The Power of Brands A Research on The Economic Weight of BGA Hungary Tams cs Business Days 2012, Tapolca

Branded Goods Association Hungary

Since 1995, collective voice of local brand manufacturers ~ 60 member companies, 90% of the FMCG market Full member of AIM (European Brands Association, 350 Bn turnover across Europe by 1,800 members) Full member of WFA (World Federation of Advertisers, 90% of global ad spends)

Membership

Mission, objectives, and target groups

To create for brands an environment of fair and vigorous competition, fostering innovation and sustainability thus guaranteeing maximum value to consumers now and for generations to come. Make the case for brands to policymakers Promote win-win strategies for retailers Propagate brand values to consumers

1) Make the case for brands to policy-makers

2) Promote win-win strategies for retailers

3) Propagate brand values to consumers

Networking Formal, official cooperation agreements

Ministry of Economy (NGM) Ministry of Rural Development (VM) National Tax and Customs (NAV) National Consumer Protection Authorities (NFH) National Anti-Counterfeiting Board (HENT) National Federation of Consumer Protection Associations (FEOSZ) Advertising Self-Regulatory Body (RT) Hungarian Trademark Association (MVE) Competition Authorities (GVH) National Foodchain-Safety Authorities (NBIH) National Food-Processors Federation (FOSZ) National Trade Association (OKSZ) ECR Hungary Interbranch associations, other trade associations, etc

Informal, fair and efficient cooperation

Integrated research, background

The public image of the industry, especially of multinational companies, gets worse and worse.

Profit repatriation by multinationals is on the rise, they pay no taxes, they drive out the local SMEs from the market. They feed us with cheap imported rubbish, good old Hungarian produce is nowhere to find, they destroy local farmers and food industry. Expensive brands are no better than the cheaper products, we only pay a price premium for their stupid ads.

Media is reluctant to falsify these beliefs and politics is even keen to further stress them. This endangers our industry interests and also hinders reliable planning and long-term business activities.

Intergrated research, objectives

Expose the real economic weight and role of our members and the FMCG-industry Find fact-based evidence for an information campaign Start pro-active communication to positively shape government, consumer, and media perception Falsify popular myths and unfound stereotypes Improve our lobbying positions, create a level playing field

Integrated research, methodology

Trend International, independent research company

Quantitative on-line survey with uniform and methodologically agreed questionnaires Voluntary membership input 49 respondents vs. 56 total members (missing input of 7 later added using official public e-reports and balances)

Internal check based on public sources External check by BGAs reputed tax advisor firm

Main findings
Number of members: Company originally established, avg: Company locally established, avg: Local FDI so far (39 responses from total 56): Number of local manufacturing sites: Number of employees , 2011: Net sales revenues, 2011: Taxes and dues, 2011 (43 responses from total 56): R&D spends so far (22 responses from total 56): Ratecard media spends, 2011: Number of local suppliers, 2011: Local purchases, 2011 (44 responses from total 56)): Ratio of local suppliers, 2011: Number of main brands, 2011: 56 1905 1984 680 Bn HUF 98 22,869 1,793 Bn HUF 452 Bn HUF 15 Bn HUF 105 Bn HUF 29,308 471 Bn HUF 61% 795

Ratios
As compared to the average local company, BGA members create far more value in every possible aspect but it is the Taxes and Dues Paid value comparison that makes the real difference.
Number of companies

650 063 companies

Central Statistics Office data (basis = 1 company)

56 BGA members
BGA data (basis = 1 member)

BGA member vs average local company

Local FDI, past 10 yrs avg.

5,3 Mn HUF / yr

272 Mn HUF / yr

51 X

Total emloyees, 2011

5,86 103,10 Mn HUF 1,86 Mn HUF

408 32 024 Mn HUF 10 515 Mn HUF

70 X 310 X 5653 X

Net sales revenues, 2011

Taxes & dues paid, 2011

Corporate values
Quality is the most important value, closely followed by innovation, reliability, respect, tradition, and sustainability. Many consider as value creativity, team work, awareness for environment, and also being a Hungarian company.
Brand value

Quality
Reliable

Innovation

Creativity

Honour
Spirit

tlthatsg Biztonsg Bizalom Egszsgtudatossg

Eredetisg Felels alkohol fogyaszts

Team work Respect Tradition

Flexibility Entreprener

Munkahelyi biztonsg

EmberEtikai normk kzpontsg Folyamatos Szolidarits tanuls Partnersg Vevkiszolgls

Elktelezettsg Nemzetkzisg

Felelssg

Hungarian Sustainability
Environment

Experience
Oktats

Fggetlensg Szenvedly

Transparency

Credibility

Customers

Openness

Hossz tv Hatkonysg Trsadalmi Vllalati siker kltra felelssgProfessional szintesg vllals Prmium Klcsnssg Tradcik termkek Kiszmthatsg zletes termkek Kivlsg Kvetkezetessg Szabadsg Vilghr

Number and ratio of local suppliers

In 2011, BGA members had a total of 29 308 local supplier partners, 523 on average. Local raw material and services purchases by BGA members equaled to 471 Bn HUF. +25% of BGA members purchased 81-100% of its total supplies from local partners. +33% of BGA members purchased 41-80% of its total supplies from local partners.
NT/NV, DK/NA 7% 81-100% 26% 21-40% 16% 0-20% 13%
1000 felett, above 1000 19% NT/NV, DK/NA 2% 1-50 18%

601-1000 9%

51-100 16%

61-80% 22%

41-60% 16%

401-600 11% 201-400 9% 101-200 16%

Number of local suppliers of raw material and services? N= 45 / data% Percentage of raw materials and services from local partners? N= 45 / data %

Corporate responsibility
In 2011, 73% of the BGA membership did have a CSR program. Every second such member was active in the field of health, social care and environment. Every fourth member supported youth and sports and every fifth supported culture and education.
Egszsg / Health Szocilis segtsgnyjts / Social aid Krnyezetvdelem / Environment protection Ifjsg / Youth Sport / Sport Kultra / Culture Oktats / Education

48 48 45 27 24 21 21

Objectives of the above programs? N=33 with CSR programs/ data in %

Summary

BGA Hungary adds to building a strong and healthy national economy and also a competitive local FMCG-sector. BGA members create numerous jobs and also create a stable market for their local supplier partners. BGA members contribute to generating state revenues by paying an exceptionally high level of taxes and dues. BGA members generate further values in the supply chain through their decisive role in innovation, R&D, marketing and media content. BGA members brought ethical and transparent company cultures to Hungary and they also implement numerous CSR programs.

Next steps Translate research into policies > industry proposals for the government

Propose strategic partnership and cooperation Identify regulatory & economic facilitators & inhibitors to growth Propose to start a constructive dialogue and also a more transparent legislation and enforcement Find a balance between farmers, manufacturers, and retailers, with both local and international background Combat black market anomalies

Decrease food VAT Initiate stricter enforcement Revision of current trade industry regulations

Request stronger guarantees for non-food suppliers

Our vision is a long-term and true partnership