Retailers to continue their expansion this year on the local market
Retailers will continue their expansion plans in 2017, possibly with a larger number of store openings than 2016. Consumption will continue to grow and new laws that come into force are among the events planned for this year on the Romanian retail market
Lidl, Kaufland, Carrefour, Profi, and Mega Image are some of the major retailers that have announced expansion plans in 2017. The number of new stores planned for this year will be similar or even higher than last year, when about 240 stores were opened, according to profit.ro.
Retailer Profi has opened 134 new stores in 2016 to reach 500 stores, and for this year wants to open new 200 supermarkets, which also means 3,000 to 3,600 new employees and expanding logistic capabilities including a new warehouse of 20,000 sqm in the Moldavian locale of Roman.
Mega Image, part of Delhaize Ahold group, will open its first stores in 2017 in Cluj, the tenth market nationwide for the retailer after Bucharest and Ilfov, Brasov, Prahova, Constanta, Giurgiu, Dambovita, Ialomita and Calarasi. Last year, the network was expanded by 51 stores, reaching 522 Mega Image supermarkets and Shop & Go convenience stores nationwide.
Rewe Romania also has expansion plans for its Penny Market network after opening 26 new stores in 2016 to reach a total of 200 units. This year, company retires its XXL MegaDiscount brand, with six stores to be rebranded into Penny and two will be closed.
Lidl opened 11 stores in 2016 and wants ten new stores this year, expanding its network to 215 units in 2017. The company estimates that the Romanian market has the potential for a total of 300 Lidl stores. This year, Lidl will inaugurate its own headquarters, located in Bucharest′s Aviatiei neighbourhood and developed by Skanska. German retailer Kaufland is also planning new store openings in 2017, having expanded its network by five hypermarkets during 2016, reaching 112 units nationwide.
For Carrefour, this year's main investment will be the rebranding of the 86 Billa supermarkets purchased from Rewe to be changed into Market format. Last year, Carrefour opened 19 stores, including three hypermarkets (two in Bucharest and one in Piatra Neamt), 15 -Market' supermarkets and one -Express' convenience store. The Carrefour network includes 292 units, consisting of 32 hypermarkets, 119 supermarkets, 44 -Express' convenience stores, ten -Contact' convenience stores, 86 Billa stores and one online shop.
Selgros will also continue to expand in 2017, as a new compact format store will be opened in the Bistrita Retail Park project, with completion estimated for the second quarter of 2017. Selgros resumed expansion in 2016 after four years since the last opening of two stores in the new format, Targu Mures and Alba Iulia. The company, part of Transgourmet Holding AG, owns 19 standard stores.
Retailers going online
Mega Image could open its own online shop in 2017, but will continue its collaboration with eMag. Last year, Vassilis Stavrou, general manager of Mega Image, said that they could use Ahold's experience in e-commerce and move to a next stage of online development.
Kaufland may also launch an online shop in late 2017, as told by Valer Hancas, director of corporate affairs and communications for Kaufland Romania.
German retailer Kaufland announced in early 2016 that they want to launch their online operations by 2017, creating a special department on this occasion.
So far, only Carrefour and Cora own online stores, while Metro has an online office supply store. However, some retailers such as Profi do not foresee any entry on the e-commerce segment.
Consumption will continue to grow
In the past three years, consumption - as reflected by the turnover of registered retail trade - increased between seven and nine per cent, supported by higher household incomes, falling VAT to nine per cent for food and 20 per cent on standard rate.
This trend is expected also for 2017 amid wage increases announced in various fields, but also helped by other measures such as further reducing the standard VAT rate by another percentage from 20 per cent to 19 per cent.
According to the National Institute of Statistics (INS), the turnover of retail trade advanced by 7.9 per cent in October compared to the same period in 2015, but recorded slower pace than in previous months and was supported mainly by sales of non-food goods.
Lidl to open at least ten more units this year
"The retail market in Romania has had a rather notable development and now represents a 60 per cent share of modern trade," Lidl representatives told The Diplomat. "The beginning of 2016 was marked by the positive effects of the VAT drop to nine per cent for food, thus our clients could enjoy more of their favourite products. Most probably, the same will be applicable with 2017 and the new drop in VAT."
According to the quoted source, one of the most important changes is the law 321/2009, for which the implementation rules and regulations are still pending.
"However, Lidl has been developing partnerships and projects with the local suppliers ever since entering the Romanian market approximately five years ago, and will continue to do so. In 2016, our one year discussions with the University of Agronomic Sciences and Veterinary Medicine - Bucharest (USAMVB) have materialised in a partnership called "Cultivat in Romania, specific romanesc" ("Grown in Romania, traditionally Romanian"). This is a platform developed for Romanian producers, through which they can reach us to become partners and further develop their businesses with advice from Lidl experts and the University's professors."
