a very important topic and the experience of others who have invested earlier is a very important factor when it comes to their final decision,” Ésik explains.

“We have become one of the major hubs for electromobility and we now have companies knocking at our door saying that ‘We realize you are an industrial leader in this field and that’s why we have your country on our shortlist of potential locations’.” “On the other hand, in the past few years we have been able build up very important ecosystems in certain industrial fields. We have become one of the major hubs for electromobility and we now have companies knocking at our door saying that ‘We realize you are an industrial leader in this field and that’s why we have your country on our shortlist of potential locations’,” he says. “So, either they have heard the positive experience of others, or they have analyzed their value chain and they have come to the conclusion that a) many of their customers and, b) many of their partners and suppliers are located in the area.”

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Business

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Budapest Business Journal | January 29 – February 11, 2021

Why you Should pay Attention to 10Y Treasuries Going Up Corporate finance columnist Les Nemethy looks at why investors need to take heed of rising treasury rates.

280

260 250 240

% of GDP, weighted avg.

Global debt topped $272 trillion in Q3 2020

270

230

Even if you do not own Treasuries, rising Treasury rates are arguably the most important event in financial markets this year so far: 10Y Treasuries bounced from a low of 0.52% on August 5, 2020 to 1.15% on January 15, 2021. So, why is this so significant? First, it signals an increase in financing costs, not just of government debt, but for housing, corporations, mortgages, etc. When there are such massive amounts of government, corporate and individual debt, both in the United States and worldwide, any increase in financing costs sucks oxygen from the economy. Just to put this into perspective, U.S. Government revenues are USD 3.3 trillion per annum, and the States has some USD 27 tln of debt and potentially USD 100 tln plus of off-balance sheet liabilities (pensions, etc.), as Luke Gromen discussed recently on the Erik Townsend podcast Macro Voices. Global debt has been growing for a number of years, and has now surpassed USD 270 tln, some 370% of global GDP, as illustrated in this chart. The second reason is that rising interest rates will affect asset valuations, which are exploding in the current market. Indeed, the S&P index is in record territory, by just about any metric. Other stock exchanges, both in the United States and globally, are heading into similar record territory, as are various commodities, real estate in several markets. The only possible justification for such valuations are the record low interest rates. As interest rates rise, valuations will become ever so more fragile. Markets

$ trillion

The Corporate Finance Column

360 350

Global debt (in USD) % of GDP (rhs)

340

Source: IIF, BIS, IMF, National sources

330

220

320

210

310

200 190

370

2013

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2016

may experience what I call a “road runner” moment: as the cartoon character runs over the cliff, he treads on thin air for a while; when he looks down, he crashes. Third, one should look at the reason for the rise: an increase in inflation expectations driven by a massive double whammy of record monetary and fiscal stimulus. Last year’s surge in U.S. money supply was the largest in

150 years.

Monetary stimulus will likely be even larger in 2021. The Fed needs to refinance some USD 7 tln in maturing debt this year, and will need to fund the USD 2 tln stimulus program announced by new President Joe Biden, as well as many other new programs.

Feeding Inflation

Many market watchers have discussed how this is likely to feed inflation in the mid- to long-term, once we have the deflationary forces of COVID behind us, (including myself in one of my former columns). Should inflationary expectations, and hence Treasury rates, rise further, the U.S. Fed will have one of two choices: crush the economy, or crush the dollar (and hence ignite U.S. inflation). Let me explain.

2017

2018

2019

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300

Crush the Economy: If interest rates continue to climb, enormous pain will be felt throughout the economy, individuals, corporates and even government will strive to make interest payments, driving out other types of spending (or in the case of government, creating an even steeper debt spiral), thereby crushing the economy. Crush the Dollar: To save the economy from tanking, the Fed may engage in yield curve suppression (in other words, keeping yields low by buying bonds, thereby driving bond prices up and yields down), which is likely to crash the U.S. dollar. This will have numerous knock-on effects, such as importing inflation into the United States. The above choice puts the Fed between the proverbial rock and a hard place. So, which of the two is the likelier option? Given that politicians have little tolerance for recession and want to be re-elected, probably crushing the dollar (although the Fed will probably want to defend the dollar while it can).

Four Suggestions

So, what might investors do? I would suggest four things. Firstly, avoid not only Treasuries, but also government bonds in all countries where national debt is high and spiraling higher.

There is every likelihood that financial repression (real interest rates below interest rates) will reduce purchasing power of your investment). Unfortunately, eliminating or reducing government bond exposure in your portfolio also reduces your ability to mitigate risk. Secondly, create or maintain an appropriate degree of liquidity (in cash, for example, or short-term bonds). Thirdly, consider hedging up to 5% of your portfolio in physical gold. Gold is an excellent hedge, a form of insurance, in case the wheels come off, with thousands of years of history. (At the height of hyperinflation in the Weimar Republic, you could buy a large villa in suburban Berlin, for just five ounces of gold). The USD has

lost

98%

of its value since going off the gold standard in 1971. Finally, for now, also invest a portion of your portfolio into stocks or other assets that produce yield. This is the most challenging part of the investment equation. How do you generate decent yields at acceptable risk levels? Markets today are in a relentless quest for yield. There are no easy answers here; the decision is very personal. So, if you have not done so up to now, watch the Treasury yield curve, not only because it determines the cost of money, which financially fuels the world, but because trends in government bond yields provide a harbinger of things to come. Note: Do your own due diligence and discuss any investment decisions with your financial advisor before making any investments. Les Nemethy is CEO of Euro-Phoenix Financial Advisers Ltd. (www.europhoenix. com), a Central European corporate finance firm. A former World Banker, he is author of Business Exit Planning (www.businessexitplanningbook.com) and a former president of the American Chamber of Commerce in Hungary.

