Nevertheless, presence in supermarkets and hypermarkets is compulsory since the 1,200 units of modern retail are bringing half of sales, with the rest being divided between the 60-70,000 kiosks, groceries, convenience stores and sometimes between own stores and exports.
Since they hold large chains and have high sales volumes, retail networks have a high negotiation power in talks with Romanian producers. Moreover, foreigners’ aggressive expansion doubled by their negotiation power, translating into lower shelf prices, led to the disappearance of several thousand small stores and to a decline in revenue.
Thus, though their networks account for just 1% in the overall number of stores in Romanian retail, they hold almost 60% of total sales on a market valued at EUR18 billion last year.
“Talks with international chains are very difficult, they are putting high pressure on prices and are always levying ever higher taxes. Now, they are focusing on their private labels, which have turned into a priority. For the moment, we are not in the situation of having to produce for them to be able to enter stores with our own products, but we may come to this,” says a producer that chose to remain anonymous.
Despite the high pressure they are putting on domestic producers, international chains are vital for the businesses of the former.
“We have to be present everywhere, both in modern and traditional retail. Albalact products are present in 6,000 sales point across the country,” says Raul Ciurtin, president and general manager of dairy producer Albalact.
The Romanian modern retail includes around 1,200 stores overall, while traditional retail includes 60-70,000 units overall.
“As weight in sales, 50% is accounted by modern retail and 50% by traditional retail,” adds Ciurtin.
The figures once again show supermarkets, hypermarkets and discount and cash&carry stores secure a much higher traffic and thus bring higher sales volumes to domestic producers.
As a matter of fact, international players, with total revenue of EUR8 billion to EUR9 billion, came to control 53% of the Romanian retail market in 2013, outrunning the traditional commerce for the first time.
“Around half of the group’s sales are secured by modern retail, 10%-15% come from our own stores, 10%-15% from exports and the rest from traditional retail. Though international chains are putting high pressure on prices, we need to be there as this is where traffic is,” says Grigore Horoi, president of Agricola Bacau, a major player on the poultry market.
Hans Dewaele, head of Procter & Gamble in Romania, recently said that two thirds of the company’s sales are secured by modern retail. In the Western Europe, modern retail secures 85%-90% of P&G sales. Dewaele is confident, though, that similar figures will be registered in Romania as well. He does not specify a timeline, though, saying the logistic system and infrastructure need to be developed.
The executive said modern retail is now expanding strongly and is getting ever closer to people. In this context, part of domestic entrepreneurs are vanishing or become partners of major networks. However, the expansion of the latter must not be seen as a negative as they pay taxes and hire.
(English version by Catalina Apostoiu)