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Read our exclusive interview. |
 VASSILEVI BROS. GROUP
Manager:
Mr Vassil VASSILEV, Chairman and CEO
Contact:
BULGARIA:
32 Dondoukov Blvd
1000 Sofia, BULGARIA
Phone.: 359 2 876 304
fax: 359 2 871 074
E-mail: vavas@mraz.com
FRANCE
27 rue de Rome
75 008 PARIS, FRANCE
Phone: 01 42 93 07 03
Fax: 01 45 27 12 14
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| COMPANY PROFILE |
In 1996, two years ago, with 5 million dollars I had the task to invest them in a long term project, with a satisfactory profit at reasonable risk. After six months search in different countries in Eastern Europe, I bought a factory in Bulgaria. My reasons for the country choice were:
Bulgaria offered me the best correlation in the world between the price and the productivity of the labour force.
There are countries where the workers are two times more productive and disciplined. But their salaries are twenty times higher. There are also countries where work force is cheaper, but also more experience, but also more inexperienced and less productive than in Bulgaria.
Or, no other industrial country in the world might offer for a pay of 100 dollars a week so qualified and educated engineers or technicians. And, no doubt, their productivity and efficiency will increase in the next ten years faster than their salaries.
If you want to create a production unit on a green field with a 10 million dollars a year turnover, you might need at least 50 million dollars, or the turnover for five years. In 1998 the turnover of my factory will be 20 million dollars, but its price was not 100 million. It was 5 million. So one dollar of turnover costs me an investment of 25 cents instead of 5 dollars.
Few nations are sharing so much by nature the traditional American values of freedom and life, of free enteprenuership and hard work. Such values were damaged, but not destroyed in the fifty years of communism. Their come back in the social moral is evident and, I believe, irrelevant.
When 18 month ago I invested my first 5 million dollars, Bulgaria was less predictable and more cloudy. Now, the situation looks clearer. And the country’s government is selling tens of dozens of working factories with established markets and sales for 1 to
100 million dollars a year, which you can get for the equivalent of half to one year of their turnover. A hidden treasury, which makes this country the Klondike of the year 2000.
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| STRATEGY |
 Interview with Vassil Vassilev
the Chairman and CEO of Vassilevi Bros.Group :
Mr . Vassilev : Just two weeks ago we established a company in California and it will have to take care of the market ; first we will try to buy a lot of products from the USA and we are looking for partners and investors; and we are looking to the American market as a second step, trying to sell some of our products. I believe that we will be able to sell in the USA. I have already been asked to prepare some products. So I am very interested to be with you.
Q : There is no doubt that your company is very well-known in Bulgaria. Could you give us a brief historical background?
A : Actually the company was established more than
100 years ago by my great-grand father and it was
one of the biggest product-trading and producing
companies before the war. It was nationalised in
1947 ; the company disappeared but my grand father
survived because he was a very open person and he
had contacts in all levels and he was not destroyed
physically. He was a man of great spirit, a very
interesting and very progressive person. He died
at the age of 68 and my father was always in the
business. He started his own business when he was
18 with borrowing some money from his father. His
own business had nothing to do with the business
of his father’s. Then when the communists took
power, they moved from the city of Varna , where
the head quarters of the companies were, to Sofia
in order to escape from being persecuted as rich
people. Then after coming to the capital, with his
creative mind, he was the one who proposed at the
end of the 50’s to Todor Zhivkov an idea about
development of agriculture in Bulgaria. He created,
himself, one of the biggest state owned companies
at that time in the Socialist countries called «Rodopa
» which was with about 50 000 employees. It was
a company that helped the people to produce meat
and diary products and export them all over the
world. In the 1960’s the company became one
of the biggest state owned monopolists in the ex-communist
block but it was based on the principles of the
free trade and market economy. The relations between
the state and the peasants was based on these principles
and this was the reason why the company became so
important and grew that big . My father was the
second man in the company because he was not a communist
and he was not supposed to be a leader of a company
at all. At that time this company was noticed even
by Rockfeller and he sent a person to see what is
going on, because the company became prosperous
in the most difficult years of the socialist planning
economy. There was something different. The man
spent a week here in Sofia discussing business with
my father who was afterwards invited to the USA.
As he was not a member and a supporter of the Communist
party, they sent somebody else to the USA for two
weeks. When he was back he became the first man
in the company. And they have been friends with
my father since then. It was 1967 when the company
was destroyed because the Russians wanted this,
they did not want such a big state-owned company
based on the principles of the free economy in the
heart of the socialist block. So they were scared
by this interest from the USA to this company. After
the kicking out of this guy from the company it
was divided into 15 small units here and there and
almost liquidated. But still the biggest meat-producing
company in Bulgaria is called « Rodopa ». This brand
name reminds to any Bulgarian of the time when you
could find everything in the food stores. Of course,
after all this in the beginning of the 70’s
my father was also out. He worked here and there
and then retired. In 1989, when we heard that the
regime was over, (I was in Paris at that time),
so I said we would start again. Then we reactivated
the old company. Well, we had no money then, I had
approximately 5000$. We started with press distribution.
