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Pasta da Czechia

The success of the largest domestic producer of pasta - Moravian-based Adriana - has given a new meaning to "rolling in the dough".

Zbyněk Navrátil & Jiří Pavlík

ADRIANA GOT ITS START in 1993 and has gone through many ups and downs-including weathering a financial crisis-but has come through nicely, positioning itself as the top domestic producer of dried pasta, with annual production of more than 36,000 tons in a country that, according to Euromonitor, only purchases about 70,000 tons each year. In a limited Czech market, the thing that has helped the company grow is its export channels, which now reach not only regional neighbors but also former Soviet countries like the Baltic countries, Ukraine, Kazakhstan, Azerbaijan, as well as countries in the Middle East and Africa. Its biggest foreign customer, though, remains Russia - which almost spelled Adriana's ruin, too.
The Litovel-based company's first down occurred at its inception. Founders Jiří Pavlík and (the late) Vladimír Karger, managers of a local farm cooperative at the time, had been approached by an Italian investor that had plans to produce Italian specialities, like pasta, parmesan cheese, and prosciutto, in the Czech Republic. Hoping to use both men's experience, the investor wanted to start a pasta factory together. Soon, however, the two groups had a falling out, leaving Pavlík and Karger to do it alone, according to Zbyněk Navrátil, Adriana's export manager, who's been with the firm from its birth.

Crisis comes home
With almost no experience in the pasta business, the men used several loans to help finance the CZK 200 million investment - CZK 75 million going to Italian company Pavan for two production lines, one for short and one for long pasta. For much of the 90s, things went smoothly. The company was producing around 15,000 tons of pasta and exporting 90% of it to Russia, helped by Navrátil, who had lived and studied in Moscow for many years. In 1998, a third (larger) production line was even installed.
However, on Aug. 17 that same year - a date both men remember - exports crashed amid the Russian financial crisis. "We had to stop exporting," recalls Navrátil. "It was very hard for us - we had to change our entire plan and marketing." Pavlík, the firm's director, simply adds, "It was the worst thing that could happen - terrible stress." That may be just what the firm needed, though. It retooled by focusing on other foreign markets, starting first with the Baltic countries, where a common language (Russian) still wasn't a problem. It also put an added emphasis on the domestic market by going after large retailers, which now account for 80% of domestic sales (while wholesalers and caterers make up the remaining share). "The reaction was good," says Navrátil. "[At that time], we had to change and diversify our market." The big chains over the years have helped in this - a local contract now is essentially a regional deal guaranteeing easy access to neighboring markets. "Now our core business is in middle Europe (including Russia)," says Navrátil, which has been helped by EU accession dropping customs duties.
The year before the Russian crisis, in 1997, production totalled around 28,000 tons, dropping to 21,000 tons in 1998 before bottoming out at approximately 16,000 tons the following year. Since then, production has consistently risen to its current 36,000 tons a year. Production may have recovered quickly, but, it took the company longer to rebound financially.

An extra ingredient
At the end of 2003, Adriana got a new 50% owner: Europasta BV. This company invested CZK 10 million, after ČKA sold two of Adriana's bad debts amounting to CZK 380 million to an unnamed investor, in the spring of 2003. The debt was the result of Adriana's experience in the Russian saga, making it impossible for the Moravian company to pay its IPB loan (which was later taken up first by ČSOB then ČKA). As part of the deal, though, two managers of another Europasta company, fellow Czech pastamaker, Bratři Zátkové, now sit on Adriana's executive committee. (Europasta is in fact a holding company set up to consolidate shares in Bratři Zátkové and Adriana, and is owned by Michal Mitka and Pavel Hrdina, the two top executives at Bratři Zátkové who both are now executive members of Adriana.) Still, those involved maintain there are no plans to merge the two Czech firms as Bratři Zátkové produces egg-based pasta while Adriana makes egg-free pasta, and both have long histories apart.
With Europasta pitching in, Adriana can now concentrate on its business again. As part of this, the firm has plans to spend around EUR 1 million to fully automatize the plant-which already has 120 employees working round the clock in four shifts. "[Automatization] will cut production costs and lead to a growth in productivity," Navrátil says. The company's turnover is already double what it was in Adriana's first year, although the firm declined to discuss numbers. (Exports alone amounted to CZK 60 million in 2002, according to Czech Trade.) Although the firm is feeling the effect of the strengthening crown, exports are growing and consumption at home is increasing, so it looks like Adriana has a secure future feeding the masses.


Marketing lines

Adriana has two lines of pasta: the Exclusive and the Standard lines. The former, as its name suggests, is of better quality using semolina, flour made of hard wheat, imported from Austria. The advantage this offers is pasta that doesn't stick or lose its shape. The standard line, in contrast, uses only medium-ground flour. An unofficial third line is the retailers' private label, which, while good for business, doesn't have any marketing advantage, so the firm hopes to begin an advertising campaign sometime next year - its first - to promote the company name. It has also used the Adriana name on another Italian product, a Tuscany sauce it produces in cooperation with local firm Alibona.



Far from home

The majority of Adriana's export strength is in central and eastern Europe, in spite of the fact that the pasta brand has customers all over the world. It irregularly exports to America, Israel and Egypt, as well as New Guinea. It reaches customers in the Far East through its Moscow importer. And, more recently, it's become an exclusive supplier to markets in Nigeria, Senegal and the Ivory Coast. Still, Navrátil admits that these numbers aren't significant and don't represent a concentrated international marketing effort. For example, exports to Africa came about when local African students approached the company, striking a deal to assist Adriana in reaching markets there. For now, however, the focus of the company remains the domestic market and exports to neighboring countries.

© The Prague Tribune, 2005
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