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Romania Food and Drink Report Q3 2008
Business Monitor International, July 2008, Pages: 66
The Romania Food Drink Report provides independent forecasts and competitive intelligence on Romania's food and drink industry.
Despite its recent membership of the European Union (EU) and various political and economic improvements associated with the accession, Romania remains one of the least promising of the 14 Central and East Europe (CEE) markets surveyed by BMI’s Business Environment Rating. The Food and Drinks table places Romania second-last, above only Slovakia. Key reasons for this low ranking are low spending, a negative food and drink trade balance, and weak forecast growth. However, multinationals continue to see potential in the market, with a number of recent transactions illustrative of their desire to compensate for saturated Western European markets by shifting their activities elsewhere.
To this end, in April 2008, French dairy conglomerate Lactalis entered the Romanian market through its purchase of local dairy firm LaDorna.. One of the key local producers, LaDorna is mainly engaged in the manufacture of liquid milk, dairy products and cheeses, although it also runs a distribution network in Greece. Shortly prior to this announcement, Dutch Heineken revealed its intention to acquire the Romanian brewer Bere Mures, which would increase its market share in the country to 31%. Similarly, in November 2007, Cadbury Schweppes increased its stake in the recently purchased Romanian confectionery maker Kandia-Excelent to around 96%. Kandia is the second-largest producer of confectionery in Romania, with a well-established regional presence and a 20% share of the domestic market, which explains Cadbury’s involvement.
International mass grocery retail (MGR) operators continue to demonstrate their commitment to the Romanian market with a series of further expansions. German retail operator Metro Group is remodelling its Romanian Cash & Carry at a considerable expense, while Belgian retailer Delhaize
acquired Romanian supermarket chain La Fourmi and its 14 stores in March 2008 through its subsidiary Mega Image. Finally, French retailer Carrefour's profits in the Romanian market experienced a boost last year, with the company continuing to invest in Romania and retain its position as the country's top hypermarket operator, as well as entering the supermarket segment with the acquisition of Artima. Despite these positive developments, there are growing concerns regarding the country's macroeconomic stability. Romania's potential downfalls are its vast and widening current account deficit, which makes it vulnerable to any further downturn in global investor sentiment. Growth in the Romanian economy, which has averaged over 6% in the past five years, has been built on debt-driven consumer spending, often on imported goods. Consequently, any economic upset would have an immediate negative impact on MGR sales, which is something that foreign companies should consider.
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