After its takeover by private equity investor Mid Europa Partners in 2016, Romania’s Profi Rom Food supermarket chain is pursuing aggressive growth in the country with support from the EBRD.
The bank announced plans for a €25mn equity investment in Profi on March 9. Profi, which already has the widest geographical spread of any supermarket chain in Romania, now plans to expand its network further, in particular into smaller Romanian towns.
“With our support, Profi will open hundreds of new stores in both big and small localities of Romania, offering customers the opportunity to shop for affordable food in convenient locations while boosting the local economy and creating jobs,” said Matteo Patrone, EBRD regional director for Romania and Bulgaria.
“Extending the outreach will not only benefit customers but also local producers who will have more options to sell their excellent products.”
“The company is in excellent shape and has great potential to grow in the years to come across Romania, including into smaller localities,” added Profi CEO Daniel Cirstea.
Currently, the company operates around 523 stores in more than 272 localities across Romania. Cirstea announced earlier this year the that it planned to open 200 new stores in 2017 and increase its turnover by up to 40%, according to daily Ziarul Financiar.
The investments into Profi come at a time when retail sales are booming in Romania, spurred on by recent VAT cuts and rising salaries. Sales of food products have increased sharply, helped by the slashing of the VAT rate on food, but Romania has also seen an increase in spending on fast moving consumer goods, electronics and other products.
Overall, retail sales have expanded by a total of 42% since January 2012, or an average annual growth rate of 9.2% per year. Growth of food sales was particularly high: 59% over the five-year period.
This helped turn Profi into a highly attractive proposition when its former owner, private equity firm Enterprise Investors, sought an exit. The investor had bought 100% of Profi for €66mn in 2010, just one eighth of its sale value in 2016, though it made a €10mn capital increase in 2011.
The EBRD had also provided a €25mn loan to support the company’s growth through improved competitiveness.
When Mid Europa Partners bought the supermarket chain for €533mn in 2016, it was largest deal ever completed by a private equity firm in Romania and the largest retail deal in the country's history.
“This is the most successful transaction in the retail sector in Enterprise Investors’ history, and we are proud to have been a part of Profi’s success story,” said Sebastian Krol, the Enterprise Investors partner responsible for the investment, at the time of the deal.
Looking forward, Mid Europa aims to target in particular areas of Romanian not already penetrated by major retail chains. “The company is in excellent shape and has great potential to grow in the years to come, as Romania has many more areas to take modern retail to," commented Cirstea when the sale was announced.
In addition to Profi’s two formats for urban areas, Standard and City, it recently developed Loco, a format for rural parts of the country. This made it the first retail chain in Romania to have created a brand dedicated to rural customers and aimed at reaching regions previously unavailable to modern retail.