COMMENT: Crisis at Croatia’s leading retailer Agrokor hurts advertising sector in Southeast Europe

COMMENT: Crisis at Croatia’s leading retailer Agrokor hurts advertising sector in Southeast Europe
Advertising spending in Southeast Europe grew by 7% in 2017 to reach €1.17bn, but was hurt by a crisis at Croatia’s leading retailer Agrokor
By weCAN advertising agency August 31, 2018

Advertising spending in Southeast Europe grew by 7% in 2017 to reach €1.17bn, but was hurt by a crisis at Croatia’s leading retailer Agrokor that spilled over into the media sector last year, reports weCAN, a leading network of independent advertising agencies in Central and Eastern Europe.

The combined spending of Bosnia & Herzegovina, Bulgaria, Croatia, Romania, Serbia and Slovenia made up 9% of the total ad spending of the Central and Eastern Europe (CEE) region last year, which is dominated by the big countries in Central Europe.

The advertising market recorded a growth in all countries except Croatia and Bosnia. In Croatia, Agrokor, the biggest Croatian company with €6.5bn in revenue and almost 60,000 employees across the region, was on the brink of collapse in the first quarter of 2017. The company is so big that it threatened to wound the economies of the region and the government scrambled to get it back on its feet.

Since then the company has been rescued by Russia’s state-owned retail banking giant Sberbank that traded debt to become the majority shareholder, and a deal has been reached with the rest of the company’s leading creditors. The group reported operating profit of HRK729.7mn (€98.2mn) for the first six months of the year on August 13, 6.4% more than planned.

The crisis was a big shock for the media market, too, as Agrokor’s advertising budget was slashed in half to €5mn in 2017, killing the business of Croatia’s biggest ad agency Unex in the process.

The advertising sector was further hurt by Spar’s takeover of Billa (Rewe Group) that meant another €2mn of advertising spending disappeared from the market.

“While the Croatian economy in general recorded a growth, the media market demonstrated a 1.4% decrease. Luckily, it has recovered and is on a path of steady growth now,” says the CANnual Report 2018 that is due to be published next month.

In Bosnia, advertising spending shrank by 8.7% — partly as a consequence of the financial problems of Agrokor, which is present in the Bosnian market with its retail company Konzum. Digital advertising spending was only 6% of the total ad turnover, which is by far the lowest figure in the whole CEE region, weCAN reports. The possible reasons for the lack of investment in digital are cheap TV commercials as well as a lack of regulation, standards and measuring in Bosnia, according to the CANnual Report 2018.

As in the previous three years Southeast European companies spent the most on TV advertising in 2017. The share of television within the total advertising spending of these markets did not decrease but stagnated or increased in a few cases. Advertisers are investing an increasing amount of their budgets — previously allocated to print — in television and online tools.

Digital ad spending reached €222mn — 19% of the total ad spend — in the SEE countries. The share of online grew or remained flat in all markets, and exceeded print within the total expenditures. Serbia had been the last country in the region where print had a larger share than digital, but print finally gave up the lead to digital media, which achieved y/y 24% growth, last year in Serbia as well.

 

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