Interview: Saolo Spolanse, president of Schneider Electric Romania, talks to BR about energy-efficient solutions, electric car infrastructure, green buildings and smart grid technologies »page 8
ROMANIA’S PREMIERE BUSINESS WEEKLY
October 17 - 23, 2011 / VOLUME 16, NUMBER 36
AUSTRIAN BUSINESS FORUM AUSTRIAN FIRMS ARE NOW SWITCHING THEIR ATTENTION FROM COST CONTROL TO MARKETING, SAID PARTICIPANTS AT BR’S LATEST COUNTRY EVENT »PAGE 12
NAILING THE NICHE Do-it-yourself mania is taking over Romania, despite more price-conscious consumers and greater competition »page 10-11
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NEWS Beefy profits: French retailer Carrefour is partnering local meat producer Angst to open a series of franchise stores throughout the country » page 7
NEWS Snap happy: Romanian firm F64 has opened its largest photography store in SEE in Bucharest, and plans to attract 10,000 visitors in the first month » page 7
FURNITURE Sitting pretty: BR reviews this year’s international furniture exhibition (SIM) in Bucharest and what local manufacturers put on display » page 13
www.business-review.ro Business Review | October 17 - 23, 2011
BUSINESS AGENDA
NEWS 3
NEWS in brief
October 17 14:30 The European Commissioner for agriculture and rural development, Dacian Ciolos, will speak at a press conference organized at the Romanian headquarters of the European Commission representation. By invitation only.
WEEK in numbers
October 18 18:30 The Association of Women in Business organizes Meet the Woman at Capital Plaza Hotel. Bibiana Stanciulov, owner of the Topoloveni Magiun factory, will attend, to debate the subject of business development. By invitation only.
million euro is the increase made by Erste to BCR’s social capital
100 Courtesy of European Parliament
October 18 19:30 Toyota will organize an event to mark the launch of a new car model at its showroom in Pipera-Tunari. By invitation only. October 19-23 Romexpo organizes the fourth Alimenta, an international festival dedicated to the food industry at Romexpo Exhibition Center. By invitation only. October 19-23 Romexpo organizes the International Fair of equipment and products in agriculture, horticulture, viticulture and animal husbandry at the Romexpo Exhibition Center. By invitation only. October 19-23 Romexpo organizes the 13th international exhibition for packaging material, specific machines and equipment at Romexpo Exhibition Center. By invitation only. October 19-23 Romexpo organizes the international wine and spirits exhibition, gathering companies that produce, import and distribute wine, alcoholic beverages as well as equipment and processing technologies at Romexpo Exhibition Center. By invitation only. October 25 09:00 Business Review organizes the 11th REALTY 2011, a forum on the real estate market, at Wilbrook Platinum. By invitation only. November 1 Business Review organizes Focus on Telecom, a forum looking at the state of the local telecom market, from Romania’s leadership status in broadband usage to the necessary improvements in infrastructure development. For details and registration please go to www.business-review.ro/events.
IMAGE of the week European Parliament adds Romanian and Bulgarian works to contemporary art collection The European Parliament has added pieces by contemporary Romanian and Bulgarian artists to its collection of artworks from EU member states. The works were bought in 2011 for a total of EUR 99,100. The Romanian artists represented are: Ioana Batranu, Horia Bernea, Geta Bratescu, Daniela Chirion, Florin Ciubotaru, Suzana Dan, Sorin Dumitrescu, Daniela Fainis, Stela Lie, Valeriu Mladin, Gili Mocanu, Teodor Moraru and Mihai Topescu. The selection was made by the EP based on proposals from the National Contemporary Art Museum, National Cotroceni Museum, Romanian Cultural Institute and art universities. The exhibition of works from the Balkan neighbors is open in Brussels between October 11 and 14, after which the pieces will go on display with other artworks in European Parliament buildings in Brussels, Strasbourg and Luxembourg.
PROPERTY real,- Romania invests EUR 500,000 per unit in redesigning local chain Hypermarket chain real,- has redesigned and modernized stores in Constanta, Pitesti, Craiova and Timisoara at an average outlay of EUR 500,000 per unit since the beginning of the year, and the process is expected to continue, the retailer has announced. Part of Metro Group, real,- Hypermarket Romania was set up in 2008 and now operates a network of 25 hypermarkets in 18 cities. In the past five years the company has invested over EUR 550 million locally and says that over 90 percent of the products it sells come from Romanian producers.
