Packaged Food in Romania

Packaged Food in Romania - Industry Overview

EXECUTIVE SUMMARY

Very Modest Performance for Packaged Food in 2010

Economic Downturn Negatively Impacts Food Growth in 2010

Undisputed Leadership of Artisanal Products in 2010

Large Retailers Account for Strongest Dynamics

Economic Downturn Lowers Forecast Growth

KEY TRENDS AND DEVELOPMENTS

Romania Affected by Economic Downturn During 2010

Lifestyles Driven by Purchasing Power

Packaged Food Sustained by Expansion of Large Retailers

Romanians Show Increasing Interest in Healthy Food

Packaged Food Remains Fragmented

Brands Have Capacity to Stimulate Growth

Rural Areas Offer Significant Growth Potential

MARKET DATA

FOODSERVICE – KEY TRENDS AND DEVELOPMENTS

Headlines

Trends

• 2010 represented the beginning of serious economic downturn in Romania, affecting most of the population through limitations on income and the threat of job losses. However, the strong growth of purchasing power over 2006-2009 led to changes in consumption habits and lifestyle, with an ultimately profound influence on consumer foodservice as a whole; this became evident in 2010, when consumers had to reduce expenditure on the acquisition of durable goods as well as on the renovation of dwellings and real estate. This situation did not have too pronounced an effect on busy lifestyles in Bucharest and other large cities, where Romanians’ propensity to engage in other activities such as tourism and weekend shopping remained quite strong. On the other hand, lower-income consumers had to reduce their levels of expenditure on foodservice and direct their income to paying bills, procuring medicines and purchasing fresh food to be cooked at home.

Competitive Landscape

• The packaged food industry in Romania was heavily fragmented in 2010, with a few multinational companies active within dairy products, confectionery, oils and fats, sweet and savoury snacks, sauces, dressings and condiments, and soup. Meanwhile, foodservice consisted of many small businesses, with an incipient emergence of chains, especially in kiosks and fast food. As a result, most small businesses remained loyal to local producers of meat, bakery and dairy products because of the low number of transactions, but became more pretentious in terms of quality and sophistication. As a consequence, the main producers of oils and fats, spreads, soup, pasta, dairy and bakery products also held the leading positions in foodservice.

Prospects

• Having in view the expected positive dynamics of foodservice over the forecast period resulting from changes in consumption habits and lifestyle, distributors will tend to take the initiative towards the creation of special divisions for foodservice. Macromex SRL, one of the leading distributors in Romania for frozen processed vegetables, has created a specialist division for foodservice following the experience gained in supplying small independent food stores, kiosks and petrol stations, dealing with many small and repeat orders. Given the extensive fragmentation of foodservice, the overall situation is similar to supplying a large number of retail outlets. The same steps have been taken by Delaco SRL in dairy products.

Category Data

IMPULSE AND INDULGENCE PRODUCTS – KEY TRENDS AND DEVELOPMENTS

Headlines

Trends

• Impulse and indulgence products have become a common presence among the urban population, since these people have higher disposable incomes compared with rural inhabitants. The expansion of modern retailing, especially supermarkets/hypermarkets and discounters, has made a strong contribution to the excellent dynamics following a change of perception concerning impulse and indulgence products from sophisticated items to convenience ones, with further impetus added by strong exposure near checkouts.

Competitive Landscape

• Aside from artisanal products, overall the largest category within impulse and indulgence products by a substantial margin, Wrigley Romania Produse Zaharoase SRL was the leading manufacturer thanks to its prominence in confectionery where the company’s gum and sugar confectionery brands have a very strong impulse character. Kraft Foods Romania SA, Cadbury Romania SA and Nestlé Ice cream Romania SRL were close competitors due to their leading positions in chocolate confectionery and ice cream. Thanks to its commanding lead within sweet and savoury snacks, Star Foods EM Srl, itself owned by the giant PepsiCo Inc, ranked fourth overall in 2009.

Prospects

• The economic crisis, anticipated to exert its effects throughout 2010 also, will diminish in force over the forecast period, by the end of which a recovery can be expected. However, impulse and indulgence products will be less affected by this, a fact which creates a basis for good dynamics. Since these products are less affected by fluctuations in income, penetration of all distribution channels can also be expected. Multinational retail chains, with timely advertising and product testing at point of sale, will remain the main distribution channel, although certain impulse products such as gum, small-sized cakes, countlines, snack bars, and sweet and savoury snacks will also achieve a significant presence in small independent food stores and kiosks due to their universal nature.

Category Data

NUTRITION/STAPLES – KEY TRENDS AND DEVELOPMENTS

Headlines

Trends

• The evolution of nutrition/staples was affected by the economic downturn. The higher incomes of 2009 continued to have an impact on the majority of consumers in terms of lifestyle alterations towards increasing consumption of healthy food, although Romanians generally have little interest in health and dietary issues. Traditional Romanian cuisine features a significant amount of animal fat and deep-fried dishes. Nevertheless the rising level of health awareness was reflected in a slight reorientation of consumer preferences towards healthier options, although this eating behaviour was mainly restricted to highly educated, wealthier middle-aged consumers, people who were in fact less affected by the economic crisis. The majority of the population continued to eat in the traditional way, in other words without really thinking about how healthy the food is, as long as it is tasty and costs little.

Competitive Landscape

• Aside from the substantial share of artisanal products, particularly in the largest category of bread, there remained a high degree of fragmentation, with only three companies holding retail value shares of 4% or more in 2009. Vel Pitar SA and Titan SA were in first and second places respectively, a result of their leading positions in packaged/industrial bread, but these were challenged by the multinational companies prominent within the large categories of dairy products (Danone Romania SRL and Friesland Romania SA) and oils and fats (Bunge Romania SRL).

Prospects

• Romania is expected to represent an excellent locality for the production of nutrition/staples, with a strong interest in the development of both organic and functional food as a result of the anticipated economic recovery and greater investment by multinationals. Domestic manufacturers will be the main winners in this area, but only those which have already established strong operations. Higher disposable incomes will tend to cause a reduction in sales of artisanal products in favour of packaged alternatives, especially within bread and dairy products, where foreign investment will likely remain significant.

