Romania remaining critical expansion target
Although big tickets investors such as Daimler may favour a more mature market, Romania remains a key strategic target for German foreign investment in the EU
Earlier this year Romania lost the bid to Hungary to host a new production facility for German car giant Daimler. The multi-million Euro investment was thwarted partly by the absence of Romania’s motorway infrastructure.
“Daimler’s decision for Kecskemet in Hungary was a specific decision by one company for one location and not a statement on the general attractiveness of investment in Romania,” says Roland Lohkamp, Germany’s Ambassador to Romania. “It does show, however, that Romania is in strong competition for foreign investments.”
Daimler based the decision on how close the site would be to its suppliers and markets, as well as the state of the roads and railways. A motorway through one proposed site in the Banat region was still only on the drawing board. “Some observers also stated that the strikes at Renault-Dacia [in Spring 2008] caused some concern among investors,” adds the Ambassador.
Nevertheless the business health of a country cannot be based on its quantity of final assembly-line factories. Car manufacturing is continuing to see more outsourcing of its production. Romania is already the location of a large number of German automotive industry suppliers, such as Draexlmaier, INA Schaeffler and Continental, employing around 40,000 people.
At the end of 2007, Romania had attracted large German investments with 16,000 companies with registered German financial participation - an increase of 1,358 firms on 2006. The country’s continuous economic growth above 5.5 per cent for seven years is also attracting German investments.
Germany has maintained its position as Romania’s most important trade partner, amounting for almost one quarter of Romania’s trade within the EU in a total figure of 13.74 billion Euro.
With 1.86 billion Euro in subscribed capital since 1990, Germany is on paper the third biggest foreign investor in Romania, after Austria and The Netherlands, with a 10.5 per cent share of the overall FDI in Romania. However it is not unusual for German companies to place their investment in Romania through non-German subsidiaries which can distort the overall FDI figure to the disadvantage of Germany.
“In the long run investments will probably lessen a bit, which is a sign of normalisation and the closer Romania moves towards western European economic levels, the closer its foreign direct investments levels will move towards western European levels,” says Lohkamp. For German investors disadvantages include deficiencies in infrastructure, a lack of transparency in administrative decisions, such as on state aid, and a comparatively low predictability and speed of court decisions.
Politics frustrates justice
Last July the European Commission, which is monitoring Romania’s justice system after EU accession, praised the National Anti-corruption Department (DNA) and criticised the Romanian Parliament’s record on justice reform. Nevertheless the Government decided not to renew the mandate of highly-praised anti-corruption chief prosecutor Daniel Morar.
“The DNA made good progress on the pre-trial investigative side, but the authorities showed so far few tangible results in their fight against high-level corruption,” says Ambassador Lohkamp. “Efforts by the administration at local, regional and central level to fight corruption are very often frustrated at a political level.”
A broad based political consensus to reform has decreased since Romania’s EU accession. “Political commitment to rooting out high-level corruption is not as unequivocal as could be expected from a member state of the EU,” he adds.
Almost all sectors in Romania offer strong attraction for German firms, except for banking, with automotive and retail remaining the most interesting for German companies.
Big box chains such as Metro, Real, Billa, Hornbach, Kaufland and Praktiker are among the main players. In supermarkets, the Tengelmann Group plans to increase its number of stores to 175. Rewe’s brands Penny Market, XXL, Billa and Selgros are also cleaning up in the discount, supermarket and cash & carry sectors.
“When asked which features of the market appeal to German investors, many state that they are attracted by relatively low wages and a high level in human capital,” says Arvid Enders, head of the Economic section of the German Embassy to Bucharest. “Romania’s workforce is often described as well-trained, motivated and very creative and some argue that Romanian creativity combined with German thoroughness leads to astonishing results.”
German car parts manufacturers are constantly scouting for young Romanian university graduates. This includes automotive giant Continental which hired 300 new engineers only last March.
“Probably the highest potential for economic growth among the new EU members in the short and medium-run, relatively low wages compared to Poland, for example, and a low density of cars per person, are some of the possible benefits of a German car company in choosing Romania compared to other members in central and eastern Europe,” says Enders.
The market for new cars in Romania is expected to grow by an average of 11 per cent per year until 2010.
Many suppliers for the automotive industry, often coming from Germany’s automotive belt around Stuttgart, settled in economic centres such as Sibiu, Brasov or Timisoara. “I expect more such investments in the future if Romania keeps up working on weaknesses such as bad road infrastructure and a lack of skilled workers,” says the Economic Attache. “Car manufacturers can benefit from this development by expanding to where many of their suppliers are present.”
By Ana Maria Nitoi
Real: aiming for 28 stores by the end of 2009
This year Real Hypermarket is planning to open four more stores in Arad, Oradea, Pitesti and Suceava to reach 20 stores by this year’s end. A third store was due for Bucharest this year, but will probably be postponed until 2010, when the company’s fourth hypermarket opens in shopping mall Cotroceni Park. The German retail chain is targeting 28 stores by 2009’s end.
