As SAZKA Group strengthens its position as a leader in the lottery and gaming sector, with geographies firmly established in southern and northern Europe, and a current bid in the works for the UK National Lottery, Gambling Insider speaks with Group CEO Robert Chvátal about capitalising on technology and the knowledge at their disposal to deliver beyond expectations.
Robert Chvátal, who joined SAZKA Group in 2013, has helped to create one of the fastest-growing lottery companies in Europe, and there are no signs of slowing down now. He is clearly excited about the UK lottery bid but there are many other initiatives underway at SAZKA Group. Executing several initiatives at once and leading by example have been characteristic of Chvátal’s approach throughout his career, which started at Procter & Gamble, followed by 15 years in mobile telecommunications.
He believes one of SAZKA Group’s strengths is its geographical diversification: its two northern markets in Austria and the Czech Republic, and its two southern markets in Italy and Greece. The northern markets enjoy high levels of lottery penetration and are the Group’s trailblazers in terms of online sales, which Chvátal sees as key to its continued growth, and the Mediterranean markets benefit from a culture where gaming is a popular social activity.
The Group concentrates primarily on lotteries, with a smaller focus on digital gaming, sports betting and, as the name of SAZKA Group’s subsidiary Casinos Austria would imply, land-based casinos. It is made up of SAZKA a.s. in the Czech Republic, OPAP and Stoiximan in Greece, LOTTOITALIA in Italy and Casinos Austria and its subsidiary, Austrian Lotteries, in Austria.
With a presence in these varied regions and across such popular modes of gaming entertainment, SAZKA Group has managed to remain resilient and grow in a year of unpredictable shifts due to the spread of coronavirus. Business in the Czech Republic has remained strong, as have the lotteries and online business in Austria, although the casinos have been shut. In these regions, retail sales have remained steady since newsstands and retailers of essential goods, which are the main channels for lottery products, have remained open and lockdowns have helped to accelerate the share of online sales. Italy and Greece, however, were impacted in the first lockdown. In Italy, the regulator suspended lottery draws early on, and retail outlets selling OPAP products were deemed non-essential and were, therefore, closed. However, the Italian lottery remains up and running in the most recent lockdown with points of sale largely open, although Greece has once again been impacted.
Helped by its diversified footprint and products, SAZKA Group’s performance compares well to a leisure sector that has been dealt a hard blow. The Group appears to have had a robust 2020 with the last reported quarter, Q3, showing a swift recovery in GGR to slightly above 2019 levels. The last quarter of the year will be impacted by restrictions in Greece but the lotteries in other regions were largely unaffected, meaning 2020 overall should prove to be a robust year for the Group.
Over 80% of our EBIT is generated through lottery types of games and the demand for our products has been resilient. Our strategic focus on online channels has also paid off
“It was a challenging year for all,” says Chvátal, “but I’m really proud of our teams who have acted swiftly to keep staff and customers safe, and also adapted the business to lockdown and other restrictions. Over 80% of our EBIT is generated through lottery types of games and the demand for our products has been resilient. Our strategic focus on online channels has also paid off and I think the growth of digital sales is very supportive for our future growth.”
Online is certainly a priority for the Group with its northern markets already advanced on this front. The Czech business, for example, generated a significant 30% of its GGR online in 2020. Austria is also doing well online and will now be boosted by SAZKA Group’s experience and capabilities, with the Group owning a majority share of the Austrian business since mid-2020.
Online in the southern markets isn’t as prevalent yet but in Greece, OPAP launched a digital entertainment hub in March. Since then, OPAP is seeing good take-up of online lottery sales and encouraging growth in the online casino and sports betting businesses, despite starting from a low base.
Alongside the online strategy, Chvátal and his team are actively seizing other opportunities to grow the business. One focus is on event-based jackpots with specific themes. “For us, Friday the 13th has become a tradition. There are some magic dates when it’s worth trying your luck,” he says. Chvátal also cites Black Friday as a date that resonates in some of its markets. While many lotteries are not run in an innovative way, SAZKA Group is trying to instill agility and creativity into the lottery part of its business. “We are typically able to collect much higher wagers on these special dates because we’re able to market them better,” Chvátal adds.
Another area of interest for SAZKA Group is customer loyalty. That’s not unusual for many businesses, but lotteries face a different challenge compared to those online in that the retail customer base is traditionally totally anonymous; people go to a newsagent and buy a lottery slip and no one knows who they are, nor is there a way to capture their spending habits. In comparison, the online space requires that people register and be verified. This makes consumer behaviour more transparent and, importantly, consumers are safer from a responsible gaming point of view. However, SAZKA Group is finding some overlap between online and offline consumers that it can effectively utilise.“
We’re able to relate to the big data: what the percentage is of people who buy lottery and scratch cards, or play online casino, and vice versa,” he says. “This is a big benefit of online. But retail loyalty is also very important so we offer virtual loyalty cards, where players register online with a mobile number, which then allows us to identify them as a unique player. We also have a proposition in retail loyalty called Wheel of Fortune where participants benefit by being offered a second chance within 24 hours of their retail purchase, for example. People are definitely embracing it.” Despite these initiatives, Chvátal thinks there will always be a segment of the customer base that will want to remain anonymous and be reluctant to go online.
