Nicholas Penny spent the first ten years of his career in leading beverage companies. Moët &Chandon champagne, Hennessy cognac and Guinness beer are some brands in work portfolio that belongs to the Director General of the only local brewery in the Republika Srpska. In 1998, Brewery Holdings Romania steered by Nicholas Penny, through acquisition and organic growth, managed to increase the sales from 500.000 HL to over 2.4 million hectolitres. In only three years, Brewery Holdings Romania became a true leader in Romania’s beer industry, ahead of the largest international companies. Mr. Penny served as a Consultant in important strategic projects to companies such as South African Breweries, Coca-Cola International, Jim Beam and William Grant. Seven years after he took over as Director General, the Brewery began to reap first fruits of the change of course.
By: Jelena Stanišljević
You have been in Banjaluka Brewery for seven years now. A lot of changes have been made and everything looks quite different today. Now that the time has passed, how do you see the Brewery you took over back then?
I believe that the story about the Brewery is a textbook example for this region. There were too many problems that have lost us too much time over the last seven years. I joined the Brewery in an extremely negative period, when the Brewery had lost control over the quality because the company was not concerned about the beer production, but politics. We had to turn the tide, lay off a lot of people and deal with issues that nobody else paid any attention to for a long time. The most difficult was to deal with people who were not focused on the quality but on some other issues.
In your opinion, why was it so difficult to change the course in the Brewery?
I can’t see that problems here are different from problems anywhere else in the world. But, apart from the different interests, the biggest challenge was communication. For example, I tell people to take their seats and then ask them 10 successive questions. They cannot stand it. They believe that I am criticizing them. People here are not taught to develop critical thinking. Their defensive mechanism is very strong and it extremely hard for new ideas and constructive criticism to get through these barriers.
Is the consolidation of the Brewery’s operations finished? Have you reached the phase where you can say that you have closed the majority of open issues and that from now on you can focus on the company’s growth?
Definitely. Now it is quite evident and measurable. What I am most concerned about is that, when I look at the political culture, I can see that it does not celebrate success.
Politics over economy
What is the solution?
We could improve things if we managed to change the culture of listening. I always complain about the attempts to talk with the Government. People in the Government do not want to listen, assuming that we want some special privileges. Yes, we want some special privileges, but maybe those privileges are in the national interest, perhaps they have a political significance. We assist the development of the local economy which is, quite obviously, national interest. But, there is a bias that, if you are in business, you must be devious and unethical. There is no business culture.
So, you feel they don’t believe you are working in national interest?
Do you know any political figure who consults businesspeople about industry needs? In this region, political culture focuses neither on consulting nor your needs, but decision-making. For some reason, meeting the needs is perceived as a weakness. Listening is perceived as a sign of weakness and that is what stands in the way of the point of everyday decision-making.
Do the decision makers, government representatives and media see Banjaluka Brewery as a local company – a company which operates in RS/BiH?
It is not important who runs a company, any company. It does not matter whether it is in the hands of foreign or local shareholders. What matters is that it employs people, pays taxes, uses local suppliers and invests in marketing. Yes, we occasionally pay dividend to the foreign shareholders, but that makes only 1% of the turnover. At the end of the day, 99% of the money remains here and circulates in this economy.
BiH market – pitfall or opportunity?
Do you feel any difference between the market in the Republika Srpska and Federation of BiH, apart from the obvious differences between legal frameworks? How does Banjaluka Brewery operate on two markets in such a small territory such as Bosnia and Herzegovina?
There is no such thing as the B-H consumer! There are many different consumers in Bosnia – Federation and the Republika Srpska are not the key division. People in Bihac do not see things the same way people in Sarajevo do; people in Bijeljina do not feel a special connection with the people in Banjaluka.
Do these characteristics represent a pitfall or an opportunity?
Both. The key is to understand the market. We are a small local company, better capable of adjusting than big multinationals and we have the advantage over the competition. We are faster, smarter and better in providing our goods – because we make our decisions right here.
What do you see as a main problem of industry and economy?
If we take the Republika Srpska alone, monetary stability is very important. A huge plus is that the Republika Srpska has economic stability, which people often find difficult to believe. Yes, you do have the economy which is in a slight decline, but that is rather predictable. Your administration is your sore point but your taxes are not high, which is more important. On the other hand, your human resources are your weak link – there are no trained capable managers – there are no experienced people. Moreover, you don’t have a good development strategy. Republika Srpska has a lot of advantages, such as your geographic position, you have exceptionally good quality wood, touristic potential and considerably cheap labour. These are the opportunities you should focus on, subsidize and make them targets to international companies. It doesn’t take a brilliant plat, does it?
Yet, it is not done?
Quite frequently I witnessed the stance ‘We cannot give priority to somebody just like that,’ or ‘Why do we need foreign capital?’ Well, why not? It’s not all about the money. It is about the power of knowledge. Just take a look at successful companies operating in Banjaluka: Hemofarm – foreign capital, foreign knowledge; Celex, too. Take a look at companies doing business around the world – foreign knowledge, foreign money. Foreign investors have not taken anything away, they have just added. It is not about the money, it is about the knowledge, because we have a broader picture.
How do you see the future of RS’s economy?
One thing that would ‘push’ your economy is that the banking sector should relax and starts to reinvest. The wisest thing for this region would be to focus on Croatia as soon as possible. We believe that our costs and taxes are high, but we actually have a great competitive advantage compared to the people who are only an hour’s drive away. You should make use of that advantage. We should bring some clever people from the EU, who are paid for that job. Let them come here and teach us what to do.
What about the Brewery’s future?
The future is quite simple. We will either build what we took over – if we want to become key players in BiH – or, we will be taken over by some big foreign company. The investors will seek the safest solution. If they opt for big multinationals, then what is our long term future? It does not necessarily mean that those big companies would opt to keep the production here and invest in Banjaluka Brewery. Every third foreign investor who runs businesses here raises the same question.
As a foreigner living in the Republika Srpska, are you happy with your life here?
The climate is great. If your economy was an active and growing economy, there would be more money in your pockets and people would call this paradise. It’s not a great change of course, the quality of life is already quite high, but people are unable to enjoy it because they don’t have enough money. If people had more money, they would build bigger and better houses, travel to the seaside and enjoy more – and those are not huge changes. Some 6-7 years ago people used to live that way. I think we all can be optimistic, but that takes a collective change of energy.