There Will Be Chocolate, but Flour May Not Be

For some time now, the scent of an impending recession has been in the air. The problems that began to arise in the autumn as an expected reaction to disruptions in supply chains were just the beginning of the challenges we are facing these days, with the biggest blow to the economy being the war in Ukraine.

What has become an unavoidable topic in the conversations of numerous entrepreneurs, both foreign and domestic, is the shortage of raw materials. At the ninth Lider Export Conference, this was discussed by Slavko Ledić from Kraš, Miroslav Bajkovec from Bajkmont, Alojzije Šestan from Šestan-Busch, Tihomir Premužak from Vetropack Straža, and Matt Darko Sertić from Applied Ceramics.

There is no crisis in cocoa procurement

Slavko Ledić recalled the time when all the media buzzed about how there would be a shortage of cocoa and that Kraš would run out of cocoa. The situation today is somewhat different.

– Two years ago, everyone was writing about an impending cocoa procurement crisis, but I must admit that we have no problems with that at all. Good cocoa can be sourced from several countries; we have been importing raw materials from Ghana for a long time, which collaborates with the best chocolate producers in the world – said Ledić.

There will be chocolate, but what poses a challenge for Kraš and many other producers is the war in Ukraine, which calls into question the procurement of sufficient quantities of flour and sugar, and even if the problem is not always about quantity, the rise in prices plays a significant role.

– The Russian market, together with Ukraine, is exceptionally large. This means that large multinational companies that successfully sold their products in those countries are currently losing that market. Surplus goods are now being sold where Kraš also sells – he commented.

Nevertheless, Kraš has managed despite the rise in raw material prices. Changes in consumer habits during the pandemic have also affected business, and people have spent more time at home. Because of this, Ledić said, they started producing more snacks and foods like cookies and wafers.

– We performed correctly and successfully last year despite all circumstances. This year and next year are challenges for all of us, but we are preparing well – concluded Ledić.

Steel has become a problem

Miroslav Bajkovec from Bajkmont, a company where steel constitutes as much as 50 percent of production, stated that construction mainly consists of material production, and only then of construction.

– For two years now, we have been in a constant battle with material procurement, but we are also struggling with constantly changing prices and meeting our customers’ needs – said Bajkovec.

Explaining the various ways the supply chain crisis affects their business, Bajkovec could not overlook the fact that the prices of some raw materials, such as steel, have increased by about 300 percent, and that is not even the highest percentage considering what it was at the beginning of the war in Ukraine.

The rise in prices also poses a problem affecting already contracted jobs

– We agree on a new project, but after the agreed price, it often happens lately that the price rises despite the initial agreement – concluded Bajkovec, adding that unlike some manufacturers, Bajkmont purchases finished steel bars on the European market from long-term suppliers.

– Interestingly, about 60 percent of steel is produced from scrap, that is, secondary raw materials, but such a thing does not suit Bajkmont – he concluded.

Alojzije Šestan, director of Šestan-Busch, also thinks like Bajkovec and claims that as quality manufacturers of protective equipment, they cannot risk using secondary raw materials, especially since it concerns equipment that saves workers’ lives.

– A small company like ours has gained the trust of 70 countries worldwide and delivered 2.5 million helmets made from the best materials over 25 years because we play in the ‘Champions League’. Alternatives exist; manufacturers from India and China produce lower quality materials, but we make a product that protects human life and health, and there is no alternative to that – said Šestan.

Some lucky ones have no problems with raw materials

Tihomir Premužak, CEO of Vetropack Straža, which deals with the production of glass packaging, claims that the company can replace basic raw materials like sand with glass cullet, but if they accepted 100 percent packaging glass, it would still be insufficient.

– We were loaded with products; we are a process industry, and we must have stocks. That is the nature of our industry and our advantage. Materials have not been a problem for us; there has been no shortage, but transportation has become more expensive, and that is the biggest challenge – concluded Premužak.

Matt Darko Sertić from Applied Ceramics is one of the few lucky ones who have not been significantly affected by the supply chain crisis. Since the company deals with the production of highly sought-after semiconductors, demand remains constant, and the raw materials they had trouble sourcing have started to be procured by themselves.