“Consumption will no longer decline next year, but its structure will change. (…) We will become more cautious, more balanced. Romanians will abandon luxury items and turn instead towards basic products,” says Sorana Georgia, who has been running the Romanian operations of the Billa supermarket chain.
Since it is not expecting consumption to decline further, German retailer Billa, which is part of Rewe group, asked its shareholders to approve a major expansion plan on the Romanian market, of 20 stores next year.
If the plan is approved, the new openings will take the chain to around 80 stores. Billa’s expansion plan could entail an investment of between EUR35 and EUR40 million.
According to Sorana Georgia, if the store is under 100 square meters, the investment is less than EUR2 million, otherwise it is around EUR2 million.
This is Billa’s most ambitious expansion plan since its market entry in 1999, with the company opening 12 stores in its best year in terms of expansion – 2010.
This year the supermarket chain opened three stores, with three more openings planned by the end of the year.
“We are opening stores both because we have confidence that consumption will be revived and because we want to gain market share.”
Consumption started to decline in 2009 and continued its downward trend until 2011. So the cumulated decline nears 20%.
“You can’t be a pessimist your entire life”
Similarly to Sorana Georgia, Philippe Lejeune says he expects consumption growth next year. “We are not talking about a major growth, just by a few percentage points. In order to see significant growth, you have to cut the VAT and build roads,” says Lejeune, who has been at the helm of Cora since it entered the market. Also, “you can’t be a pessimist your entire life,” he says.
On the other hand, Thierry Destailleur, chief operating officer of Cora, says “2012 will be a complicated year, maybe even more complicated than this year, because the effects of what has happened in the last two years will be seen only in 2012.” He admits, though, that Romanians are ‘bon viveurs,’ so they won’t give up shopping.
Consumers choose basic products
In turn, convenience supermarket chain Profi pursued expansion this year, opening over 20 stores, with a further 25 planned for next year.
Although it opens store after store, Profi also expects a consumption decline next year.
“Consumption will decline overall, and its structure will change. Romanians will turn towards cheaper, more basic products,” says Pawel Musial, general manager of Profi Rom Food, the company that operates the Profi stores.
Asked why he continues to open stores if he expects the consumption decline to deepen, the Profi representative says the business can grow if the number of consumers also grows.
“A large number of stores means small prices. Our main focus is to cut our costs as much as possible, and whatever savings we make we fully re-invest in order to cut prices. The crisis allows us to make acquisitions at lower prices and to build more cheaply.”
He also says the decision to open stores takes into consideration longer-term prospects.
Purchasing power will increase
Laurian Lungu, financial analyst and managing partner within Macroanalitica, says in 2012 there will be a marginal growth of consumption. “There will not be a spectacular growth, but normally there should be a slight growth because there will be a slight increase in the purchasing power against 2010 and 2011.”
He explains that high inflation recorded in 2009, 2010 and even 2011 led to a decline in real wages.
(English version by Daniela Stoican)