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Budapest Business Journal | January 29 – February 11, 2021

Special Report WFH or not, Office Equipment Remains Crucial

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New Trends Appearing in Office Supplies Market

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COVID Accelerates Changes in how Firms Look at Using Office Space

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The Slow Spread of the Circular Economy in the Office

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Photo by jason cox / Shutterstock.com

Office Equipment

How the work from home trend is shaping and changing the office equipment market in Hungary.

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Special Report

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Budapest Business Journal | January 29 – February 11, 2021

WFH or not, Office Equipment Remains Crucial While it is still early to make long-term predictions on what direction the office equipment market will take in the shadow of the coronavirus pandemic, some recent trends may offer guidance as to how the next decade will shape up. CHRISTIAN KESZTHELYI

Last year the office equipment and furniture market brimmed with enthusiasm. The creation of separate spaces catering for different functions and establishing more community areas and shared spaces appeared to be the most up-to-date fads. COVID-19 quickly tabled this ardor. Home office scenarios spiked in hopes that social isolation would help keep the virus at bay. This has caused some significant changes in the life of office spaces. “Offices significantly reduced their printing and related services demand (by about 40-50%), while home offices invested in simple IT infrastructure, including printers or MFP [multi-

to environmental effects, as soon as these affect their homes and families,” he explains. Unsurprisingly, smart devices are also increasingly gaining popularity in offices. “Smart lamps, smart tables that can be adapted to the physical and mental abilities of a given person, are becoming more common,” Mosolygó of Vivax and IDdesign confirms. “For example, lamps adapted to the circadian rhythm, which can increase the brightness and color temperature in the case of dropping attention. With adjustable work desks, you can also choose to move the table to a sitting or standing position, essentially moving employees to increase mental and physical well-being,” he says. Miklós Fábián function peripheral] devices,” Miklós Fábián, national sales manager at Epson Europe B.V. Branch Office Hungary, tells the Budapest Business Journal. Fábián adds that they have not identified complex home-based IT infrastructure developments, such as centralized print management, which could mean that home office developments are expected to remain temporary, until people can return to offices. The market appears to be waiting to see what will happen next. “Most companies in the Hungarian market, unlike those in Western countries, do not yet financially support the provision of tools and conditions for working from home, so most people try to use existing tools at home,” András Mosolygó, CEO of Vivax Irodabútor, and the owner of IDdesign, tells the BBJ. In both his stores, Vivax Irodabútor and IDdesign, the number of individual buyers increased; however, professional products are purchased less often due to higher prices.

András Mosolygó

Those who are stuck in home offices, often on reduced pay, do try to boost their work from home (WFH) setup, but they are trying to keep expenditure down. “Although our [Epson] sales of the very economic EcoTank printers and multifunctional devices increased by

nearly

20%

in 2020, we lost market share against the cheapest, entry-level ink cartridge technology equipment. This also suggests that customers looked at the current demand as a temporary solution, not considering more economic long-term investments,” Fábián points out.

Basic Needs

Capital is not the only limiting factor when trying to maximize possibilities in a home office. Most homes are just too small to allow for the setting up of a separate, well-equipped office. “The most basic equipment is a quality office chair that can be properly calibrated to the user’s physical abilities and where the depth of the backrest and height of the seat can be adjusted,” Mosolygó said. His shops stock an increasing number of chairs that meet orthopedic standards, as health is paramount. In addition to that, a correctly sized and properly placed work desk is important. “It is very advantageous if height [of the desk] is electrically adjustable. Unfortunately, the demand for this for home use is still very small, as the prices are higher,” Mosolygó adds. The office equipment market has seen some ubiquitous trends. “Our technologies are developing in the direction of network or cloud-based managed services. Another important trend is to be eco-friendly, having less impact on our environment,” Epson’s Fábián says. “I think this will be more in focus, when people move some IT tools into their homes. They are more sensitive

Two Possibilities

How the coronavirus pandemic and its effects will change office space usage, and hence the office equipment market, is hard to see yet. There are two possible approaches. “One is that office attendance could drop

by

20-30%,

so offices will be less crowded and vacated areas will be transformed into community spaces, reducing the currently congested layout,” Mosolygó says. A perk for companies, but not so much for office space lessors. “The other scenario, I think, is that the original occupancy of the offices will be restored next year, as personal presence and contact is needed in several industries, and employees also need personal contacts,” he continues. Nevertheless, the gains of this period will carry on; the number of business trips may not return to pre-COVID levels, which is “good for the entire planet” as Mosolygó sees it. Fábián agrees as far as reductions are concerned. “I hear conversations of the possibility of reduced office areas, the introduction of a shared-desk policy, part-time home office and other revolutionary ideas, “ he says. “Personally, I believe in most cases companies and employees are waiting to return to normal working processes, including office work, face-to-face meetings and visiting partners and customers. Development of the related equipment is more based on technological and ecological changes rather than COVID-generated trends,” he adds. As this decade unfolds, companies may consider more carefully whether they will allow employees to do homebased work to an increased extent, if it fits their processes well. Nevertheless, there are industries where such an approach is impossible, such as public services, where offices will reset to the previous standards. “I do not expect major changes in offices in the next 10 years, provided we return to our standard life as before the COVID pandemic,” Fábián concludes.

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Budapest Business Journal | January 29 – February 11, 2021

Special Report | 13

The office supplies market has been hit hard by the pandemic. The French Lyreco Group, a major player in Hungarian and European markets, reorganized its operations in a few weeks and, since last year, has been delivering the equipment needed for work to homes as well as offices.

Photo by Roman studio / Shutterstock.com

New Trends Appearing in Office Supplies Market

unsurprisingly not included among its standard catalogue, Kiss says the firm was able to procure the BBQ sets.

