2017 in review: ten most important events in Romania’s retail
Modern retail is an about EUR11 billion market with more than 2,000 stores, dominated by ten international groups. The sector continued to expand in 2017, at the same rate in as the last few years when 150 to 250 stores have been opened annually.
The market is also reconfiguring as a result of deals, either between existing foreign players (Lidl – Penny Market) or between foreign chains and local retailers. New names are looking at Romania, a market where retail sales are seeing one of the highest growth rates in the EU.
Real hypermarket chain leaves the market for good after selling last four hypermarkets
Germany’s Metro group sold its last four Real hypermarkets in Romania to an international retail expert group. The sale included the stores and the plots of land on which they stand. The four Real stores in Constanta, Suceava, Oradea and Arad are the only ones Metro still had in Romania, following the sale of the other 20 to French-held Auchan. Two of the stores went to Jumbo and two continued as hypermarkets with some changes.
Auchan enters small format segment with convenience stores and announces first supermarket
French-held Auchan group, holding 33 hypermarkets in Romania, is to open its first supermarket in Bucharest. Also in 2017, Auchan entered the modern convenience store segment by opening four stores inside OMV Petrom gas stations. Moreover, it bought the Ok Supermarket stores to turn them into convenience stores, as well. The two segments – supermarkets and modern convenience stores are the stars of the local retail, accounting for 18% of the market and generating about EUR3 billion sales. Auchan’s hypermarkets in Romania generate almost 4.9 billion lei (EUR1.06 billion) revenue a year.
Retailers bet on online segment, even though it accounts for less than 0.5% of the market
Mega Image (Ahold-Delhaize) launched an online store in partnership with online retailer eMag about three years ago, but now has opened its own web store. Other chains are considering it, too, such as Auchan, which announced it would make a similar move. French-held Carrefour, the second largest retailer in Romania, which posted RON8.3 billion (EUR1.85 billion) revenue in 2016, brought expat Herve Colin onboard to develop online sales in Romania, ZF has found. As for Cora, its only moves in the past few years have been on the online segment. The cora.ro service, which offers home delivery was introduced in Ploiesti, Constanta, Cluj and Bacau this year, after having been available only in Bucharest.
Two new retailers over the EUR1 billion revenue mark
Kaufland, Carrefour, Lidl, Auchan and Metro have been the only retailers to overshoot the EUR1 billion revenue mark so far. In 2017, two more will join them – Mega Image and Profi.
Profi’s revenue could go beyond EUR1 billion in 2017, following a 35% increase.
As for Mega Image, its revenue up went up 25% last year and this year will see solid double-digit growth, its officials said.
Foreign chains eye local networks
International supermarket and hypermarket chains are looking at the local entrepreneurial businesses in grocery retail to expand their networks and gain another slice of the market. Modern retailers, mainly Profi, Mega Image and Carrefour, have made acquisitions in the past, as this is their development model, i.e. buying local businesses and businesses developed by foreign shareholders. The latest move is the acquisition by Auchan of three OK Supermarket stores in view of expansion on the convenience store segment. International chains have also looked at other local networks in 2017, such as Unicarm and Annabella, though nothing has happened yet.
Cora replaces boss after 15 years, puts another expat in charge
French executive Thierry Destailleur was put in charge of Cora’s operations as general manager this year. He replaced fellow French executive Philippe Lejeune, who had run Cora’s local operations since the beginning, for about 15 years.
Private labels take first step back as purchasing power improves
The share of private labels in the total fast-moving consumer goods market reached 15.3% at the end of the first quarter of 2017, down 0.3% on the year-ago period, according to the latest data available to ZF. The economic growth, wage raises and purchasing power improvement led to the first decline in market share for private label products, which had been steadily gaining ground for a decade. The FMCG market is put at EUR17 billion to EUR18 billion a year, so private label sales can be estimated at EUR2.6 billion to EUR2.7 billion a year, ZF has calculated. Total sales of such products as Pilos (Lidl), Aro (Metro Cash & Carry) and 365 (Mega Image) rose in value because the FMCG market grew last year, but their share in the total is dwindling. Overall consumer spending rose faster than the spending on private label products.
Germany’s Aldi taking first steps towards Romania
Aldi, a giant with 10,000 stores and EUR50 billion revenue a year, is taking the first steps in Romania’s grocery retail. The discount store chain is entering a market estimated at EUR20 billion and dominated by ten foreign businesses. Aldi has started recruiting its local management team and this is the first step showing the retailer’s intent to enter the Romanian market, according to market sources. However, official entry will not happen any sooner than three to five years or even more, the same retail and recruitment market sources say. Lidl for instance, first came in 2002 and after hiring started buying land. It officially entered in 2011 when it opened its first new stores and bought the Plus Discount network.
EBRD makes equity investment in Profi
In spring 2017, the European Bank for Reconstruction and Development (EBRD) made a EUR25 million equity investment in Profi, without revealing how high its stake in the retailer would be after the move. The equity investment came one month after buyout investor Mid Europa Partners got the approval from the Competition Council to become the sole owner of the retailer with more than 500 stores. Mid Europa Partners bought Profi from private equity firm Enterprise Investors for EUR533 million at the end of 2016.
Modern retail reaches more than 2,000 stores after two decades
Modern retail, a market dominated by ten foreign chains, has gone beyond 2,000 stores in 2017 for the first time ever after more than two decades. The retailers continued to open more than 200 stores mostly small format ones. The market includes several formats – hypermarkets, supermarkets, convenience, discount and cash & carry stores. Modern retail started in 1996 with the arrival of Metro Cash & Carry in partnership with businessman Ion Tiriac. Meanwhile the market has grown to ten large networks, 2,000 stores, EUR11 billion revenue and almost 60% share of the overall grocery retail. (EUR1=RON4.6210)
Source: Ziarul Financiar www.zfenglish.ro