The average investment per store stands between 18 and 20 million Euro and Real plans to invest a total of around 600 million Euro in Romania employing a staff of 10,000 by the end of 2009.
Because its hypermarket in Deva posted good sales figures this year, Real is targeting cities with 75,000 to 150,000 inhabitants in Romania, because these stores also attract rural customers.
“Around 50 per cent of our customers come from villages,” says Tjeerd Jegen, managing director of Real Hypermarket in Romania. “So even if we open stores in smaller cities there are enough villages around to help increase customer numbers.”
Romanians are starting to buy healthier food, such as chicken, fruit and vegetables in a move partly influenced by the increasing price on meat.
“Fish sales have exploded this year and this is probably connected to the fact that meat prices rose, influenced by the increasing fuel price,” says Jegen.
Wine is also among the store’s best selling products. However one product which hasn’t yet caught on is high-fibre bread.
“Romanians really enjoy life, food, parties, spending time together and they need a big selection of products to chose from,” says the managing director. “Buying quality products is not linked to income and sometimes people with high income buy really cheap products and the other way around.”
■ No of stores: 16
■ Forecast by 2009: 28
■ Biggest selling items incl. fish, chicken, fruit, vegetables, wine
■ Employees: 8,000
Selgros: Romanians picking up healthy trends
Recently Romanian consumers have started to change their eating habits towards purchasing healthier food. “There are still many differences between German and Romanian consumers’ eating habits, but Romanian consumers are adjusting their habits to those of consumers in western European countries,” says Pia Krauss, marketing manager at Selgros Cash&Carry. “Romanians are open to testing new products on the market. This is why, in collaboration with our suppliers, we have been trying to introduce new products in our stores as often as possible.”
In Selgros, the best selling foods this year are meat, non-alcoholic and alcoholic drinks and detergents, while multimedia and household devices sell best among non-foods.
This year the German retailer opened its 17th Romanian store, in Braila, and is not planning to expand further by the end of 2008. Posting the best sales figures this year are the units in Brasov, Bucharest, Constanta and Timisoara, which were among the first opened in Romania.
Owned by Rewe Group
■ Stores: 17
■ 2007 turnover: 758.5 mil Euro
■ 2007 profit: 33.5 mil. Euro
■ Employees: 5,200
Metro: new store for Deva
One of the largest companies in Romania, with a turnover last year over 1.5 billion Euro, Metro Cash & Carry has been consolidating its estate of 23 stores with a redesign process. The retail chain will make one further opening in the near future in Deva, Hunedoara county, according to Francois Oliver, general manager of Metro Cash & Carry. Targeting companies and self-employed professionals, Metro pioneered the cash&carry concept in Romania in 1996 when it opened its first store in Bucharest Militari.
■ Stores: 23
■ 2007 turnover: 1.529 bil.Euro
■ Employees: 7,000
Rewe Group Romania: aiming for 100 stores by end-2009
Keeping up with the expansion of retail chains is the main challenge faced by discounters Penny Market and Penny Market XXL, part of Rewe Group Romania. “Our competitors are expanding fast, but we have to grow faster than them,” says Marcel Thiele, CEO of Rewe Group Romania.
The group will invest 45 million Euro in 2008 in the expansion of 15 more Penny Market stores to reach 70 by this year’s end.
The company also has six larger format Penny Market XXL and has a target of 100 stores by the end of 2009. Rewe is targeting different cities for the two concepts, although there are cities such as Targoviste, Dambovita and Bucharest where both brands are present.
Penny Market targets cities above 15,000 inhabitants. “We try to be the first modern food retailer in each town,” says Thiele. “The XXL concept includes a bigger assortment than Penny and also a bigger sales area, so the catchment area should be at least 60,000 to 70,000 inhabitants.”
Both concepts are targeting customers with low to middle income and have four times as many customers per week in Romania than in Germany.
Rewe Group Romania
■ 2007 turnover: 250 mil. Euro
■ 2008 forecast turnover: 360 mil. Euro
■ Employees: 1,750
Hornbach: manpower and land prices limit development
DIY retailer Hornbach is planning to open ten stores by 2015 in all Romania’s large cities, such as Cluj-Napoca, Iasi, Timisoara, Craiova and Constanta in a 250 million Euro investment, but land is hard to come by. “The land prices are too high at the moment and we need large plots to open 24,000 sqm stores,” says Horia Mugurel Rusu, general manager of Hornbach Romania.
The retailer is considering smaller cities for the opening of smaller store concepts, with the same sales area of 17,000 sqm, but fewer empty spaces.