Category Data

MEAL SOLUTIONS – KEY TRENDS AND DEVELOPMENTS

Headlines

Trends

• Despite the economic downturn, consumers in Bucharest and other large cities remained time-poor in 2010, with professional employees required to work increasingly long hours. This resulted in a large number of consumers having less time available for food preparation yet sufficient disposable income to pay more for meal solutions. This need was addressed by the launch of new ready meals, frozen processed food, soup and sauces, dressings and condiments, all of which benefited from a change in perception from sophisticated to convenience products.

Competitive Landscape

• Cris-Tim 2 Prodcom Srl retained the leading position within meal solutions in 2009 due to its pre-eminence within the largest category of chilled processed food. Angst RO, Aldis SA, TC Affaires Srl and Tabco Campofrio Romania Srl, all with prominent positions in chilled processed food, also fared well in meal solutions as a whole. The trend towards increased branding as a means of differentiating products in this highly competitive area led to a concentration of packaged items in the hands of a few large manufacturers. These have developed their packaging and product quality since Romanians have become more cautious regarding provenance, labelling and product information.

Prospects

• The anticipated economic recovery following the recent crisis is expected to also lead to higher disposable incomes. These in turn are likely to encourage a modest sales performance over the forecast period given the poor economic outlook for the initial years of the forecast period, with constant value expected to rise slightly faster than volume. The anticipated rapid expansion of discounters and even of hypermarkets such as Kaufland in medium-sized cities is likely to provide strong support for volume growth but will also prove an important factor in slowing down unit price increases. Higher disposable incomes will also have an impact on consumer lifestyles, and since the recovery of the economy would most likely lead to longer working hours there will be less time available for cooking at home; this would in turn boost sales of meal solutions.

Category Data

DEFINITIONS

• Summary 1 Research Sources

Packaged Food in Romania - Company Profiles

Albalact SA - Packaged Food - Romania

STRATEGIC DIRECTION

KEY FACTS

COMPANY BACKGROUND

PRODUCTION

COMPETITIVE POSITIONING

• Summary 4 Albalact SA: Competitive Position 2009

Angst RO - Packaged Food - Romania

STRATEGIC DIRECTION

KEY FACTS

COMPANY BACKGROUND

PRODUCTION

COMPETITIVE POSITIONING

• Summary 7 Angst RO: Competitive Position 2009

Argus SA - Packaged Food - Romania

STRATEGIC DIRECTION

KEY FACTS

COMPANY BACKGROUND

PRODUCTION

COMPETITIVE POSITIONING

Cris-Tim 2 Prodcom Srl - Packaged Food - Romania

STRATEGIC DIRECTION

KEY FACTS

COMPANY BACKGROUND

PRODUCTION

COMPETITIVE POSITIONING

Orkla Foods Romania SA - Packaged Food - Romania

STRATEGIC DIRECTION

KEY FACTS

COMPANY BACKGROUND

PRODUCTION

COMPETITIVE POSITIONING

Scandia Sibiu SA - Packaged Food - Romania

STRATEGIC DIRECTION

KEY FACTS

COMPANY BACKGROUND

PRODUCTION

COMPETITIVE POSITIONING

• Summary 16 Scandia Sibiu SA: Competitive Position 2009

Supreme Chocolats SRL - Packaged Food - Romania

STRATEGIC DIRECTION

KEY FACTS

COMPANY BACKGROUND

PRODUCTION

COMPETITIVE POSITIONING

• Summary 19 Supreme Chocolats SRL: Competitive Position 2009

Vel Pitar SA - Packaged Food - Romania

STRATEGIC DIRECTION

KEY FACTS

COMPANY BACKGROUND

PRODUCTION

COMPETITIVE POSITIONING

• Summary 22 Vel Pitar SA: Competitive Position 2009

Baby Food in Romania - Category Analysis

HEADLINES

TRENDS

• The growth registered by baby food in 2010 was mainly the consequence of changes in lifestyle, which took place mainly during the booming period 2006-2008, and continued to show results in 2010, despite the impact of the financial crisis on purchasing power. As a consequence, there are an increasing number of Romanians concerned about baby health, of which many are prepared to pay more for baby food. The performance of baby food was also the result of fewer government grants for milk formula in 2010, due to the need to reduce budgetary expenditure. In this situation, retail sales increased in order to compensate for the reduction in free baby milk via public health assistance.

COMPETITIVE LANDSCAPE

• Milupa SRL and Nestlé Romania SRL were by far the main players in baby food in 2009. Foreign companies accounted for the bulk of sales in 2009, while Nestlé’s Nan was the leading brand due to its recognition across milk formula and good positioning on retail shelves. The availability of Milupa brands and their presence in social welfare programmes for subsidised milk created recognition and the habit of using such brands, resulting in the leading position for this company.

PROSPECTS

• The main factor behind the forecast growth of baby food will be economic recovery after the financial crisis, which will continue to affect Romania in the first years of the forecast period. Changes in lifestyle and consumer education will lead to a change in terms of the increasing acceptance of convenient baby food. However, the growth rate will not be significant, as the social welfare programme will continue to be in force, and will impact on sales of milk formula.

CATEGORY DATA

Baked Goods in Romania - Category Analysis

HEADLINES

TRENDS

• Bread remains a very important part of the Romanian consumer’s meal and it dictates the performance of baked goods as a whole. To most Romanian consumers bread continues to be a traditional food and it cannot be replaced by other bakery products. The economic crisis affected the incomes of the majority of the population, which was reflected in the stability of volume sales of bread in 2010 as consumers preferred to stick to the traditional bread as a cheaper item compared to other food products. In the countryside, consumption of bread is lower, but is replaced in many households by consumption of “mamaliga” (polenta), made easily at home from corn produced in the backyard. As the urban population maintained high consumption levels of bread, the alternative consumption of polenta in the rural areas was compensated for by the greater consumption of bread in numerous households affected by the crisis.

