Nutrition

1. Cluster Profile

1.1. Overview

An increase in the incidence of diabetes, obesity, vascular diseases, cancers, and other degenerative diseases has dramatically inflated the cost of medical care. Consequently, health care demands have drastically shifted toward preventative measures in the past few decades. To achieve a better quality of life, people have started to take a more preventative approach to ensuring their wellness by proactively adjusting their nutritional intake and therefore wellness outcomes. Traditionally, this had involved eating more healthy foods (for example, vegetables and fruits) and maintaining proper diets, but in recent years, consumers and health care professionals have increasingly turned to dietary supplements (‘nutraceuticals’) or utilization of wellness therapies (for example, sports nutrition or phytotherapy) to target some health concerns. Some of the key target areas for nutraceutical market are cardiovascular diseases, weight management, cognitive enhancements, sports performance enhancement, and bone and joint issues.

This new consumer view on the ability of nutritional products to manage health has been driving the global demand for improved nutrition. However, the ‘nutrition industry’ is difficult to define since it has evolved as a theme within the food and health sectors to describe a type of wellness outcome. Nonetheless, it is the demand for these outcomes, which is supporting a set of industries—including ‘production’ activities and ‘service’ providers—that can help achieve these outcomes for individuals or for public health objectives more broadly. Understanding how this industry evolved out of the existing food/beverage and pharmaceutical industries can perhaps be a starting point in understanding the industry (Mordor Intelligence 2017).

As a starting point, a definition of the industry can be conceptualized by looking at manufacturing activities that are associated with traditional industry. This STPA will therefore include a range of ‘functional foods and beverage manufacturers’ and ‘nutraceutical supplement manufacturers’.

The global nutraceutical products market was valued at around US$205.39 billion in 2016 (Mordor Intelligence 2017). Other industry reports estimate a smaller market of US$43.27 billion (Republic of Croatia 2016). Whatever the actual figure may be, it is apparent that in recent years demand for nutraceuticals has grown rapidly (Prabu 2012) with an estimated compound annual growth rate (CAGR) of 6.3 percent from 2017 to 2022 (Mordor Intelligence 2017). Some even expect that by 2022 the market will reach around US$294.79 billion.

1.1.1. History and Significance of the Industry in Croatia

From 2015 to 2016, Croatian gross domestic product (GDP) grew 2.9 percent to approximately EUR 45.819 billion (Eurostat, n.d.). The total revenue for all identified firms engaged in the manufacture of nutritional food and beverage or dietary supplements in 2016 was just under EUR 2 billion. However, it is difficult to ascribe the proportion of these sales that went for nutritional products given limitations in data. A review on the annual reports of some large companies revealed that up to 10 percent of their sales were ascribed to nutrition-themed products, while fieldwork confirmed that small companies had up to 80 percent of their sales in nutritional products. It would be difficult to offer an accurate view of total industry sales given the data constraints posed by the definition of the industry.

Given these data limitations, it is hard to estimate the size of the market. Nonetheless, some market reports estimate the Croatian food supplements market at around EUR 25 million (Nutra 2017), while the Croatian market for dietary supplements (a subsector of nutrition) was valued at EUR 11.3 million in 2015. Others report that the subsector is expected to grow to EUR 11.7 million by 2020 (Statista 2017). While these figures are still relatively small, the weight of these markets can better be put into the context of an emerging industry. The Croatian nutrition industry has emerged along with a set of food and pharmaceutical companies that are trying to embrace trends in healthy living and eating habits.

1.1.2. S3 and the STPA

The government’s S3 provides useful insight into the scope and focus of the STPA (Republic of Croatia 2016). The strategy spans a varying set of activities and lays out a range of research and development (R&D) topics and key enabling technologies (KETs) that can be utilized to support private sector growth. “Areas for research in Croatia include an improved understanding of the role of optimal levels of traditional nutrients for specific segments of the population, as well as identifying bioactive substances present in foods and medical plants, in order to establish optimal levels” (Republic of Croatia 2016). Most notably, the strategy specifies a need for the integration of new and emerging fields of research—such as nutrigenomics, proteomics, and metabolomics—as well as the integration of bioinformatics and other technologies to the sector.

