The Bulgarian Company Kabo processes and sells canned fish and vegetables. Although nationalized in 1947, the company prospered because its home market was sheltered and its export business was handled by the state foreign trade organization. To Kabo, marketing was of little concern, and its main priority was production. By the 1980s, the company had 32 products and the overall volume of production was 20 000 tones. Only 5 per cent of sales were generated in the home market, while 70 per cent came from what was then the USSR, and around 20 per cent came from other markets, especially the UK, Italy and the Middle East.
The prices between the markets varied considerably, with prices in the EU several times higher than those charged in the USSR. That was not a problem for Kabo, as any losses were made up by state subsidies. The first signs of trouble, however, began to show in the 1980s. Mr. Lasarov, the executive director, felt that the main problem at that time was too many home competitors who had a distinct advantage by being up to 40 kilometers nearer the main regions supplying vegetables for canning. This meant higher transport costs for Kabo.
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These, coupled with reduced state subsidies and restrictions on more innovative marketing and product development activity, led the company to decide to reduce volume and wait for better times. By 1989 the situation had deteriorated further because of the uncertainty of raw material supply and poor competitiveness. Production had fallen to less than 14 000 tones a year and the number of products was down to 12. By the early 1990s, state subsidies had virtually disappeared in the food, tobacco and wine industries. Companies had to become self-sufficient.
The free market was now a reality. Many of the problems Kabo faced were common to other central European organizations as they sought to manage the transition to a free enterprise market-based system. Interest rates soared from around 7 per cent to nearer 45 per cent, making investment problematic. Fuel and energy costs nearly doubled and workers began to look for higher wages. As all this began to affect prices, Kabo’s food products became too expensive for the home market, and the former USSR had problems paying even the old price levels.
Bartering deals, such as petrol in return for canned vegetables, were proposed at least guaranteeing some form of payment. In other cases, however, no payments were made at all. The state foreign trade organizations disappeared and Kabo had no experience in international marketing and no experience or knowledge or contacts with international distributors and intermediaries. Faced with all these problems, the decision was made to seek new international markets. Dedicated staff in the newly formed sales department were assigned the task of finding new sales opportunities.
The USA, China and France were targeted, importers appointed and test sales carried out. However, none of these markets lived up to sales expectations, as the head of the project Mr. Ivanov reluctantly concluded. “These markets are huge enough for us to sell our entire production, but they are too far away which leads to high transportation costs. It would also appear that we cannot offer a product which meets their requirements as far as quality and packaging are concerned. Up