Iki! But not farewell… (1)

When the announcement was made at the end of 2007 that Coopernic, Europe’s second largest group of companies in food distribution, would take over the Iki Group, the number-two food retail company in Lithuania, the news broke almost unnoticed in Vilnius.

But it was covered in most of continental Europe by economic and financial intelligence, in the press and on the air. There are great consequences for Lithuania.

The move by Coopernic is of largely symbolic importance on the European food market, where giant world renowned retailers have been fighting bitterly since the early nineties in newly opened Eastern European countries for every market chunk in order to prevail. They have been betting on long-term gain as returns on investments have so far been less than profitable.

It is of bigger consequences to Lithuania. Today, the four main local players, VP Market, Iki, Rimi, and Norfa, have seen their turnover grow significantly in recent years. But they have found little room for manoeuvre as they squeeze each other back into their trenches, their facades glittering under the dark winter skies.

The Coopernic and Iki deal, estimated at LTL one billion (over EUR 300 million), will shape the retail market in the Baltics for years to come, bringing a breathe of fresh air into a putrid atmosphere of saturated competition, for the benefit of all.

For Georges, Oliver, and Nicolas Ortiz, it all started in 1992 when, respectively aged 28, 26 and 24, they left their comfortable Belgian nest for an uncertain future on the remote shores of Europe. The Insider tracked down Nicolas Ortiz, now aged 39, for an exclusive interview about the consequences of the Coopernic-Iki deal.

The Iki Group is ceding 80 percent of its shares to the Coopernic alliance. How would you define this event?

We are really proud of it. It bears historical significance. This is the first time in Europe that an alliance of independent retailers has jointly made an acquisition of this type. It reinforces the alliance as a group, though every network that is part of it remains independent in its decisions and acts in its own interests.

For Iki, and for Lithuanian consumers, it will definitely provide better access to suppliers and brand names altogether with a consolidated and joint distribution system. The main benefiter will definitively be the consumer.

But why Lithuania, and why did Iki become so important in their eyes?

Well, buying the Iki Group is for them an opportunity that strengthens the alliance as a whole. It strengthens their activities and their ability to make decisions in common. It strengthens their position, geographically, in Europe.

This strategic cooperation will enable Coopernic to become more attractive to international suppliers, to offer new sales outlets to the alliance members’ own brands, to strengthen Coopernic’s position in the north-east of Europe and to extend the zone of influence of its members.

There are three other players in the Lithuanian food retail sector: VP Market and Norfa, both Lithuanian, and Rimi, held by Scandinavian capital. How extensible is this market in Lithuania?

There are always development possibilities. First of all, the market keeps on growing. This year, our turnover grew by 30 percent, reaching over EUR 600 million. On the other hand, when there are more than two players, an acceptable level of competition and likewise concentration, everything remains open.

How do Lithuanians see this agree­ment between Iki and Coopernic?

I have to say that the Lithuanian press, with one or two exceptions, has remained rather silent. No analysis was made about this event. It is striking that the news was longer and better developed in the Western press. No in-depth analysis was done here. I find it even rather funny. A foreign investor buying into the capital of Iki must have been interesting for some. But there was no interest in the strategy behind it, in the alliance of the investors itself, in the brands they were bringing along. They represent five renowned brands in Europe, all very much present in neighbouring countries as well.

What can local competitors expect from now on?

Competition is harsh. For the market, it’s good news. It’s good for the customers. For all the competitors, it is very healthy to have re-energized competition.

Some competitors suggested in the local press that the deal came after Iki’s strenuous development?

Strain is normal, but we did not have any problems. It came just at the right time. A new shareholder has come that can throw Iki into the future. Distribution has become more complex. It needs professionalism. Only a strate­gic partner, and a distributor, can develop Iki to reach for the future.

And what about you, what are the plans of Balstisher Haus, Iki’s main share holder?

We are going to follow these developments and advise the shareholders.

Coming back to the early years that followed Lithuanian independence. You were raised in Belgium, you all studied successfully in the UK and the USA. Then you left. What did motivate you and your brothers to come to Lithuania? How did you start the business? And why food retail?

We were young, and our father motivated us to go east. The Berlin wall had just fallen. The Soviet Union was breaking apart and the Baltic states offered the best prospects culturally, economically and politically. We just drew up a map and came over.

Everything seemed possible back then. We came feeling uplifted with that sense and spirit of adventure. A new country was born again. Everything was rising out of the colonial ashes, the administration, the governance and the economy.

We started the distribution business in early 1992 by accident. We had just met a Frenchman called Gérard Bourdon, who was trying to set up a food shop in Vilnius. What followed this encounter was the first Iki shop, a few months later.

We founded together a small outlet in the Old Town, renting 50 sq m. We passed our first order to a French supermarket, one lorry. We unloaded it and we sold it. The new thing we introduced at once was the self-service, which was completely unknown to Lithuanians who were still buying their food at state-owned Soviet-style shops.

People could not believe it. Everybody at that time was afraid of theft in the stores. So we started thriving by adding a better service towards the customer and offering him a larger and different choice of goods.

Wasn’t it difficult to start up in a country where people at that time were not very agreeable, and may have found your manners and ways to conduct business simply too untraditional?

It’s true that Lithuanians didn’t smile much at that time. But we had to rely on them, and young people adapted very well and very quickly. Things have changed today, even though Lithuanians like to create negative stereotypes about themselves. They are hard working and flexible.

New services, new people, and there you were in the retail business?

Yes, though we didn’t plan it. Remember, this was a time where speculation was thriving. We found a niche. Choice and quality, at the same place, at the same shop, different from the others who used to drop their goods on the black market and were unreliable for customers.

In no way could we have made market research. Things were so unstable. No pre-vision was possible. We just took a good opportunity at the right time, in the right country.

The Iki brand was created. We then tried to launch a franchised network. It was difficult at the beginning. The owners of shops and retail premises were reluctant to get on with a different accountability. Lost or sold products were deleted, erased from their official books – nurašyti, as it was called. It was officially accepted. However, they had to understand that a lost product was a loss in their margin, not just an official bookkeeping scripture, that meant nothing really.

From there we went on. Laws and attitudes became progressively more favorable to the business community.

Is there any other idea or business you have tried to implement?

[laughing] Yes, we tried to set up a top model agency. It worked. But not for long, as our French partner, a highly rated agency, had just been bought by foreigners.

But we did successfully create Vilnius In Your Pocket, a local tourist guide in the English language, whose format is now exported and adapted to several countries all over Europe. The idea came to life thanks to another friendship we established in Lithuania, with a French-German news correspondent by the name of Matthias Lufkens.

Did your studies help you in any way, and how did you learn such a difficult language?

We all learned Lithuanian while we worked. For me it was easier as I had studied oriental languages, among them Russian and Chinese, though the latter was of no help at the time. One of my brothers studied history, the eldest biology. Most important in life is one’s character, the ability to form your views, to think and to analyze. In all cases, business-wise, we responded to a need and a demand.

What were the greatest difficulties you met?

The beginning. The Soviet mentality, theft, speculation, dishonesty. It was difficult to convince people that we could make a business together or form a team on different principles. But they ended up adhering to our views. Building a country is difficult. Building a business is as well. But things have evolved so much, and we have all together achieved a great success today.

We were keen, from the start, to promote social and charitable activities. So are the Lithuanians today. We are still trying to help the community. We work with Lithuanians in promoting ecological awareness, and support different childcare organizations.

We can only rejoice at the results. We really feel that we are a part of the country today. There are a lot ways to promote business and take an active part in society, contributing to its development. It’s a nice country to live in.