The strategy also further lists a range of indicative R&D topics—such as natural health products, dietary supplements, and functional and enriched foods—that are relevant for this STPA. The strategy also lists the following KETs for the STPA:

• KETs for functional and lifestyle foods to meet diversifying dietary requirements of consumers and embedded computer automation and control processes
• Information and communication technology (ICT) systems, solutions, and applications for smart devices for health nutrition, divided on targeted groups (sports, pregnant women, diabetics, and so on), disease prevention, and protection through detection and monitoring of poor and/or inadequate nutrition
• Innovation technologies based on developing solutions in function of monitoring of nutrition and health quality through application of the ‘Internet of things’ and through the management and analysis of big data and solutions ‘in cloud’ (Republic of Croatia 2016)

These topics will be important for achieving innovation in the sector and will be more thoroughly assessed in Deliverable 11 in the context of how they can support access to more attractive segments. More immediately, the following sections take stock of how the Croatian industry is performing now—particularly in the perspective of GVC participation—and then maps a set of relevant actors, agents, and organizations that represent the ‘cluster’ associated with this sector.

1.1.3. Regulations

The growth of the industry is encouraging, not only from the market perspective but also from the contributions it could make to public health. As consumers are increasingly tending to substitute traditional medicine for nutraceutical products, the development of the sector provides an opportunity for business and public health professionals alike. However, at the same time, there is some need for caution as the industry often is incentivized to make claims without base in the marketing of their products. In this respect, the pharmaceutical industry is increasingly focusing on business development in dietary supplements, owing to the less restrictive regulations. Therefore, it is important to maintain a proper balance in the regulatory framework for nutrition to both promote and protect public health.

In Croatia, dietary supplements are considered as a category of food product, and thus regulations for food products are applied for labeling, food additives, health claims, and so on. The composition, labeling, and placing on the market of dietary supplements in Croatia is governed by several frameworks, including the Food and Health Claims Act (Official Gazzete No. 39/13 2013), the ordinance on supplements (Official Gazzete No. 126/13 2013), ordinance on the conditions for inclusion in the monitoring and implementation program of dietary supplements (Official Gazzete No. 83/13 2013), and the ordinance on foods that can be added and used in the production of food (Official Gazzete No. 160/13, 2013). The ordinance on dietary supplements is governed by the provisions of Directive 2002/46/EC of the European Parliament and of the Council of June 10, 2002, on the approximation of the laws of the member states relating to food additives (Republic of Croatia, Ministry of Health 2017).

As nutrition is an emerging field, regulations are continually being adapted and improved to fit the public health needs that are arising.

2. National Profile

2.1. National Demand

The nutraceutical industry (natural health products, dietary supplements, and enriched products) has become an important part of the Croatian food and health industry in this decade. However, the Croatian market has not yet fully embraced trends in healthy living and nutritive diet as is seen in Western European countries. Today, the Croatian nutraceutical sales are dominated by protein preparations, which were 97 percent of market sales in 2014. This market is driven by sport and fitness-oriented nutraceutical consumers, which is expected to grow 2 percent per year over the next several years. Nonprotein preparations appeared on the market a few years ago. The primary focus of such new products was placed on consumers seeking weight loss (fat burning and definition among men and body weight reduction among women). While many such products are sold through traditional retail, these products are increasingly being sold through fitness centers and the Internet, the latter of which constituted 20 percent of sales in 2016.

2.2. National Production

While the nutrition industry in Croatia is relatively small, it is also an emerging topic that has grabbed the attention of many in the pharmaceutical and food/beverage industries. Croatian companies produce a limited range of nutraceutical products, including herbal products, dietary supplements, functional foods and beverages, and animal feeds. Moreover, traditional food manufacturers have begun to do product development of more nutritious versions of currently existing products (for example, low-sodium dried soup, probiotic yogurt, omega-3-enriched foods, and low cholesterol foods) (Republic of Croatia 2016).