Manpower shortage is an issue limiting the development of the retailer in cities outside the capital. Bucharest attracts a large number of people from Romania looking for jobs and this reduces the availability of workers in the rest of the country.
“We need between 110 and 118 employees per store and in Brasov there is a huge labour force shortage,” says Rusu.
Next year Hornbach opens two stores, which require a 21 to 25 million Euro investment each, in Brasov and in the Prisma commercial centre on the national road between Bucharest and Ploiesti. Three more stores are planned for 2009.
■ Stores 2008: Berceni and Militari, Bucharest
■ Stores 2009: Brasov, Prisma Commercial Center
■ Investments by 2015: 250 million Euro
■ Products in-store: 60,000
Takko: clothing stores targeting retail parks
German clothing store Takko Fashion International will open five new stores this month in Oradea, Constanta, Bacau, Buzau and Focsani. The company launched last September two stores in Bucharest, inside Vitantis shopping centre in southeast Bucharest, at the junction between Berceni and Titan area and inside the mall Era Park Iasi. Takko entered Romania last year with a store in Arad and expanded last May to Bucharest with a shop inside Iris Shopping Center. “For now we are not targeting high street locations, but we prefer to be present in commercial galleries near hypermarkets, where we have good customer traffic,” says Cosmin Ulmean, sales director at Takko Fashion International. “We are not interested in exclusive mall projects such as Baneasa Shopping City either.”
In Romania Takko is looking at cities with over 30,000 inhabitants, but does not rule out the possibility to open stores in smaller cities.
Takko Fashion International
Family clothing store
■ Stores: 14
■ Investments in one store: 150,000 to 450,000 Euro
■ Employees: 130
Deichmann: shoe retailer heading for capital
German general shoe retailer Deichmann Schuhe last spring launched two stores in malls Shopping City Sibiu and Suceava Shopping City and is planning to enter Bucharest by the end of the year.
This year the chain is also planning to open another six stores in Bacau, Oradea, Focsani (Vrancea county), Buzau, Fagaras (Brasov county), Targu-Mures and Bucharest. Sales have been good across the ranges of shoes, says Ulrich Effing, corporate communications director at Deichmann Schuhe, who says the best-selling brand has been the ‘Elefanten’ range for children. Deichmann entered Romania in 2007 with four stores in Pitesti (Arges county), Arad, Roman (Neamt county) and Cluj-Napoca.
■ Stores: Six, 13 by end 2008
■ Employees: 90
New Yorker: targeting malls and high streets
German clothes and accessories retailer New Yorker entered this year the Romanian market with three stores in Polus Center Cluj, European Retail Park Sibiu and Mures Mall, Targu Mures. One new store with a 700 sqm sales area opened last month in Bacau and the company will continue to target high streets and shopping malls. New Yorker stores, which targets 12 to 39 year-olds, stretches over areas ranging between 500 and 1,200 sqm.
Clothes and accessories retailer
■ Year established in Romania: 2008
■ Stores: Cluj-Napoca, Sibiu, Targu-Mures and Bacau
Schaeffler: Romania exclusive producer for group’s bearings for wind turbines
Since 2002 German bearings manufacturer Schaeffler Romania has constantly developed its industrial base in Brasov county. The production volume has increased significantly so that this year’s turnover rose by 70 per cent on the company’s figure for 2007.
The products manufactured in Romania have diversified so that Schaeffler Group has decided to produce its ballbearings used for support and positioning in wind turbines exclusively in Romania. “This increase will continue in the future, so that by the end of 2009 we forecast to more than double the initial planned investment of 180 million Euro announced in 2002,” says Alexandru Blemovici, general manager of Schaeffler Romania.
The company has encountered problems with the lack of skilled workers. “We anticipated this and the company has already invested in teaching programs for future employees,” says Blemovici.
Recently Schaeffler Group worldwide took over 49.9 per cent in automotive giant Continental AG. “This move can only bring positive effects to all the group’s companies, but will not bring changes in the planned development of our operations in Romania,” adds the general manager. All Schaeffler’s products made in Romania are exported.
Manufacturer of components for machine building and automotive
■ Includes: rollers, large size bearings, slewing rings
■ 2007 turnover: 185 mil. Euro
■ 2008 predicted turnover: 301 mil. Euro
■ Total investments at end 2007: 250 million Euro
Continental: continuing solid industrial commitment
German car parts giant Continental has already invested in Romania more than 350 million Euro and for 2008 plans investments worth around 40 million Euro in all its plants. “All our present activities will be extended in the future, especially with increasing the production capacity of the plants,” says Thierry Wipff, general manager of Continental in Romania.
In Romania Continental manufactures passenger and truck tyres, refrigerant, oil, hydraulic and cooling lines, power transmission belts, heating and cooling water hoses, airbag control units, displays and electronic door modules. The bulk of production is in Timisoara and Sibiu, where the firm has factories and R&D centres.
