Country Presentation Romania

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Country Presentation Romania

Updated November 2007
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Contents

• Map
• Demographics
• Political Outlook
• Economic Overview
• The Retail Market
• Europanel Data
• Top 10 Retailers
• Challenges and Opportunities

• Retailers covered include

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Summary

• Area 238,391 sq. km
• Capital City Bucharest
• National Currency Leu
• Population (2006)21.57 million inhabitants
• Population Density 90.48 people/km
• President Traian Basescu
• Ruling Party Coalition between the National
  Liberal Party (NLP) and Democratic Party (DP).
• Prime MinisterCalin Tariceanu

Source CIA
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Demography 10 most populated regions
Source Romanian Statistical Office, July 2004
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Demography Top 20 Cities
Source Romanian Statistical Office, 2002 Census
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Demographics
Population Split by Age, 2006 ()
Population Growth Forecast (000s)
www.igd.com/analysis/datacentre
Source IGD Datacentre, UNs World Population
Forecast Database (2004 Revision)
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Political Outlook

• Relations between the 2 main coalition parties
  the National Liberal party (NLP) and the
  Democratic Party (DP) have been frosty in recent
  months following tensions between the Romanian
  president Traian Basescu (DP) and the Prime
  Minister Calin Popescu Tariceanu (NLP).
• Since December 2006, the government has enjoyed
  only a minority support following the departure
  from the ruling coalition of the Conservative
  Party (CP). Under the current situation, the
  collapse of the coalition is possible.
• The NLP-DP alliance breakdown increases the
  chances for the Social Democratic Party (SDP) to
  play a role in the future, despite its corruption
  scandals and weak public support.
• President Basescu is pushing for early elections
  in Romania, supported by recent polls which show
  its party in the lead.
• Overall, we expect no major economic shortcomings
  from the current political instability, despite
  some short-term depreciation pressures on that
  may materialise on the Foreign Exchange Market.

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Economic Performance Consumer Spending

• Amongst the main drivers of growth, private
  consumption went up by 11.2 yoy, stimulated by
  easier access to credit and lower taxes.
• Growth was also backed by robust investment
  activity, which has increased in advance of EU
  accession.
• Sustained by fast expansion in economic activity,
  the average unemployment rate in Romania fell to
  a 14-year low last year, reaching 5.4

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Economic Overview
Source IGD Datacentre, UniCredit Group, Eurostat
www.igd.com/analysis/datacentre
10
Grocery Retail Market Sizes 2007e
Top 10 Eastern European Markets
Top 10 Global Markets
www.igd.com/analysis/datacentre
Source IGD Datacentre estimates
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The Retail Market
Source IGD Datacentre estimates
www.igd.com/analysis/datacentre

• IGD Grocery Retail Market corresponds to the
  total annual turnover (excluding VAT) of retail
  outlets predominantly selling food. It includes
  the sales of non-food articles (i.e. health
  beauty, pet care, clothing, DIY etc) sold by
  hypermarkets, supermarkets, discounters,
  neighborhood stores, specialised food stores
  (bakeries, butchers, etc) and open markets. It
  excludes all cash carry, delivered wholesale,
  foodservice and drugstores/chemists.
• IGD Total Grocery Market includes is a wider
  definition of the grocery universe and is the sum
  of the grocery retail market and the cash and
  carry outlets.

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Consumer Retail Spend Per Capita in Romania

• Consumer spend in Romania remains significantly
  lower than the EU average.