COMPETITIVE LANDSCAPE

• Artisanal goods maintained by far the biggest sales share, a consequence of the strong fragmentation of bread production. Fragmentation was very high, mainly at the regional level, where each county and district generally has two or three larger producers as well as hundreds of small producers that are very active in bread production. Artisanal bread accounted for the vast bulk of sales in Romania, with small bakeries often representing the sole source of fresh bread in smaller communities.

PROSPECTS

• The forecast period is not expected to bring spectacular changes to baked goods, due to the already high per capita consumption of bread. Bread will continue to dictate the overall performance of baked goods and the actual financial crisis is expected to further stimulate consumption of bread which will continue to remain a basic food for almost all Romanians. Unpackaged bread will retain the majority of sales due to its perception as fresh and cheap, but the growth is estimated to decline slightly over the forecast period as an economic recovery is expected, with longer working hours and higher consumer incomes that will encourage busier lifestyles and health awareness, with consequences for better volume dynamism for packaged/industrial bread.

CATEGORY DATA

Biscuits in Romania - Category Analysis

HEADLINES

TRENDS

• The good performance of biscuits in 2010 was the result of the negative effects of the crisis on purchasing power, which led to a change in options for consumers from more expensive chocolate confectionery to biscuits, perceived as cheaper and providing the same attributes as snacks or desserts. On the other hand, the good growth rates despite the recent austerity measures were the result of the consumption of biscuits on the go or as snacks in the office. The crisis strengthened the polarisation of incomes into high and low, with a small middle class. As a consequence, there is a return to plain biscuits, but also demand for premium brands, exploited already by multinationals, which are present on the market with their main premium brands.

COMPETITIVE LANDSCAPE

• Dobrogea Biscuit held the leading position in 2009 due to the distribution in Bucharest, Constanta district, and other large cities. Dobrogea Biscuit SRL is a company owned by Dobrogea Grup, but specialised in the production of biscuits. Its strong dynamism and leading position were the consequence of investment in a new production line and the expanded distribution, including the fast-growing multinational retailers. The rebranding of Eugenia, perhaps the best-known biscuit for decades, with strong appeal among children from all household incomes, was behind its performance. The acquisition of the brand Merlin from Strauss with national distribution also contributed to its leading position in 2009.

PROSPECTS

• The economic crisis that has affected Romania since the beginning of 2009 is expected to show its impact on sales of biscuits too. Consumers will focus on economy and premium brands, with a main shift from standard to economy brands. On the other hand, premium brands will maintain and even improve their position, especially following the activity of Kraft Foods with LU, BelVita Start, Oreo and Milka ChocoMinis, Nestlé with Joe and Supreme Chocolats with Ulpio.

CATEGORY DATA

Breakfast Cereals in Romania - Category Analysis

HEADLINES

TRENDS

• The growth of breakfast cereals in 2010 was mainly the result of the final effects of the boom period, which led to important changes in lifestyles and consumption habits in the last years of the review period, despite the adverse economic conditions. The sources of growth include the growing appeal of Western lifestyles and the acceptance of the health benefits attributed to breakfast cereals. In fact, high-income consumers have played an important role in increasing health awareness and creating the demand for “healthy” food. The perception that breakfast cereals provide health benefits contributed to the growing appreciation of these products among urban consumers, but per capita consumption in small towns and rural areas remains poor. The fact that people in the countryside and, to a lesser extent towns, consume food based on their own household produce, perceived as “natural”, limits the growth potential of breakfast cereals in these areas.

COMPETITIVE LANDSCAPE

• The concentrated competitive landscape in breakfast cereals remained in place in 2009, with Nestlé Romania maintaining its leading position without any serious challenges. It has also succeeded in recording share gain, albeit marginally. Meanwhile, the company’s presence is strong across all breakfast cereal categories, which represented an advantage over the main domestic producers, which continued to concentrate on either flakes or muesli.

PROSPECTS

• The changes in lifestyles and consumption habits, which were the result of integration into the EU and the strong growth of disposable incomes during the boom period 2006-2008, will remain in place over the forecast period, leading to moderate growth rates. The trend towards consumption of healthy food will remain the privilege of urban professionals, who are more open to novelty but also have higher comparative incomes. The financial crisis is expected to continue to affect Romania and large swathes of the local population until 2012, although higher-income and better-educated consumers will continue to show an interest in healthy food, thus supporting the growth rates of breakfast cereals. The growing presence of cheaper flakes, manufactured locally, will stimulate the dynamics of breakfast cereals as a whole, due to their penetration in several urban income households as well.

CATEGORY DATA

Canned/Preserved Food in Romania - Category Analysis

HEADLINES

TRENDS

• Canned/preserved food is expected to increase by 3% in retail current value terms in 2010. Amongst the most important factors behind growth in this category is the level of investment in product promotion by key players. Canned/preserved food is expected to register decline of 2% in volume terms. The competitive nature of the category is driving overall sales, as producers diversify their ranges of products and introduce new attractive packaging in terms of design and size, whilst also undertaking increased marketing activities and improving their distribution strategies.

COMPETITIVE LANDSCAPE

• The competitive landscape in canned/preserved food is relatively fragmented. The leading player, Scandia Sibiu, with its brands Scandia, Bucegi and Cardinali, accounted for a value share of 22% in 2009. Following Scandia Sibiu was Ardealul with a 10% share, Hame Foods with a 6% share, then Conserv Buftea, Contec and Omnitron Trading, each with a share of around 5%.

PROSPECTS

• Canned/preserved food is expected to continue to grow in retail constant value terms and in retail volume terms over the forecast period. The demand for canned/preserved food is close to saturation, and growth will be stimulated by the development of value-added products, rather than by increased demand. Volume sales are set to increase by less than 1% over the forecast period. The high unit prices will serve to limit volume growth.

CATEGORY DATA

Cheese in Romania - Category Analysis

HEADLINES

TRENDS

• The effect of the economic downturn was more obvious in the cheese category, because all products are industrialised, and an alternative is provided by cottage cheese, with a very strong component of consumption from own resources or purchases directly from production sites or in open markets. Large retailers also followed the consumer preference for unpackaged cottage cheese, and offered such products in their food areas. On the other hand, the volume decline in cheese was lower compared with the decline in disposable incomes, because urban consumers became dependent on shopping in large retailers. As a result, the sales decline recorded in 2010 was the result of the switch from packaged cheese to unpackaged cheese, especially in small cities and rural areas, while consumers in Bucharest and a few large cities, which have the highest concentration of multinational retailers, continued to keep an eye on packaged cheese.

COMPETITIVE LANDSCAPE

• Hochland Romania SRL was the leading company in cheese in 2009, benefiting from strong recognition of its Hochland brand in spreadable processed cheese. Extended advertising campaigns increased the popularity of the brand, which also helped the performance of hard cheese under the same brand. The performance of Hochland camembert, brie and bleu (all imported and available at affordable prices) improved, although they were not particularly influential on overall company and brand shares due to the small size of soft cheese and the strong competition from other similar imported products.

PROSPECTS

• Expected economic recovery in the last years of the forecast period is expected to lead to the slight growth of cheese. However, the fight for survival will be tough, especially for those small domestic producers which are focused solely on the production of cheese. Competition from the EU could also become important, as the rest of Europe will also recover after the crisis and increase exports. While the largest companies, such as Hochland, FrieslandCampina, Napolact, Albalact, Lactalis, Covalact and Delaco do not fear competition from EU countries due to their developed, well-known brands and strong positions, the smaller processors are expected to suffer losses or even closure unless they can create brands which can achieve strong regional recognition. The fact that incomes will remain limited in the first years of the forecast period means a strong fight for share, as consumers are expected to value quality at affordable prices.

CATEGORY DATA

Chilled Processed Food in Romania - Category Analysis

HEADLINES

TRENDS

• The largest and one of the fastest growth categories in 2010 is expected to be chilled processed meat, accounting for a 95% value share in chilled processed food in 2010. It is also expected to remain one of the most dynamic categories within the packaged food market over the forecast period.

COMPETITIVE LANDSCAPE

• Chilled processed food is dominated by local producers, namely Cris-Tim 2 Prodcom, Aldis, Angst, TC Affaires and Elit-Cugir. There are also several foreign producers which have established production facilities in Romania. Campofrío Alimentación (Grupo) entered the Romanian market in 1998, after acquiring the local producer Tabco; in 2009 Tabco Campofrio Romania held a value share of almost 8%. The German producer Reinert operates a meat processing facility in Feldioara, in Brasov district.

PROSPECTS

• In 2014, retail value sales of chilled processed food are expected to reach RON2.9 billion. Chilled processed meat is expected to continue to account for a 95% share of retail value sales in 2015.

CATEGORY DATA

Chocolate Confectionery in Romania - Category Analysis

HEADLINES

TRENDS

• The poor performance of chocolate confectionery was the result of the negative effects of the financial crisis on disposable incomes. Compared to 2009, when the first effects of the crisis were seen, mainly among the urban population, 2010 witnessed the application of severe austerity measures for the reduction of the budget deficit, which ended in an increase in taxes, out of which VAT was the most significant and had the most visible effect on inflation. The growth of unemployment and the reduction by 25% in incomes for budgetary employees also led to the noticeable loss of purchasing power for many families, which contributed to the volume decrease in confectionery in 2010.

COMPETITIVE LANDSCAPE

• Kraft Foods Romania retained the leadership in 2009, following its concentration on chocolate confectionery, having moved out of sugar confectionery. The strong campaigns for Poiana and Milka together with the launch of premium packaging ensured the top two positions for Poiana and Milka. Challenger Cadbury Romania could not keep the pace due to the situation arising after the acquisition of Cadbury by Kraft Foods at international level and the obligation for Kraft Foods to sell Cadbury Romania.

PROSPECTS

• The financial crisis and its consequences over the forecast period will have a lesser impact on premium products as higher-income consumers will maintain their consumption habits. The economy brands will also show good prospects as lower-income consumers will continue to value them, especially against a backdrop of a drastic reduction of income growth. As a consequence, premium chocolate confectionery should become increasingly perceived as more sophisticated for the majority of consumers.

CATEGORY DATA

Dried Processed Food in Romania - Category Analysis

HEADLINES

TRENDS

• Rice is expected to represent the most important category in dried processed food in 2010, accounting for a 49% share of retail value sales, despite the fact that it has reached maturity. Rice is also expected to register faster retail current value growth compared with retail volume growth in 2010. This growth trend is largely due to rising global commodity prices for foodstuffs, and, in particular, the rice shortage.

COMPETITIVE LANDSCAPE

• The main rice producers, Atifco International, Caliprix, Riso Scotti and Tasty Company, accounted for an 80% share of sales in value terms and a 46% share in volume terms this shows that it would be difficult for a new player to enter the category. Atifco International SA is a branch of Atifco Ltd. Egipt is currently the leader, accounting for a 45% share of overall sales of rice, followed by European Food (12%) and Klevek Co (8%).

PROSPECTS

• Although rice is expected to continue to account for the largest proportion of sales in dried processed food, it is also expected to record stronger volume growth in the forecast period than in the review period. This is due to the increasing popularity of Asian cuisine, which drives Romanian consumers to use more rise in their diet.

CATEGORY DATA

Drinking Milk Products in Romania - Category Analysis

HEADLINES

TRENDS

• Increased consumption of packaged drinking milk products was mainly the result of the expansion and popularity of large retailers, which led to changes in purchasing habits and encouraged sales of branded, packaged products. Manufacturers responded to increased demand for good quality packaged products by engaging in more intense branding activity in the largest category of fresh/pasteurised milk. However, sales of fresh milk from farm production and consumption from self-production units remained very high; far exceeding sales of industrially processed milk. This situation is the result of the traditional consumption of milk, and the perception that milk purchased from individual farms is far healthier and natural compared with packaged milk.

