Hungarian oligarch expands business empire to sportswear manufacturing

Hungarian oligarch expands business empire to sportswear manufacturing
Viktor Orban's friend supplies shirts for his home team, Felcsut
By bne IntelliNews July 24, 2018

Sportswear manufacturer Magyar Sportmarka, majority owned by Hungarian billionaire Lorinc Meszaros, a close friend of Prime Minister Viktor Orban, has signed contracts with three division one football teams and a dozen smaller clubs to supply clothing and accessories, Hungarian media reported on July 23.

Magyar Sportmarka wants to turn 2Rule into an innovative, world-class national sports brand, capitalising on the work of Hungarian professionals and businesses, said CEO Agnes Kovari, who owns 30% of the shares. Talentis Group, a holding company of Meszaros, holds the other 70%. 

The brand name 2Rule refers to Turul, the Hungarian mythological bird of prey, a national symbol.

Meszaros, who is commonly referred to as Orban’s proxy, became Hungary’s second-richest man after OTP chief Sandor Csanyi with an estimated wealth of HUF280bn (€858mn), making him a billionaire in dollar terms. Unlike Csanyi, Meszaros rose to Hungary’s business elite thanks to his friendship with Orban and through state contracts. 

His business empire includes companies across all sectors, ranging from tourism to banking, industry, agriculture, retail, media, energy and the sportswear manufacturing business. As a former mayor of the small village of Felcsut, Meszaros is also the founder and president of the football academy set up by Orban. 

Magyar Sportmarka has contracts with four local garment makers and is working on setting up its own workshop, Kovari said, but she gave inaccurate information on its suppliers and their location. According to media reports, one company has already cancelled a contract with Magyar Sportmarka, which raises questions about the viability of the company’s plans. 

At present, 20-30% of the materials used are locally made, but that ratio is expected to double within two years, and the goal is to reach 90% in three years, the CEO added. 

Keeping production in Hungary may not be the most cost-efficient way of operation, industry sources say. Local garment producers outsource much of their work abroad. Among neighbouring countries, Ukraine is the obvious choice, but it is still much cheaper to have goods produced in China or Vietnam than in Hungary, due to labour costs. 

It is unusual for sports clubs to switch suppliers in such a hasty manner, pointed out some analysts, who suspect that the deals struck by Magyar Sportmarka and the clubs were not solely inspired by business considerations but were rather based on political motivations.

There is no logic in replacing the products of a well-known international company with decades of research and experience with that of an unknown small company, with no track record, one Hungarian sports economist wrote on social media. In his view, the emergence of 2Rule is just another example of the corruption engulfing Hungarian football, ruled by political aspirations.

​​Taxpayers pay for Orban's passion

Orban, an avid football fan, has built a stadium next to his house in Felcsut, his home village, and has begun a large-scale stadium construction programme. Over the past eight years, the government has spent hundreds of billions of forint on upgrading or building new stadiums, even in small towns with only a second or third division team.

In 2011, parliament approved legislation to allow companies to sponsor sports clubs directly through tax deductions, commonly known as the TAO-scheme. 

In the past eight years, the budget’s shortfall from the TAO-scheme reached HUF500bn. Not surprisingly, the football academy operating in Felcsut has been a major beneficiary of the programme, receiving tens of billions of forints of corporate money.

Despite the flashy stadiums popping up in small towns, and the generous state subsidies, football fans do not have much to celebrate as Hungary is placed 51st on the FIFA rankings and its top clubs rarely go through the second or third rounds in international championships.

The maker of the 2Rule brand has received some marketing support from state news television, which broadcast the company's press briefing live when the products were showcased last week, a rather unusual gesture in favour of a privately run business. State television may have breached ethical and legal rules, experts say.

Despite all the publicity, the 2Rule brand got off to a shaky start as all the first division clubs wearing their shirts were defeated in the first matches of the season.