Currently, the industry is dominated by a few large players that produce vitamins and dietary supplements (Nutra 2017). In contrast, there are a greater number of small companies in the Croatian nutrition industry that mostly repackage products with low, if any, added value. Such companies more often focus on natural herbs and spices used as folk medicine. For both large and small companies, it is important to note that the majority of primary inputs (for example, whey powder) are generally not sourced from Croatia. This is largely due to the low quality and the inadequate quantities of raw ingredients needed for production. These lead companies to import such inputs and then act as secondary processors (in the case of the larger companies), or they simply engage in repackaging operations (in the case of many of the smaller companies).

2.3. Exports

The competitiveness of an economy and of a sector can often be ascertained by looking at exports. However, given that ‘nutrition’ is not a sector by itself, it is difficult to quantify exports related to it. Nonetheless, there are some Harmonized System (HS) product codes at the four-digit level that may capture some of these nutrition-related exports from both upstream and downstream parts of the value chain. Most notably, in the upstream, there are products such as rape seed, ground nuts, natural honey, and so on. In the downstream, consumer products such as whey or vitamins for therapeutic or prophylactic could be ascribed to this industry. Figure 1depicts the export rates for some of these codes; however, some of these figures may also be more descriptive of the traditional food or pharmacology industries than the nutrition industry.

In Figure 1, growth in the rate of Croatian exports for various nutrition products is mapped against the growth rate in world demand for those same products using HS classifications. While this is not an exhaustive description of all nutritional products (or Croatian exports in this space), it should be noted that Croatia only produces a limited number of primary and secondary nutritional products. In Figure 1, the vertical axis represents the world’s growth of imports between 2012 and 2016, while the horizontal axis represents Croatia’s percentage increase in exports for the selected group of nutrition-relevant products. Product categories falling in the right quadrants indicate areas where Croatian industry is increasing its market share, while those in the left quadrants are product segments where it is decreasing. Similarly, those in the top quadrants are product segments that are becoming more traded globally, while those in the bottom are product segments that are becoming less traded. The size of the bubble also indicates the U.S. dollar value of exports.

Analysis of the graph shows that most of the industry’s exports are concentrated in the product code for HS-3304 Medicaments, which notably includes certain types of vitamins. The global trade in this product code only grew at 1 percent per year between 2012 and 2016, while Croatia’s share in this market grew at 3 percent. Other nutrition-relevant products are exported from Croatia in largely insignificant values. Only US$2.15 million worth of whey, a product typical of the sports nutrition market, was exported from Croatia in 2016. The graph further shows a decrease of 6 percent in Croatia’s share in the world market for whey, which is juxtaposed against a 10 percent decrease in world trade (a proxy for global demand) for this product. These figures pose a more tepid story than some other industry reports that suggest much higher growth in international trade for these products.

Other tangentially relevant products and chemicals have varying growth rates and presence on the register of Croatian exports. For example, the essential oil global market, which grew at an average rate of 6 percent, is compared against Croatian exports of the same, which grew at a 71 percent annual rate. Moreover, total imports of esters and other inorganic acids have shrunk by 4 percent on average in the world while Croatia had an astonishing 130 percent annual growth rate in the period. Other nutrition-relevant chemical elements include various derivatives of acyclic alcohols4 (61 percent growth rate), polycarboxylic acids (52 percent), and so on. All those products had negative growth rates worldwide in the period, which suggests that Croatian nutrition industry is growing significantly faster than the rest of the world. See Annex 1: Nutraceutical Export Data for detailed data tables.

The main export markets for Croatian nutraceutical firms are Central European Free Trade Agreement (CEFTA) countries and Slovenia. Fieldwork interviews with industry leaders purport that these markets are less saturated than larger markets such as Germany or Austria, where large multinationals supply their demand.

3. Industry Functioning

This chapter examines how the nutrition cluster is performing and how it is currently structured in Croatia. It analyzes the various types of companies as well as their geographic dispersion across the country. The chapter then presents a financial analysis of the industry to show an indication as to the competitiveness of the industry at large. It finally analyzes the evolution of the industry and the most recent trends in the cluster.

