György Váradi, owner
The owner of the Columbus Klíma Group, György Váradi, grew up at hotel construction sites in Budapest, because his father used to work for a socialist corporation that installed building ventilation systems in the pre-1989 communist era. Although he first studied medicine, he later “returned” to air engineering. He graduated from the faculty of engineering in Pécs (Hungary), then spent two-and-a-half years in the US, where air conditioning (which only came to Hungary around the 2000s) was a booming business already. In the US, he joined a company which repaired wall-mounted air conditioners and learned the whole trade firsthand. Returning home, he found the world of business more attractive, so he joined the international distribution network of Graphisoft at the beginning of the 1990s. He travelled a lot, and in Southeast Asia he saw how much cheaper wall-mounted air conditioners are there. In fact, they costed one-third of the devices imported from Germany to Hungary, not counting the additional margin applied by the two dealerships. He could not forget this opportunity and in 1994, he and his brother, Gabor Váradi, became air conditioner wholesalers. Their timing was good, because there were not any brand-independent wholesalers in Hungary at the time. The price difference is well illustrated by the fact that they could sell devices imported by air freight from Singapore at a competitive price in Hungary. Today, they use containers for that: every year they receive 100 from the Far East, each carrying 250 air conditioners. This allows them to distribute nearly 25,000 devices on the Hungarian market every year.
Business boomed from the outset, they could increase their market share both in the residential and office segments. Then came the crisis and, together with the construction projects, the bottom also fell out of the market for air conditioners (which were not yet regarded as basic home appliances). Columbus’s turnover dropped by 50%. They had to find a strategy to survive the crisis: this was when they began to focus more on marketing their wholesale activities. György Váradi remembers how hard this was. Because they do the import and distribution, they are not in direct contact with customers, only with resellers, who are usually small shops that do not have money for advertising. “Our success, however, depends on how big they dream”, he explained. They decided to advertise certain air conditioner brands centrally, but they also realised the importance of industry events. This is how the Columbus conference on air conditioning and business development started. They first offered marketing trainings to resellers, and the event was a great chance to introduce themselves to specialised shops and brand representatives.
Although it is becoming less significant, seasonality is still a key factor in air conditioning sales. 2015, for instance, had an especially high number of heat waves, with five or six heat warnings, it caused market demand to soar. In 2016, all air conditioning companies saw an unprecedented sales boom, including Columbus, which holds 8-10% of the residential and office market. Then, in August 2016, even though there is always a slight downturn in sales at the end of the summer, sales suddenly stopped. Reaching this years’ sales target of HUF 4.2 billion also became uncertain, as “we’ve had no heat for three weeks” (this was at the time of the interview). Examining a broader, more historical perspective, one can see that seasonality has become less prominent since the 2000s, because A/C units have become more efficient and can now be used for heating as well. Sales are of course also supported by the boom of the construction industry and the growth in of new home building projects. Although there was a time when customers preferred to spend more on premium category tiling; nowadays, there is much less penny-pinching when it comes to installing a HUF 250,000 A/C unit into a flat worth HUF 30 million or even more. The habit of installing the A/C unit last is, however, still quite strong among customers, so often they only want to install a very basic HUF 100,000 device into a building or flat worth many tens of millions of forints.
The Columbus Klíma Group does not only deal with wholesaling, but also offers installation services and engineering support. They have nearly 100 employees, so more than half of them are manual workers. Through their resellers, they are present in the entire country, working with 300 to 400 partners at the same time. The lack of competent professionals has been an issue for years, it limits growth in this sector as it does in so many others. In the opinion of the company manager, the problem is aggravated by the fact that more and more people leave their jobs and start their own businesses. Due to the strong demand, A/C technicians are – so to speak – promoted by the customers themselves. The result of this is that the average size of A/C installation companies becomes too small. This is why the company manager finds it so important to find and contact skilled labour. The situation is further complicated by the fact that A/C technicians usually have other trades as well; for instance, in the autumn, they switch over to installing boilers or entry intercom systems, and stop taking installation orders for air conditioning units.
As with every technical product, air conditioning has also become more energy efficient over the years. In the opinion of György Váradi, innovation is not only driven by technological development, but by EU regulations as well. These are becoming stricter and stricter: the A+ energy grade, which has been the standard for refrigerators and washing machines, is now the minimum standard for air conditioners as well. While air conditioners used to be especially “power-hungry”; today, their energy cost adds up to merely HUF 6,000-7,000 a year, if used for cooling only. However, the bill does not go much above HUF 10,000 if they are also used for heating on cooler autumn or spring days.
The company manager thinks that the key to future success lies in exporting: he wants to increase their share of exports from the current 10% to 80%, as the Hungarian market is limited, and can only take 150,000 to 200,000 A/C units a year. György Váradi thinks that the opening to export markets would need serious funding and a larger product range. The greatest challenge they currently face is not to lose momentum despite the shortage on competent professionals and not to miss out on the global boom of the industry. In order to develop competitive skills and sustain constant development, they are committed to taking part in the new autumn course of the ELITE Programme.
BÉT50 2018 publication: