Romania Food and Drink Report

In BMI's Food and Drink Business Environment Ratings (BER) for Q409, Romania retained the fourth position it achieved the previous quarter, out of the 14 markets surveyed in the Central and Eastern European (CEE) region. Although consumers are feeling the pinch of the recession, Romania's food consumption values are expected to post stronger growth in 2008-2013 than those of many of its CEE peers. In 2013, expenditure on food is forecast to reach RON71.89bn (US$31.0bn), growing at a rate of 27.98% in local currency terms. This development will be supported by the expansion of modern mass grocery retail (MGR) outlets, which are increasingly targeting markets outside the capital city. However, lower per capita incomes and undeveloped infrastructure in expansive rural areas will remain some of the main barriers to growth, with economic considerations weighing down on the short-term market expansion.

Nevertheless, a number of Romanian food and drinks players have reported positive developments, despite falling consumer confidence in recent months. In July 2009, multi-segment beverage company Tymbark Maspex reported a 14% year-on-year (y-o-y) increase in H109. The company, a subsidiary of Poland-based Maspex International, recently launched a EUR30mn manufacturing facility, which is expected to significantly increase production capacity, both for domestic supply and exports. Around the same time, the National Company of Mineral Waters (SNAM) suggested that the mineral water market in Romania could grow as much as 10% in the course of the year, despite a 6% y-o-y drop posted in Q109. This belief in the positive outlook for the Romanian soft drinks market is also upheld by Dole Europe's acquisition of Distrifruit - its long standing Romanian distributor - thus becoming the first multinational fruit conglomerate to enter the Romanian market.

In the MGR sector, a number of leading players announced expansion for the remainder of 2009. In fact, Belgium-based supermarket operator Delhaize Group announced it is to sell its four German stores to locally based Rewe, in order to focus on Romania as the hub of its Eastern European operations. Reweowned Billa Romania is expecting to open ten stores in total by the end of 2009, although the new outlets will be significantly smaller than the stores opened previously. Billa is also aiming to strengthen its Clever private label line, in a bid to maintain consumer levels during the economic crisis.

On the other hand, there is no denying that 2009 will be a challenging year for both the food and drinks and the MGR industry. Indeed, Belgian brewing behemoth Anheuser-Busch InBev (A-B InBev) is reportedly looking for interested parties that would buy its CEE operations, including Romania. Meanwhile, Romania's leading beer maker Heineken recently sold its bottled water operation to a domestic business in accordance with its strategy to focus its resources entirely on its beer business, while SABMiller's Romania-based subsidiary Ursus Breweries pulled the plug on Bere Azuga's brewing facility, due to the poor manufacturing capacity and equipment quality. Delhaize recorded Q109 net losses in Romania and Indonesia (its rest-of-theworld market), despite growing sales by 20.1% y-o-y, due to unfavourable exchange rates.