Since 2005 Continental has delivered tyres to local customers such as Dacia-Renault. Around five per cent of production remains on the local market, the rest is exported. “The structure of our sales in Romania is changing as we sell more high-performance tyres, 4x4, winter tyres and truck tyres for international transport than a few years ago,” adds Wipff.
Car parts manufacturer
■ Six production facilities and four R&D centres located in Timisoara, Carei, Arad, Iasi, Sibiu
■ Tyre Distribution Centre in Sacalaz (near Timisoara)
Part of East-European 2005, a joint venture with Italy’s Pirelli in Slatina, to produce steel cord. Continental owns 20 per cent
■ Employees: around 6,200
Robert Bosch: strengthening production in Blaj plant
Technology and services supplier Robert Bosch’s division Bosch Rexroth will continue to invest a further 30 million Euro in its factory in Blaj by 2010 to strengthen production capacity.
Here the company manufactures linear technology components supplying materials for driving, controlling and moving machinery in industrial and factory automation, as well as for mobile applications.
The company had a 17 per cent growth in 2007 compared to 2006. “Robert Bosch’s evolution on the Romanian market continues its ascendant trend,” says Brigitte Eble, general manager in Romania.
A new production hall will open at the beginning of 2009, when 140 people will be employed in addition to the 300 at the Blaj plant. The entire production from Bosch Rexroth Blaj is destined for export.
This year the company also opened a call centre in Timisoara in 2008 to provide outsourcing and other operations, including invoice checking, management assistance, reservations and facilities focused to attract and maintain customers.
On the local market Robert Bosch is also an importer of car parts, power tools, security systems and heating equipment. The company provides car components, including the ABS Bosch system for the Dacia-Renault car plant in Mioveni.
Robert Bosch Romania
Supplier of tech and services for car, industry and construction sectors and large consumption
■ Bosch Rexroth division manufactures linear technology components in Blaj
■ 2007 turnover: 136 mil. Euro
■ 2008 forecast turnover: 200 million Euro
■ Employees: 570
Max Boegl: bidding for Constanta-Bucharest motorway
Infrastructure construction company Max Boegl Romania, which in co-operation with Italy’s Astaldi has built part of the Sun Motorway between Bucharest and Constanta, has put in offers to build two other segments of this road.
“The authorities can take several months to analyse the offers and anounce a winner for a public tender,” says Romeo Botocan, executive manager at Max Boegl Romania. There is no regulation stipulating a timetable in which the authorities can take such a decision.
In 2007 Max Boegl and Astaldi won a project worth 60 million Euro to design and build an exit to the Sun Motorway to connect to Bucharest’s central Splaiul Unirii. The auction was contested in court by another bidder, which has held up works for a year.
Last August the construction company started building Sibiu’s by-pass, a project worth 50 million Euro and meant to be finished by spring 2010. At the moment the company is also rehabilitating some national roads in northern Romania.
Max Boegl also won design-and-build project for the National Stadium in Bucharest. The project is due to be finished in April 2010. “We are pleased that Mayor of Bucharest Sorin Oprescu visited the site and said he is satisfied with the rhythm of the works,” says Botocan.
Max Boegl Romania
Infrastructure construction company
■ 2007 turnover: 115 million Euro
■ 2007 profit: up to 11.5 mil.Euro
■ Total investments: 12 mil. Euro
■ Employees: 550
BSH Romania: targeting ten per cent market share in white goods sectors where active
Romania’s subsidiary of BSH Bosch und Siemens Hausgerate is importing and distributing Bosch and Siemens electrical household appliances in Romania and also providing after-sales services during the warranty period and beyond. The two premium brands are focusing on above-medium income customers. With a market share of six to seven per cent in each of its segments on the local white goods market, BSH Romania targets a ten per cent market share in the next two years. “Now we constantly endeavour to communicate to our potential end-users the benefits and values of our two main brands,” says Liviu Popeneciu, general manager at BSH Romania.
Worldwide BSH operates 16 brands which cover a range of price segments. The local market is expected to hold up to 1.2 million large appliances, about the same as Hungary, which has a much smaller population. “Romania has a bright future for white goods and it will soon develop to support a wider range of our portfolio. Right now what is important is to get the proper job done with the main two brands, Bosch and Siemens, for household appliances,” says Popeneciu.
Following the development of real-estate, the company has formed a special department to meet the demand from project developers for innovative built-in solutions for top residential complexes, based on high-tech Siemens kitchenware. “We target developers that sell fully-equipped apartments and villas to customers looking for high standards in their daily comfort, and there top brands such as Siemens perfectly fit their high expectations,” says Popeneciu.
