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Overseeing Global Vaping Growth from Budapest

An ambitious North American vaping company with plans for global leadership has its international customer service and sales operation based in Budapest, even though it has no Hungarian business, as of yet.

Graham Simmonds,  CEO of GILLA Inc.

According to its website: “Gilla aims to become the global leader in the manufacturing and distribution of generic and premium E-liquid brands and proprietary recipes for the vapor industry.” It is a goal that will be realized, at least in part, by a 20-strong team in Horvát utca, in Buda’s District II. 

All customer service and sales activities outside of North America, as well as international logistics and distribution, are handled by the team in Budapest, which Gilla took on a little over a year ago. “The main reason we did so was there was strategic opportunity, in that a company called Green Smoke had a distribution business set up in Budapest. When it was acquired, Green Smoke was going to shut down that operation,” chairman and CEO Graham Simmonds tells the Budapest Business Journal.

“The business was similar to ours; the advantage for us was that we would have to do very little training. We saw it as an opportunity, and of course it was great for the employees who would get to keep their jobs. What we did when we hired them is we honored their historic tenure from that previous business.”

Very Happy 

The CEO says the acquisition has worked out well. “I am very happy with the decision we made year ago. We were able to integrate it quite well with the North American business, and it has been very successful. It gave us an opportunity to expand that platform, the European business is growing well. Actually, we also have a Slovakian business, a distribution platform, that is only a 45-minute drive away from Budapest and that allows us to service our customers throughout Europe seamlessly.”

In terms of company size, Simmonds says, “We are somewhere in the mid-range, but we are the fastest growing company.” Significant European markets include the United Kingdom, Belgium, Netherlands, Denmark, Germany and France. One thing that stands out in that list is the relatively small size of some of those countries. “Smaller markets can be great opportunities, because bigger players will ignore servicing them for many reasons. Belgium, for example, is a complicated market with three official languages.”

And skills with languages is definitely something that the Budapest office can help with. “Our people speak many languages. Having a country manager who speaks the language and who, in dealing with the customer, can maintain a level of respect for the culture and how you are used to doing business is a help. We sell to 25 countries across most of Europe, and we have someone who can speak to people in any one of those markets in their own language. When we go to trade exhibitions and shows, for example, most North American companies do not have that capability; it is a huge advantage.”

All manufacturing is currently done in Gilla’s eVapor Labs, located in Daytona Beach, Florida. Simmonds says that this is a high margin business, meaning shipping across the Atlantic is viable, but having a European manufacturing base would be an obvious next step. “We would prefer that was in Hungary, so we can get lines of management close together. Our second choice would be Slovakia. We are having some due diligence done; there are a number of issues to look at around import and manufacturing.”

Highly Controlled 

And then there is the question of selling in Hungary itself. “We have looked at the market, and we have had our products registered, but to date there have been no sales. The distribution network [for tobacco products and e-cigarettes and related products] is highly controlled. We have to find the right distribution partner, a local partner who can plan the development of the market and manage things hands on. But we have great products, and that is one of things on the docket for this year.”

Interestingly, Simmonds admits he does not use his own products. “I am not an end user, I did not develop the product. What I am is an entrepreneur who has built a number of businesses from the internet to financial. This started as an opportunity for me because I thought it was a business that was being run inefficiently.”

He describes it as being, in essence, a bottling business, and decided to take the sort of approach used by bottling and distribution companies such as Diageo and Coca Cola, finding the right product from a range to suit the local palate.

What is Vaping?

Gilla Inc. specializes in the manufacture, marketing and sale of own-brand and white label e-liquids, used to vape, a process the Oxford English Dictionary defines as to “Inhale and exhale the vapor produced by an electronic cigarette or similar device.” Basically, the liquid is heated by an atomizer to deliver the sensation of smoking. As it has only been around since 2004, there have been no long-term studies on the health effects of vaping, but the respected British Royal College of Physicians published a report on April 28 last year called “Nicotine without smoke: tobacco harm reduction” that, according to the RCP website “concluded that e-cigarettes are likely to be beneficial to U.K, public health. Smokers can therefore be reassured and encouraged to use them, and the public can be reassured that e-cigarettes are much safer than smoking.”