Source IGD Datacentre
www.igd.com/analysis/datacentre
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Retail Legislation

• Foreign investment is encouraged but in practice,
  retailers face a number of challenges. They have
  to deal with many bureaucratic hurdles and a
  complicated property regulation policy.
• In Romania, foreign companies can own buildings,
  but under the current law cannot directly own
  land. They are, however, allowed to do it
  indirectly, by creating a 100 held company
  incorporated in Romania.
• Under the terms of Romanias EU accession,
  foreign companies and nationals will be allowed,
  at some point, to own land but the precise timing
  has not yet been confirmed.
• For the construction of an hypermarket or a cash
  and carry outlet, capex averages between
  15m-25m. However, real estate prices in Romania
  and especially in Bucharest have skyrocketed in
  recent years, negatively affecting would-be
  investors.
• In terms of opening hours, there are no fixed
  regulations. In large urban areas, stores
  generally open from 9am to 9pm during the week
  and can also trade on Sundays (mostly in the
  morning). In rural areas, independent store
  owners decide on store opening hours.

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The Grocery Retail Market Value Share By Format
()
Source Gfk, IGD estimates
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The Grocery Retail Market Structure By Format

• Despite the increasing presence of foreign
  retailers, the Romanian grocery market remains
  highly fragmented with a large proportion of
  stores accounted for by small family owned
  enterprises or private chains.
• Open markets are a key feature. Romania is a very
  agricultural country and many Romanian supplement
  their income with privately produced goods.
• Traditional trade remains popular with rural and
  older customers. According to ACNielsen data, 15
  of customers still shopped in traditional stores
  for basic groceries, soft drinks, snacks and
  sweets in 2006. Moreover, 40 buy dairy products
  in traditional stores and open markets.
• However, the development of modern trade has
  accelerated over the last 2 years. EU accession
  has heralded an investment boom in the sector and
  over time, this will lead to a sharp reduction in
  small shops and street vendors.

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The Grocery Retail Market Structure By Format

• If Romania follows Poland's example, modern
  retail could account for nearly 50 of the total
  grocery trade by 2010. Similarly to what happened
  in Poland, one can forecast that supermarkets
  operated by local chains and hypermarkets will be
  the leading formats.
• Compared to other Eastern European countries, the
  number of hypermarkets and superstores remain
  very low. However, the large investments planned
  over the next 5 years by Carrefour, Auchan, Metro
  (Real), Kaufland and Spar will massively impact
  the Romanian retail landscape.
• Local retailers are also stepping up their
  expansion. Artima is the most aggressive local
  retailer and plans to operate 35 stores by 2009.
  But local retailers are already suffering from
  the entry of international players. Univers'all
  filed for bankruptcy in 2006 and Carrefour and
  Spar are bidding for its stores.
• The discount market is still in its infancy but
  players have pledged to open a significant number
  of outlets in the next 3 years. To date,
  difficulties linked with land acquisition and
  bureaucracy have limited the expansion of the
  discounters but it is highly likely that we will
  witness an acceleration in store development in
  2007.

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Top 10 Retailers 2006
Source IGD Datacentre. Data is for grocery
formats only. Sales are net. Grocery Retail
Market Shares excludes cash carry operations.
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Key C/C Cash Carry, H Hypermarket
Cash Carry Sales Stores In million
Stores
1
2
4
4
7
11
15
19
21
23
23
www.igd.com/analysis/datacentre
Source IGD, Metro. Sales are Net.
Source IGD, Metro. Sales are Net.
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Metro Cash Carry

• Metros strategy is focused on
• Metro has been present in Romania since 1996 with
  the opening of its first cash Carry stores.
  Today, Romania is one of Metro's most promising
  market in Central eastern Europe alongside Poland
  and Russia.
• Romania has proven to be a very successful market
  for Metro. It invests approximately 15-20m per
  store. Operating ROCE in Romania was superior to
  Metro Cash Carry average of 20 in 2005.
• Metro opened its first Real hypermarket in
  Romania in March 2006. It opened 8 Real
  hypermarkets in 9 months in its first year and
  plans to expand its network to 15 stores by
  year-end 2007 and 21 by 2008, taking its total
  investments in Romania to 400m.
• The first Real in Bucharest will open in Q1 2007.