COMPETITIVE LANDSCAPE

• Albalact SA and FrieslandCampina Romania SA led drinking milk products shoulder-to-shoulder in 2009, which was a result of their increasing presence across the whole drinking milk products category and availability in all distribution channels. Albalact’s brands Fulga, Zuzu and Albalact, as well as FrieslandCampina’s Milli and Oké! brands retained leading positions, based on strong advertising campaigns, extensive distribution and product quality. On the other hand, La Dorna was the leading brand overall, due to its dominance of long-life/UHT milk, but also due to its investment in distribution across the whole country.

PROSPECTS

• Drinking milk products is expected to suffer less than other food sectors from the economic downturn, as there is already a strong component of consumption from own resources or purchasing fresh milk directly from small farmers. The expected recovery after the downturn will have results, especially in terms of a continuous switch from unprocessed milk to processed, packaged milk, but the this process is expected to be long and slow. At the same time, health concerns, and the sometimes unreliable sources of unpackaged milk, will lead to growth over the forecast period, although modest. Increases in incomes are not expected to immediately follow economic recovery, which is not predicted in the short term to create more conscious and informed consumers, capable of valuing the quality of more expensive packaged products.

CATEGORY DATA

Frozen Processed Food in Romania - Category Analysis

HEADLINES

TRENDS

• Other oven baked potato products and frozen processed red meat are expected to record the fastest constant value growth of 8% in 2010, as consumption of such products has increased amongst Romanian consumers. The lack of available free time for cooking and the shift towards healthier lifestyles were the main factors which led to the growth of these categories.

COMPETITIVE LANDSCAPE

• Within frozen processed food overall, the competitive landscape is fragmented, and no company has achieved a clear leading position. The leading player in 2009 was Metro Romania, which held an 12% share of retail value sales. In terms of importers, the highest sales were achieved by Macromex and Agroalim Import-Export, part of the American group Smithfield Foods.

PROSPECTS

• The expected rise in disposable incomes in Romania over the forecast period means that preparation time will become an increasingly important factor in food purchasing decisions. This will benefit frozen processed food as a whole, as heating up frozen processed food products is considered to be easier than preparing fresh food from scratch.

CATEGORY DATA

Gum in Romania - Category Analysis

HEADLINES

TRENDS

• The value growth recorded by gum in 2010 was the result of diminished purchasing power, which was behind the unit price stability provided by distributors and retailers, which preferred to maintain the volume sales, supported also by the strong impulse purchases. However, volume decreased as consumers became more cautious about how much they spend, with a first reduction in impulse purchases. This last issue is also explained by the revival of the close proximity independent grocers, valued especially by lower-income consumers who can make better management of their money resources and spend only on immediate-need products and avoid impulse purchases.

COMPETITIVE LANDSCAPE

• Wrigley Romania was the undisputed leading manufacturer in 2009 and over the whole review period. The company dominated sugar-free gum, functional gum and bubble gum through its Orbit, Winterfresh, Airwaves and Hubba Bubba brands. With regard to sugarised gum, the attempt to gain recognition here through the relaunch in 2006 of the old brands Wrigley’s Peppermint and Wrigley’s Spearmint, available in larger 10-stick packs, failed and they soon disappeared.

PROSPECTS

• The growth in both retail volume and constant value terms over the forecast period will largely be sustained by the product’s perceived health benefits and its appeal as an impulse purchase product. Most Romanian consumers enjoy chewing gum for its flavour or just for the pleasure of chewing. Nonetheless, other benefits are increasingly valued and these are forecast to stimulate interest and sales over the forecast period: fresher breath, providing a low-calorie snack, teeth whitening, deep-mouth cleaning, fighting tooth decay and aiding breathing. Gum brands will continue to benefit from heavy advertising support and the marketing of its oral hygiene properties.

CATEGORY DATA

Ice Cream in Romania - Category Analysis

HEADLINES

TRENDS

• The comparatively low growth rates in 2010 were the consequence of the financial crisis, which led to consumers switching to mid-priced and economy brands, which were more affordable in a situation of declining purchasing power. On the other hand, the attraction of modern retailing also stimulated sales of take-home ice cream, which is more expensive, but offers a lower unit price than impulse ice cream. Good availability in retailers all year round stimulated a reduction in seasonality, sustained by the constant presence of take-home ice cream on shelves, and the increasing preference for such products amongst consumers, who were negatively affected by austerity measures, and were thus in search of lower unit prices.

COMPETITIVE LANDSCAPE

• Nestlé Ice-Cream Romania SRL was the leading company in ice cream in Romania in 2009; after the acquisition of Delta Romania SA and the finalisation of the transformation into Nestlé Ice-Cream Romania it has not lost its leadership. On the other hand, the financial crisis, and the impossibility of achieving a significant share gain against the domestic producers, pushed Nestlé to give up its operations in Romania, and move the production of its brands to Bulgaria, at its facility in Varna, in order to reduce costs. However, Nestlé maintained its leading position due to the increasing penetration of its premium brands.

PROSPECTS

• The decline in seasonality is expected to continue at the same pace in the future, due to lower prices and the abundance of cheaper domestic brands, valued in the condition of the reduction of the purchasing power. Consumers will start to value branded products, which are perceived as providing better quality. However, the expansion of large multinational retail chains is also predicted to stimulate the growth of ice cream, due the increasing consumer preference for shopping in such stores, which is expected to lead to a further reduction in seasonality, mainly in take-home ice cream.

CATEGORY DATA

Meal Replacement in Romania - Category Analysis

HEADLINES

TRENDS

• Meal replacement products remained a minor packaged food category in 2010, with consumption targeting high-income consumers, concentrated in Bucharest and other large cities, where education levels are higher and life is more sedentary. The high incomes in 2008 led to important changes in lifestyle, which were still having a significant effect in 2010 as well, especially when considering health consciousness. Interest in slimming remains high among the young urban population, which in many cases, are just following the latest fashion.