Asked about how perceptive Romania is when it comes to e-commerce, Lidl representatives told The Diplomat: "We have recently launched an online holiday store (lidl-tour.ro) and after just six months of activity our expectations have been exceeded as to the interest people show in both the platform and the offers. The wide array of holidays to choose from, in Romania and overseas, has served as destination to many people. And we are confident that the ascending trend will continue. This is the reason why we are on the look to develop and strike new partnerships to provide our clients with the best holiday offers."
Last year, Lidl exceeded 200 stores in Romania and opened its fourth logistics centre in Lugoj. The store is equipped with five charging stations for electric cars, one of which is provided with two power stations.
"Our plans for 2017 include expanding the network with at least ten more units and continuing to offer our clients the best price-quality ratio," company representatives told The Diplomat. "We offer our clients a wide variety of products, ranging from food to clothes and decoration items. So far, we have had great feedback from our clients both on Facebook and in the stores. This, together with the ascending financial track we have been on since entering the local market, encourage us to believe that all our products are of preference for our clients. We could say that the Themed Weeks, with products inspired from international cuisines are a synonym to our business and popular to our customers. Recently we have included the ′Camara Noastra′ in our Themed Weeks and it has become a favourite to our clients. This is the Romanian-inspired assortment, which we have developed based on actual Romanian recipes. We started with 40 SKUs and have now reached 70 products for this range and we will still grow it as Romania has many great products to offer."
This year, Lidl wants to continue searching for Romanian collaborators, as part of the project developed with USAMVB, and they invite local fruit and vegetable growers to contact them.
"Of course, amongst our focuses is our wish to expand our network, to be closer to our clients. In previous years, we have been on an ascending path businesswise, which is something we are confident we will maintain. And this is owing to our clients and to our more than 5,000 employees who work in the stores, logistics centres and headquarters."
German retailer Lidl, which has 5,000 employees in Romania, will recruit another 500 people this year across the country as a result of network expansion plans. The company has 200 stores in Romania and has plans to increase salaries for its employees, according to Mediafax.
Lidl will open two new stores in Cluj-Napoca and Targu-Jiu to reach 208 units nationwide. Each of the two units will provide about 20 new jobs, having an area of 1,200 square meters and nearly 100 parking spaces. The investment in a Lidl store is over two million Euro. The company has already opened a store this year in Drobeta Turnu Severin. The company opened 14 new stores in 2016, five in Bucharest, and has upgraded 45 units. Expansion plans will continue this year, as the company claims a real potential of 300 stores Lidl in Romania.
Lidl was in third place on the retail market in Romania, as of 2015, with a net turnover of 4.72 billion RON (1.04 billion Euro), up 21.5 per cent compared to 2014 and a net profit of 172 million RON (38.2 million Euro). Lidl entered the local market in 2010 when it took over about 100 "Plus" discount stores from the Tengelmann group.
The retailer is part of German group Schwarz, which also owns the Kaufland network in Romania.
Kaufland opens a new store in Timis County to reach 113 units in Romania
Kaufland has opened its first store in Lugoj, Timis County, reaching 113 units in Romania and creating 80 new jobs within the company, according to a press release.
Kaufland is one of the largest retail companies in Europe, with over 1,300 stores in seven countries.
More than half of the retail market in Romania is controlled by four major companies, which together hold 60 per cent of the entire market. The biggest player in the market remains Kaufland Romania, which is the largest private employer in the economy, with 16,000 employees. In 2017, Kaufland continues its expansion plans and will open six new stores in Romania with over 600 employees.
"Kaufland has managed to position itself among the top companies in the food segment of retail industry in Romania, not only in terms of attracting young talents interested in having a retail career, but also in terms of a successful business model," said Estera Anghelescu, recruiting, employer branding and engagement director, Kaufland Romania.
Profi reaches over 500 stores in Romania
Profi Rom Food, the supermarket chain with the largest expansion in Romania, has reached a number of 523 shops in Romania, after opening two stores in Brasov and Neamt, with a total of 12 units inaugurated in February, according to news.ro.
Through the 523 stores in 272 cities and more than 11,000 employees, Profi has the modern retail network with the largest geographical expansion in Romania. Private equity fund Mid Europa Partners had taken over the Profi retail chain from Polish Enterprise Investors in a deal worth 533 million Euro. The buyer said this was the largest deal ever completed by a private equity firm in Romania and the largest retail deal in the country's history. The transaction has received regulatory approvals and was finalized in February 2017.
"Profi is the fastest growing food retail operator in Romania and is ideally positioned to build on its leadership position to deliver organic growth in the future," said Nikolaus Bethlen, partner of Mid Europa. "We have closely followed Profi's development over the last few years and are excited to have the opportunity to work together with management to continue Profi's success story. The acquisition of Profi underscores our commitment to Romania and is the second landmark transaction in the country after our acquisition of Regina Maria last year."
