Tibor Bagdi, Managing Director

The story of Foodbox started a good 20 years ago, says Tibor Bagdi, one of the founding owners and Managing Director of the company. He represented a Spanish company in Hungary that manufactures and operates vending machines and coffee machines. Around 2008-2009, the Spanish came up with vending machines that could also dispense hot food. With sales growing at a dizzying pace in Western Europe, the Hungarian distributor started to explore the domestic market. He first approached food delivery companies but was mostly turned down. However, one of these companies was hooked and, in the resulting collaboration, they provided the food (6-7 types of product), and Foodbox provided the vending machines. They visited office buildings and public institutions and imagined selling in busier public areas. However, most establishments already provided some form of catering, and consumers were not familiar with this type of convenience product.

They then realised that there was no other way but to take the product to retail, and once the brand was known, the way was open for vending machine sales. They first approached independent shops and cafés, building up their own distribution network, initially with three trucks. It took several years to get into the big chains, partly because the shelf life of the food was too short. In the wholesaler network of a large chain, it can take up to a week for a product to reach the shelves.

Then, in 2014, in response to market feedback, a technological improvement was made to extend the expiry date to 30-35 days. For each dish, a specific procedure must be developed to ensure that the result meets microbiological requirements, but not at the expense of the enjoyment of the product. It is important to emphasise that the products are not canned; they are made without preservatives, and consumers see them as fresh products. For this purpose, a unique technology has been developed in Hungary and abroad.

It takes about a year from the moment a new product idea is conceived to get it on the shelves. Most time is taken up by the slowness of the retail chains, as it takes time to complete the inspection process, and their shelf space is also finite. “We need to prove that we can generate additional turnover”, says the Managing Director. At the same time, retail chains also have an interest in generating the most sales revenue from their shelf space, so they are open to the ever-expanding convenience food market.

Eventually they managed to sign with all the big chains. Even then, the food was still prepared for them by the Cityfood-Interfood Group on a contract basis. But Foodbox grew at such a pace that outsourced manufacturing soon reached the upper limit of its available capacity. So, they decided to produce private label products. In September 2017, the Cityfood-Interfood Group started to expanded its capacity, with the completion of the ultra-modern plant in Vértesszőlős. However, at the beginning of 2018, the company said it wanted to get out of contract manufacturing, so Foodbox took over the workforce and production systems, and bought the building at the end of November 2020.

The business was many years ahead of the market, and it took a long time for consumers to get to know and accept these convenience products. However, this did not discourage them; the owners believed in it and continued to finance the company. The vending machine business has been let go in the meantime, but the Managing Director believes that, in the long term, there is still potential for it if the Hungarian market catches up with Western trends. With a domestic market share of over 50%, Foodbox is a market leader, and on this basis, they have also targeted exports. Deliveries are already being made to the Czech Republic, Slovakia, and Bulgaria. Negotiations abroad have been stalled by the coronavirus pandemic, but with the lifting of restrictions, these initiatives have been resumed.

The company was financed in two ways: the owners contributed the capital until the company broke even, but bank loans were involved after that. Good relations have been established with financial institutions; government communication that the state is supporting the domestic food industry has played a role in this. Profits are constantly reinvested in technological development and innovation. Dividends have not yet been taken out by the owners, who believe in stable growth from internal funds.

According to their experience, the Western European trends are showing up on the Hungarian market with a slight delay, so the domestic customer base is constantly expanding, and the outlook is positive. In the Czech Republic, for example, where convenience foods are part of everyday life, this range of products is much more accepted than in Hungary. Product development is particularly important, because although there are basic flavours that are common to all countries and for which there is a constant demand, the so-called second to third flavours need to be replaced more frequently because the life cycle of the product is much shorter.

At the outbreak of the pandemic last spring, there was a very strong vacuum in the market, with orders soaring and retail chains building up large stocks, to the point where there were supply problems. After a few months, however, demand fell and people started to use up the stockpiles. Demand then stabilised at the end of the first wave. Growth resumed in the second half of last year, but this was driven by a number of new products coming onto the market. The third wave no longer had a significant impact on demand; the consumer habits of lockdowns were established, and people believed that the shelves would not be empty. As a reaction to the first wave, they started to develop home delivery, contracting with delivery companies.

They had the capacities to withstand demand shocks, and large capacities were anticipated when the plant was built. The aim is to double the current volume over five years, and there is the manufacturing capacity to do this. At the same time, warehouse capacity and automation are constantly being expanded.