“We all changed after these three years of crisis. For instance, I no longer buy six products at one time, I only buy two. Even though I need something, I postpone buying it,” says Adrian Gaspar, chief executive officer of Scandia. Despite this he believes the market still has potential and can rebound.
Gaspar, who controls 80% in Scandia along with the Crestin family, returned to the chief executive position three months ago after three years during which the business was run by Robert Redeleanu.
Scandia moved manufacturing to a plant near Sibiu (central Romania) last year, an investment that took EUR40 million over the last four years. The move to the new facility allowed the company to boost production capacity by 60% to over 30,000 tons a year; the automation of the plant also allowed it to lay off 150 of its 700 employees in 2010.
“You have to streamline, competition becomes fierce at a time like this, we are trying to cut costs to avoid passing them on to consumers. You can’t help it, you just get to work on cutting them.”
Layoffs will continue, as Scandia had 50 employees more than it though it should at the beginning of 2011, so that Gaspar expects to end the year with 7% lower sales, a decline that will take the revenue to EUR43.7 million.
Next year’s strategy will therefore be adjusted to suit the appetite of Romanian consumers for cheaper products. “We might start working with private labels, but we will also keep our own brands. Private label production went up 3% this year,” Gaspar says.
The strategy also entails introducing smaller packaging, as well as other changes such as thinner cans, which will directly translate into lower costs. Scandia’s approach is different than other producers’ such as Orkla Foods, which has recently announced it would go for bigger packaging.
Another way for Scandia to react to the decline in domestic consumer spending is to boost deliveries to foreign customers. Exports stand at EUR3 million now, or about 7% of its revenue, up 2% compared with two years ago.
“The foreign market is extremely important. It proves we have a competitive product price and quality-wise.”
Scandia exports to Western European markets like Germany, Italy and UK, as well as to Eastern European countries like Bulgaria, Hungary and the Republic of Moldova.
The strategy to go abroad is also what other companies in the same business such as Agricola Bacau and CrisTim embraced.
Unlike its rivals, Scandia does not expand presence by going new countries but focuses instead on boosting the amount of products delivered to a set number of markets.
“We had the same number of foreign markets two years ago, but sales have gone up over the last two years.”
Adrian Gaspar does not rule out expansion to exotic markets such as Hong Kong, Ukraine and Russia.
While moving ahead with plans to boost exports, Scandia is not that convinced it should pursue expansion of its restaurant business too fast, even though at the end of last year it said it would open seven restaurants in shopping centers and on the ground floor of office buildings by the end of 2011. The seven new restaurants should have complemented the two already existing fast service restaurants in two malls.
Gaspar says investments are frozen for the moment until the company completes an assessment of its financial capabilities. Plans were changed to five restaurants in Bucharest, one of which in Plaza Romania mall or in the Old Town.