Specialization

GERGELY SEBESTYÉN

In line with demand shaped by the pandemic, the product range has also been expanded, and many multinationals now expect to be supplied with masks and disinfectants, alongside the usual office supplies. According to Péter Kiss, Lyreco Group’s country manager for Hungary, it saw orders fall overnight and it had to sell milk and other food stuffs in addition to classic office supplies. The Hungarian market is worth between EUR 300 million and EUR 350 mln, according to Kiss, most of which comes from orders from offices and production units, but there is also significant consumer consumption when, for example, parents are buying school supplies at the start of the accedemic year. Lyreco’s product portfolio is very diverse, it having moved away from limiting itself to traditional office supplies in the last

15 years,

a decision that paid off in the current crisis. Kiss says it has strived to meet the needs of its customers with everything from printer paper to ballpoint pens, but also includes office coffee, cleaning products, protective equipment, office furniture and IT equipment among its wares. One company that approached Lyreco during the summer of 2019 needed 15 barbecue units for a corporate party. Although

Very few companies in the office supplies market aim at meeting every need as Lyreco Group does, Kiss says. Most are more specialized; some supply catering units, others focus on hygiene products, yet more on protective clothing. Some 17,000 of Lyreco’s products are stored for daily delivery. Kiss believes this is one of the company’s strengths, that almost anything can be ordered, and it will be delivered the next day. There are some exceptions, of course. In the event of a complete office renovation, design, construction, and delivery of furniture can take three or four weeks.

The office supplies market would seem to be potentially vulnerable to digitalization trends. That said, it has been promised for

30 years

that printer paper will disappear, but Kiss says the volume has actually increased since then. Even so, it was the threat of the impact that digitalization could have on the sector that led Lyreco to start to diversify its portfolio, although it did not radically reduce traditional categories. “This includes filing stuff, classic stationery that we might have thought would disappear as a result of digitization, but it didn’t,” he adds. Although the main focus is different today, about half of its revenue still comes from the core business. Kiss says that while the market has stagnated or grown by only a few percent, Lyreco has seen growth of 12-15% every year, and it has doubled its revenue in Hungary in five years.

“The digitization projects we have started are continuing and they have Trading-up plenty of new office buildings accelerated due to the virus. While have been handed over in recent years, We are constantly looking this had limited impact on the office supplies market sector. Well-performing at how we can get out companies simply traded up, moving of the crisis more strongly from category “B” to category “A” offices, Kiss says. than our competitors.”

It is not so much that there are massively many more people working in offices than 10 years ago, rather that there are more people work in category The French company strives to offer “A” offices. a full range of services: the purchase Kiss says Lyreco is a global, of special products, the provision of capital-intensive group, whose individual customer gifts based on an liquidity has helped it withstand the accurate brief, but this also includes the provision of premium coffee, for example. crisis financially. Indeed, it has not stopped investing. Occupational safety is now a priority in “The digitization projects we have started the B2B sector, along with traditionally are continuing and they have accelerated strong areas of hygiene and catering.

due to the virus. We are constantly looking at how we can get out of the crisis more strongly than our competitors.”

There were difficulties when people started to work from home en masse, with Kiss describing the drop in volume as noticeable. Lyreco countered that by introducing its home office service: those on WFH order through their employer, and it is delivered to their home the next day. Initially, of course, there were difficulties when people started to work from home (WFH) en masse, with Kiss describing the drop in volume as noticeable. Lyreco countered that by introducing its home office service: those on WFH order what they need through their employer, and it is delivered to their home the next day. As a result, the number of new web-shop registrations increased

by

300%.

Quite a few ordered home catering products, which was a surprise initially, but was put down to home delivery dates for retail chains being booked up for weeks ahead. As the Lyreco catalog already included catering products such as milk, biscuits and salty snacks, these could be accessed much faster. “And we can only be glad to contribute to the productivity of those who work from home,” Kiss adds.

Special Report

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Budapest Business Journal | January 29 – February 11, 2021

COVID Accelerates Changes in how Firms Look at Using Office Space This is probably not the first time you have read that the coronavirus accelerated a transformation that had already been under way and the office is no exception. As the way we work has been changing, the environment we work in was also in need of an overhaul. ZSÓFIA VÉGH

Companies have been aware of the deficiencies of the open-air environment, the predominant design of the past 15 years. They realized they could reduce space without hindering efficiency. With the COVID outbreak and the forced evacuation of offices, these processes have come forward. Firms were finally able, or perhaps it would be more accurate to say their hands were forced, to implement changes they had long been planning. The most common one was, where possible, a reduction in office space, though this was by no means universal. With the exodus of workers, offices sit empty but rents still have to be paid. In most cases, though, companies had no choice but continue paying them. Space reduction was also off the table due to contractual obligations. But that’s not case for new leases, or where the development of the space was ongoing. Here companies did not hesitate to move forward. “We started designing an office for a large pharmaceutical a year ago that chose to go with an activity-based space,” Norbert Bányai, co-CEO of LEVEL Up Office Design told the Budapest Business Journal. This approach means there are no designated workspaces for employees and the number of work stations is enough

for

70%

of the workers employed. “These would include an ‘aggressive’ collaboration space, meeting rooms, lounges, a café – where anyone can work where they finds themselves most comfortable,” he explains. Then came the

New design approaches can only work if employees’ needs are thoroughly studied and understood, Bányai says. Especially given the limitations of a substantially smaller area, designers have to look carefully at the different functions and interactions in order that it would work in the end.

Working Relationships

Norbert Bányai pandemic and for a while it looked that the company would stay with the initial design. Yet by the time summer came, like most, they took the consequences of the forced home working phenomenon and adjusted their requirements, Bányai says.

