Local retailers take their expansion plans seriously

These supermarket chains have been so inactive in creating brand awareness, that most people have never heard of them, expect those living in such towns who go to “the shop across the street'. Still, their low profile does not keep away the investors, and they may be a good target for the acquisition attempts coming from the bigger operators looking for a comfy place within the smaller markets, as part of their expansion plans all over the country.

Annabella, Luca, Fidelio and a Wolf – not the names of characters in a children's story …
… but a sequence of names for the supermarket chains operating locally in cities such as Sibiu, Ramnicu-Valcea, Brasov, Covasna and even on a larger scale in eastern Romania, like Wolf supermarkets.
Annabella supermarket chain, controlled and established by two investors Dorina and Dan Mutu in Ramnicu Valcea, also the managers of two other businesses Fralvil SA and Sere SRL Ramnicu Valcea, opened a single new store in 2006, in Dragasani, the first time the chain has ventured outside its birth place, Ramnicu Valcea.
The two investors' plans include completing a network of 21 Annabella supermarkets, with one opening in Balcesti, Valcea county, and two others in Ramnicu Valcea. The current network comprises 17 supermarkets in Ramnicu Valcea and one in Dragasani. For a long term, they have also been looking at expanding their supermarket network to spa resorts such as Baile Olanesti, Govora and Calimanesti, where the local tourism development and increasing tourist traffic would create demand.
In many cases, retail and real estate developments have joined forces, so it is not surprising that both Annabella's owners and House of Wolf, the operator of four supermarkets in the country, are looking to real estate with interest. For example, Dorina and Dan Mutu plan to move into real estate developments with a project which could exceed EUR 20 million of investment, to be built on the land owned by their other company Sere Ramnicu Valcea.
Brasov-based House of Wolf had the same idea of real estate projects, after establishing the first Wolf supermarket in 2004. The company currently runs supermarkets in Bran, Campulung, Curtea de Arges and Pitesti, and is planning to build one in Brasov too in the near future. In May, it announced it had started the construction of a four-star hotel in Bran, where the firm plans to invest EUR 5.5 million, Adrian Filip, the investment director of the company, said at the time.
At the delivery date, Wolf Hotel in Bran will bring 50 double rooms and apartments, two conference room with 200 seats, a spa center, pool and sauna, according to the project plan. For the next three years, the company has big plans to build five more four- and five-star hotels in Romania, in cities such as Timisoara, Cluj, Bucharest and Brasov.
Another firms with Romanian-capital, Danilux Botosani, the owner of the Fidelio supermarket chain, opened its first retail unit seven years ago, at first focusing on TE&C products. Within two years, Danilux had developed a network of eight shops on this segment in north-eastern Moldavia. According to company data, its emergence on the supermarket segment took place in 2003, with the first opening of a store in Radauti, and Danilux Shopping Center also being the first commercial center development in the area. The shop delivers 2,000 sqm and displays 10,000 products from the food industry, IT&C, furniture and house-design, the company said. An average investment in a Fidelio supermarket, delivering 1,200 sqm, is estimated at EUR 800,000.
The financial performances of supermarkets operators pretty much equal their expansion act, as, at least by 2006, Danilux reported a more than double increase over the previous year, posting a turnover of EUR 27.8 million in 2006, while in 2005 the company only attained EUR 11.7 million. Angst reported an increase of 42 percent for the same period while Annabella almost stayed in the same place with its financial performance for the two years, reporting an increase of 4.3 percent. At the end of 2007, the network operated by Danilux included 10 units covering cities such as Suceava, Iasi, Botosani, Bacau and Neamt, reporting a turnover of around EUR 12 million.
Ethos, another local supermarket chain present in southern Romania including Bucharest, announced at the end of 2007 that five openings would take place in 2008, including three greenfield investments. The first supermarkets on the expansion roadmap have opened in Titu, Gaesti, Pitesti and Campulung Muscel, delivering sales areas ranging from 360 sqm to 550 sqm, the company said. Ethos is planning another opening in Slatina, in October. In 2007, the company registered a turnover of EUR 22 million, an increase of 63 percent compared to previous year.

Big retailers keep eyes on the local players
Romanian hypermarket chain Pic, started in 1991 by brothers Cornel and Ilie Penescu, is now spreading its supermarket chain around the country. Pic is the only local hypermarket operator on a market dominated by foreign players. Its next step is to enter the capital city. The chain posted a turnover of nearly EUR 150 million in 2007 and hopes for EUR 200 million in 2008, according to Claudia Rusu, marketing director at Pic Hypermarket. It operates four units in Pitesti, Craiova, Braila and Oradea and is planning two more openings in Calarasi and Ploiesti during 2008.
The company will enter a new development area with the construction of Park Retail Calarasi, a retail park to include Brico Store, Flanco, Leonardo and Staer. The investment for the park has been estimated at EUR 60 million. The chain will continue its expansion in 2009 with the opening of four new locations, of which two are retail parks and the others rented areas for Pic hypermarkets, Rusu said. For these developments, Pic targets cities exceeding 50,000 inhabitants.
Following the latest major acquisitions on the retail scene, such of Carrefour taking over Artima chain and Delhaize group taking over La Fourmi, Pic had also had an offer from Carrefour but decided to remain independent and continue developing its own network, Rusu said. She added that the company is not interested in acquisitions on the local retail market.

Retail market overview
In 2007 the Romanian retail market grew by 17.8 percent and was worth EUR 31.3 billion, and is set to increase by another 16.5 percent in 2008, to EUR 38 billion, according to a report published by research company PMR. The Romanian retail industry is still far from saturation, and many chains are competing for pride of place, found the report. At the end of 2007, there were 70 hypermarkets all over Romania, operated by seven companies.
Despite the small number of stores, the share of hypermarkets on the grocery market was quite substantial, around 12 percent, the study found. Spending on food products accounted for more than half of all spending in Romania in 2007, excluding cars and fuel. This situation, which is unusual for developed economies, was caused by a reduction in the weight of home-grown food in the grocery supply chain in Romania, according to PMR specialists.
“People who once relied on their own farms are increasingly going to shops instead, thus increasing the value of food retail sales. In addition, the rising prices of food products, caused by poor harvests, have contributed to increases in grocery spending, as consumers were unable to reduce the volume of foodstuffs consumed and were thus forced to pay more,” says the report.

By Magda Purice

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