Special feature: Greece

Interview with Mr Stavros Constantinides, CEO of Eurimac

March, 2018

The history of Eurimac is a remarkable story of evolution from a modest, locally-oriented pasta-maker, that blossomed into a dominant player in the Greek food sector, who then teamed up with a global leader and is today Greece’s top exporter of pasta. Tell us a bit more about the family values and traditions that have contributed to the company’s success over the years?

Mr Constantinides: The founder of Macvel was my father. He passed away three years ago but lived to be 97. The name Macvel stands for Macaroni Company of Northern Greece. What the founder of the company taught us was dedication, hard work and to be optimistic about the future. In 1997 I put this dedication and optimism to practice when I personally forged a strategic alliance with the Euricom Group with Mr Sempio. Euricom Group, from Italy, at that time had 3 pasta factories and 10 rice factories. The rice factories still all exist today, but the pasta factories have consolidated to just one, which is Eurimac, our factory here in Kilkis.

50% of the shares of Eurimac belong to Euricom and the remaining 50% belong to Macvel. The company is in a very strong position and has been performing well. We started producing 2,000 tonnes of pasta in 1997 and we have reached a production of 55,000 tonnes in 2016-17. This is a tremendous increase. Of the total production, 23,000 tonnes are exported. We are a leading player in the Greek market as well. We have a 33% market share in Greece. The size of the market here is around 100,000 tonnes. We share this market with two other key competitors, but we are the largest exporter. Most of our production in Greece is under private label for the large super market chains of Greece. In 2017 we decided to relaunch the historic brand, Macvel, for which we have created media campaigns on TV/radio and with distribution across the country. Macvel is now present in most supermarket chains. In the next five years, we expect the Macvel brand to have about 6 - 7% of the total, local market share.

If we are to look back at the last 8 or 9 years in Greece, we see a country whose economy contracted by 25% and reached peak levels of unemployment. Average spending power also fell drastically. Domestic consumption was hit so hard, that even some supermarket chains collapsed, such as Marinopoulos. What key, underlying factors helped Eurimac to not only weather the storm, but to have continued growing and investing during such a challenging economic environment?

Mr Constantinides: If we look at the historical context of the pasta business in Greece, twenty years ago, there were fifteen smaller pasta manufacturers. The majority of these did not invest in upgrading their machinery, and because of this, they did not make it. Consequently, from fifteen producers we became four. During the period, the market expanded from 75,000 tonnes to 100,000 tonnes, and at the same time, the number of pasta manufacturers shrunk from fifteen to four. The crisis period in Greece had a positive impact on private label products, because these were more accessible to the consumers. Consumers during this period have bought and continue to buy more private label products, especially when the quality is at the same level as branded products. I wouldn’t say the quality is better, but it is at least at the same level. Each year during the crisis we gained new market share. Our factory has the capacity to produce 72,000 tonnes of pasta, and operates with only 125 workers. Our direct competitors produce about the same volume with double the personnel in their factories. Our operation is very cost-efficient and because of this, we can approach the market more aggressively.

The UK is among Greece’s top 3 markets for food exports. In the last 10 years, the grocery retail market of the UK has shown steady increase with growth topping 5% last year 2016, numbers not seen since 2012. How would you gauge the potential of the UK market for Eurimac and do you see potential for introducing some of your own brands in addition to private labels?

Mr Constantinides: We are quite strong in the hotels, restaurants and catering (HORECA) market in the UK. We have four different importers who are selling our products to the HORECA market. Our next step is to enter the retail market. We are targeting direct supply to one or various of the large UK supermarket chains. We have strong connections with UK supermarkets thanks to the business relationship of our partner, Euricom, who exports its rice products to UK key players.

In a highly competitive global landscape for food products, it is a challenge to compete with producers in countries with low labor costs and low costs of borrowing money. Here in Greece, we understand that you run the business focusing on 3 main pillars: quality, cost-efficiency and customer service. Tell us more about your Quality Assurance systems and methods that allow you to manufacture products with an outstanding price/quality ratio and therefore compete in the global market?

Mr Constantinides: Our factory here in Kilkis has all the leading certifications including DFC, IFS and ISO. Another aspect that contributes to the quality of our products is that we only use Greek durum wheat. In fact, Greece is one of the few countries that is self-sufficient in durum wheat; we needn’t import any from outside Greece to satisfy our consumption needs. This gives us a comparative advantage. Thanks to our mill, our factory is 100% vertically integrated. We also have a unit that produces thermal energy, making us self-sufficient in the use of energy and more cost-efficient. The fact that we only use Greek durum wheat, coupled with the fact that we are located in the heart of the region where durum wheat is produced, allows us to optimize our costs.

We have made large investments in our facility in the last twenty years. Every year, we reinvest our profits to upgrade our factory. One year we might install a new production line, and another year, we might build a clean energy unit or upgrade our laboratory. The laboratory is also a key element for the quality of our products. There are competing countries where labor is much cheaper than in Greece, such as for example in Asia or even our neighbour, Turkey who is a strong player in our market. The countries in Asia, for example, do not have durum wheat, so they rely on imports for their production. This of course, drives up the cost. Here at Eurimac we have silos for durum wheat and we will be investing in more silos in order to have a minimum of 6 - 7 months stock at the time of teh harvest, when prices are usually lower. So for us the key factor behind our competitiveness is the raw material, which accounts for 65% of our total costs. Our laboratory allows us to carry out all the tests during the production process, but also R&D for new products.

The retail value of pasta globally is massive, estimated at $31.3 billion. Perhaps eating trends in the West have in the last 5 to 10 years shifted towards healthier food. With the boom of social media, information about healthy diets has been disseminated at global scales. Have you noticed in your markets a trend in sales of “healthier” pasta versus traditional types of pasta?

Mr Constantinides: I was not aware of the total retail value of pasta, but it is consistent with the volume of pasta produced globally, estimated at 20 billion tonnes per year. We started producing whole wheat pasta 3 years ago. It is very popular in the UK market. In Greece, whole wheat pasta accounts for 5% of total sales, with an average yearly increase of about 8% growth.

You are another fantastic example of Greek-UK relations, since you spent some years studying in Manchester. As such, you represent the strong partnership in academics that has existed between Greece and UK for decades. What valuable lessons did you learn while you were in the UK that helped you succeed as a businessman later in life?

Mr Constantinides: The lessons I learned in the UK reinforced the values that where already taught to me by my father. This is having a mentality of hard work and living simple. I returned from the UK after finishing my degree when I was 24 and went straight to work in Macvel in 1976. I have 40 years of experience in the pasta business! My engagement in the business when it Macvel was a smaller company, Macvel, taught me so much. As a metaphor, we can say that “I learned how to swim when the sea was not very deep 30 years ago. Nowadays, the sea is very deep, but I have the skills to swim in such waters.”

On behalf of Eurimac, this is your opportunity to share a powerful message with the business and investor community of the UK.

Mr Constantinides: We at Eurimac are dedicated to our work and the quality of our products. Every day is a new day and we make sure to work hard and look to the future with optimism.