I am a journalist by education and I have worked
as such for 15 years in Paris and Beirut (1978-1983).
I was working for the Bulgarian News Agency, which
was very influential source of information at that
time – a monopolist on the import of news from
the world. In Paris I worked as a correspondent
for the Bulgarian Television. So I went to the Director
of distribution of the IHP and said that I wanted
to sell in Bulgaria. He said: OK. Let’s try.
We arranged a special air link via Vienna so it
could be imported the same day of the printing and
this was something new for Bulgaria. That was in
1990. We succeeded although nobody believed us at
that time. My father went to the American Embassy
and asked the ambassador if he would like to make
a subscription. We started in that manner talking
directly to the people . We went to Sheraton and
asked them if they wanted 50 copies, they agreed
; then went to the Time magazine and said that we
were suppliers of Sheraton and if they would like
us to be their distributor for Bulgaria. We are
still a member of Distribution Press which is the
world organisation of press distribution. And as
a second step we started importing Peugeot. So we
have several « firsts » : we are the first importers
of foreign press in Bulgaria on the day of the publication;
the first private company that imported officially
foreign western cars to Bulgaria. We developed a
very good market. So we started the Peugeot business
with the money from the press business. When we
earned a lot of money from the car business we invested
everything in the construction of gas stations.
This idea for creating a net work of gas stations
located on the border points was accomplished in
1991. Because there is a very important international
traffic. I went to the Ministry of Finance and I
suggested that I be given locations on the border
between the two barriers and to be allowed to sell
duty free, with no taxes to the transit traffic
which was very important and we would make a deal
: I would give them a larger percentage of the taxes
. I promised them and I would give them 10% more
of the usual tax amount we are paying to the state.
I gave also some percentage to the customs and the
police working there, to the ministry of finance
and its custom’s department. That business
was started in 1992 and it was a very profitable
one because we were serving all the traffic linking
Europe and the Middle East, Turkey. We developed
that business and we are still doing it. In 1996
we decided to invest somewhere else. We were quite
strong and we needed to invest in the industry.
So the decision was for investing in the refrigerator
business because the factory was on sale and we
applied and we won the auction. So we started that
business I did not know anything about it ; I just
had a refrigerator in my house. It is a very interesting
story . In the ex-communist bloc Bulgaria was selected
to produce different kinds of compressors . So Bulgaria
was the supplier of compressors for the refrigerator
industry for these countries starting from 55 to
2000 cubic centimetres. We used to have a huge market
in Russia and Eastern Europe. And this factory that
we bought was producing small household refrigerators.
In the years after 1993 it was falling down for
a very specific reason. The factory was obliged
to switch to the new standards according to the
Montreal convention. At that time the state did
not help the factory at all. So they used all their
turnover money in order to buy new technology so
as to be able to sell in Europe. But then they failed.
They bought new technology for 1.5 million $ and
there were no more money to invest and reinvest.
So for two years they were put on their knees. They
were not ready to develop. We found the factory
in a really bad situation : with good machines and
new technology but with a financial disaster. |
Their debt was over 2 million $ and a lot of lost creditors and lost markets, etc. We started to work in such conditions. After 18 months we took over the factory and I can say that we are in a very good position because of the development of the market. We are selling 85% of our production to Europe and our main customers are Germany, France, Holland, Belgium, Ireland, Greece, Cyprus, Malta and etc. We have very good products on a very reasonable price. We specialised in a very special type of table-top refrigerators and we took that empty space of the market. I can say that we are one of the best in Europe in that field. It is cheap and mainly for students, emigrants, for middle class people. I am very happy with the development of the factory now. I am not able now to respond the increasing demand especially from Germany. That is the dream for any industrialist. I am working very hard in order to supply but respect at the same time. There is another kind of production which is the compressors. As I told you our country had the monopoly in ex-communist bloc but we do not have it any more, we lost our markets. Because in the last three years we were not able to follow the supply but I am sure that now we will catch up. These compressors are produced with Sanyo technology and they are very good. There are 5 factories in Europe and 15 in the world producing compressors of this kind and we are one of them. We are producing compressors for the industry, not small ones. So I am sure that we will return our old markets but not only Russia and Central and Eastern Europe – also the Middle East. We are selling now to Malaysia and Thailand.
Q : What were the financial results of that company?
A : They were very bad. They had about 2 million $ debts. And today we cleared everything. We will sell this year about 100 000 refrigerators and the turnover for 1998 will be 25 million DEM for the refrigerator business and 5 million DEM for the compressors. Roughly – 17 million $. The turnover in the holding as a whole is about 30 million $ with the gas stations and the spare parts business. We finished with the car business and we do not deal any more with Peugeot; we think that it will not be profitable any more in the coming three or four years, because of the increased competition and that the market has shrunk and there is not a big potential. There is a lot of import from Europe for second-hand cars. They are destroying the business. But the spare part business it is a good one. We represent Dupont car paints for Bulgaria – also a very good business. Another branch of ours, which is developed by my wife, is the luxury; we have two shops in the Sheraton selling Cartier and Bernardor products.