As noted earlier, the industry is dominated by a few large food and pharmaceutical companies. However, it is also important to note that ‘nutritional foods and supplements’ only constitute a relatively modest portion of their overall portfolio (<10 percent). On the contrary, the range of small and medium enterprises (SMEs) companies have most of their products (>80 percent) in the nutritional food and beverage or dietary supplements sector.

3.1. Economic Geography

3.1.1. Number of Firms

In total, 42 companies in Croatia were identified through a comprehensive HGK sector scan. Figure 2 categorizes them across both large and medium and small classifications, as well as by whether they are better described as a nutritional food and beverages manufacturer or as a nutritional supplements manufacturer. There is a fairly even split of the latter classification. An analysis of these firms shows that three-quarters of the firms are SMEs (60 percent of them are small enterprises, while another 16 percent are medium-size enterprises). There are only 10 companies in the cluster, which may be classified as large. Although these large companies are a minority, they represent more than 60 percent of the revenue generated by the industry.

3.1.2. Clustering of Firms

Companies in the nutrition industry are mostly clustered around the City of Zagreb or Zagreb county (see Figure 3). Given the origins of the nutrition sector, the cluster is strongly oriented toward Zagreb since a majority of pharmaceutical and food processing companies are located there. Some production can also be seen in Northern Croatia, areas around Split, and some parts of Slavonia. However, other counties in Dalmatia, Lika, and Slavonia may not have any firms yet operating in this industry.

3.2. Profitability Analysis

As explained earlier, the nutrition industry sector consists mainly of food and pharmaceutical companies that have some part of their product portfolio in functional foods or dietary supplements. SMEs in the industry have a more nutrition-focused product portfolio. From 2014 to 2016, the nutrition industry in Croatia has expanded in revenues, the number of employees, and equity. The only financial indicator that has decreased in the observed period is assets, which contracted 2.3 percent on average across the industry.

Table 3 presents disaggregated financial data for the Croatian nutrition industry in both 2015 and 2016. The data are disaggregated across two subsectors:

• Nutritional foods and beverages
• Nutritional (dietary supplements)

The financial indicators presented include the revenues, number of employees, assets, net profit, equity, profit margin, and employee productivity. The industry has mixed results in the observed period. Categories such as revenues and assets have decreased while there is significant increase in the number of employees and net profit. The industry has started to invest more in the market development encouraged by steady profits. The decrease in overall revenues has caused some decline in productivity per employee in the period observed from 2015 to 2016.

3.2.1. Assets, Debt, and Revenue

Total assets in the industry have decreased 0.72 percent, although this was largely influenced by the nutritional supplement firms. In 2016, nutritional food and beverages firms experienced an increase of 1.52 percent in comparison to 2015. Nutritional supplement firms have more assets than nutritional food and beverage firms on average, and so this weighting their 2.26 percent asset decrease brings the total amounts down in comparison to values in 2015. Across the industry, the total assets are nearly EUR 2.6 billion, as indicated Figure 5.

Source: World Bank analysis using Bisnode Portfolio Intelligence data.

Financial indicators for industry debt are expressed through financial liabilities, which mainly consist of loans and accounts payable. When looking at revenues, it is evident that nutritional supplement firms have more assets, but this does not always correspond to levels of debt. In 2016, both categories had almost equal debt levels. It is also significant that this segment went through the process of leveraging, because in 2014 they had much less debt than nutritional foods and beverages.

Source: World Bank analysis using Bisnode Portfolio Intelligence data.

It can be observed from Figure 7 that food and beverage firms went through a deleveraging process while nutritional supplement firms started to put on more debt. The food and beverage firms decreased their debt/asset ratio from 0.24 to 0.17 while the ratio for nutritional supplement firms doubled in the same period to 0.12.

 Source: World Bank analysis using Bisnode Portfolio Intelligence data.

Revenues in the nutrition industry in Croatia had a 4.4 percent CAGR during 2014–2016, although total revenues declined 0.85 percent in 2016 in comparison to 2015. The nutritional supplement firms had relatively strong growth in 2015. This is likely the result of investments by large firms in 2014, which began to yield about EUR 200 million in increased revenues in 2015.

Source: World Bank analysis using Bisnode Portfolio Intelligence data.

