Local companies adopt relocation trend

Newsroom 18/12/2007 | 16:18

This year, the Romanian industrial platform market saw companies such as Bunge, Coca-Cola and local producers like Moldomobila Iasi relocating their activities to alternative sites away from the city, making way for the real estate developers. One of the companies to relocate its factory from Bucharest is Coca-Cola. “The consolidation process of the Coca-Cola operations entailed the transfer of the bottling lines from the Bucharest factory to the one we have at Ploiesti. We will open a new warehouse in Bucharest,” said Mugurel Radulescu, public affairs & communications manager at CCHBC Romania, at the beginning of October. Romanian drug producer Biofarm also announced that it was considering a possible relocation. “This year we bought a piece of land in district 3 in Bucharest for approximately EUR 600,000, because of Biofarm's expansion needs. In the new location we are going to build a warehouse, construction works on which will start at the beginning of next year. It is possible that, over long term, we will consider relocating the Biofarm factory to the same area,” Gabriela Orasanu, PR specialist at Biofarm, told Business Review. According to company representatives, this strategy aims to strengthen its targets for next year: to increase sales and expand the product portfolio. “For the following year, Biofarm plans to make noteworthy investments in neighboring countries such as Ukraine, Bulgaria, Serbia and Hungary. Now we are analyzing possible acquisitions of local producers with significant portfolios, market shares and with prospects of expansion on the nearby markets through new branches,” added Orasanu.

Analyst Constantin Rudnitchi argues that it was the rising cost of land which persuaded companies to move their operations outside cities, making space for new office buildings and malls. The president of Moldomobila Iasi, Adrian Butuca, plans to sell the 13.3-hectare platform of Moldomobila, a furniture factory in Iasi, for approximately EUR 39 million. Ten foreign companies have shown their interest in the platform and the transaction is most likely to be completed at the beginning of next year, says Adrian Butuca. “Part of the money from this transaction will be used to buy a smaller plot outside Iasi, of approximately three hectares, to relocate the factory's activity,” Butuca told Business Review.
Faimar, the tile producer in Baia Mare, decided in September this year to sell a real estate asset for EUR 5.7 million in order to finance the company relocation. According to company officials the process of relocation should be completed in one year. The Romanian cable producer Romcab Targu Mures has also sold several real estate assets (42,000 sqm and a building with a built surface of 29,000 sqm) in order to finance relocation. The total sum made from the sale reached EUR 9 million.

Home or away?
Economic analyst Constantin Rudnitchi believes that the relocation trend is just beginning and this pattern will increase in the following year. This was the case for Unilever South Central Europe this year. when the company announced it would relocate the production of Kaliakra (a prominent brand of margarine and mayonnaise, sold exclusively on the Bulgarian market) from Bulgaria to Romania. Kaliakra's production was transferred to the food factory from Unilever's industrial platform from Ploiesti (and became operational in December 2006 after a EUR 4 million investment). At the same time, the company stressed that it would continue to invest in its Bulgarian business, with Bulgaria being one of the most important markets for Unilever in the region.
“The repositioning of Kaliakra production was not determined by a cost-cutting strategy. The decision to concentrate production on the industrial platform from Ploiesti was taken in order to consolidate the company's position as a market leader in one of the most dynamic regions from Europe. This relocation is part of the company's plan to concentrate its production operations in strategic locations, able to support its growth on the long term. To be able to continue growing in the region, the company needed to coordinate production operations from one location,” company officials told Business Review.
A similar decision to relocate the operations from Bulgaria to Romania was taken by Bunge, the oil producer. The company made the move owing to the lower production costs.

Dana Ciuraru

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