The local white goods market is a challenge for those willing to expand the business for premium products. National chain retailers are mainly interested in selling high rotation products and so constantly press for entry products. This is not the case for Bosch and Siemens household appliances, so BSH Romania has been investing over the last years in the development of independent retailers and the training of their personnel to secure the proper transfer of know-how for premium brands to the benefit of consumers. Also supported by the traditionally higher awareness for German brand names, almost 40 per cent of the company’s turnover is actually made in the central and western part of Romania. Over the last nine years, BSH Romania sold more than 1.2 million electric household appliances branded Bosch and Siemens on the local market.
Even though ‘innovation’ and ‘energy efficiency’ are key words when referring to Bosch and Siemens brands, Romanians are not yet convinced to give up their old appliances in the favour of new ones. “Romanian end users will surely become educated consumers for whom energy efficiency shall really matter upon buying new electric appliances,” adds Liviu Popeneciu, “and to this end a major contribution will be brought into by the young RoRec, the very active non-profit WEEE association of the European manufacturers in Romania, where BSH constantly supports programmes for the increase of the energy efficiency awareness with the public.”
BSH Electrocasnice Romania
Electrical household appliances
■ Importings over 500 products to Romania, in 12 different product groups
■ 2007 turnover: 20 per cent increase overn 2006
■ 2008 predicted turnover: between five and 12 per cent increase, depending on the group of products
Draexlmaier: Romania loses significance compared to other countries
Lisa Draexlmaier, one of the largest employers in the automotive sector in Romania, continues to be affected by the rising salary costs. “Romania has thus decreased in competitive significance for us compared to other countries,” says Ferdinand Zilcher, country manager at Draexlmaier Group Romania.
Some foreign producers and manufacturers have started this year announcing their relocation away from Romania due to the increasing costs and the labour shortfall, but this is not in Draexlmaier Group’s plans. “However labour-intensive production has been relocated to other countries in southeast Europe and the Romanian locations have been reorganised,” says Zilcher. The company is investing in new technologies, such as a semi-automatic engine wiring harness production in Timisoara. The company’s country manager says that the Draexlmaier Group no longer includes a new production site in its plans for Romania. For 2008, the German manufacturer forecasts only a four million Euro investment mainly in acquiring new land, construction and equipment modernisation. Draexlmaier exports its products to Germany for brands such as BMW, Mercedes-Benz and Audi.
Draexlmaier Group Romania
Car parts manufacturer
■ Five production facilities in: Pitesti, Satu Mare, Timisoara, Codlea and Hunedoara
■ 2007 turnover: 165 mil. Euro
■ 2008 predicted turnover: 180 million Euro
■ Employees: 17,500
HeidelbergCement: doubling production capacity by 2011
Romanian real estate and construction market boom has prompted HeidelbergCement Romania to start large investments to double its production capacity.
Almost 150 million Euro will be spent by the company in the next three years. In the first phase, HeidelbergCement will modernise and start the operation at a production facility in Bicaz, Neamt county in a cash injection worth 55 to 60 million Euro.
“The group’s strategy is to double the production capacity in Romania in the next three years both by modernising our existing units and by building new ones,” says Mihai Rohan, president and CEO of Carpatcement Holding. “Most probably we will start building a new production facility next year as we predict a constant yearly growth of the domestic cement market of 15 to 20 per cent in the next ten years.” The factory, worth around 300 to 330 million Euro, should take two years to build.
Owns Carpatcement Holding, Carpat Beton and Carpat Agregate
■ 2007 turnover: 363 mil. Euro
■ 2008 forecasted turnover: 380 million Euro
■ 2007 profit: 117 million Euro
■ 2008 forecasted profit: about 117 million Euro
Norr Stiefenhofer Lutz: state subsidy laws still unclear
In the last year Romania has seen moves from German investors in non-food shopping, with the arrival of retailers Peek & Cloppenburg, New Yorker, Obi and Hornbach and interest from mid-sized production companies and large European industrial groups, such as Nokia relocating its factory from Germany to Cluj county.
But one major problem for investors is the unclear legislation on state subsidies, argues Joerg Menzer, Romanian-based partner at law firm Norr Stiefenhofer Lutz.
The Ministry of Economy and Finance has set aside around 500 million Euro over five years to provide up to 50 per cent in subsidies to investors willing to create an enterprise worth over 30 million Euro with a staff of at least 300. But many proposals are rejected for minor reasons and for contradictions in the legal framework, says the German lawyer.
“Some investors are downsizing their planned operations or not coming at all because they do not know if they will receive subsidies,” says Menzer.
The procedures for granting aid in the Czech Republic, Poland and Hungary are clearer and more predictable, argues the lawyer. These countries also give companies sufficient time to appeal against a decision, which does not happen in Romania. “If the environment is predictable and clear and investors trust it, then they come,” says Menzer.
The country has to be careful, argues Menzer, to ensure that it can grow its industrial base, as this will help boost exports.