To have a financially stable, responsible and innovative operator running the national lottery makes sense in any country, and with that in mind, we’re going to the UK where the lottery deserves the best operator
He is clearly very focused on growing the businesses organically but M&A also remains an integral part of SAZKA Group’s history and future. The Group recently received a €500 million investment from Apollo, one of the most respected investors in the gaming space, to help finance future expansion. SAZKA Group’s track record on M&A is impressive as well as its record of making bolt-on investments, such as that of Stoiximan in Greece recently. Chvátal explains: “As part of our M&A strategy, our Greek business OPAP acquired a sports betting and online casino market leader called Stoiximan, which means ‘the bettor’ in Greek. We’ll be building on Stoiximan’s own proprietary sports betting platform not only in Greece but also in other European markets.”
And that’s not all in terms of growth initiatives. Closer to home, Chvátal is deep in preparation of the bid for the UK National Lottery. Air Miles and Nectar Card founder Sir Keith Mills, former J Sainsbury plc CEO Justin King, and co-founder of lastminute.com Brent Hoberman are also involved to secure this national treasure of a brand after 26 years of operation by Camelot.
“In my view it’s a good opportunity and it should be in the interest of the British people, government and regulator to seriously consider whether the stewardship of the national lottery under Camelot after over a quarter century looks a little dated and should be changed,” Chvátal says. “I think so, of course, because we’re the ones suggesting that change is necessary. We’ve demonstrated in several geographies that our proposition is a win for the government as we increase income for state budgets, and a win for consumers because we offer fresh and innovative products. To have a financially stable, responsible and innovative operator running the national lottery makes sense in any country, and with that in mind, we’re going to the UK where the lottery deserves the best operator. Sometimes after so many years of the same story, you can’t teach an old dog new tricks.”
Along with the expansion, Chvátal is keen to stress SAZKA Group’s commitment to responsible gaming. It can be a balancing act between operators and regulators to find the best compromise to mitigate risks yet ensure the most enjoyment and opportunities for the vast majority of consumers still exist.
“Responsible gaming is of course very important to every regulator in every country and it is always a crucial part of our strategy,” says Chvátal. All of SAZKA Group’s member companies are part of European Lotteries, so there’s a strict and supervised responsible gaming certification mechanism. “We’re fortunate in the sense that we’re in the business of big wins with small probability, which is the essence of lottery, draw-based games or even scratch cards," he continues. “The wins are infrequent, compared to games with higher probability and higher frequency, so the risk of excessive or problem gaming with lotteries is small. You don’t buy 100 lottery tickets for next Sunday’s draw. Given the payout ratio is smaller than for online casino, I find it unfortunate that there’s been this debate about scratch cards in the UK, which I believe can be solved by offering scratch cards that don’t show diamonds, gold nuggets or a safe full of cash, but something less glitzy and more common to everyday life, and maybe more fun. Above all, they’re consumer products and not dangerous. They should be enjoyable and playful propositions that people buy once, not products where you sit in front of the computer for hours or click 50 times in a row.”
Irrespective of gaming, people are indeed sitting in front of computers for more hours now due to the coronavirus dictating that people work from home. But SAZKA Group has been able to successfully transition to a more remote-based organisation.
I’m a big advocate of a combination of online and office so people can work flexibly. People deliver inspiration, creativity and motivation in unexpected ways and at unexpected times, so any way to maintain personal interaction, while remaining safe, is encouraged
“We have knowledgeable workers who are qualified, competent and able to work at home,” Chvátal adds. “But it’s not ideal. On the one hand, we are able to work very efficiently through remote working. But never underestimate the importance of the office kitchen or a corridor chit-chat.” This deficit is where Chvátal believes companies will suffer if we’re in lockdown for another year and the culture slowly erodes into robotics.
“I’m a big advocate of a combination of online and office so people can work flexibly,” he adds. “People deliver inspiration, creativity and motivation in unexpected ways and at unexpected times, so any way to maintain personal interaction, while remaining safe, is encouraged.” But the steady move to online is inevitable, from both the human capital and cost standpoints.
“We are fortunate that our business is able to move online, so you don’t see a major disruption like you see in many sectors like retail, hotels, travel and events,” he adds. “So we can continue to provide employment for our people and generate funds for good causes.”