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Success comes with a strategy and a team

Nov. 23, 2012, 10:25 a.m.

Our cigarettes will not rise in price, we will optimize the costs

A good product at the right price need to be offered, says Ventzislav Cholakov.
Ventzislav Cholakov is the executive director of "Bulgartabac holding". He was nominated for the "Mr. and Mrs. Economy 2012" competition in the category "Industry". Cholakov took over the company management at the end of 2011 after the privatization of state-owned tobacco holding. Then 79.83% of the company passed into the hands of company BT Invest, registered in Austria, and the deal was for 100.1 million euros. Before taking the helm of "Bulgartabac holding", Cholakov had been financial director of the trade company for food products “Billa Bulgaria". He had held various positions in the "Metro Cash & Carry" and he also had been a manager in the "Metro Cash & Carry International" in Germany.

- Mr. Cholakov, what is the impact of smoking prohibition in public houses on your business?
- Currently we do not report a serious effect on our sales, partly because during the warmer months there are more opportunities to smoke outdoors. We expect a serious negative effect in the winter months.

- Is there a market for Bulgarian cigarettes abroad? For which countries are you exporting?
- Currently about 80% of our production is sold on world markets. The main areas in which we sell are Western Balkans, Middle East, North Africa and Southeast Asia. We think there is great potential for the realization of our products in those regions, as well as in Russia and former CIS countries, Ukraine, Moldova, and Romania. In 2013 we are going to put a strong emphasis and in the direction of Central and Western Europe as well as in the area ASEAN in Southeast Asia with nearly 610 million people.

- You will have meetings in Dubai, what do you expect from them?
- Our contacts in Dubai are very intense. It is a market with great potential and from this point of view is very important to us. Within a month we will open an office there. There has already appointed personnel. Our goal is that office to become a regional centre through which "Bulgartabac" will succeed to maintain contacts and to develop markets in the Middle East, Asia and Africa. We will open such offices in other countries in Asia, Africa, and Russia very soon.

- Does Bulgarians’ taste to cigarettes change? Which are the most popular cigarettes now?
- The Bulgarian market is dynamic and belongs to the developed markets. Trends are towards "slim" and "light" products. An interesting phenomenon is the growth of the 100's cigarettes, which is explained by the high share of the specific excise duty. I.e. big part of the excise duty is paid per cigarette no matter its length and creates the feeling that for more product is paid the same price.

- Are you preparing new types of cigarettes?
- We work with the best specialists in the field of branding and since New Year we will come up with a new vision of our products. We are preparing also brand new products to meet the tastes here as well as to become global brands.

- You make yourself a gift - the new logo for this year's 65th anniversary of "Bulgartabac". What you want to achieve with the new look?
- The new logo is part of our new corporate identity. It expresses our wish and desire to be responsible, modern, thoughtful, creative, proactive, rational and confident in our actions. It meets the new requirements of our customers. It expresses the direction we choose - making "Bulgartabac" a global company, a solid player in the world markets.

- What is the volume of the tobacco market in the country? How much of it "Bulgartabac" holds?
- "Bulgartabac" continues to be a leader on the Bulgarian market with nearly 35% share. All other companies in the industry have less than 20% of individual market shares, i.e. even now we have a major advantage over all others.

- Will be there an increase in prices of tobacco products next year?
- We do not intend to increase the prices of our products. Although, the price depends directly on the expenses made for specific good production. However, we will try to compensate the rising costs by optimization.

- Is there an increasing or reducing the tobacco smuggling in the country according to you? How could be solved the problem with the sale of illegal cigarettes?
- To our satisfaction the measures taken by the government give effect and the share of the illegal cigarette market in Bulgaria is 15.3% by the middle of 2012 These are the results of a study of independent market research agency commissioned by the tobacco companies participating in The Initiative "Against the illegal cigarette trade". The greater becomes the excise / tax burden more "attractive" becomes the possibility of making quick profits from criminogenic environments that require more effort, resources and prevention mechanisms by regulatory authorities. In this situation, it is already accepted that reducing the levels of illegal cigarette trade in 10-12% is not very easy.
That is why maintaining a stable excise environment and active measures against existing channels for imports from outside plus blocking of illegal production in the country remain the most effective means against the illegal trade. A serious issue that has not been discussed actively, but is a fact, is the lack of any quality control on the illegal products. I.e. if in our country there is hourly control of the main characteristics of the production and we meet all European standards, the illegal cigarette sometimes contain anything but not tobacco.

- Our biggest goal is to make "Bulgartabac" a modern company that takes its place among the world leaders in the branch. We have the confidence and ambition to do it because "Bulgartabac" had already been in the top three of exports in the 80s of last century. Naturally, the market environment today is quite different, but we are convinced that if we produce high quality products at a reasonable price for the client, the potential is huge. It is necessary to implement active marketing and advertising strategies also to develop regional sales units in all parts of the world where a potential for sales is available. Modern sales techniques require very good knowledge of customer preferences across regions and countries active actions on site - i.e. you go to the customer rather than waiting for him to come.
That is why we launched our redesigned and modernized corporate vision and actively develop new more blends that are recent and packaging of our products.

- How do you obtain raw material, is there enough quality Bulgarian tobacco this year?
- Modern quality cigarettes are complex combinations - blends of tobacco that have different taste parameters. That is why we buy Bulgarian tobacco as well as those from Brazil, Africa, North America, India, and Bangladesh etc. Thus, our products are not inferior to global brands and in some ways are better.

- How do you assess the 2013 draft budget and ideas for introducing new taxes on interest from deposits and gambling?
- In my opinion, the fiscal policy led by the government is correct and balanced. Naturally, everyone wants to pay less taxes but expectations of government support and high social standards are also high, especially compared with the developed Western economies. Ultimately, at least in the field of finance it is possible an objective evaluation of the quality of public and corporate finance through evaluations that global rating agencies give to Bulgaria - in contrast to many other European countries, they are positive.

- What is your formula for a successful business?
- The most important thing in business is to offer the right product at the right price in the eyes of the customer. Second, you have to have a good strategy and team to implement it. Sounds simple, but in fact it is quite complex and it requires hard work, leadership, market research, and motivation of the team and the people you work with to happen.