“Private labels account for less than 10% of the market in the entire Balkan region, but are seeing strong growth. Moreover, the aggressive expansion of modern retailers makes these products reach more and more consumers,” says the Belgian executive put in charge of P&G operations in the Balkan region, supervised from Bucharest, at the end of 2012.
Romania is the most important market out of eight, which also include Bulgaria, the Republic of Moldova, Serbia, Bosnia and Herzegovina, Albania, Macedonia and Kosovo.
Dewaele, 51, says private label products account for 25% or even 30% of the market in Western Europe. Moreover, they are stronger in Bulgaria and Serbia than in Romania, but this is a sign that the local market still has potential for growth.
Private labels have cleaned the market of minor brands so far. One of the reasons why they are not stronger now is the high number of brands and retailers, hence fiercer competition over prices, Dewaele says.
Under the circumstances, a consumer will choose a brand name product over a private label product if the price difference is small.
P&G’s rivals on the local FMCG market are Unilever, Henkel and Colgate, as well as regional and local companies like Interstarchim.
Modern retail is a EUR7 billion to EUR8 billion business in Romania, where 12 networks compete and some of them even operate three different store formats. Romania is one of the few markets with so many modern retailers.
Hans Dewaele says that in order to fight private labels he decided to keep consumers close so he and his team are making house calls and participating in shop-alongs.
“Gillette, Ariel and Pampers are our most powerful brands. We used to sell Ariel products even before officially entering the market in 1993.”
Pampers was launched twenty years ago and was the first diaper brand in Romania, the executive said.
P&G entered Romania officially in 1993 and a year later opened its first office in the Balkans in Bucharest. In 1995, it bought the detergent plant in Timisoara at a time when only a handful of investors were interested in the country.
Hans Dewaele spent twenty-five years working for P&G and is one of the first employees the company brought in Romania to start its operations here. His role was to devise marketing strategies, which means pick the product categories and brands that P&G should launch on this market.
Romania is the only country where he went back for a second term. He returned in December 2012 after fifteen years.
P&G now has tens of brands distributed over several product categories and its most important are care, kids and laundry products, which generate 80% of its total sales, ZF has found.
It is the largest FMCG company in the country and its annual revenue from production and wholesale stands at more than EUR300 million. It has two plants in Timisoara and Urlati, with the latter opened in the fall of 2010 after a $100 million greenfield investment.
“We’ve had single-digit growth this year, more or less in line with the market.”
The markets where P&G operates were either flat or saw low single digit growth, Dewaele added. Romania has potential for growth because consumption per capita of either detergent or diapers is much lower than the European average and even lower than in Bulgaria and Serbia.
(English version by Loredana Fratila-Cristescu)