Author: red
Source: Hospodárske noviny, July 28, 2008, No. 145, p. 13
The export of mineral water is complicated, especially when long distances are involved.
We are not involved in foreign investment in mineral water for the time being. Despite the interest of several investors, the market situation regarding mineral water remains unchanged. According to producers, it is an expensive and inefficient exportable product. Therefore, the recent negotiations of Asian investors in Čerín have not yet been responded to.
“We have no information about the establishment of business cooperation between the Malaysian company Nagamas and companies in the Slovak market,” says Jana Murínová, spokeswoman for the SARIO investment agency. At the end of last year, the Asian investor expressed an interest in investing in a recreation and hotel facility and, in cooperation with Čerínska Minerálka company, in delivery of non-saturated mineral water for the Malaysian and Chinese markets. However, at this time, it is lacking a strong position in the domestic market, which should be a starting-point condition for the creation of a joint venture with Čerínska Minerálka.
Imprudent investment
Other producers claim that mineral water has a principal disadvantage in comparison with other exported raw materials, in that it is not possible to preserve mineral water and transport it long distances. However, the demand for mineral water is huge around the world, especially in the Near East and Asia. According to Ľudovít Brezina, the commercial director of Trenčianske Minerálne Vody, the situation is not changing. “Foreign investors appear continually in Slovakia, sometimes with certain regularity. Often there are companies which have an incomplete impression of what such a business may include,” Brezina claims. At the same time he adds that, “They request huge volumes, which complicates exports. Sometimes it is not feasible technically. If mineral water is not air-conditioned, it loses many of its properties and quality during transport.”
As for mineral water, according to Brezina it is an imprudent investment. “Investors are returning, they do not take conditions into account, they have no idea about distances. As soon as we present prices, business remains many times without any response,” Brezina suggests. As a result, exports are gradually expanding in the tight competition space of Europe. Trenčianske Minerálne Vody have some orders from the Canary Islands or within the V4 countries. It is a similar situation for other producers, while Western Europe does not yet fully appreciate the quality of Slovak waters. “So-called exotic export prospective customers are mainly from the United States and the Arab peninsula,” Brezina adds.
However, demand may not end with the Near East. An example is C-Spring company, which two years ago sold its shares to an Australian investor. The investor came with an interest in investing in the modernisation of water-bottling technology. The Cígeľská mineral water producer has collected SKK 2.5 million from the Australian market.
Domestic investments determine developments
The shares of strong investment groups in home companies are evidence that mineral water is still a lucrative commodity. In 2005, Arca Capital, owned by businessman Pavol Krúpa, entered into the production of Maštinská mineral water through the purchase of a 67% share of the Aqua Group company, an investment of EURO 2.5 million (over SKK 75 million). The existing target of the company is the stabilisation of the company through restructuring and strengthening of financial power. Settlement of liabilities and construction of a modern line and logistics center would help the company achieve stabilisation. The effort is to expand the company’s export. “It does not create even a percentage from total receipts. The reason may be also the fact that surrounding countries have no problem covering their market with domestic brands, which does not leave much space for imports. On the other hand, the export into more distant countries is disabled by high transport costs, which increase the price of our products to the level of western countries. We would lose one of our main competitive advantages”, says Peter Kalman, general director of Aqua Group. At present, the company exports into Hungary, Slovenia and Serbia.