Changed Proportions

As opposed to the original space, already 70% of what would have been necessary in a ‘traditional’ office considering the headcount, they reduced the space even further. This new way of working not only brings with it a reduction to the overall space; the proportions within have also changed, Bányai explains. “We designed a large ‘tribal area’, which is basically an office within an office. Here people or teams can collaborate, can sit down or hold a presentation around a large enough table, but it is also suitable for meetings and one-on-one discussions; an open but still separate project area.” There is also a free-for-all, flexible zone where anyone can use a work station and

a mix-and-match zone which can easily be adjustable to changing needs. Flexibility and multifunctionality has been given much more emphasis in this new normal. It is important that offices are not rigidly structured, instead they can be easily repurposed by, for example, moving a table, or setting up a folding screen, the expert says. To meet such requirements, designers use adjustable office furniture, tables with rollers, etc. There is still a need for meeting rooms where companies can hold “town-hall” meetings, but also areas that enable more focused work should someone’s home be not suitable for that. However, not all thrive in an office environment. With this sudden shift to home, many realized how much more they can focus on work when they are not distracted by colleagues. Unlike in an office, people have authority over their home environment, says Bányai. This allows not only for a deeper focus with fewer distractions but more confidence in what one does.

Though LEVEL Up has designed offices in several “A” category buildings, and has many multinational clients, it had to be even more thorough. “We conducted a lot of interviews in advance, but even so, we have to pay much more attention to the relationship [between people and divisions],” Bányai explains, citing a telecommunication client who recently reduced its office space to less than a third of the original. The optimization of space and the lessons learnt from the work-from-home phenomenon have made companies realize that there is even more room for reduction – and not only as far as office space is concerned. “Many companies understood that work can be done efficiently from home and in general. So much so that they decided to let go of more people, and not only due to the economic consideration, but also because they can do with fewer,” Bányai says. “These trends started prior to the pandemic,” he points out. “What the coronavirus did is it simply accelerated them and shifted focus. With people spending on average

2.5 days

in home office, the purpose of the office has changed: instead of a space for (focused) work, their main function is to build and maintain community,” he explains. And even though there is less time spent in the workplace, the office, as a major element of company branding has not lost its appeal, according to the expert. People may spend more time at home, but if the environment feels cozy and the office is well equipped, it remains attractive. “People may come in to have a coffee and a chat with a colleague and when in, they may well stay and do some work at one of the working stations,” Bányai adds. Photo by Halfpoint / Shutterstock.com

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Budapest Business Journal | January 29 – February 11, 2021

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Special Report | 15

Photo by Roel van Wanrooy / Shutterstock.com

The Slow Spread of the Circular Economy in the Office The circular economy seems more of a concept than a trend at this point, whether in Hungary or elsewhere. When it might be common depends on how strong a driver the need to save resources will become, both in the economy and the environment.

Path Finders

All of the above are unique examples, pilot projects at best. Even in the Netherlands, it is mostly startups that are involved. For the circular economy to become widespread, it first must become financially viable. In Hungary, the Embassy of the Kingdom of the Netherlands, the Business Council for Sustainable Development in Hungary (BCSDH) and the Ministry for Innovation and Technology founded a Circular Economy Platform three years ago.

ZSÓFIA VÉGH

When talking about circular economy, most still do not have a clear idea of what it is. Even experts and policymakers confuse it sometimes with waste management or recycling. Without a doubt, these make up part of the it, but are far from the main idea behind the concept. “People tend to look at the circular economy as a panacea to save the planet whereas there are very sound market and business interests behind it,” Bálint Horváth, circular economy policy officer at the Netherlands Embassy tells the Budapest Business Journal. Not least among those is the fact that, when the European Union realized that soon it won’t be able to dispose of its waste in third-party, often developing countries, it started to look for ways to manage it. “So far, the goal of most environmental policies has been to mitigate or minimize the negative effects of economic or human activity. However, this has proved a dead-end as the systems created with such an aim get stuck after a while, not to mention the rebound effects in the future,” he explains. Instead of aiming at minimal or “optimal” harm, the circular economy

the green façade, recycles rainwater and waste water, is energy neutral, promotes wellbeing and it doesn’t produce any waste. In Hungary, a good example of the circular economy in an office environment is the transformation of an old building into an office for Bánáti + Hartvig Architects. Here, concepts such as repurposing or rethinking – also part of the circular economy – have been given some priority. The architects reused many of the materials found in the building, originally a restaurant in the 1960s. The external metal windows and openings have been recut and used indoors. They also reused the glass walls. Prior to that, however, these materials were tested to see if they contained any materials harmful for the health or the environment; if they do, they are not reused.

The city hall, Venlo, The Netherlands. applies nature-based solutions to turn a negative impact into a positive one. Nature has had its own circularity, so why not apply it for industry as well? This includes everything from rethinking and reusing existing resources and turning them into something new, through keeping a product in use as long as possible, to replacing ownership by services.

China Leading

China has been in the forefront of reusing raw materials: in the past 30

The concepts and practices of the circular economy are yet to appear on the Hungarian office market and in its offices, according to the experiences of market players including the property developers and management firms, business councils and designers. Tenants are not really conscious of this or other environmental aspects and, due to the pandemic, these considerations have been set aside for a while. Green building schemes such as BREEAM, LEED or WELL certification are all but a basic requirement for a new office in Budapest, but nothing more transformative have been introduced.

years it has not only shipped its products to the world, but also bought them back to salvage the raw materials from them. Up to 2018, the country had sucked up roughly 70% of the world’s plastic waste until legislation put an end to it. For examples of circular economy at a smaller scale, one should look at the Netherlands, the hub of circular economy ideas and practices today. Here, discarded jeans are used in the creation of sound insulation materials, granite from a façade is used as floor covering and biotech firms use biomass for components of interior building products. In the city hall of Venlo, a city in the southeastern Netherlands, designers used greenery not only on the façade, but inside as well. Raw materials for the municipal office have been sourced as much as possible from the immediate surroundings. Architects also introduced a material passport system that records where items come from and how they can be used once the building is demolished. The building purifies air through

Bálint Horváth The trio regularly hold working group meetings, thematic seminars and an annual Circular Economy Summit to involve and educate businesses on the benefits of the circular economy. “The platform membership is growing and businesses are getting familiar with the circular concept. What they need is to see pragmatic solutions that create value through circular practices. Policies and scientific concepts come in handy, but we need the business interest to drive the circular transition,” Horváth says.