Source Metro
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Key S/S Superstore/Supermarket DDiscount
C/C Cash Carry
Source2006 estimates. Data is for grocery
formats only. Total sales are Net.
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Penny, Constanta

• Rewes strategy is focused on
• In 2006, it operated 65 stores in the country,
  including 25 supermarkets and 16 discount stores.
  The retailer plans to invest 200m in its
  Romanian operations by 2011.
• Rewe is planning to open 2 new Penny stores in
  Bucharest and Buzau by March 2007 and hopes to
  add a further 120-200 XXL and Penny stores in the
  mid-term future.
• In February 2007, Billa Romania's CEO, Wolfgang
  Janisch, announced plans to open 8 to 10 new
  outlets in 2007, at an investment of 5m per
  store.
• The stores will open in cities including Medias
  and Reghin in the Northwest of the country, and
  Giurgiu in the South. Billa Romania hopes to
  expand its network to 30 stores by year-end 2007.

Source Retail Analysis photo gallery
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www.igd.com/analysis/datacentre
Key H Hypermarket

• Carrefours strategy is to
• Carrefour Romania has targeted sales of 1bn by
  2010.
• Carrefour's network in the country comprises 7
  outlets, in which it has invested 220m. In the
  second half of 2007, Carrefour Romania plans to
  open 3 more hypermarkets, 2 in the north-eastern
  city of Lasi and 1 in Cluj-Napoca.
• Carrefour earlier announced plans to extend its
  Bucharest network to 6 outlets and its
  countrywide network to 40 outlets, focusing on
  cities with a population exceeding 150,000.

Carrefour, Bucharest
Source Retail Analysis photo gallery
Source IGD Datacentre. Data is for grocery
formats only. Total sales are Net.
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Key H Hypermarket D Discount
Source IGD Datacentre, 2006 estimates. Total
Sales are Net.
www.igd.com/analysis/datacentre

• The Lidl Schwarz group opened its first store
  in Romania in October 2005, a Kaufland compact
  hypermarket in the capital, Bucharest.
• Lidl Schwarz is planning on investing a further
  500m in the country over the next five years.
• Kaufland plans to operate a portfolio of 40
  stores within the next three to five years, with
  each compact hypermarket 3,000 to 4,000 sqm. It
  is also planning on opening a distribution centre
  in Ploiesti.

Kaufland, Bucharest
Source Retail Analysis photo gallery
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Key S/S Superstore/Supermarket C
Convenience
Source2006 estimates. Data is for grocery
formats only. Total sales are Net.
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CBA, Romania

• CBAs strategy is focused on
• CBA is a buying cooperative that was formed in
  Hungary in 1992.
• The group entered Romania with the formation of
  CBA Romania in 2002, with the union of eight
  private retailers.
• CBA Romania now owns 10 regional centres in
  Romania, and operates 453 stores.
• CBA also focuses on the development of its store
  network and private label offer.

Source CBA Romania
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Key H Hypermarket D Discount

• Market entry into Romania 1999 (Profi) 2003
  (Cora)
• The retailer's first two hypermarkets are located
  in investment of approximately 90m. In 2006, it
  opened a further store in Cluj-Napocoa.

www.igd.com/analysis/datacentre
Source IGD Datacentre, 2006 estimates. Data is
for grocery formats only. Total Sales are Net.
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Cora, Bucharest

• The retailer operates 2 fascias in Romania
• In 2006, Profi started its expansion outside
  Transylvania with the acquisition of 2 sites.
• Profi also started work on its Cluj logistic
  center (12,000 sqm).
• Profis focus is on improving the quality of its
  products and extending its range.
• In October 2006, Cora ventured outside of
  Bucharest for the first time with opening of a
  20,000 sqm hypermarket in Cluj-Napocoa.
• In the future, Cora plans to invest up to 500m
  on the construction of 14 hypermarkets.

Source Retail Analysis photo gallery
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Key S Supermarket

• Artimas strategy is focused on
• Artima is a regional supermarket operator, which
  was acquired by a Polish Fund in 2005.
• Artima is currently operating in the
  Transylvania and Banat regions.
• Artima plans to open 10 stores in 2007, expanding
  eastward with stores in Timisoara, Deva,
  Sf-Gheorghe, Campina and Slatina

Source Artima. Data is for grocery formats only.
Net sales.
Source Artima
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Key S/S Superstore/Supermarket C/F
Convenience/Forecourt

• Intermarché entered the Romania market in 2002
  with its Interex subsidiary.

