TOP 500 CEE Domestic companies stagnate, foreign retail chains too strong for Croatia

The absurd dominance of energy companies in countries that are energy importers does not apply only to Croatia. Energy companies – oilmen, gas companies, but also ‘electricians’ – dominate all of transitional Europe, and last year they further solidified their supremacy in business.

According to the publication ‘CEE TOP 500’, Škoda’s operations in Slovakia are the only ‘intruder’ among the ten largest companies in the real sector (excluding banks and insurance) from 12 countries in Central and Eastern Europe. Coface has been preparing a ranking of the most important companies in 12 countries (Bulgaria, Czech Republic, Estonia, Croatia, Latvia, Lithuania, Hungary, Poland, Romania, Slovakia, Slovenia, and Serbia) for the fifteenth year. This area, besides geography and the somewhat forgotten Three Seas Initiative, is connected by a common transitional past (and present), but the key is certainly business connectivity. Last year, Croatia placed 36 percent of its commodity exports (8.5 billion euros, with an increase of as much as 48 percent) in those 11 countries. For comparison, the three most important foreign trade partners (outside that circle) – Germany, Italy, and Austria – together absorb 6.8 billion in imports from Croatia.

Relativity of comparisons

In this context, it is good that all CEE countries recorded GDP growth (except Estonia, which fell by 0.5 percent). Croatia’s GDP grew the most (6.2 percent), but the publication explains that this was possible primarily due to the tourism boom after the pandemic. However, Croatia also recorded the largest decline in that society in 2020. Therefore, we delved a little deeper into the past, even further than the current prime minister, who compares all macroeconomic data with the beginning of his mandate. We will compare the data with those from the same publication from about ten years ago. In 2012, Croatia had not yet begun to recover seriously from the prolonged recession and was still in the waiting room for admission to the European Union. So, what happened in the meantime? GDP per capita increased by more than 7,000 euros, or 70 percent, from 10,203 to 17,370 euros. Approximately the same increase occurred in the revenues of Croatian companies in the top 500 CEE. Similar data in the style of government PR could be strung together. However, the problem is that Croatia is not alone on the globe, nor in the region. Our neighbors, who are also economic partners but also competitors, have mostly grown faster. Thus, GDP per capita in absolute terms has increased less only in Serbia and Bulgaria, and only Slovenia’s GDP per capita has grown less than Croatia’s 70 percent. And the revenues of the top 500 have increased by 87 percent.

The largest in Croatia stagnate

There are significant changes in relation to the companies that made it onto the ranking list then and now. New players include PPD (47th), MET Croatia Energy Trade (151st), MVM CEEnergy Croatia (183rd), Petrol (263rd), Lidl (301st), Spar (462nd), and HEP Elektra (498th). The Natural Gas company (which was merged with INA), OMV (which sold its business to Ivan Čermak, who then sold it as Crodux Derivatives Two to Petrol, under which it operates today), and four living companies: HEP ODS, Tisak (plus), Pliva, Brodosplit, and Petrokemija have dropped out of the top 500.

Changes in life and business are a normal occurrence, but we also have six long-term residents in the top 500. However, INA has fallen from 26th to 45th place, Konzum (plus) from 74th to 194th, HEP from 79th to 120th, HT from 183rd to 428th, and Plodine from 455th to 500th, while only HEP production improved its ranking – from 382nd to 206th position. Thus, a large part of Croatian business leaders is failing to keep pace with competitors in the region. After all, ten years ago, 14 Croatian companies made it into the select company, and there is one less on the current ranking list. Additionally, Coface included 47 companies from Ukraine in 2012, so according to today’s criteria, several more companies would have made it into the top 500. If A1 Croatia, Vindija, Petrol, Lidl, Mercator-H, and Kaufland had made it onto the list back then, today’s result would be even more disheartening.

The strength and weakness of trade

The sectoral distribution of power between the Adriatic, Black Sea, and Baltic is interesting. Companies from the oil sector with plastic production, as well as the chemical and pharmaceutical industries, account for 24 percent of the total revenues of the top 500, and when you add 21 percent of the revenues from ‘communal and public services’ (where the most powerful energy companies are), the energy sector generates almost 45 percent of revenues. Only two other sectors have double-digit shares: the automotive industry and transport (13 percent) and trade (11 percent). Only electronics with IT has a share of nine percent, while the remaining 20 percent is distributed across a number of smaller sectors.

A similar pattern for a quick comparison is found in Lider’s publication ‘1000 largest’. In Croatia, energy (combined oil and electricity) is leading, but with a smaller share in the real sector (a total of 35 percent). However, in Croatia, the dominant sector among the 1000 largest is trade, which accounts for as much as 27 percent of the revenues of the 1000 largest. This strength certainly cannot be overlooked. It could be an opportunity as it could be used as a development lever for the entire domestic production. However, large retail chains in Croatia are mostly foreign-owned and prefer to tie themselves to production in their home countries (or less so in transitional countries that entered the EU before Croatia). Therefore, such a distribution of power is one of the greatest weaknesses of domestic entrepreneurship, especially that which is production-oriented.