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www.bbj.hu

Budapest Business Journal | January 29 – February 11, 2021

Digital Hardware Producers Ranked by total net revenue (HUF mln) in 2019

laPtoP

tablet

seRveR

bRanDs RRePResenteD

samsung eleCtRoniCs magyaR ZRt.

761,628

–

–

✓

✓

Samsung

1989

– Samsung Electronics Co. Ltd. (100)

Hwanseog Choi Sang-Woo Lim Gerda Witsch

5126 Jászfényszaru, Samsung tér 1. (80) 726-7864 –

ClouD netWoRk teCHnology kFt.

454,693

✓

–

–

✓

A

2017

– Focus PC Enterprises Ltd. (100)

Péter tálos Gabriella Pistauer –

2900 Komárom, Bánki Donát utca 1. (34) 886-888 komarom@emea.foxconn.com

3

lg eleCtRoniCs kFt.

136,697

–

–

✓

–

LG

1992

– LG Electronics European Holding B.V. (100)

kim Dae Hwan, kim Hyeong tae – –

1097 Budapest, Könyves Kálmán körút 3/A (1) 455-6060 kapcsolat@lge.com

4

HuaWei teCHnologies HungaRy HíRaDásteCHnikai kFt.

2005

– Huawei Cooperatief U. A. (100)

gan Jianhua, shi yanli, li Jian, Wu biqiang – –

1138 Budapest, Népfürdő utca 22/A (1) 555-2300 hungary@huawei.com

János andrási, katalin turza, Zoltán Zerényi – –

2600 Vác, Deákvári fasor 16–18. (27) 500-400 info@hu.ibm.com

Rank

yeaR establisHeD

PC

PRoDuCeD ComPuteR tyPes

1

ComPany Website

total net Revenue in 2019 (HuF mln)

www.samsung.com

2

www.foxconn.hu

www.lg.com

76,993

–

–

✓

–

Huawei

www.huawei.com

oWneRsHiP (%) HungaRian non-HungaRian

toP loCal exeCutive CFo maRketing DiReCtoR

aDDRess PHone email

5

ibm Data stoRage systems kFt.

39,554

–

–

–

✓

IBM

1995

– IBM Ireland Product Distribution Limited (100)

6

oRaCle HungaRy kFt.

27,655

–

–

–

✓

Oracle

1993

– Oracle Nederland B.V. (100)

titusz Csaba Puskár – –

1095 Budapest, Lechner Ödön fasor 7. (1) 224-1700 –

7

HeWlett-PaCkaRD inFoRmatikai kFt.

22,919

✓

✓

✓

✓

HP

2008

– Gatriam Holding B.V. (100)

gábor gonda – –

1123 Budapest, Alkotásutca 55–61. (1) 229-9999 info@hp.com

8

ibm magyaRoRsZági kFt.

17,973

–

–

–

✓

IBM

1936

– IBM Ireland Product Distribution Limited (100)

Péter szalay Árpád Konc –

1117 Budapest, Neumann János utca 1. (1) 382-5500 info@hu.ibm.com

9

FuJitsu teCHnology solutions kFt.

2,937

✓

✓

✓

✓

Fujitsu

1999

– Fujitsu Technology Solutions (Holding) B.V. (100)

krisztina batári – –

1143 Budapest, Gizella út 51–57. (1) 471-2111 info@fujitsu.hu

maurice Joseph barrett, Robert linn Potts – –

1062 Budapest, Váci út 1–3. (1) 888-0550 –

www.ibm.com/hu

www.oracle.com

www.hp.com

www.ibm.com/hu

www.fujitsu.com

10

Dell magyaRoRsZág műsZaki megolDások kFt.

1,081

✓

✓

✓

✓

Dell

2007

– Dell International Holdings VIII B.V. (100)

asus magyaRoRsZág kFt.

430

✓

✓

✓

✓

Asus

2007

– ASUS Europe B.V. (100)

Zoltán gyöngyösi – –

1075 Budapest, Wesselényiutca 16. (1) 505-4561 backoffice_hu@asus.com

A

✓

✓

✓

✓

Acer

2016

– Individuals (100)

tamás József borhi – –

1023 Budapest, Árpád fejedelem útja 26–28. (1) 336-3300 info.hu@acer.com

A

✓

✓

✓

✓

Lenovo

2005

– Individuals (100)

anita lukács – –

1037 Budapest, Montevideo utca 16. (1) 211.1402 info@lenovo.hu

David leslie Preece – –

1117 Budapest, Alíz utca 4. (1) 382-6060 reception.psee@ eu.panasonic.com

Fujioka yoshiyuki – –

1138 Budapest, Váci út 144-150. (1) 777-9151 Yoshiyuki.Fujioka@sony.com

www.dell.hu

11

NR

www.asus.hu

aCeR sales inteRnational s.a. magyaRoRsZági keReskeDelmi kéPviselete www.acer.hu

NR

lenovo teCHnology b.v. magyaRoRsZági FióktelePe www.lenovo.com/hu/hu/

NR

PanasoniC maRketing euRoPe gmbH soutH-east euRoPe FióktelePe

A

–

✓

✓

–

Panasonic

2010

– Junichi Suzuki (100)