Source IGD Datacentre, 2006 estimates. Data is
for grocery formats only. Total sales are Net.
Source ITM
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Interex, Romania

• Interexs strategy
• Stores are run by independents and average
  2500m².
• Interex is a discount concept with an extended
  non-food offer.
• 2 new outlets were opened in 2006
• Stores are located in Ploiesti, Giurgiu, Tirgu
  Jiu,, Focsani, Satu Mare, Râmnicu Vâlcea,
  Targoviste, Constanta.
• Like in other countries, Interex is developing
  its city center concept to accelerate its
  expansion (City Interex).

Source ITM
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Key D Discount
www.igd.com/analysis/datacentre

• Tengelmann entered the Romanian market in
  November 2005 with its Plus discount format.
• Tengelmann plans to invest 200m to operate 120
  new stores by 2010.
• Tengelmann stores average a sales area of 1,250
  sqm per store, well above the standard size of
  Plus discount stores.
• The retailer is targeting cities with a
  population exceeding 20,000.

Plus, Bucharest
Source IGD Datacentre, 2006 estimates. Data is
for grocery formats only. Total Sales are Net.
Source Retail Analysis photo gallery
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Key S Supermarket C Convenience

• Delhaize entered the market in 2000 through the
  acquisition of the controlling 51 stake in
  Mega-Image, and in 2004 it increased this stake
  to 100.

www.igd.com/analysis/datacentre
Source IGD Datacentre, 2006 estimates. Data is
for grocery formats only. Total Sales are Net.
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Mega-Image, Bucharest

• Delhaize operates Delhaize supermarkets under the
  Mega-Image fascia, and one convenience store
  using the Delhaize European City format. All
  the Mega-Image stores are located in Bucharest
  area.
• The first European City convenience store opened
  in 2004, now rolling out successful features of
  the concept to other Romanian stores, such as new
  deli products (e.g. pizza and sandwiches) and
  in-store prepared products (e.g. the grill and
  fresh fruit juice bar).
• Delhaize is also developing its private label
  365 to enhance its margins.
• Following its retrenchment from Central Europe,
  Delhaize is an exit candidate.

Source Retail Analysis photo gallery
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Key H Hypermarket

• Auchan opened its first hypermarket in Romania in
  November 2006, in the Titan area of Bucharest.
  Auchan invested 40m in the 16,000 sqm store,
  which stocks 60,000 SKUs.

www.igd.com/analysis/datacentre
Source IGD Datacentre, 2006 estimates. Data is
for grocery formats only. Total Sales are Net.
35
Auchan, Romania

• Auchans expansion strategy in Romania
• In 2007, the group plans to open 4 more
  hypermarkets in the Berceni area of Bucharest, as
  well as the towns of Cluj-Napoca, Tirgu Mures and
  Pitesti.
• Going forward, the retailer plans to open two
  hypermarkets a year.
• Auchan has already announced its intention to
  focus on price as it has done in Russia, where it
  has developed a strong customer base.

Source Retail Analysis photo gallery
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Key S/S Supermarket/ Superstores

• Spar entered Romania in 2006 after extensive
  research. Spar focuses on the development of
  medium to large supermarket depending on the size
  of the cities.

Source IGD estimates. Data is for grocery
formats only. Total Sales are Net.
37
Spar, Romania

• In 2006, Spar opened 10 stores in medium-sized
  cities located in the central and western parts
  of Romania (Târgu Mures, Resita, Râmnicu Vâlcea,
  Deva, Arad, Media and Odorhei).
• This includes the first Interspar hypermarket,
  opened in Targu Mures, and the conversion of 3
  Diskont supermarkets, acquired by Spar in 2006.
• In 2007, Spar plans to extend its portfolio
  rapidly and will open 20 stores, including 5
  Interspar hypermarkets and Spar superstores in
  Bucharest.
• Spar is also bidding to buy several supermarkets
  from the bankrupt Romanian chain Universall (15
  stores).