Another major issue for investors are rising salaries. Wages have increased by up to 20 per cent in the last year. Companies also have to take into account social security costs, which double the cost of every net salary. “The market’s size and the low salary workforce were the chief reasons for firms to invest in Romania,” says Menzer. “If the salaries increase by ten to 20 per cent per year, this makes investments hard to calculate and, in ten or 20 years, wages could be the same as Germany. This means some long-term investors are thinking they might as well stay in Germany.”
Norr Stiefenhofer Lutz
Commercial law firm
■ THI Audit tax consulting
■ Staff: 55
■ Lawyer to partner ratio: 27:3
■ Turnover: up 25 per cent in 2008 on 2007
ProCredit Bank: branch drive to rise by half
Small and micro-lending finance institution ProCredit Bank aims to increase its number of branches by 50 per cent by the end of 2009. The bank now has 37 branches and intends to open five more by the end of the year, while next year plans to open a further 20.
Around 90 per cent of its clients are very small businesses which take out development loans less than 10,000 Euro.
“We want to further expand in the small business and agricultural sectors and cover all regions,” says Asmus Rotne, deputy general manager of ProCredit Bank. “Agriculture is not very well covered by banks in Romania. They are cautious because most of them do not understand how to manage the risk present in this kind of financing. But the margins are good in agriculture and our presence has been met with enthusiasm, because for small farm
ers it is very difficult to get loans.”
■ Assets: 308 million Euro
■ Profit 2007: 950,000Euro
■ Net profit mid-2008: 250,000 Euro
■ Customers: 100,000
Fuchs: factory to be operational by April 2009
Fuchs Condimente Romania has recently invested ten million Euro in its new factory located in Curtea de Arges, which will become operational in the first four months of 2009. This will also include a logistics centre for Romania and other eastern European countries where Fuchs is present. Around 300 people will be employed in the new factory.
■ Spice brands: Fuchs, Cosmin
■ Products: over 200
Signal Iduna: planning to lead in health insurance
Officially launching on the local market this month, insurance group Signal Iduna Asigurari de Viata plans to become the market leader in health insurance.
So far the company has invested seven million Euro in Romania and plans to invest a total of 20 milli on Euro by 2010 to gain a 25 per cent market share in health insurance.
The German group will also offer life insurance and accident insurance.
Signal Iduna is targeting cities such as Bucharest, Timisoara and Brasov and plans to open five branches by the end of 2008, with a further seven earmarked for the near future.
In Romania if a company wants to offer its employees health insurance as a bonus, the financial regulations state that only 200 Euro per employee a year is deductible. “A complex and competent package of insurance services can rise above this figure,” argues Sinziana Maioreanu, CEO of Signal Iduna Asigurari de Viata. “Employers are already fiscally overloaded, so if they do not receive any kind of incentive they will be quite reluctant to make an additional investment.”
Another problem is the poorly developed infrastructure in the Romanian public health sector, which cannot provide high quality to those who have health insurance. “We would like to have a partnership with the public health sector, but I have to be sure that our clients receive exactly what they have paid for and I do not have the means to control this in the public system,” says Maioreanu.
Educating the public about the advantages of health insurance will also be a challenge for Signal Iduna Asigurari de Viata. “The insurance market is still dominated by non-life and car insurance, which shows that, for Romanians, their house or car is more important then their health,” argues Maioreanu.
Signal Iduna Asigurari de Viata
■ Areas: health, life, accident
■ Branches: five by end 2008
■ Employees: 50
Bayer: healthcare division seeing fastest growth
Global healthcare, nutrition and high-tech group Bayer’s CropScience division is the company’s largest in Romania. Meanwhile HealthCare is the group’s fastest growing business in Romania.
“Bayer CropScience experienced a 15 per cent growth last year compared to 2006 and we expect a similar trend for some years in the future,” says Laurent Perrier, Bayer’s country manager. This division is currently the leader in pesticides in Romania. In this country only seven million out of a total of nine million hectares of land are harvested, which means there is still room for further development in crop protection.
Meanwhile Bayer’s HealthCare division has developed fast in the last two years, also due to the group’s takeover of Schering worldwide. Perrier argues that the Romanian pharma market will grow faster than the similar markets in Hungary or Czech Republic, for example, due to the low consumption of medicines per capita in Romania compared to these two countries.
Bayer’s MaterialScience division deals with high-performance plastics and engages with the car industry. “With a strong presence of Dacia-Renault and Ford, Romania is very active in automotive and interesting for us,” says Perrier. “Also Nokia in Cluj-Napoca could become the customer for some of our products.”
Divisions: Bayer CropScience, Bayer HealthCare and Bayer MaterialScience
■ Employees: 170
■ 2007 business growth with Bayer CropScience compared to 2006: 15 per cent
Boehringer-Ingelheim: drug consumption still has to play catch-up
Drug consumption per capita in Romania remains among the lowest in the EU, especially in rural areas.
