Clare Nuttall in Bucharest -
Romanian supermarket chains have been outlining ambitious expansion plans as the country’s GDP growth accelerates. With incomes still relatively low, there is intense competition among discount retailers, which is set to increase with the expected entry of Carrefour’s Supeco to the market.
Carrefour, which has 166 stores in Romania including 25 hypermarkets, is planning to launch Supeco – a new brand positioned midway between a discount retailer and a cash & carry. It is based on a hybrid model pioneered in Latin America, and later rolled out in other developing economies. However, this is a new phenomenon in Europe, where the recent crisis suddenly skewed the market in favour of low cost outlets.
Carrefour started piloting the Supeco format in Spain, one of the countries worst hit by the crisis, last year, and has yet to launch in any other country. Romania, while now growing relatively strongly, has the second-lowest income per capita in the EU region and cost is an important factor in household purchasing decisions. In 2013, the country’s GDP per capita in purchasing power standards was just 50% of the EU average, according to Eurostat.
While the French retail giant has not yet made an official announcement, and did not respond to a request from bne for confirmation, according to the Romanian press it is already recruiting for its first three stores in the towns of Giurgiu, Ramnicu Valcea and Targoviste.
The first discount retailers entered the Romanian market over a decade ago, and chains such as Lidl, Profi and REWE’s Penny are already well established within the country. They are also looking at expansion; Profi, for example, opened three new stores in Deva, Borsa and Constanta on April 10, bringing network of stores to 217.
REWE, which operates both Penny and the Billa chains, sees Romania as one of the main focuses for its investments, alongside Bulgaria and Italy. Alain Caparros, management board member responsible for international business, said in a statement that the company would “focus on expansion in Eastern Europe in particular, also in Russia”, with the aim of taking a place “at least among the top three relevant competitors in each country”. A REWE spokesperson tells bne the company plans to open 10 new stores in Romania this year.
Romania’s grocery retailers largely managed to avoid the pain Europe's crisis inflicted on the retail sector as a whole. As consumer confidence slumped and credit dried up, before rebounding in 2012, supermarkets and grocers continued to thrive, according to a Euromonitor report. Vendors of economy products did especially well, as they “benefited from rising demand for low-priced goods”.
The same period also saw continuing consolidation as major international chains strengthened their hold on the market. According to Euromonitor, grocery retail chains have been outperforming their independent rivals, and in the last few years chains active in Romania have continued to expand into small and medium-sized cities and rural areas.
While small independent grocers, specialist shops and outdoor markets have remained the preferred channel for products such as dairy products and fresh fruit and vegetables, chains such as Carrefour and Mega Image have tapped into this preference by launching smaller outlets in Bucharest and other cities.
Mega Image, which is owned by Belgian retail giant Delhaize, currently has the strongest presence in Bucharest, operating a total of 168 Mega Image stores and 127 Shop & Go stores in the country. While Delhaize has exited several countries in the Southeast European region as it concentrates on its core markets, the company has so far held on to its Romanian operations.
Delhaize has already sold off supermarkets in Albania, Bulgaria, Montenegro, and most recently announced the sale of its 39 supermarkets in Bosnia-Herzegovina to local investor Tropic Group BV. Delhaize CEO Frans Muller has indicated that the company may keep its operations in Romania, noting in a January 2014 statement that in the face of a challenging economy in Southeast Europe, "our businesses in Greece and Romania posted good sales growth.”
With 2012 marking a turning point for the Romanian economy, both grocery and non-grocery retailers are expected to embark upon a period of accelerated growth. A study by Romanian daily Ziariul Financiar forecasts the number of modern stores will double within the next five to seven years. While the Central and Eastern Europe region as a whole achieved a remarkable rebound in the final quarter of 2014, Romania was well ahead of the rest of the region. According to estimates released by Eurostat in February, Romania’s GDP growth reached 5.2%, putting it well ahead of other frontrunners such as the Baltic states.
In this respect, Romania is in direct contrast to other markets in the region such as Croatia or Slovenia; both considered to have medium-term potential, but unlike Romania currently suffering from minimal GDP growth. Meanwhile, other markets within the Southeast European region currently have lower purchasing power, although they show potential for growth. Serbia in particular is expected to get a considerable boost when it eventually joins the EU.
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