“Loans are no longer a solution to reboot consumer spending, banks will no longer come and say ‘just show your ID and get a loan’. So you’ve got to be competitive, you have to allow consumers to buy as cheaply as possible, and a 24% VAT is too much for product prices,” Cornel Caramizaru, a manager with more than 15 years of experience in the fast-moving consumer goods industry told ZF in an interview.
A lower VAT for dairy products would also help Romania be competitive when the milk quota system ends in the EU, since other countries charge a much lower VAT, he added.
“No one will be carrying milk, we won’t see milk tank trucks queuing in Nadlac (western border town i.e.) but we might see trucks carrying already packaged milk. Romania would stand to lose twice then: because it no longer produces milk and because others will be earning the wages and making the profit.”
The 39-year old manager has been working for the local subsidiary of the Dutch dairy group for three years. He had previously spent 14 years at the PepsiCo bottler, one of the largest soft drinks companies on the market.
FrieslandCampina operates via three fiscal entities on the Romanian market: FrieslandCampina Romania, Napolact and Industrializarea Laptelui Mures, which posted EUR161 million revenue together last year.
This year has been a good year for the company, as its main brand, Napolact is seeing an estimated 15% increase in sales compared with 2013.
“I would rate 2014 as a good year for our company. The main thing is that Napolact brand is performing very well and we estimate a 15% growth for this year. It’s a very good growth given the market, either dairy or food market in general,” Caramizaru added without providing further details about the entire FrieslandCampina’s business in Romania.
The company started focusing on growing the Napolact brand in mid 2013. Napolact is one of the oldest milk brands in Romania and also the brand with the highest contribution to Friesland’s sales more than ten years after its takeover.
Its sales are now 10% higher than in 2008. “Napolact accounts for an estimated over 60% of the FrieslandCampina Romania business in 2014.”
FrieslandCampina’s other brands include Milli and Oke.
The dairy market grew by 1% I the first half, according to FrieslandCampina Romania, but consumption is far from matching the growth of the days before the economic crisis.
“The year 2014 brought a bit of optimism. There is consumption growth. The dairy market grew by 1% in the first half, that’s not sensational growth, it’s not the same as the growth in 2008 or before 2008 but it’s still growth not decline.”
Caramizaru says the growth was because of the higher purchase frequency, even though the people are buying less than they used to.
Two other factors helped the market do well this year: the increase in food consumption and in the amount of milk collected, and the decline of the grey market.
“All these things show this is a better year. It’s not extraordinary, but I say it is good because, unfortunately, we, the companies in the industry, are all experiencing a profitability problem. There are challenges in this department, because purchasing power remains low.”
FrieslandCampina’s only profitable company last year was Napolact, which posted EUR0.5 million net income. Danone, one of the biggest rivals of FrieslandCampina, too, slipped into the red last year, posting EUR1.1 million loss, according to Finance Ministry data.
The dairy market has lost more than 6% a year in the last five years, which caused a number of dairy plants to close. FrieslandCampina was one of the companies that decided to close plants, so it will only have two plants left in Romania next year.
(English version by Loredana Fratila-Cristescu)