Banks’ lack of appetite for lending and the low consumer spending have confined the company’s project to build a new plant to a drawer for the last three years.
“We were at a 2% lower level at the end of the third quarter compared with 2010 but offset the decline almost entirely in October and November. We will reach RON101 million turnover, the same as in 2010,” says Florin Rizea, general manager of Meda Prod 98, who has been running the business since 2006.
The cold cuts producer owned by Luchi Georgescu (65%) and Gheorghe Netoiu (35%) will close the year with barely any profit, as a result of the rise in raw material prices.
“We get the pork from the European Union, which entails different costs compared with Romania, but on the other hand, profit is also down because of the leu depreciation and because certain raw materials witnessed a surge in price by as much as 50%, and we could not pass any more than 5% of it on to consumers.”
Under the circumstances, Meda’s profit is to go down for the third year in a row. It posted EUR0.9 million in 2009, then EUR0.6 million in 2010 according to Finance Ministry data.
As a result of dwindling consumer spending, Meda adjusted its portfolio so that it now includes more ‘economy’ products, which account for 35%-40% of the total. Another step it took was to boost the percentage of sliced and packaged products it sells. This line of business now stands at 11% from the 3% two years ago.
Three years ago Meda Prod 98 was planning to expand to dry-cured meats by an investment in a new production facility but the crisis forced it to put it on hold. Florin Rizea does not rule out the completion of the project once investment loans are granted again, as well as after finding a new market because the competition on the home market of dry-cured meats is fierce.
Meda is not focusing on exports because its range of cooked and smoked meats has a lower shelf life than the dry-cured meats, which other local producers export. Only 5% of its sales come from orders from Italy and Spain.
As it relies almost entirely on the domestic market, the cold cuts producer intends to expand by one or two brands in 2012. It also plans to buy a warehouse to be able to serve the entire country. These investments should boost sales up by 5% to 10% a year.