Source Retail Analysis photo gallery
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Challenges and Opportunities

• Romania joined the EU in 2007. Accession
  increases competition in the grocery market as
  greater numbers of suppliers consider trading
  opportunities with the region. Retailers are also
  stepping up their investments in this large
  promising market.
• While the Romanian market remains highly
  fragmented (modern retail accounts for circa 25
  of total sales), the pace of change is
  breathtaking and it is highly likely that modern
  retail will account for 50 of total sales by
  2010.
• As the market consolidates, and competition
  intensifies there is an increasing pressure on
  domestic retailers to remain competitive. Local
  retailers and suppliers should look to Central
  European markets to decide how best to respond to
  the growing influence of foreign competition.
• Grocery spend per capita remains significantly
  lower than in Western Europe and the market is
  very price sensitive. While this limits the
  opportunity to improve margins through
  added-value products, it is an attractive
  proposition for discounters. Lidl Schwarz, Rewe
  (Penny fascia) and Tengelmann (with its Plus
  fascia) all have plans to develop aggressively
  their discount format in Romania over the next 5
  years.

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Market Share Definitions

• IGD Market Shares
• IGD defines the grocery retail market as all
  food, drink and non-food products (i.e. health
  beauty, pet care, clothing, DIY, tobacco etc)
  sold through all retail outlets selling
  predominantly food in a given country. This
  definition includes modern retail formats such
  supermarkets and hypermarkets as well as
  traditional retail formats such as open air
  markets and traditional food stores such as
  bakers. However, it excludes cash carry and
  drugstores.
• IGD Market sizes are derived from national
  statistical sites wherever possible. In all other
  cases, the figures published in this report
  represent IGD estimates and are based on a
  consistent methodology and knowledge of local
  markets.
• For each retailer, the turnover used is total
  grocery (rather than total company), and
  therefore excludes non-food formats (such as DIY,
  electrical stores, department stores etc). IGD
  also excludes cash carry formats and retailers
  and drugstores / chemists from this measure to
  ensure a consistent market share figure.
  Therefore these shares are based on IGD Grocery
  Retail Market Sizes.
• 1.Retail turnover is excluding VAT
• 2.Retail turnover is excluding non-food formats
  (e.g. furniture, electrical stores etc)
• 3.Metro cash carry operations are excluded
• 4.Where known, we have subtracted the cash
  carry operations of players such as Carrefour and
  Rewe to use a pure grocery retail estimate of
  turnover.
• IGDs market shares differ from ACNielsen or TNS
  data due to the different methodologies applied
  to calculate the market shares (till roll data
  and customer panel information respectively
  from limited categories).
• Europanel Data
• Europanel market shares are based on purchases
  made by private households, and cover the
  purchasing of fmcg products bought in all outlets
  even if they do not sell primarily food
  (e.g. pharmacies).
• In many countries, the definition excludes large
  items bought in hypermarkets (e.g. television,
  washing machine).
• It does not cover Cash Carry (except where
  private households buy directly from them),
  institutions who may buy some of their products
  from retail outlets (e.g. hospitals, schools etc)
  and purchases made for out of home consumption
  (e.g. caterers, offices etc).

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For More Information

• Visit Romania hubpage on Retail Analysis.
• Use the IGD Datacentre for key macroeconomic data
  on Romania, plus statistics on retailers
  operations by banner and format.
• Visit the photo archive for images of retailers
  operating in Romania.
• Got an iReports subscription? Try checking our
  International Research reports.
• To find out how an IGD Customised Briefing can
  bring you up to speed on the market and the key
  players, email nick.everitt_at_igd.com
• Still cant find what youre looking for?
  Contact us igd_at_igd.com or 01923 857141.