Retail in Romania 2008 – Market analysis and development forecasts for 2008-2010

Expansion of foreign retailers

The promising outlook of the Romanian retail industry is attracting an increasing number
of international investors. In the 1990s, Romania was in the shadow of the Central European
countries, which were more advanced with regard to their market economies. The markets of
Poland, the Czech Republic and Hungary have recently shown signs of saturation, and more
international players have left these countries than have entered.
In 2006 only three well-known grocery chains entered Romania – Auchan, Real and
Spar. The DIY industry was strengthened by Austria’s bauMAX and the French-Hungarian
Mr. Bricolage. In 2007 three more chains appeared – namely Brithouse, Hornbach and Tekzen.
In addition, last year, the Spanish clothing giant Inditex invested directly in Romania, although
some of its brands had already been present as franchises.
In 2006 only
The expansion of foreign players could pose a threat to domestic companies, particularly
three well-known to individual stores and small chains. On the one hand, the late entry of most international
grocery chains retailers (a few years after the Central European countries), gave local companies time to
gather capital and knowledge and to prepare for competition. On the other, however, most
entered Romania
of the domestic players modernise only when exposed to more intense competition. We
– Auchan, Real therefore expect that large foreign companies will increase their market shares in Romania
and Spar. as long as the market is more-or-less saturated and that they will have to compete with their
peers rather than with undercapitalised local retailers.

Food vs. non-food sales

More than half of the retail trade in Romania is accounted for by food products.
Furthermore, in 2007 their share grew by 2.2 p.p. There are two significant reasons: the
fading prominence of self-cultivated food and rises in the prices of grocery products.

Food vs. non-food retail sales in Romania (%), 2001-2010

RRA022

54.7% 55.8% 54.6% 56.0% 53.2% 51.7% 47.6% 47.4% 47.8% 48.2%

45.3% 44.2% 45.4% 44.0% 46.8% 48.3% 52.4% 52.6% 52.2% 51.8%

2001 2002 2003 2004 2005 2006 2007e 2008f 2009f 2010f

Food Non-food
e – estimate
f – forecast
Source: PMR Publications, 2008 www.pmrpublications.com

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 Retail in Romania 2008 – Market analysis and development forecasts for 2008-2010

Hypermarket chains active in Romania by sales (€ m) and storecount, 2007

RRA046

Chain name Owner Year of Storecount Revenues (€ m) Change in revenue Share of

entry 2006 2007 2006 2007 2007/2006 grocery market
Carrefour Carrefour 2001 7 12 607 866 42.7% 4.7%
Kaufland Schwarz Group 2005 17 31 232 410 76.7% 2.2%
Romania Hypermarche 33.3%
Cora 2003 3 3 300 400 2.2%
(Louis Delhaize)
Auchan MGV Hiper Distri 2006 1 4 19 210 1,005.3% 0.5%
Real Metro Group 2006 10 14 82 155 89.1% 0.8%
Pic Pic Group 2004 2 4 83 90 8.4% 0.4%
Trident Trident Trans Tex 2004 5 5 33 66 100.0% 1.1%
Total - - 45 72 1,356 2,197 62.0% 12.0%

Source: PMR Publications, 2007 www.pmrpublications.com

Of the foreign players expected to appear in Romania in the next few years, the most
likely is the Slovenian hypermarket chain Mercator, which is already present in Slovenia,
Serbia, Bosnia-Herzegovina and Croatia. In addition, the UK’s Tesco, which has a strong
position in Hungary, is likely to appear in Romania at some stage.

Profiles of market players

Carrefour

Owner: Carrefour

Country of origin: France

Market entry: 2001

Storecount 2007: 12

Headquarters: Bucharest

Revenues in 2006: €607m

Revenues in 2007e: €866m

Store size: 8,000-14,000 m2

The first Carrefour in Bucharest opened in 2001 by a joint venture involving the Carrefour
company and Hyparlo, a Lyon-based family group and franchisee of the Carrefour group. This
was the first western hypermarket in Romania. In 2004 Carrefour opened a store for the first
time in provincial Romania, in the city of Brasov.
Today 11 Carrefour hypermarkets operate in the largest cities (five are located in
Bucharest), and the retailer has further development plans. In addition to retail business,
Carrefour in Romania also operates travel agencies (Carrefour Voiaj) in four of its stores. In
September 2007, it launched the Carrefour Mastercard, a co-branded credit card, in partnership
with BRD Finance IFN, a subsidiary of the Societe Generale group.

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 Retail in Romania 2008 – Market analysis and development forecasts for 2008-2010

Breakdown of consumer electronics sales in Romania

(estimated market shares), 2007
RRA072

Altex
27.3%
Others
39.8%

Flanco and Flanco

World
12.5%

Teknosa Domo
In 2007 the four
2.7% 17.7%
leading companies,
Source: PMR Publications, 2008 www.pmrpublications.com
which operate
nine retail chains,
In comparison with other retail markets in Romania, that of consumer electronics is
had a joint market
relatively concentrated. In 2007 the four leading companies, which operate nine retail chains,
had a joint market share of 60.2%. The process of consolidation is underway, in 2006 the share of 60.2%.
same companies had a market share of 55%. The remainder is controlled by minor retailers,
who usually own one or two stores.
The current leader in terms of consumer electronics is Altex, whose market share was
about 27% in 2007. This is followed by Flamingo (the operator of two chains: Flanco and
Flanco World), Domo and Teknosa.
Interestingly, all four key retailers operating on the Romanian consumer electronics
market were established on home ground. Furthermore, between 2006 and 2007 the owners
of all of these companies changed. Whereas one company was taken over by another domestic
player, the other three were bought by foreign concerns. This series of acquisitions may be
partly explained by financial difficulties experienced by the targets, who were surprised by the
sudden decline in demand in 2006. However, in at least one case, Bomenveld’s acquisition
of the Altex company, the main if not the sole, reason seems to be financial engineering
(see Altex’s company’s profile).

Major takeovers on the consumer electronics retail market in Romania, 2006-2007

RRA073

Aim of takeover Size of stake

Buyer (origin of the company) Date Value of transaction
(origin of the company) bought
Estimated €35-40m in
The entire
Flamingo (Romania) Flanco (Romania) January 2006 addition to 30% of Flamingo
company
shares to Flanco owner
Lynx Property (Equest July 2007 (transaction 75%
Domo (Romania) €62.5m
Investments Balkans) finalised 28.09.2007) of shares
50.73%
Teknosa (Turkey) Primex (Romania) November 2006 Undisclosed
of shares
99%
Bomenveld (the Netherlands) Altex (Romania) December 2006 Undisclosed
of shares

Source: PMR Publications, 2008 www.pmrpublications.com

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