Lithuanians have learnt to wait for the best price in the Ukraine
Irma Verbienė, Renaldas Jakubauskas
24-10-2007, Verslo žinios (the newspaper)
Successful project sales of Lithuanian businessmen in the Ukraine shows a new trend – wait out for a suitable price and profitable withdrawal.
The decision of UAB “Sanitex”, wholesale and logistics company, to sell shares of the company operating the store chain „Bumi Market“ in the Ukraine refreshed the issues whether it is worth investing into the market of this state and how much these investments cost.
Successful decision
According to the business news portal VZ.LT., 55% of the shares of the company “BM Trade”, the managing company of „Bumi Market“, were aquired by the company “Fora” belonging to the holding company “Fozzy Group“. These two chains are among the leaders in the so called the Group “Shops near home”. In its website in the internet, “Fora“ declares that it owns more than 60 shops, and 42 shops belong to “Bumi Market“, including 20 shops in Kiev and 10 shops in the Kiev district. Persuant to the valuation of the Ukrainian business media, the Group “Shops near home” holds around 25% of retail commerce of this country.
„We manufacture a product and sell it. Concerning niuances…there may be many’, says Algis Pakalnis, Director of Investment and Development of “Sanitex”, and refuses to make any further comments.
Only a year ago VŽ wrote that the trade chain “Bumi Market“ is planning to expand in 3,5 times – up to 150 shops. Then it was stated that „Hermis Capital“ (hereinafter - HC) was playing with the idea of investments into the food industry that together with the store chain would bring an interaction effect. It was mentioned that Nerijus Dagilis, Chairman of the Board of HC, personally makes investments into the development project of “Bumi Market“. However, yestaerdaiy Mr Dagilis ensured VŽ that neither HC nor he himself had invested into this project. “We invest into other areas in this country. Its market is really complicated and we are not very successful there. And speaking about the corruption, you would better asked the Ukrainians themselves”, he commented reservedly.
Although the representatives of „Sanitex“ do not comment either amount of the trades or causes, the market members concider this step as a rational one as a rapid ans successful development of “Bumi Market” was hardly possible due to the savage competition of chains.
Not the only ones
„Sanitex“ are not the only one Lithuanians who sell their business. Businessmen Raimondas Tumėnas and Igoris Bezzubas, who started the juice production business in Ukraine in 1995, this year sold 45% shares of the biggest Ukrainian juice production company “Sandora” to the global giant “PepsiCo“. These $542 mln. (almost LTL1,4 billion) got from “PepsiCo“ are hold by the investment company “BT Invest” established in June in Lithuania and which also implements the investment projects.
The company pays much attention to investments into the Ukraine, Rumunia, Bulgaria and the Balkan states. In September, the company manager stated that the largest return on investment at the present situation is possible in the developing Middle and East European countries exactly. The possibility remains that a part of the investment projects of the company may be performed in Lithuania as well, however, the company has already decided the projects where the Lithuanian experience could be used in the developing countires to be underlying. The initial investment project started in August with the establishment of the company “Pagoda-invest“ the prospected activity of which is realty development and building in the Ukraine. The project value – over $100 mln. (around LTL 251 mln.)
In September, the company decided to increase its authorized capital from LTL 100,000 to LTL 50 mln.
Rational approach
„It seems the Lithuanian business has learnt to sell a matured project in due time and receive a normal return on investments. I have in mind not only „Sanitex“, the example of ”Sandoros“ proves the same. They created the exclusive trademark, formed an excellently operating chain and waited out for an attractive price. It is already the right time to speak about trends that the Lithuanians started to behave rationally in the Ukraine market. Our businessmen are ruled by commercial logic when see there is a client proposing a good price“, says Kęstutis Masalskis, Attache for Commercial Affairs of the Embassy of the Republic of Lithuania in the Ukraine.
He conciders the decision of “Sanitex“ to sell the trade chain shares as conditioned by extremely increased competition and rapid development chains of the local capital, especially in the regions of the country.
”The trade chain development in the cities has become more stabilized, and the followinf step – regions; the purchasing power of their inhabitants has been increasing rapidly. Earlier, let’s say, the city chains used to dictate fashion, now the region ones are in the forward ranks. In case one would like to got to the regions, either much money is needed or local partners or own logistics. Creation of own logistics requires a chain of at least 100 stores“, says Mr Masalskis and mentions that ambitious plans of foreign capital collapse in the Ukraine quite often.
„The Ukrainians have a sceeptical point of view to ambitious projects and usually there arise problems during their implementation. For example, 3 years ago the Swedish “IKEA“ declared its coming to the Ukraine and spoke in a high key about its ambitious plans and large projects. Up till now there is no “IKEA” in the Ukraine. When accompany comes to the Ukraine declaring loudly about its ambitious projects, the local businessmen are forced to respond sharply, and they are excellent fellows. And when a small project is started at the beginning, relationships made, and the company seems to be quite a good partner, it may become a serious market player”, explains the diplomat.
Promising future
Nedas Karklius, Director General of UAB “Rolvika“, selling the chilling, airing and commercial equipment: „We valuate the development of our company in the Ukraine optimistically. We have two project for a million, their development is prospected next year. We, as partners from Lithuania, are viewed quite positively. We have a secondary company and work with the private sector, and we do not interfere with any political issues. Speaking abour promotion, we do not make much efforts since the information about us spreads from lip to lip, therefore our deeds are the best promotion. The main interest to go the Ukraine is its growing market wherein there is enough place for everyone. Here, in Lithuania, the market has already been steady.“
Alvydas Stulpinas, Director General of the company of PET pre-forms and products “Putokšnis“: “In the Ukraine, we adapt to the market of this counrty. We find much prospect here and we will work in this country. The drink industry has been growing, the foreign capital coming, and the consolidation going on. For the meantime, it is too early to speak about possible selling of the business as there is nothing to sell yet. We opened the plant together with the local partners, and it is positive when you start a business. At the beginning our partners and we had ambitious plans, however, we did not manage to fulfil them in the starting position – red carpets are not laid down for those who tries to come loudly in the Ukraine.”
