Darko was established in 1991 as a limited liability company to distribute ice cream products that were produced from a state-owned facility located in Varna, Bulgaria. In 1993, the state privatized the Varna production facility, selling it to one of Darko’s competitors. In order to secure more favorable supplier terms, Darko began sourcing its ice cream from a different production company; however, supplier uncertainty, insufficient capacity, and increasing demand for its ice-cream drove Darko to seek a more concrete sourcing arrangement. In 1996, Darko accepted a joint-activity agreement with the Ministry of Agriculture to operate an ice cream production facility located in Sofia.
When Darko approached SEAF for financial investment, the Bulgarian ice cream distributor was in a difficult financial position and lacked a stable supply source. Darko needed financing to face its largest operational challenges which included securing reliable suppliers and scaling up its capacity.
Despite its immediate challenges, SEAF recognized Darko’s long-term growth potential and in 1995 invested a combination of debt and equity in the company though the CARESBAC Bulgaria fund. In 1997, CARESBAC Bulgaria invested additional equity in the company to help with the acquisition of an ice-cream production facility in Sofia called Darko-Serdika. In addition to financing, SEAF assisted the company in accounting, taxation policy, financial management, and access to additional, external sources of capital.
The combination of both rounds of SEAF’s financing allowed for several improvements for the ice-cream company. The first round of financing allowed for the purchase of 500 new freezers with improved product display features to expand Darko’s distribution network in prime consumer areas. The second round of financing in 1997 addressed supplier inefficiencies through the ownership of the Darko’s very own ice-cream production facility.
Between 1997 and 2000, sales grew by 175% and the company’s market share expanded from 11 to 25 percent. Darko currently is the market leader in fresh-milk ice cream. Together with its production company, Darko became the second largest producer and distributor of ice cream in Bulgaria with its 25 percent market share.
A Completed Exit
Much of Darko’s success can be attributed to its relationship with CARESBAC-Bulgaria. In 2002, SEAF made a successful exit from the company through a management buyout.