COMPETITIVE LANDSCAPE

• Herbalife International Inc remained the leading manufacturer in 2009, due to its significant share in powder concentrates. The company boasts a strong distribution network, based on freelance agents and word-of-mouth recommendations. The company has been present in Romania for several years and it has promoted a new healthier lifestyle through its products. However, its main brand Herbalife Formula 1 ranked second in 2009, closely challenging Walmark Romania’s Viaredin, which held the biggest share of meal replacement slimming products due to its recommendations by pharmacists and its perception as providing a visible effect. Herbalife Shapeworks was positioned as a main slimming product, covering the entire range of dietary needs. Its relatively high price was compensated for by the perception that it is seen as the best product when starting a diet.

PROSPECTS

• Meal replacement slimming products are expected to see good growth over the forecast period, despite the negative effects of the financial crisis. The explanation can be found in the small consumer base primarily to be found among consumers enjoying higher incomes. The desire to match the fashion of slim silhouettes will keep growth rates high, although sales remained limited to Bucharest and a few large cities. The traditional dominance of powder concentrates, used to prepare slimming drinks, will weaken, due to the increasing presence of bars, which are much cheaper and are perceived as impulse products, easier to consume and with increasingly wide availability.

CATEGORY DATA

Noodles in Romania - Category Analysis

HEADLINES

TRENDS

• The noodles category does not have a strong presence in Romania, because there is little tradition of eating noodles; most Romanians prefer pasta. However, this relatively new category increased rapidly from a low base throughout the review period, registering value sales of RON5.5 million in 2010.

COMPETITIVE LANDSCAPE

• VIFON – Vietnam Food Industries Joint Stock Co and FG Food Carpati Srl were the only major players in noodles in Romania in 2009. FG Food Carpati is part of the Russian company Rollton, which entered the category in 2004, and saw a steadily increasing value share from that time. VIFON, on the other hand, saw its value share decrease over the same period.

PROSPECTS

• Noodles, which is still a young category in Romania, is expected to increase over the forecast period, although at a slower pace than seen over the review period. Growth will be stimulated by a greater variety of products penetrating the category. However, it should be noted that it is unlikely that noodles will ever be considered an important category within the packaged food market in Romania, simply because Romanians do not have a strong tradition of eating noodles.

CATEGORY DATA

Oils and Fats in Romania - Category Analysis

HEADLINES

TRENDS

• The main factor which impacted sales of oils and fats in 2010 was the unchanged price of sunflower seeds on the domestic market; this was due to good production, which was sufficient for manufacturers to maintain price levels. In fact, the price of raw seeds was the main determinant for the performance of oils and fats as a whole. In this situation, as staple products, oils and fats did not show a noticeable change in 2010 despite the worsening economic situation and the decline in disposable incomes.

COMPETITIVE LANDSCAPE

• As vegetable and seed oil accounts for the vast majority of sales of oils and fats in Romania, the main manufacturers of such products also accounted for the largest shares in oils and fats as a whole. Bunge Romania SRL was the leader in oils and fats in 2010; a position which was consolidated after the acquisition of Agricover SA, the leading domestic manufacturer at the time. The top four positions were held by multinationals, with interests in seed oils, margarine and spreadable oils and fats. The ranking of the top brands was definitely in favour of the manufacturers of vegetable and seed oil, Cargill Oils SA and Bunge Romania SRL, with Cargill’s Untdelemn de la Bunica (Oil from Grand’ma) brand retaining the leading position. The explanation stands in the premium nature of Untdelemn de la Bunica, and the fact that it is the only brand from the multinational Cargill Inc in Romania, while Bunge Romania has several brands, of which only Floriol is premium.

PROSPECTS

• Following the experience of the last years of the review period, the price of sunflower seeds will be the main determinant for the sales growth of the largest category of vegetable and seed oil. At the same time, manufacturers are prepared to develop the production of corn and soy oil in order to reduce their dependence on fluctuations in the price of sunflower seeds, but this is only in view of economic recovery, which is expected to take place only in the last years of the forecast period. However, GDP growth is not predicted to record high rates, and increasing purchasing power will follow later, slowly; thus producing very small changes compared with the review period.

CATEGORY DATA

Other Dairy in Romania - Category Analysis

HEADLINES

TRENDS

• Declining purchasing power was the main factor responsible for the poor performance of other dairy products in 2010. Earlier in the review period, higher incomes were responsible for changes in consumption habits and lifestyles, with increasing interest in packaged products and larger amounts purchased during weekly shopping trips. This trend was slowed down by the economic downturn, as packaged food proved to be the most appropriate for weekend shopping, dominated by cream and fromage frais and quark.

COMPETITIVE LANDSCAPE

• FrieslandCampina Romania SA held the leading position in other dairy products in 2009, due to its high share in the largest categories of fromage frais and quark and cream. Although it did not advertise its brands in these categories, it gained its strong position through the best shelf placement via extensive distribution channels, thereby resulting in high brand recognition for its Milli and Oké! brands. Danone Productie si Distributie de Produse Alimentare (PDPA) SRL was its main challenger, but domestic players also improved their presence in supermarkets/hypermarkets across the whole of other dairy products.

PROSPECTS

• Economic recovery is not expected to be noticeable before 2012, and will be followed by an improvement in purchasing power, which will have an impact on the forecast growth of other dairy products. Low income consumers will maintain an interest in fresh sour cream and savoury fromage frais, with a particular focus on cottage cheese. This preference will be accentuated by the large proportion of the population living in rural areas and small cities; these consumers will continue to rely on consumption from their own resources or purchases from production farms or in open markets.

CATEGORY DATA

Pasta in Romania - Category Analysis

HEADLINES

TRENDS

• In 2010 pasta was characterised by a diversified offer, with most producers trying to meet consumers’ needs by launching new higher quality products, or by improving the quality of existing products. The pasta offer in Romania consists of a wide variety of products, both in terms of composition and shape. According to the main producers, demand is currently almost fully covered. The slower growth rates recorded in 2010 compared with previous years in the review period reflect the fact that the category is approaching maturity.

