A Unique Case In Franchising – SAKRET Prosperity In The Baltic States

Everything changed in 2001, when Latvian entrepreneurs started importing and distributing SAKRET production in Latvia and in 2003 put bigger risk and business benefits on the scales. They decided to purchase a production manufacturing licence from the European SAKRET in Germany for functioning in the Baltic region after the franchise principle. Thus SAKRET Ltd was founded in Latvia. The owner of the enterprise, a local investor who invested EUR 100 000 for purchasing the licence, undertook the team formation and managing responsibilities. At that time European SAKRET director Mr Reinhard Wacker could not have imagined that quite soon he would define the Latvian entrepreneurs’ unbelievably rapid SAKRET achievements in domesticating the Baltic market as “a unique case in the European Union” and in the history of SAKRET. 

Latvian entrepreneurs did not doubt that it was necessary to make use of both the acquired licence advantages and the capital invested into binding annual payments. The franchise licence secures them the rights to use SAKRET respectable brand achievements, as well as experience: technological experience, dry construction mix recipes, modern manufacturing equipment, raw material suppliers and customers from German factories. Having invested additional EUR 4.2 million, on October 15^th 2004 the new SAKRET franchise owners opened the first SAKRET dry construction mix production unit in Latvia with the capacity of 110 000 tons per year. At the production unit opening, the director of SAKRET Ltd. Mr. Andris Vanags said, “The first SAKRET production unit, being the most modern dry construction mix manufacturer in Latvia, will be quite a significant contribution to the development of building material manufacturing and economics in general. Besides, the profit obtained will not flow abroad but will increase GDP. The production unit mission is manufacturing dry construction materials on the spot (concrete, tile glue, systems of heat insulation of buildings, plaster, building chemistry, etc) rather than overpaying for their transportation for we would be able to offer our customers qualitative production for competitive prices.

Having put in inexhaustible energy and work, half a year after the production unit opening they succeeded in fast domestication of the Latvian construction niche –35% of the market shares, manufacturing 50 types of products. In previous two years this market share comprised only 15% and it is necessary to point out that historically the rights to import and distribute SAKRET production in Latvia belonged not to SAKRET Ltd, but to Brocenu cement plant and German SAKRET joint venture that was part of “Readymix” group and that was the holder of the obtained franchising licence for work in the Baltic region. Due to the fact that Brocenu cement plant repudiated the intention to build the SAKRET production unit in Latvia, Mr. Andris Vanags, who at that time was the customer service director at the plant, made use of that possibility and established SAKRET Ltd in 2003 by attracting investors.

This year SAKRET Ltd export has also increased, from 30% planned in 2005 they now export 10% of products with EU quality verifying certificate CE mark to Estonia, Lithuania, Ireland, Germany, Scandinavia, Byelorussia, Kaliningrad. In half a year time they have achieved annual turnover of 3 million euros at a surprising speed. As a result, a necessity to double the number of employees had arisen. Evaluating the development of the enterprise, Mr. A. Vanags admits, “Observing this quite rapid SAKRET development, we are sure that we hit the jackpot by risking and investing local capital into franchise purchasing and production unit itself. The production demand in spring 2005 made us hasten opening a SAKRET branch in Estonia and look for land to build a new production unit there in order to domesticate the Scandinavian market. We have also switched to the maximal production unit working regime having invested EUR 500 000 to increase the capacity of the production unit and, of course, we invested additional EUR 2.5 million into building a new production unit near the existing one, which is planned to be opened by the end of the year 2005. 50% of the ready-made construction mix production manufactured at the new production unit is planned to be exported abroad”.

Purchasing a franchise is mutually profitable for both the franchisor and the franchisee. In case of SAKRET, it is most directly manifested in everyday mutual co-operation. Franchise gave both parties a possibility to develop common and individual business ideas which basically are based on progressive activity and stable SAKRET leadership achievement in the Baltic region too. Another benefit is that working as a franchisee there is a possibility to manage an enterprise independently coordinating decisions with the franchisor only in global scale questions. It is essential that in everyday activities it is possible to constantly exchange new information, as well as knowledge in management, technologists’ and laboratory assistants’ work with SAKRET franchise owners and other SAKRET brand users. It is manifested, for instance, in working out new products recipes. The new SAKRET product invented by Latvian production unit chemists has been admired by the European SAKRET for already 10 years. In Latvia this product has become the most demanded 2004/2005 winter season SAKRET product due to which franchisors were interested in a possibility to use the invented recipe in European SAKRET work. 

Having heard about the successful SAKRET development and rapid domestication of the Latvian market niche, Mr. R. Vaker, European SAKRET director, personally visited Latvia in May 2005 and declared to the mass media the conclusions, “Issuing the franchise licence to the Latvian entrepreneurs, European SAKRET has not expected such a rapid SAKRET development in the Baltics and the economic growth of the region in general. The fast development of the production unit in the Baltics is a unique case in the European Union and now it will make us use Latvian entrepreneurs’ experience and knowledge how to domesticate a market share so rapidly. Ireland and England will be the first two countries for domestication of construction market of which European SAKRET would want to get Latvian SAKRET experience and knowledge”. The successful development of Latvian dry construction mix production unit SAKRET proves that there was sense in expanding old boarders of the European Union and allowing new participating countries in the market. Exactly these countries show rapid economic growth including the Baltic region rather than long standing EU countries. Having issued a licence for functioning to the Baltics, Hungary, the Czech Republic and Slovenia, European SAKRET has only been a winner for the speed of these countries’ economic growth has increased up to 10%.

Information prepared by: SAKRET Ltd. and PROSPERO public relations