A

–

–

✓

–

Sony

2010

– Individuals (100)

www.panasonic.com

NR

sony euRoPe limiteD magyaRoRsZági FióktelePe www.sony.hu

3

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Budapest Business Journal | January 29 – February 11, 2021

Special Report | 17

Office Equipment Manufacturers' Branch Offices Ranked by total net revenue (HUF mln) in 2019

visual tECHnOlOgy

sCannERs

OtHER

A

A

A

A

A

–

REpaiR

paRts supply

REntal

COnsulting

HOME dElivERy

aCCEssORiEs

A

A

A

A

A

A

HP

✓

✓

✓

✓

–

✓

tOp lOCal ExECutivE CFO MaRkEting diRECtOR

MultiFunCtiOnal MaCHinEs

A

OWnERsHip (%) HungaRian nOn-HungaRian

sHREddERs

A

yEaR EstaBlisHEd nO. OF Full-tiME EMplOyEEs On july 1, 2020

Fax MaCHinEs

A

BRands CaRRiEd

MajOR CliEnts in 2019

digital COpiERs

11,305

OptiCal iMagE COpiERs

Hp inC MagyaRORszág kFt.

sERviCEs

lasER pRintERs

1

COMpany WEBsitE

tOtal nEt REvEnuE in 2019 (HuF Mln)

Rank

pROduCts

addREss pHOnE EMail

A

2014 29

– Alpha Holding Two B.V. (100)

kristóf takáts Tibor Rovó –

1117 Budapest, Alíz utca 1. (1) 485-6580 –

A

1990 173

– Konica Minolta Business Solutions Europe GmbH (100)

dániel székely – –

1117 Budapest, Galvani utca 4. (1) 464-9000 ugyfel@ konicaminolta.hu

www.hp.com/hu/hu

2

kOniCa MinOlta MagyaRORszág ÜzlEti MEgOldásOk kFt.

10,317

✓

–

✓

–

–

✓

–

–

–

Konica Minolta, Develop, KP

www.konicaminolta.hu

3

CanOn HungaRia kFt.

9,094

✓

–

✓

✓

✓

✓

✓

✓

–

Canon, Therefore, Iris, UniFlow, Insta, Lifecake, hdbook

✓

–

✓

✓

✓

✓

A

1994 127

– Canon Europa N.V. (100)

Jacob jacob van t Ooster Van’T Ooster Orsolya Földi Csaba Kátai

1037 Budapest, Záhony utca 7. (1) 237-5900 info@canon.hu

4

xEROx MagyaRORszág kFt.

6,861

✓

–

✓

–

–

✓

–

✓

–

Xerox

✓

✓

✓

✓

✓

✓

A

1992 113

– XEROX Ltd. (100)

andrew Mark Verbán János Mussett – –

1138 Budapest, Madarász Viktor utca 47-49. (1) 436-8800 info@xerox.hu

Epson

–

–

–

–

–

–

A

2008 13

– (100)

Miklós Fábián – –

1092 Budapest, Köztelek utca 6. (1) 382-7680 info@epson.hu

Ricoh

✓

✓

✓

✓

✓

✓

A

1990 61

– Ricoh Europe Holdings Plc. (100)

Michael Raberger Péter Eperjesi –

2040 Budaörs, Puskás Tivadar út 14. (23) 806-800 info@ricoh.hu

✓

✓

✓

✓

✓

✓

A

1991 25

Individuals (100) –

zoltán schneider – –

1089 Budapest, Delej utca 41. (1) 477-4050 posta@kvint-r.hu

1992 19

László Juhász (90), Anikó Szabó Juhászné (10) –

lászló juhász Orsolya Jámbor Dorottya Juhász

1172 Budapest, Rétifarkas utca 16. (1) 273-0100 global@globalunion.hu

– Stefka Grozeva, Takashi Tomonaga (100)

toru Osawa – –

1117 Budapest, Budafoki út 209. (1) 382-7450 sales@brother.hu

– (100)

Miroslav tyburec – –

Futurama Business Park, Sokolovska 668/136d, 186 00 Praha 8, Czech Republic (1) 814-8000 askoki@okihu.hu

– Sharp Electronics (Europe) GmbH (100)

lászló Horváth – József Starostiák

1138 Budapest, Váci út 191. (1) 815-2500 info.sehu@sharp.eu

www.canon.hu

www.xerox.hu

5

EpsOn EuROpE B.v. MagyaRORszági FióktElEp

4,875

✓

–

✓

–

–

✓

✓

✓

Large format printing, sign- and textile printing, industrial colour labelling, POS retail solutions, mobile scanning and printing

2,912

–

✓

✓

–

–

✓

✓

–

–

www.epson.hu

6

7

8

RiCOH HungaRy kFt. www.ricoh.hu

kvint-R kFt. www.kvint-r.hu

glOBal uniOn kFt. www.globalunion.hu

BROtHER CEntRal&EastERn EuROpE gMBH NR MagyaRORszági kEREskEdElMi képvisElEtE

2,674

✓

–

✓

✓

–

✓

–

✓

3D Systems, 3D printers, HP, CraftBot, matrix and Lexmark, line printers, Brother, label printers, UTAX, Tally accessories Dascom, Printronix

2,265

✓

–

–

–

✓

✓

–

✓

–

Kyocera

✓

✓

✓

✓

✓

✓

TV2 Média Csoport Zrt., Richter Gedeon Nyrt., Libri Könyvkereskedelmi Kft., Lufthansa Systems Hungária