COMPETITIVE LANDSCAPE

• Local producers dominated the pasta category in 2009, accounting for the majority of sales, led by Pan Group SA with a 24% share in 2009, and Pambac SA being second with a 22% share. Pangram SA was third with a 19% share. Barilla Alimentare SpA was in fourth position in 2009 with its Barilla brand, which is the most popular foreign pasta brand in Romania. The company is working towards a better position in 2010. In this respect, it plans to invest EUR600,000 in a new production line in 2010, renewing its equipment and automating an existing warehouse. The company registered sales growth of 112% in 2010.

PROSPECTS

• Pasta is a product which will always have a large customer base in Romania, because it can be used in a variety of meals or be eaten as a meal in itself. As perceptions of pasta are changing amongst Romanian consumers, higher quality products, such as pasta which is positioned specifically to be used in Italian cuisine, are expected to become more popular. Tortellini, ravioli and penne are examples of the newer product offerings available in the Romanian market, and it is expected that there will be more such products available over the forecast period.

CATEGORY DATA

Ready Meals in Romania - Category Analysis

HEADLINES

TRENDS

• Canned/preserved preserved ready meals are more popular than frozen ready meals in Romania. However, this is starting to change, as higher growth rates are expected to continue to be registered by frozen ready meals in 2010. The lack of a culture of consumption of ready meals means that Romanian consumers tend to perceive frozen processed food as healthier and easier to prepare than canned/preserved food. This perception is boosting sales of frozen ready meals, which is expected to register the fastest retail value growth in 2010.

COMPETITIVE LANDSCAPE

• Scandia Sibiu was the leading player in ready meals in 2009, with a 27% value share, due to its range of traditional canned/preserved ready meals under the Scandia brand. Other important Romanian producers in 2009 included: Glina, with its brand Mandy, Cris-Tim 2 Prodcom, delivering most of its production of ready meals to Carrefour, Agricola Bacau with its Sav’or brand, and Transavia. Almost all Romanian producers focus on traditional recipes.

PROSPECTS

• Ready meals is expected to post a CAGR of 1% in constant value terms and 3% in volume terms over the forecast period and achieve sales of RON28 million by 2015. Ready meals are still only purchased by a relatively small proportion of the Romanian population, due to low disposable incomes and traditional cooking habits, with the roll-out to a much wider consumer base expected to extend some time beyond 2014.

CATEGORY DATA

Sauces, Dressings and Condiments in Romania - Category Analysis

HEADLINES

TRENDS

• The sauces, dressings and condiments category has not yet reached maturity. Sauces and dressings are gaining share within the category, as they represent relatively new products in the Romanian market. Not only is the number of available brands increasing, but so too is the range of product types and brand extensions. In 2010 the category was characterised by innovation, both in terms of products and packaging.

COMPETITIVE LANDSCAPE

• The sauces, dressings and condiments category was fragmented in 2009, with both foreign and local producers present. Different operators led the various categories within sauces, dressings and condiments. Within the ketchup category, Orkla Foods Romania SA, Sima Prod Academiei SRL, Original Prod Srl, Metro Romania Srl and HJ Heinz Co led with a combined value share of 94% in 2009.

PROSPECTS

• Romanians are expected to place greater emphasis on product quality in the future than they do currently, particularly in urban areas. They are becoming more aware of the fact that the ultimate taste of the food they consume is often largely dependent on the sauces, dressings or condiments that are used, and that certain dishes taste better with certain sauces. It is anticipated that unit prices will decrease, while the quality and product specialisation will become more important over the forecast period.

CATEGORY DATA

Snack Bars in Romania - Category Analysis

HEADLINES

TRENDS

• Snack bars represents a minor packaged food category in Romania, and the good volume growth rate in 2010 is the result of new consumer lifestyles, sustained by the boom period of 2006-2008, and orientated towards increasing concern for diets and healthy food. The support of advertising campaigns was also very important, with Nestlé Romania being the heaviest advertiser for its brand Fitness. The increased product awareness and demand was also the result of the perception of snack bars as healthy snacks for consumption on the go.

COMPETITIVE LANDSCAPE

• Nestlé Romania dominated snack bars in 2009. The company’s sustained efforts in promoting its brands contributed to its undisputed leadership. The popularity of the company’s breakfast cereal brands boosted the awareness of its breakfast bars, marketed under the same brand names. It also raised brand awareness by distributing across retail channels, from small independent food stores, kiosks, and petrol/gas/service stations to supermarkets/hypermarkets and discounters.

PROSPECTS

• The forecast performance of snack bars is based on the increased availability and greater consumer awareness of these products. These factors will be achieved through TV and magazine advertising campaigns that promote the health benefits, including the weight-control properties of snack bars. Snack bars are expected to benefit from their established credentials as impulse products. This perception will be sustained by the massive presence of large supermarket/hypermarket chains, which are expected to make an important contribution to lifestyle and consumption trends over the forecast period.

CATEGORY DATA

Soup in Romania - Category Analysis

HEADLINES

TRENDS

• Canned/preserved soup has not yet established a steady consumer base in Romania, in spite of rapid growth over the review period. Instant soup saw current value growth of 3% in 2010, which reflected the major trend in 2010; namely the growth of products which are convenient and easy to make, as producers sought to appeal to increasingly time-pressed consumers. Soup consumption in Romania is relatively low compared with in other European countries.

COMPETITIVE LANDSCAPE

• Multinational companies, including Nestlé Romania SRL, Unilever South Central Europe SRL, Gallina Blanca SA and Podravka dd, which together accounted for 93% of sales both in value and volume terms, dominated the soup category in 2009.

PROSPECTS

• The soup category is expected to continue to see growth over the forecast period; albeit at a slower pace than that seen over the review period, with constant value sales increasing by a CAGR of 1%, as the category approaches maturity. The category continues to offer significant potential for growth due to the fact that increasing numbers of consumers are interested in new flavours and tastes. Soup is expected to increase in popularity in Romania as lifestyles become busier, as it takes less time to prepare than other kinds of meals.