3.2.2. Cost Structure and Margins

Similar to the other financial indicators mentioned earlier, the analysis presented is not able to attribute figures to nutritional products alone. Some large companies do list where their revenues and profits come from in their annual business reports, while most of the industry does not. The underlying reason is the fact that the cluster consists of food and pharmaceutical companies that attribute bulk of their sales to regular food and medicaments. This makes it hard to discern the real profit margin from activities in the nutrition industry. Since the data are only available for revenues attributable to the entire business, it cannot be concluded with full certainty that profit margins are specific to the nutrition industry. Therefore, the availability of disaggregated data is a limiting factor to profit margin analysis.

With these caveats, a presentation of industry-wide profits is decomposed by type of firm, functional food/beverage manufacturers, and nutritional supplement manufacturers. Figure 11 shows how profit margin changed over 2014–2016. Nutritional supplement firms in the industry had a variable profitability that is currently around 11 percent. The functional food and beverage firms had a more consistent profit margin with 5.4 percent recorded in 2015. It is important to note that these segments differ in some important characteristics that could affect profit margins, such as sales channels, manufacturing methods, regulations, logistics requirements, suppliers, and so on. All these characteristics affect final profit margins in the industry and that is why it is of utmost importance to analyze markets in detail.

Source: World Bank analysis using Bisnode Portfolio Intelligence data.

3.2.3. Employees

Firms in the analysis expanded their employment considerably during 2014–2016. During this time, the industry added more than 1,000 jobs for a 5.3 percent growth rate. Figure 12 presents the share of the employment by the category of nutritional firms. Although both categories have similar revenues, nutritional supplement firms take fewer employees to achieve EUR 925 million in revenues.

Source: World Bank analysis using Bisnode Portfolio Intelligence data.

Source: World Bank analysis using Bisnode Portfolio Intelligence data.

3.3.2. Innovation

In total, the S3 estimates that there are 500–600 researchers working on the topic of nutrition. Much of the innovation in the industry comes out of the few large players that dominate the industry (Nutra 2017). Such large companies are actively engaged in nutraceutical R&D with specialized departments comprising between 15 and 50 employees (Republic of Croatia 2016). For instance, the Atlantic Grupa employs entire departments devoted to R&D. Patented innovations in packaging in Cedevita (such as for new bottle caps that enable convenient delivery for on-the-go consumers or visible packaging of products for hotel/restaurant/café [HORECA] outlets) have contributed to substantial growth in sales. More broadly, innovations in biotechnology and pharmaceuticals are reputed to account for more than 80 percent of all R&D business expenditures in Croatia. Of the 25 patents that have been registered by Croatian applications in the pharmaceutical sector since 2014, several have a noticeable focus on herbal medicines and nutrition relevant areas (Kilroy and Trpkov 2016).

However, other process and sales innovations in nutritional products specifically have been relatively scarce across the industry. Process and sales innovations can be just as key to the competitiveness of the industry. For example, realignment of production lines to react quickly to changing market tastes can be important in this fast-moving industry. The industry has been more adept at innovating in sales innovations as products have increasingly been sold in new sales outlets (for example, sports facilities) and with accompanying services.

4. Cluster Figures: Market-Based Actors

4.1. Nutraceutical Production Firms

Croatia has a relatively small set of functional food and beverage/dietary nutraceutical supplement manufacturers. Much of the industry is concentrated in two domestic companies, which led industry sales in 2016: Atlantic Grupa d.d. (15 percent value share) and Encian d.o.o. (11 percent value share) (Euromonitor International 2016). A number of other traditional food manufacturers—such as Dukat and Vindija, which manufacture dairy products, and Podravka, which manufactures a wide portfolio of food and beverages—are also beginning to participate in the ‘nutrition’ industry; however, their participation could be considered to be quite subjective. A number of smaller firms also exist in the industry, but they tend to be more concentrated on repackaging activities, as well as production of functional food and beverages, cosmetics, and other various health products. A full list of firms included in the analysis can be found in Annex 2.

