“We decided to no longer renew the contract with Philip Morris, which had become our only client in the last few years,” the company’s boss Wael el Ghadban told ZF.
“We have no idea what our future business direction is, we only know we want to keep going, so we will be looking for new customers. If we don’t find any, we don’t rule out bankruptcy.”
Cigarette producers are the most important clients to FMCG distribution companies, generating 50%, 80% or even 100% of their revenue. The termination of such a contract is a serious blow, which can really damage a business.
Top Brands Distribution was established in 1998 and its first client was Philip Morris. The client list then expanded to include Kraft Foods (now Mondelez Romania) and coffee producer Doncafe, but things changed and Philip Morris remained its only customer.
It is a common practice among FMCG producers to switch distributors based on the price factor. Mondelez Romania, for instance, is now working with Simba Invest.
According to the latest available official data, Top Brands Distribution’s debt stood at 46 million lei (EUR10 million) in 2012, while sales reached RON31.5 million. Debt was down 35% compared with the previous year, while business shrank 15-fold.
“We have no debts to the government, no debts to our employees, and are on schedule with payments to suppliers. We have debts to banks and shareholders. Only one bank refused to restructure one of our loans, we’ve been trying to do it for two years. It’s about the leasing of our office building,” Wael el Ghadban said.
This is the second high-profile insolvency in the business, after Pamimai’s. Pamimai, whose revenue stood at EUR74 million, lost the contract with cigarette producer BAT because approval on a letter of guarantee came too late, as far as ZF has learnt. It later dropped distribution of JTI cigarettes.
The leading FMCG distributors in Romania are Interbrands (Holson Holding and Rand Sherif) and Marcomex (Dan Minulescu).
(English version by Loredana Fratila-Cristescu)