Croatia’s distribution system is formalized by the Law on Trade which regulates the activities of wholesalers and retailers. With over twenty percent of the nation’s population and its central location, the capital city of Zagreb is the primary distribution center for the country. The port cities of Split and Rijeka are also important distribution points, and the eastern city of Osijek is the largest and most important distribution point in that region of the country. Croatia’s geographic location, access to seaports, and well-developed road (but not rail) transportation system give the country distinct advantages as a regional distribution point, particularly to countries located within the geographic area of the former Yugoslavia.
There are an estimated 7,500 retail outlets in Croatia (including kiosks, small shops, and open markets). However, shopping centers (such as Importanne, King Cross, Kaptol Centar, Avenue Mall, City Centar One, West Gate, Supernova, and Arena Centar in Zagreb), modernized or newly established domestic supermarket and retail chains (such as Konzum, Dinova-Diona, Prehrana, Plodine), and foreign chains (such as Bipa, DM, Metro, Bauhaus, Kaufland, Lidl, and Interspar) are the dominant players in the marketplace.
Using an Agent or Distributor
Using a local agent/distributor is the most common and efficient market entry. In Croatia’s competitive marketplace, it is essential that the U.S. exporter provide adequate servicing, spare parts, and components, as well as qualified personnel capable of handling service inquiries. In most cases, after-sales service should be available locally since potential delays often lead purchasers to seek alternative suppliers. Often funds for product marketing need to be provided by the U.S. company in order to ensure wide promotion and distribution of goods.
The U.S. Commercial Service has found that the most successful ventures by U.S. companies in Croatia are those where there has been thorough market research prior to engaging in a search for agents or distributors. U.S. exporters should carefully investigate the reputation and financial references of a potential agent or distributor and establish a clear agreement delineating the responsibilities of both the exporter and the agent. U.S. Commercial Service can help you in the market research through some of its services, including International Partner Search and Gold Key Matchmaking Service.
For additional information, please e-mail the U.S. Commercial Service office at: email@example.com.
Establishing an Office
An excellent first stop for information on establishing a Croatian company is the “Hitro” office, established by the Croatian government to assist citizens and businesses in communicating with government entities. The most common types of companies in Croatia include:
Limited Liability Company (d.o.o.)
Private limited liability companies are the most common type of company in Croatia. It is one in which one or more legal entities or natural persons invest in initial authorized stakes, with which they participate in the total authorized capital. Owners may be domestic or foreign legal entities and natural persons. Company assets are strictly separated from the personal property of the owners. The company is liable for its debts with all its assets.
Public Corporation (d.d.)
A public corporation company is based on capital, with owners (shareholders) investing in authorized capital divided into shares. The company is liable for its debts with all its assets. Shareholders are not liable for the debts of the company. The basic document for a public corporation is the articles of association, as it specifies the internal organization of the company. Authorized capital and shares must show par value in Croatian currency. The minimum amount of authorized capital is 2,500 euros. The Companies Act provides for a simultaneous and successive establishment of a public limited company. Company founders are the shareholders who have adopted the articles of association.
Under Croatian legislation, foreign companies and sole traders may conduct business in Croatia by setting up a branch office. The start-up and operation of branch offices owned by foreign companies are governed by the same regulations that apply to the establishment of branches by domestic companies.
A branch office is not a legal entity. The liabilities and rights stemming from its operation do not belong to the branch office but to the founder. The founder legally holds all rights and obligations of branch offices. In case of a dispute with third parties, the branch is not a party to it, but the company or sole trader that owns the branch. The branch office operates under its own name. The name should indicate both the branch’s and the founder’s registered office. If the same founder intends to establish several branch offices, the establishment procedure is carried out separately for each branch.
For the latest Investment Climate Statement (ICS) which includes information on investment and business environments in foreign economies pertinent to establishing and operating an office and to hiring employees, visit the U.S. Department of Department of State’s Investment Climate Statements website.
A representative office in Croatia may be founded by a foreign person performing an economic activity, or a national or international economic association from countries that are not members of the European Union or of the European Economic Area. The representative office can be founded for the purpose of market research and for purpose of representing the parent company.
Franchising is a relatively new business concept in Croatia. There are between 120 and 150, mostly foreign, franchisors operating in the Croatian market. McDonald’s has been present in Croatia since 1996 and has a total of 37 restaurants in 16 cities. The more recent U.S. franchises to enter the market include SIGNARAMA, RE/MAX, Kentucky Fried Chicken, Burger King, Subway, and Domino’s Pizza. Tourism and hospitality are considered to be the most promising sectors for franchise development. The typical prospective franchisee knows little about franchising and needs to be educated by the franchisor on how he/she could benefit from the concept. Numerous opportunities for advertising exist in the local daily press and specialized magazines.
Direct online marketing is popular in Croatia, while traditional direct marketing via phone is minimal. An average potential customer is unlikely to get more than a few phone calls or messages a year to his home or cell phone number made by companies to market their services or products. Currently, local banks, insurance and telecommunication services companies make such solicitations. Nevertheless, in 2017, the Croatian Regulatory Authority for Network Industries (HAKOM) introduced a possibility for telecom service consumers to opt-out from receiving direct marketing type of calls and messages by registering their phone number in the NE ZOVI (Do Not Call) register.
Direct marketing by mail is quite common, and households receive such mail on a daily basis, typically from local supermarket chains, restaurants, and personal services providers. Credit card companies regularly include in their bills special offerings of various consumer goods in partnership with other companies. Direct marketing by e-mail and personalized online marketing is currently the most common form.
The Law on Companies regulates the establishment of joint ventures, investment in companies with mixed ownership, as well as other types of foreign or domestic investment. This law, adopted in 1994, is very similar to the German Company Law. Establishment procedures require a Croatian lawyer, a notary public, and registration with the local Commercial Court.
There are no specific laws regulating licensing other than the Law on Obligations (“Commercial Code”) which addresses contract law. The licensing contract should also cover intellectual property rights issues (trademark, model, patent, or copyright), payments/royalties, the term of the contract, restrictions on using trademarks, etc. A Croatian lawyer should be consulted to ensure that provisions of the contract do not contravene Croatian law, making the agreement null and void.
The most well-known express delivery firms present in Croatia include FedEx, DHL, UPS, Overseas Express, GLS and TNT. The usual time needed for shipping documents from/to the United States is five days. If customs procedures are required, at least one more day should be added, providing that all the necessary documents are enclosed in the shipment. Shipments valued less than $20 do not need to be processed by customs. Croatia is part of the EU customs zone, and no customs procedures are needed for shipments from/to EU countries.
Detailed due diligence using utmost caution and assistance from experienced and well-connected local professionals is strongly recommended. One of the standard programs of the U.S. Commercial Service is the International Company Profile (ICP), designed to assist U.S. companies to enter international business relationships with greater confidence by providing background information on a prospective business partner. For additional information, please e-mail the U.S. Commercial Service office at: firstname.lastname@example.org.