CATEGORY DATA

Spreads in Romania - Category Analysis

HEADLINES

TRENDS

• The moderate current value growth in 2010 was mainly the consequence of the economic crisis, which affected retail sales. The explanation can be found in the high level of home production of jams, which increased in 2010 due to a reduction in consumer purchasing power and further financial problems among households resulting from the austerity budget. The home production of jams is also a tradition in most the rural households and the economic downturn favoured the continuation of the tradition. Consequently, sales failed to achieve their full potential. The purchasing of honey or jams and preserves directly from individual producers or in outdoor markets also remained high and undermined sales of branded spreads.

COMPETITIVE LANDSCAPE

• Cream Line Romania and its Finetti brand was the leading manufacturer in 2009, followed closely by the multinational player Orkla Foods Romania SA and the brand Bunatati de la Bunica (Grandma’s Delicatessen). Both companies owe their positions to extensive distribution in all channels and to nationwide coverage.

PROSPECTS

• The forecast performance by spreads will be in connection with the changes in lifestyle, sustained by the boom period 2006-2008, with growing consumer interest in natural and healthy food. Although the first years of the forecast period will be tough in terms of purchasing power, an economic recovery is expected, with growing incomes as one consequence, thus leading to the increasing acceptance of packaged products at the expense of home-made ones. Quality and healthy attributes will continue to drive the performance of spreads.

CATEGORY DATA

Sugar Confectionery in Romania - Category Analysis

HEADLINES

TRENDS

• The decline in volume and the modest value growth in 2010 were the result of the financial crisis and the measures taken by the government in order to reduce the budget deficit, with dramatic changes in the purchasing power of large categories of the population. As a consequence, the more expensive sugar confectionery, which was the star of the boom period 2006-2008, lost sales because the population switched to cheaper products. On the other hand, the decline was not that high as most of the consumers of more expensive sugar confectionery were young urban professionals, who were less affected by the crisis and bought on impulse as they are the most frequent visitors at large retailers where sugar confectionery is often placed near the checkouts due to its stronger impulse character.

COMPETITIVE LANDSCAPE

• Wrigley Romania was the leading player in 2009 due to the strong positions enjoyed by its brands Juicy Fruit, Orbit and Solano, and also gained significant share. Perfetti Van Melle also retained a leading position with Chupa Chups, Alpenliebe and Mentos. As far as brands are concerned, Cadbury’s Silvana was the leading brand in 2009, benefiting from strong recognition, nationwide distribution and affordable prices.

PROSPECTS

• The changes in lifestyle seen during the boom period will also remain in place over the forecast period as the appetite for premium products will remain unaltered for high-income consumers despite the negative effects of the crisis. In fact, the urban professionals are the heaviest consumers of premium brands and their incomes remained high, although the austerity measures will have an impact on all income categories. On the other hand, the low-income consumers have already switched to and will likely stick to economy brands over the forecast period, which offsets the rising sales of premium brands. As a consequence, both volume and value will record modest annual growth rates to 2015. Locally manufactured brands are expected to remain positioned in the economy segment and they will continue to be better represented at the regional level, while national distribution will increasingly become the privilege of the multinationals.

CATEGORY DATA

Sweet and Savoury Snacks in Romania - Category Analysis

HEADLINES

TRENDS

• Volume growth was strong in 2010, at 4%, due to increasing product penetration. Manufacturers started to focus on launching new products, offering improvements in product quality as well as more attractive packaging in order to encourage consumers to pay more for high quality products. Consumers’ orientation towards healthier products had an impact on the category, prompting the most important players to try to meet this demand by launching healthier products. Romanian consumers tend to look for ingredients before buying certain products, whilst also responding well to variety and a good quality/price ratio.

COMPETITIVE LANDSCAPE

• Multinational companies led sweet and savoury snacks in 2009. Star Foods EM Srl (part of PepsiCo Inc), was the leader with its main brands Star and Krax, followed by Intersnack Romania, which operates the Chio brand. It is difficult for smaller companies such as Standard Nutricia SRL, which operates the brands Oups, Fish, Zoo, Smiley, Standard and Bazzaconi, and Best Foods Productions SRL with the brands Jumbo and Lotto, to gain share, as they do not yet benefit from strong, established brand names, large communication budgets and well developed distribution networks.

PROSPECTS

• Over the forecast period it is likely that the sweet and savoury snacks category in Romania will approach maturity, as it has in other EU countries and in the US. This will happen when it becomes more difficult for brands to differentiate themselves from one another, and product lines will appear very similar to consumers.

CATEGORY DATA

Yoghurt in Romania - Category Analysis

HEADLINES

TRENDS

• The growth of yoghurt and sour milk drinks in 2010 was mainly the consequence of important changes in consumption habits, especially in large urban areas, where incomes remained comparatively higher and the expansion of large retailers was strong. Large retailers with substantial shelf space, and increasing retail sales in Bucharest and large cities, made an important contribution to growth in yoghurt and sour milk drinks. The strong presence of large retailers in large cities also turned into a benefit for small manufacturers, which succeeded in increasing the availability of their products to a wider range of consumers, increasing brand recognition and boosting sales growth.

COMPETITIVE LANDSCAPE

• Danone Productie si Distributie de Produse Alimentare (PDPA) SRL retained its outright lead in yoghurt in value terms in 2009, benefiting from high exposure, advertising campaigns and a highly developed distribution network. It also took advantage of its specialisation, with its sales concentrated in yoghurt. All the other significant companies, such as FrieslandCampina Romania SA, Albalact SA, Tnuva Romania Dairies SRL, Muller Dairy RO SRL, Napolact SA, Covalact SA, Brailact SA and Delaco SRL followed some distance behind, despite strong branding activity and extended distribution.

PROSPECTS

• The forecast period is expected to see a reduction in the effects of the economic downturn, and witness recovery, but this is most likely to start in 2012. However, growth in incomes will be slower compared with the period 2006-2008, which is considered by analysts as the boom period of the review period. In this situation, sales of yoghurt will continue to grow, but sales will be under potential, given the large proportion of the population living in the countryside; these people are traditional consumers of dairy products from their own small farm resources. In fact, yoghurt is less affected by consumption from own resources, while sour milk (lapte batut) remains important in terms of consumption from own resources, due to its easier preparation from fresh milk.

CATEGORY DATA