4.1.1. Notable Firms

In analyzing the industry, it has been attempted to identify the most notable firms competing in the industry. Table 6 presents top five companies in the nutrition cluster in Croatia by two measurements: revenue and profit margin. All the information in this section was extracted from the Bisnode Portfolio Intelligence database that draws on FINA data. It should be reiterated that it is often very hard to get information about how much nutraceutical sales account for of the total income of the company and so this information should only be taken as indicative of the nutrition industry more specifically, since most of revenues in these companies likely do not come from nutraceutical sales.

Table 6: Notable Nutrition Firms by Revenue and Profit Margin

The largest company regarding assets in the cluster is Pliva, which dwarfs all others. The second best is Podravka that has only half of Pliva assets but has 1,200 more employees. Other top companies in terms of size are Vindija, Dukat, and JGL. The second part of table 6 presents most profitable companies. The only company appearing on both lists is JGL. Companies in the cluster with highest margins generally employ less people and only one of them is based in Zagreb. A short profile of each company along with a short description of its engagement in the nutrition industry is as follows:

• Pliva is the largest pharmaceutical company in Croatia and is the leader in Southeastern Europe. Pliva is also one of the leading exporters in Croatia with 80 percent of its products exported to the United States, Russia, and other European Union (EU) countries. One of the Pliva products in the nutrition portfolio is Plivit Total which helps restore energy levels and reduces fatigue.
• Vindija is a food and beverage firm based in Northern Croatia that has attempted to break into the functional foods segment through products such as functional beverages and functional dairy foods.
• Podravka is another food and beverage firm based in Northern Croatia that has attempted to break into the functional foods segment through products such as low-sodium dried soups.
• Dukat is a dairy food manufacturer that makes a range of (potentially probiotic) yogurts, among other things. It does not see itself primarily as a nutrition firm; however, it could be relevant.
• JGL is based in Rijeka and is mainly functioning in the pharmaceutical industry. It has a wide array of products and with its sister companies produces probiotics and teas that help with indigestion.
• Spider Grupa is headquartered in Pitomača, Virovitica-Podravina county. It is a leading regional manufacturer and processor of medicinal and aromatic herbs and medicinal herbal products.
• Hospira was a biotechnology unit of Pliva and was later spun off and acquired by Hospira. In 2015, it was acquired by Pfizer.
• Hamapharm is a company that deals with the development, production, sales, and marketing of pharmaceutical self-cleaning products. One part of its products includes dietary supplements such as BronhoMax.
• Biovitalis is based in Turčin, Varaždin county. It produces dietary supplements and natural cosmetic products. Some of the products are vitamins and honey-based supplements.

For many of these companies, functional foods and dietary supplements represent a growing part of their income structure. Pliva and Podravka are the largest exporters in absolute value among the companies presented in Table 6. During the industry assessment and field interviews, it was often reported that nutritive products vary in profitability in comparison to other products in the company portfolio. On average, in food companies, nutritive products have higher margins than other products while in the pharmaceutical industry, nutritive products have a slightly lower profit margin than the other products from their portfolio; however, this cannot be quantitatively confirmed.

Notable Nutrition Firms by Revenues

4.2. Supporting Firms

4.2.3. Output Organizers and Buyers

In analyzing the Croatian nutrition industry, several different types of output organizers/buyers have been identified. Table 9 presents these types of firms including pharmacies, wholesale and retail outlets, gym/fitness facilities,5 and dietary management consultancies.6 Several indicative companies that fulfil this function and are present in Croatia are listed in Table 9.

Table 9: Notable Croatian Output Organizers for the Croatian Nutrition Industry

As can be seen from the financials, most of these companies in the top bracket are quite large but have low profits. Those companies identified through the sector scan in the lower bracket are a bit smaller and have variable profitability. A short profile of each company, along with a short description of their engagement in the nutrition industry, is listed:

