Local consumption patterns change CEOs agendas, says A.T. Kearney

Romanian households allocate over 60 percent of their consumer expenditure to food and utilities and another 7.2 percent to alcohol and tobacco, found a recent A.T. Kearney study.

About 32 percent of the total consumption outgoings of a Romanian household is devoted to services and goods such as communications, transport, clothing, furniture, restaurants, hotels, recreation, culture, education and healthcare, according to the same source.

In the Czech Republic, for example, just 42 percent of consumer expenditure goes on food and utilities.

Moreover, while a Romanian home had a consumption budget of EUR 356 per month in Q1 2011, the Czech equivalent was EUR 855.

The current outgoings of a Romanian household mean that companies that target the 32 percent share are destined not to reach their full potential in Romania until food and utilities decrease their share of the budget, said Daniel Catana, consultant at A.T. Kearney.

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But neither an increase in consumption nor a change in its composition are likely to happen very soon, he told BR.
“The end of the year is very close and several macroeconomic indicators show that we can’t expect a significant improvement in private demand in such a short period of time, from now until the end of 2011. However, for the long term, Romania is still attractive for business people,” Catana told BR

In his opinion, the composition of the expenses of a regular Romanian household can change, depending on certain criteria. One option would be for shoppers to pay lower prices for food following the optimization of the local agriculture and food industry. Consumers could also pay lower utilities bills should the state finally transform its utilities companies. A third option would be if households either willingly spent less on alcohol and tobacco, which make up a significantly higher percentage of consumption than in other countries, argues Catana, or the state imposed higher taxes on these products to stimulate a reallocation of resources.

“When households’ income is higher in three to five years from now, their expenses structure will change, with food and utilities representing less than now as a percentage of consumption,” he added.

Simona Bazavan