A programme organised by the Ministry of Public Health focused on evaluating the healthcare status of the population showed a high number of untreated patients. “This creates opportunities in the development of the pharma market which has to ‘catch-up’ with the rest of the EU members, especially when we have such well-educated and trained people to work with here,” says Franz Zinsberger, general manager at Boehringer-Ingelheim Romania.
Boehringer Ingelheim is focused on prescription medicine drugs which represented 79 per cent of the company’s sales in 2007. The pricing system for medicines is still complicated in Romania and often companies can only launch their products if they agree to sell them at the lowest price in the EU.
“Due to this situation innovative drugs are available rather late in Romania [than in other EU countries],” says the general manager. “International pharma distributors profit most from this because they buy the drugs from Romania and sell them in other countries where the prices are much more attractive.”
The company’s best selling products in Romania last year were Mirapexin for Parkinson’s Disease, Micardis for treating high blood pressure and Spiriva for chronic obstructive pulmonary disease. Essential HIV/AIDS treatment Aptivus is the company’s newest entry in Romania.
■ Market share: 1.13 per cent in June 2008
■ Prescription medicine drugs (RX): 79 per cent of the sales in 2007
■ 2007 sales: 15 million Euro
IB Cargo: logistics start-up forecasts six million Euro turnover
Mixed German-Romanian transport and logistics IB Cargo started-up this year with a plan to clock up a six million Euro turnover in 2009.
“We don’t plan to make acquisitions, we want to develop our business and grow slowly and securely,” says Catalin Putineanu, shareholder and managing director of IB Cargo. Through alliances, IB Cargo has launched the Less than Container Load (LCL) service from the Far East to Constanta.
Romania lacks adequate transport infrastructure compared to western Europe, which has not a knock-on effect onto the market of logistics and freight.
“There is great potential on the Romanian logistics market and the proof is that more real estate developers are coming here to invest in logistics space and are very satisfied with their rate of return,” says Putineanu. “But we need up to ten years to reach the level of infrastructure in Hungary and the Czech Republic.”
Another problem facing freight transport is the difficulty of gaining transit or clearance approval from the customs authorities at Constanta, which can delay delivery by up to ten days. “In Germany a transit process takes only five minutes online without any papers,” says Putineanu.
Goods that IB Cargo transports include electronics, boats, cars, machinery and chocolate Easter bunnies.
Freight and logistics firm
■ Forecast turnover 2008: 2.7 million Euro
■ Forecast turnover 2009: six million Euro
■ Forecast profit 2009: 400,000 Euro
■ Offices: three: Bucharest, Constanta and Timisoara
BMW Group: encouraging dealerships for every main city
BMW Group opened a local office in Romania at the beginning of 2007 and now operates the import activities of BMW and Mini car brands. The sales are undertaken by BMW’s dealers, including Automobile Bavaria, BMW’s main representative in Romania before 2007. By the end of this year, BMW will see dealerships in Pitesti and Baia Mare and will open a workshop in Bucharest. In 2009, five or six more BMW outlets will start operations. “One of our main targets is to have a dealership with sale and after-sale services in each of Romania’s main cities,” says
Carl-Theo Fitzau, general manager BMW Group Romania.
Even though the car market has witnessed a bad year in 2008, Fitzau expects a 15 to 20 per cent growth in the premium sector. BMW’s best sold car is the SUV X5 with 1,000 units last year in the premium SUV class. By the end of August 2008, 600 BMW X5s have been sold.
Romanians are more interested in buying new BMW cars and only about ten per cent of the total BMWs in Romania are second-hand. “Compared to German buyers, Romanians like strong and powerful engines and do not pay much attention to energy efficient cars, they are more inclined to novelties,” says Fitzau.
This November the new BMW X7 will become available in Romania.
BMW Group Romania
Car importer of BMW and Mini
■ Units sold in 2007: 2,750
■ Total units predicted to be sold in 2008: between 3,160 and 3,300
Daimler: joint venture with Ion Tiriac to sell Mercedes
In 2007 Daimler took over the import, marketing and wholesale operations in Romania of Mercedes-Benz and car brands Smart, Chrysler, Jeep, Dodge and Mitsubishi Canter Fuso.
Before 2007, Autorom, which is part of Tiriac Auto, represented Daimler’s brands in Romania. Now Mercedes-Benz Romania has created a joint venture with Tiriac Holding called DaimlerChrysler Romania Automotive, in which the German subsidiary holds 51 per cent of the shares. “We have been entirely satisfied with the development of our relationship with Mr Ion Tiriac until now,” says Michael Grewe, president and CEO of Mercedes-Benz Romania.