We are very much interested in developing business with the USA. I will tell you something that it is very important for us. The World Bank is going to help us with catching up with the new technologies. And it considers that we have made a big effort in that direction and that’s why they are helping us. So we will buy new equipment for
3.5 million $.
Q : What do you think of the possibility of creating a joint venture with an American company in the technology aspect or it is more interesting for you to work with the World Bank?
A : The World Bank will give us grant because there is money for the environment following the decision of the Montreal convention which is to keep the ozon layer and to fight against the old freons. So the project for us is evaluated to 6 million $ needed to be invested in order to adopt the new technology. So we have already invested our part and this is about 2 million $. The World Bank together with the Ministry of Ecology will help us with the remaining part. Our share is already paid and they are adding the rest. They are expecting the company to become productive as well as flexible. By the end of September,1999 everything should be completed. We should have this equipment in our factory. And then we will be ready to work with American companies on this project, so we can use it as a base for our joint venture in order to produce compressors or refrigerators. When President Peter Stoyanov visited the USA I was accompanying him as a member of the delegation. But it was more a political visit than a business one. I went there again just three weeks ago and we established a company in California, starting to work on this project. I think that there is a very important market for the table-top refrigerators. I have already talked to some people that are very interested in them, especially for the students’ campuses and colleges in the USA. I believe that we need to work just for two or three months to finalise and really to switch to 110 vaults and some other technical problems. Another important space of the US market is the hotel refrigerators which is a huge market all over the world. At the same time I am prepared to buy a lot of products in stead of buying them from Europe or Japan. I have been working for many years with a lot of European countries, and I consider the prospects for Business in the USA really amazing. I saw a lot of products that we need and we are buying them from elsewhere in the world, that are with very good quality and with very competitive prices. The transport is not a big problem for us. I am definitely looking for partners there.
Q : You often take part in official Bulgarian business delegations abroad but do you feel any change in foreign businessmen’s attitude towards Bulgaria?
A : I do not see a very big change . For years the general attitude has not changed a lot, especially in Europe. I have studied economy in New York city and I was working as a journalist in the economy section of the Bulgarian News Agency and I know that the attitude has not changed at all. I believe really in the business relations with the USA.
Q : And how confident are you in the future of Bulgaria and your business?
A : I am very confident. I see how my industry is developing. I saw the situation of my factory 20 months ago. It was disastrous. And now it is doing quite well. The very essential thing that we all need here is the establishing of rules for managing the company. Because the respect for the rules in the market economy, the free world and the democracy are a question of mentality and education. If you do not respect them it is your own problem and you are out. It has to be clear in the whole country that the one who works has a future. And now I am appointing more and more hard working people in the factory. Those that are not working hard are out by themselves, they can not follow the competition. If that gets clearer in the whole country it will get easier and the country will work . I was in the countryside this weekend and I saw a lot of people working on the land and producing. I have not seen this before for many years. They have cows and they are working on the field. I have heard that in the south-west part of Bulgaria there are 6 times more tomatoes than last year. People already know that we have to produce and work. The start is being lain. We are on the right track. I am very optimistic, maybe one of the few true optimists. Even a lot of people in the Government aren’t. We are going ahead.
Go to the country and have a look how people are working and producing, although like in the 19-th century, but they are proceeding very fast.
Q : There is no doubt that you company is a success story in Bulgaria. I would like to know what is the secret of your style of management?
A : I think that, first, we are very good partners with my father so we are working together like one person sharing the whole responsibility. My father is
70 years old and he is working 14 hours a day, the weekends also. I sleep well because I know that he is here. When he is out he knows that I am here. Of course, because of his age I might be doing more than these 50% of the job. We are working very hard and this is the secret of everything. I have seen people during the last 10 years working hard and honestly and always succeeding. Hardworking and honest people, respecting the rules – this is the formula of success. I am working with the same people for 10 years and my team is very good. They trust me and I trust them. For instance our factory is in progress and we are selling a lot to Europe and big European countries are not very happy with that because we are taking their markets. I was proposed by a company, not too big and not too small, to make a joint venture. I saw that their target was to eliminate us from the European market which is very essential for us. I refused because we have to develop and take more markets. This is a very easy way to take over a competitor. I was not interested in their tender for 5 million $.
Q : What would be your final message to ou readers?
A : Believe in Bulgaria. My family and I believe in it. This will be one of the most interesting countries in the next century. We, the Bulgarians, trust in freedom, free economy ; we believe that we are going to overcome all the problems and we are confident that soon all these people that did not know anything about Bulgaria will look at us with hope and a friendly smile. |
© World INvestment NEws, 1998.
This is the electronic edition of the special country report on Bulgaria
published in FORBES Magazine's
November 30th issue.
Developed by AgenciaE.Tv
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BULGARIA, 