Enterprise Investors had taken over Profi in 2009 for 66 million Euro. At that time, the retailer had 60 stores and this year, the Profi chain is set to reach more than 500 stores across Romania. The retailer has close to 11,000 employees and expects sales of 800 million Euro this year.
Profi plans to open a logistics warehouse in Roman to expand local logistical capacity in that region, considered to be the poorest in Romania. "Yes, we plan to open another logistics warehouse," Profi officials said, without giving details on the investment or when it will be opened, according to Ziarul Financiar.
For this year, Profi has budgeted 200 new store openings, which would take its network to over 700 units. Furthermore, the company has budgeted an increase in turnover by 35 to 40 per cent, in line with previous years, so that business would exceed the one billion Euro turnover. Last year, Profi achieved a turnover of more than 3.5 billion RON and has budgeted a turnover of over 4.5 billion RON (around one billion Euro) this year.
In 2016, Profi opened over 130 new stores, being the most active retailer on the market, also responsible for more than half of the total modern retail store openings last year.
Carrefour has finished the rebranding for the first Billa supermarket
French retailer Carrefour has reopened under its own brand the first of the 86 Billa supermarkets they took over in 2015 from their German competitor Rewe.
For Carrefour, this year's main investment will be the rebranding of the 86 Billa supermarkets it purchased from Rewe, to be changed into the Market format. Last year, Carrefour opened 19 stores, including three hypermarkets (two in Bucharest and one in Piatra Neamt), 15 -Market' supermarkets and one -Express' convenience store. The global Carrefour network includes 292 units, including 32 hypermarkets, 119 supermarkets, 44 -Express' convenience stores, ten -Contact' convenience stores, 86 Billa stores and one online shop.
Carrefour sales registered a three per cent increase in 2016 to 85.7 billion Euro, in comparable terms with positive trends in both Europe and the world, except the Asian market. At the international level, group sales in comparable terms grew by 4.9 per cent to 45.6 billion Euro, while the French market rose by 0.3 per cent. In other European countries, excluding France and the category which also includes Romania, sales in comparable terms increased by two per cent to 22.4 billion Euro.
Carrefour said that sales increased in all European countries in which the group operates, including Romania and Poland where growth was solid.
In Romania, Carrefour operates 197 stores, including 29 hypermarkets, 113 supermarkets and 55 convenience stores, according to data released by the group at the end of June 2016.
Mega Image Romania leads growth of Ahold Delhaize Group in Central and South-eastern Europe
Mega Image stores in Romania lead sales growth of Ahold Delhaize Group in Central and South-eastern Europe. Last year's final quarter brought a 4.3 per cent increase in sales for the region that includes Romania, Greece, Serbia and Czech Republic, according to economica.net.
"In Central and South-eastern Europe growth was generated primarily by Romania. However, margins fell due to business in Serbia and the Czech Republic," financial data shows.
Sales in Romania grew both organically and due to increasing the number of stores.
"Mega Image is the food retailer with the fastest expansion in Romania. In 2016, 28 supermarkets and 40 convenience stores were opened, reaching a total of 526 units at the end of the year."
In Q4 2016, the group reported net sales in Central and South-Eastern Europe of 1.45 billion Euro, 4.3 per cent more than the same period previous year, while annual sales in the region totalled 5.5 billion Euro.
At group level, Ahold Delhaize reported in the fourth quarter net sales of 15.5 billion Euro, 2.8 per cent more than in the same period last year, so that the results for the whole year 2016 shows total net sales of 62.3 billion Euro.
For 2017 no major retail project is scheduled for completion
The modern retail stock in Bucharest reached 1.225 million sqm at the end of 2016 and consists especially in shopping centres (56 per cent) and retail parks (33 per cent), while commercial galleries cover the remaining 11 per cent, according to data from DTZ Echinox.
Last year new supply reached 98,500 sqm, after the openings of Parklake Plaza and Veranda Shopping Center and the extension of Militari Shopping retail park.
The general vacancy rate stands at four per cent. While dominant shopping centres are fully occupied, particular projects located in 3rd, 4th and 5th districts city districts inflate the vacancy rate.
The average density of modern retail space reached 650 sqm/1,000 inhabitants. The First District of Bucharest, which is also the wealthiest, has the highest density, with 961 sqm/ 1,000 inhabitants, but also the highest occupancy rate (99 per cent) and the highest headline rent, with 75 Euro per sqm/ month.
The 6th District of Bucharest continues to have the largest retail stock, with 301,800 sqm, while the 3rd District advanced on the second position after the opening of Parklake Plaza, with 270,400 sqm.
For 2017 no major retail project is scheduled for completion. The current pipeline is limited and consists of the extension of retail schemes such as AFI Palace Cotroceni and Promenada Mall. Starting 2018, however, the situation is likely to change, since currently in the northern part of the city some projects are in early stages of development.