In 2008 alone, the authorised Mercedes-Benz dealers have invested over 25 million Euro. Now the car importer is represented by 20 authorised centres combining sales and after sales services in or next to the most important cities in Romania. “Future investments of our partners, that stand for additional tens of millions of Euro, include additional showrooms and workshop facilities in Bucharest and Romania, most of which are due to open by the end of 2008,” says Grewe.
Last month, the company launched its Mercedes-Benz Financial Services, a division focused on financing, leasing and insurance. Daimler is also a major shareholder in Star Transmission Cugir, which manufactures automotive parts in Cugir, Alba county for export to Germany.
■ Part of Daimler
■ Owns 51 per cent of a joint venture with Tiriac Holding
■ 20 authorised centres incl. sales and after-sales
Lufthansa: passengers up by almost a quarter
Lufthansa Romania has seen a 23 per cent increase in passengers in 2008 so far compared to 2007. This was aided by flights starting from Sibiu in September 2007, which was then European Culture Capital.
“Some tourists came to Sibiu, they were happy, spread their experiences, came back and brought some other people along,” says Stefan Versemann, general manager of Lufthansa and Swiss International Airlines for Romania and the Republic of Moldova.
Destinations for flights from Romania include Dusseldorf, Geneva, Frankfurt, and Munich, the latter three of which provide strong connections for flights to the north and south Atlantic or southeast Asia.
Airlines are now facing problems due to the increasing fuel prices, but Lufthansa managed to overcome this obstacle by hedging the fuel at the end of 2007 for its entire needs in 2008. This committed the airline to paying a pre-determined price for future jet fuel purchases over a given period. “As the fuel prices have doubled in the last 14 months, Lufthansa definitively did a great job in this aspect,” adds Versemann.
The German airliner has not introduced any flights to the Republic of Moldova yet, for which it only sells tickets. “We are waiting for the general elections next spring to have a view on the market-development of the country,” says Versemann.
■ Owns Swiss International Airlines and operates from Otopeni, Timisoara, Sibiu and Cluj-Napoca airports
Carl Reh: targeting high-class imagination
Carl Reh Romania is targeting the premium sector of wines with limited edition blends which it hopes wll capture the imagination of a public hungry for the theatre of wine. This month the wine brand launches a 6,000 bottle range of wines with exotic labels designed by painter Ciprian Paleologu.
This is part of a series of eccentric blends available for collectors which combine the six red varieties in Carl Reh’s wineries in Oprisor, Mehidinti county - Feteasca Neagra, Merlot, Cabernet Sauvignon, Pinot Noir, Shiraz, Primitivo and Dornfelder.
Romanian consumption has grown by about 17 per cent on last year, but this will continue to be dominated by white wine. Around 70 per cent of sales in Romania are half-sweet or half-dry white. “This is a tradition that will not really change,” says Ana Rodica Capatina, general manager Carl Reh Winery Romania.
Around 50 per cent of Carl Reh’s Romanian brands are exported, though this is becoming harder due to competition from the new world wines. For Carl Reh’s Romanian brands, the UK remains the most important market. “This is still increasing,” says Capatina. Germany, Sweden and Finland are also targets.
Carl Reh Winery
■ Romanian brands: Val Duna, River Route, La Cetate
2007: 1.5 million bottles
2008: 15 per cent increase
Prince Stirbey: maturing a taste for bankers
Family run wine company Prince Stirbey has managed to foster the perfect variety for the palate of bankers with its best-selling dry white Cramposie.
The Frankfurt-based European Central Bank has chosen the Cramposie as the signature wine of Romania to serve during its receptions, according to Baron Jakob Kripp, who runs the Prince Stirbey vineyard in Dragasani, Valcea county.
Seduced by the wine’s distinct aroma of apples and pears, Romanian central bank governor Mugur Isarescu is now growing the Cramposie variety in his own vineyard, also in Dragasani, securing its status as a grape destined to entertain future generations of financiers. For Prince Stirbey, sales have increased for the local market in rceent years and have stabilised at around 70 per cent for Romania and 30 per cent for the rest of the world. Meanwhile exports have registered a lift recently due to a deal to serve the company’s Sauvignon Blanc in the first class seats on Lufthansa.
The chief foreign markets remain France and Germany and most recently the UK, although the company has yet to find a distributor in the US.
The company is now producing two new Romanian-based varieties for the market, the Novac – with a strong palate reminiscent of a burgundy-style Pinot Noir and Negru de Dragasani, which is intense on the nose but smooth to taste.
The company is also vinifying some Feteasca Neagra for export. Meanwhile Rose and the whites Feteasca Regala and Sauvignon Blanc remain the company’s most popular products.
Wine producer in Dragasani
■ Production 2007: 70,000 bottles
■ Forecast 2008: 100,000 bottles
By Ana Maria Nitoi,
Corina Ilie and Michael Bird