The shelf price of Dove soap for instance has been cut by 25%, from 4 lei to 2.99 lei. Unilever South Central Europe is the Romanian distribution business of Anglo-Dutch giant Unilever and the second-largest player on the Romanian consumer goods market, after Procter & Gamble.
“We were too expensive compared with our competition. We are analyzing each product in our portfolio and are looking at our competition in Romania, at the trade structure and at the cost-profit ratio. The decision to cut prices is taken locally [for each country],” explains the Polish executive who runs Unilever South Central Europe. The Romanian business recorded a turnover of RON790 million (EUR177 million) in 2012, up 9% against the previous year.
From Bucharest, Unilever South Central Europe coordinates operations in several countries in the region: Romania, Bulgaria, Serbia, Montenegro, Albania, Macedonia, the Republic of Moldova and Kosovo. The Romanian market is the leading one, contributing around 50% of revenues, according to the latest information.
The price cut for Dove soap prompted sales to rise 10% sales rise for the category, this being the biggest rise in 2013, according to Malinowski.
Overall the turnover of Unilever South Central Europe will see a single-digit rise this year, despite a difficult market, tight competition and increasingly cautious spenders.
The price-cutting decision of the Anglo-Dutch giant is part of the group’s global strategy of making its products more affordable for an increasing number of shoppers.
“You have a choice, you either sell expensive and reach 5% of the population, or you sell cheaper and reach 50%, explains the head of Unilever’s local operations.
Present in all stores
Unilever is present on the Romanian market both on the food categories (ice cream, spices) and on the segment of personal care products and household care products. In Romania the company has 15 active brands out of a total of 400 globally. Unilever has significantly cut its number of brands in the last ten years, from 1,500 to 400.
“This year the strongest brands in our Romanian portfolio have been Magnum (ice cream), Dove (personal care) and Becel (margarine). The three contribute less than 20% of our turnover.
Unilever is present with at least one product in 93-94% of Romanian stores, with its most widespread brand being Delikat seasoning.
Malinowksi adds that modern retail currently contributes more than 50% of the company’s turnover, but that traditional retail has growth potential.
“It is true that lately traditional retail has been targeted by the major chains, which are turning small stores into franchises, but there are thousands of small shops which I think have the potential to grow on their own. I don’t think their number will rise, but I do think each of them can grow, that is why we will focus our attention on them in the coming years.”
As far as modern commerce is concerned, Malinowski says now, when Romanians prefer to buy lower amounts and take more frequent shopping trips, smaller stores have the biggest advantage – supermarkets and discount stores.
“Hypermarkets stand to suffer the most, and not just in Romania, but throughout Central and Eastern Europe.”
Made in Ploiesti, consumed in South Africa
Unilever has two plants in Ploiesti, Romania, where it makes household care products in one facility and food products in the other. In the two plants, Unilever makes Dero (detergent), Rama, Delma (margarine), Knorr and Delikat.
Unilever entered the Romanian market in 1996, when it bought from the Romanian state Dero detergent plant in Ploiesti, where it currently makes Dero products. The consumer goods giant opened a second production facility in Ploiesti more than five years ago, where it makes margarine and spices. The food products facility was opened following a relocation of production from Romanian Targu-Mures and Otopeni.
“The plants have evolved well, now we have ended up exporting detergents to South Africa,” says Malinowski, without providing more details. Production is handled by another executive.
(English version by Daniela Stoican)