A

✓

–

–

✓

–

–

–

✓

Portable printers and scanners, labelling equipment

Brother

A

A

A

A

A

A

A

1994 A

www.brother.hu

Oki EuROpE liMitEd, NR Odštěpný závOd

A

✓

–

✓

–

–

✓

–

–

Accessories

OKI

–

✓

✓

✓

–

✓

A

A

✓

–

✓

✓

–

✓

✓

–

Interactive boards

Sharp

✓

✓

✓

✓

✓

✓

A

www.oki.com/hu

sHaRp ElECtROniCs (EuROpE) gMBH NR MagyaRORszági FióktElEpE www.sharp.hu

2017 4

2008 A

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Budapest Business Journal | January 29 – February 11, 2021

Socialite

A Random Spark of Life on the Buda Side Lövőház utca, behind the Mammut shopping mall on the Buda side of the river, doesn’t look like much. But, on a freezing cold, gloomy Saturday afternoon in late January, it was a welcome oasis of warmth, color and inspiration.

COVID Trading

DAVID HOLZER

Several of the bars on Lövőház were open for the sale of forralt bor, the Hungarian version of glühwein or mulled wine, and sweet rumos tea. We stopped for a drink outside the appropriately named Random bar. There were three high tables and heaters outside. Despite the freezing weather, they were all occupied with people warming themselves with forralt bor, which my companions pronounced delicious. The air of camaraderie was also heartwarming, with people exchanging glances that said we were all in this together. It was also splendid to know I could use the Random bar restroom whenever I wished. One of the unforeseen consequences of not being able to sit and eat and drink in cafes, bars and restaurants is having to be creative when

quality. We aim to attract those people who put energy into discovering things that are a bit hidden, a little secret, who then share our location with their friends so we remain rather underground,” Zsófia told me. “This is in line with our own approach to sourcing, where we do lots of research to find the smallest, not so obvious but extremely high-quality brands and makers. Online, our customers come from all over the world, as well as Hungary,” she adds.

it comes to planning restroom visits. Now, although forralt bor is moreish, there’s only so much rumos tea a man can drink before his head starts to feel like one of those Mexican sugar skulls. While my companions tucked into their third mulled wine, my attention was drawn to a bright, lime green neon sign barely visible in a tiny store across the street. When I stepped down into the store, I saw that the sign read sparklemonde. com. I was intrigued. Spark Le Monde is tiny and filled with products that have clearly been carefully chosen or, as they say, curated. My attention was immediately drawn to one of those face roller things that are très desirable right now. Curious as to what Spark Le Monde was doing lighting up a street in an out

of the way part of Budapest, I had a chat with Krisztina, one of the founders, who was behind the counter. Her business partner, Zsófia followed up with answers to questions I emailed.

The Spark

Spark Le Monde was founded in 2018 by Zsófia, from Budapest, her husband Márton, Krisztina and Amanda. All four founders have day jobs. Spark Le Monde is a “love-project.” Zsófia has a fashion and business background, working with multinationals and small start-ups. It was her dream to “open an influential fashion space online and then physically bring it to Budapest, my hometown.” Today, she’s mostly responsible for buying and defining the vision of Spark Le Monde, with her co-founders providing financial, technical and practical support. Zsófia’s vision is to “bring to life a creative on and offline space where the most talented, independent designers creating sustainable products can meet highly design-sensitive customers. In time, we want to build up so much trust that this space can also become an incubator for fresh talent. We are on a continuous search for brands. With travel restricted, we’ve been scouting for new brands and keeping up with the scene online.” I was intrigued as to why Spark Le Monde, the kind of store you might expect to find in District VII, is tucked away on Lövőház. “At the moment, the store is mostly visited by locals, but our customers are diverse. What they have in common is their inquisitiveness and sense of design

Having just come from the city center, which has been turned into somewhat of a ghost town by the pandemic, I wondered how the situation was affecting Spark Le Monde. “We’re a young company that’s far away from reaching our full potential. Our physical space opened just three months before the first lockdown and what’s been painfully clear is how few customers have visited, which is a shame,” Zsófia admits. “But our business still grew in 2020 because of people shopping online. What’s also interesting is the way sales in different areas of what we offer have been affected. For example, because people don’t leave their homes as much to go to weddings or other social events they don’t need party clothes.” Zsófia also explained the significance of the “above the keyboard” trend to me. This is causing products visible on camera, such as tops, jewelry, glasses, and hair accessories, to sell extremely well. But, as she points out, “The sunglasses market, a particular favorite of ours, has sadly been badly affected by face masks. It’s impossible to wear a mask properly without your glasses steaming up. You also look like you’re about to rob a bank.” Looking to the future, Zsófia and her co-founders are filled with welcome optimism. “We’re keen to introduce new designers, brands and categories. We aim to become an influential destination retailer. We’d also like to open more locations when it’s practical. We have many plans and not much patience.” After my companions had finished their forralt bor, we walked to the metro via Millenáris Park (a block over from Lövőház), which has had a futuristic makeover. We stood by an iced-over lake surrounded by large, permanent wooden sunbeds dusted with snow and I knew we were all thinking the same thing. Roll on the spring and, something or other willing, the relaxation of the restrictions we’ve all been living with these past months.

If you’re in Budapest, visit the bricks and mortar Spark Le Monde store at Lövőház utca 29. If you would rather shop online, go to www.sparklemonde.com.