• Medika is the oldest and leading wholesaler in Croatia, whose core business is the sale and storage and distribution of human veterinary medicines, medical products, equipment and dental aids, diet, cosmetics, hygiene, and other products intended for the health care market.
• Phoenix Farmacija is one of the leading wholesalers in Croatia and a member of the PHOENIX Group, the leading European pharmaceutical company. The company provides delivery of medicines and medical products to numerous segments within the health care system: pharmacies, hospitals, health centers, and medical diagnostic laboratories.
• Oktal Pharma is a wholesaler in Croatia, whose core business is the sale and storage and distribution of human veterinary medicines, medical products, diet, cosmetics, hygiene, and other products for the health care market.
• Ra. Natura is a private, family-run company founded in 1998. The company represents, promotes, and distributes natural products used to preserve health and vitality. The company has developed, through the years, education aimed at health care professionals, where they work with world-renowned and recognized scientists, doctors, and pharmacies in the field of phytotherapy, micronutrition, and dermocosmetics.
• Polleo Sport d.o.o. is a retail store specialized for fitness enthusiasts. Its assortment of products is a wide range of protein supplements, weight loss products, and body shape products. The revenue in 2015 was almost EUR 8 million, which indicates the industry growth trend. Polleo Sport is where various products for professional or hobby sport practitioners can be purchased.
• BioVega d.o.o. is mainly a retail store that offers a wide range of all kinds of organic products, natural food supplements, functional foods, organic products, and so on. The revenue in 2015 was almost EUR 13.4 million, which indicates huge potential for that kind of products.
• Figurella is a health care company that focuses on women of all ages and provides them with advisory services and right tools to achieve their health goals.

Wholesale companies such as Medika, Phoenix Farmacija, and Oktal Pharma have high revenues but small profit margins. They operate in the economy of scale segment of the industry without much added value or bargaining power. More specialized companies that are able to provide education and services such as Ro. Ra. Natura are able to rack up much higher profit margins. It is also noteworthy that smaller and specialized companies employ just a fraction of wholesalers, which poses a question whether they would be able to achieve a high margin after expanding business and employing more people.

 

Indicative Wholesale Distributors

4.3. FDI in the STPA

FDI has the potential to be an important contributor to competitiveness enhancements at the sectoral level and a source for economic growth more broadly. In fact, FDI is one of the most common drivers for countries’ participation in GVCs, which often brings many benefits to host countries, including capital, jobs, skills, knowledge, and technologies. In this respect, foreign investors can bring specialized knowledge and technologies that can help the Croatian industry adapt to the new and emerging segments. In this way, FDI can be a powerful mechanism for helping capture more value for the Croatian industry. FDI can also be a powerful indicator of a country’s factor endowments and markets. However, not all FDI brings the same benefits. It will be important to take a considered view of how the domestic economy is currently being linked with foreign international investors and to what ends.

Total foreign investment8 in Croatia from 1993 to 2016 in the food and beverage industries and production of basic pharmaceutical products and pharmaceutical preparations amounted to EUR 1,355 billion (HNB 2017). After closely examining all key companies in the Croatian nutrition industry, four companies have been identified as indicative examples of FDI in the nutrition sector:

• Pliva is a pharmaceutical company that was acquired by Barr Pharmaceuticals based in the United States in 2006 for US$2.5 billion. Two years later, it was sold to Teva.
• Hipp started with baby food production in Croatia in 1998 and further expanded its operations in the industry in 2001 when it acquired Vivera. In a subsector that continually increases its level of regulations, Hipp has been continually investing in the production process and technologies.

• Dukat was acquired by the French company, Lactalis, in 2007. Dukat is currently one of the largest dairy companies in Croatia. While Dukat’s production is only marginally related to nutrition, it is the largest dairy company in an industry in which nutraceutical products are often marketed (for example, whey and probiotic yogurt).

• Meggle is a German dairy company that entered the Croatian market in 1996 through its distribution networks. It started production by investing in facilities in Osijek in 1999. Meggle is currently the third-largest dairy farm in Croatia.

The motivation for FDI—be it resource seeking, strategic asset seeking, market seeking, or efficiency seeking—varies across the different industries and companies. Most of the FDI in the food or nutrition field was mainly motivated by efficiency-seeking incentives. Companies from advanced markets such as Germany or France mainly seek to exploit lower labor cost in Croatia. Some of the investments could also be seen as market seeking—this is true for companies buying Croatian well-known brands to enter Croatian and other markets in the region due to brand recognition.