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Budapest Business Journal | January 29 – February 11, 2021

Socialite | 19

Kékfrankos Continues its Post-communist Comeback Kékfrankos is Hungary’s most planted grape, yet not so long ago its very mention brought groans if I were to pour it for unimpressed wine tasters, whose palates had been pounded by thin and sharp versions of the variety in past decades. Those very same palates are now thankfully learning to appreciate the wine in its increasingly classy incarnations. ROBERT SMYTH

In truth, Kékfrankos is a grape that Hungary’s vintners have to get right, not only because it accounts for a whopping 7,592 out of Hungary’s 64,000-odd hectares of land under vine, but also as it is one of only a pair of prominent indigenous red grape varieties (Kadarka being the other), while the country is blessed with a bevy of native white wine grapes. Kékfrankos is dependable in the vineyard, holding up very well in more challenging vintages when others can take a battering, meaning that consistency across the years can be assured. Kadarka, for example is much more at the mercy of the vagaries of different vintages. The acidic, watery Kékfrankos wines of the past came from skyhigh yields, when the aim was to suck as much juice out of the wines as possible, as quantity took precedence over quality. This modus operandi from the former communist system took a while to be phased out, or at least it took time for the grape to be utilized to make more serious wine.

Despite being Hungary’s most planted grape and well distributed around the country’s red wine regions, Kékfrankos long played something of a backseat role to the more fancied international grapes. That is until Hungarian vintners realized that indigenous varieties are where it’s at, as well as learning from the Austrians, who have led the way with Blaufränkisch, the Austrian name for Kékfrankos. Besides being a genuinely autochthonous grape variety, another key Kékfrankos attribute is that it keeps a cap on the level of alcohol, with the 14% threshold very rarely being breached, but a figure that the Bordeaux varieties top in Hungary with real regularity as temperatures rise.

The same winery also flexes its Kékfrankos wings in the best vintages, like 2017 (of which 1,100 bottles were made) with Eszterbauer Frankos, which is a single-vineyard bottling from Bodzás, and a much more concentrated effort, but with lashings of ripe, fresh fruit ( blueberry, sour cherry) that stands up to and is complemented by the good dose of oak. Despite its intensity, it keeps the alcohol at 13.5%, leading to a smooth finish. It is currently on sale at the winery for HUF 6,490, down from HUF 8,900. Quite frankly, few are likely to pay almost HUF 9,000 for a Kékfrankos, no matter how good it might be.

Blind Faith

Organically Grown

A recent blind tasting of wines made from the grape yielded some pleasant surprises. Teleki Villányi Kékfrankos from Csányi Pince is not a wine that many aficionados would associate with high quality, but the 2018 is currently drinking very well. It’s hit the point where it’s nicely balanced between primary fruitiness, namely sour cherry, and aged tertiary earthiness, with the tannins having become nicely fine-grained. It was aged in large barrels. Although this is quite a light wine that is not made for long-term ageing, the time in bottle has rendered what is ostensibly a cheap and cheerful wine, somewhat more complex. It is a steal at HUF 999 from GRoby.

Kékfrankos transforms itself with time in the bottle, something which is not widely known as little of it is kept for long. It is often initially rough tannins can become delightfully fine grained with the passing of time. Another wine that gives plenty of bang for the buck (HUF 1,990 from Pannonborbolt.hu), this time from Szekszárd, which has become a real powerhouse of the grape variety, is Eszterbauer’s “Tanyamacska” Kékfrankos 2019, which is named after the “farm cats”, or the older local peasant men, who used to spend most of their time hanging around the wine cellar, whether they needed to or not. A picture of them from the 1930s is featured on the label. This is a light, fruity, juicy, spicy and varietally-pure wine with refreshing acidity and just a touch of oak. It comes from the from the Bodzás and Porkoláb-völgy vineyards.

Staying in Szekszárd and back to the tasting, Illyés Kúria Kékfrankos 2019 comes from a 0.3-hectare plot of organically cultivated 50- to 60-year-old vines. It was the pick of the Hungarian wines at the blind tasting for me and has a vibrant, attractive purple color. It is really complex with pomegranate and blood orange notes (reminiscent of Southern Rhône reds), alongside the more typical sour cherry, robust tannins and a slightly untamed character that is both charming and pure. It costs HUF 4,550 from Bortársaság, and just 600 bottles were produced. It was made by the selfconfessed, health-obsessed cardiologist Miklós Illyés, who looks at grapes as he does people. He believes humans and grapes only perform well when they are healthy, which means not being treated by antibiotics or synthetic chemicals. Accordingly, he treats the vines with the naturally-occurring chemicals sulfur and copper, as well as orange oil. Another wine with a wonderfully wild, natural and earthy feel was Gábor Kerner’s single-vineyard Vitézföld 2017, from a volcanic vineyard in the Mátra Hills (HUF 10,800 from leesbrothers.hu) that has slightly explosive alcohol (14.5%), which is a surprise for both the grape and the relatively cool, northern wine region it comes from. The delicious pomegranate note was also captured in Gellavilla’s Kékfrankos 2016, a pleasantly restrained and elegant wine from Balatonszőlős that is ageing nicely and costs HUF 4,400 at Bortársaság. (Again, only 600 bottles were made.) This winery is also moving in the organic direction.

What’s in a Name What is called Kékfrankos in Hungary is known as Blaufränkisch across the border in Austria. Austrianwine.com calls Blaufränkisch a “traditional Austrian variety [that] is a cross between Blauer Zimmettraube and Weißer Heunisch.” It notes that “Blaufränkisch was previously widely-planted throughout the Habsburg Monarchy.” In Germany, the grape is called Lemberger, which comes from the town of Maissau in Niederösterreich (in presentday Austria), which was formerly called Limberg.

It is wise to pick up some older vintages as Kékfrankos transforms itself with time in the bottle, something which is not widely known as little of it is kept for long. It is often initially rough tannins can become delightfully fine grained with the passing of time. Taking things to an extreme, Bock Kékfrankos 2001 oozed strawberry compote and, while well past its best, it is still alive and rather tasty to boot.