IT&TELECOM Samsung ‘extremely interested’ in PPP for General Cadastre implementation Samsung has expressed its strong interest
in a public-private partnership with the Romanian state for the implementation of the country’s General Cadastre, according to a press release from the Ministry of Tourism and Regional Development. The project will require the registration of all land plots and buildings in the country, creating electronic maps and releasing the data on the internet, to be available to anyone interested. It is considered a priority by the ministry, which is in charge of the National Agency of Cadastre and Real Estate Advertising. Ministry officials said that the implementation of the General Cadastre could start in approximately three months.
RCS&RDS resumes negotiations for UPC Romania takeover RCS&RDS has resumed negotiations for the takeover of rival UPC Romania and a deal is highly likely, says HotNews, quoting sources on the market. This is not the first time reports have surfaced of negotiations between the firms, though UPC denied the allegations. Talks restarted after RCS&RDS reportedly withdrew in
108 million euro is the value of the investment in the Used Water Cleaning Station at Glina by Bucharest City Hall
September. “If UPC does not have a strategy to re-launch on the market and diversify its portfolio of services, maybe it would be a good idea to sell,” Adrian Ciobanu, CEO of Reimens, told BR.
TAXES Tobacco excise collection totals EUR 1.27 bln after Q3 The state collected EUR 1.27 billion of tobacco excises in the first nine months of the year, 38 percent up on the same period of last year, said Sorin Blejnar, president of the National Agency for Fiscal Administration (ANAF). Between January and September last year, excise collection reached EUR 919 million. The value of the excises also increased this year by 3.5 percent compared to 2010. The cigarette smuggling rate decreased to 11.8 percent in September, a 3.9 percentage point decline since July, when it was 15.7 percent, according to a study by Novel Research. Cigarette smuggling peaked in January 2010, at 36 percent. Smuggled cigarettes come mainly from Romania’s neighboring states, the Republic of Moldova, Serbia and Ukraine.
LOGISTICS Tibbett Logistics extends operations at Europolis Park with new five-year contract Local contract logistics specialist Tibbett Logistics, part of the UK-based Keswick Enterprises group, has signed a new five-year contract to extend operations at the Europolis Park, to the west of Bucharest. The firm has operated from a facility at the industrial park since 2008 and has now contracted operations there until mid-2016. The site comprises 22,000 sqm of warehousing, with over 30,000 racked pallet positions and space for cross-docking operations handling up to 40,000 cases a day.
www.business-review.ro Business Review | October 17 - 23, 2011
4 NEWS BANKING
Austrian banks boost Romanian subsidiaries with additional capital
Courtesy of Erste
Andreas Treichl, CEO of Erste Group Bank
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epresentatives of two Austrian banking groups, Erste and Volksbank, announced capital increases for their Romanian operations last week. The move came as the European context worsened, with no coherent response to the sovereign debt crisis that has engulfed the peripheral states that form part of the Eurozone appearing imminent. The CEO of Erste Group Bank, Andreas Treichl, announced during a press conference that BCR, the top lender in Romania by asset value, will receive a EUR 100 million injection of capital by the end of this year. Erste Group will partially write down its Romanian-related goodwill by EUR 700 million pre-tax to reflect the slower than expected economic recovery. Following a successful buyout of the SIF minority shareholders, the remaining goodwill will be supported by a substantially large share of BCR's cash flow. These measures were announced in an official press statement. However, BCR representatives in Bucharest refrained from commenting on Treichl's
statement on the additional capitalization of the bank. The EU will not solve the sovereign debt crisis in the near future, so Erste will take radical action in the balance sheet to prepare for a prolonged period of uncertainty, added Treichl. Erste Group cut its sovereign exposure to Greece, Portugal, Spain, Ireland and Italy from EUR 1.9 billion at year-end 2010 to EUR 0.6 billion at 30 September 2011. As a result of these extraordinary changes, the group expects to post a net loss of about EUR 700-800 million. Before these decisions, it was expecting a net profit of EUR 850-950 million this year. Its solvency rate will remain unchanged at 9.2 percent, well established in the Core Tier 1 ratio. Following the announcement by Erste Group, Raiffeisen Bank International published an official statement to the effect that the Austrian lender, which ranks fourth in the Romanian market for banking assets, had acquired its local subsidiary at a very low cost, without booking any goodwill, as is the case of Erste. The official statement added that RBI has low exposure to the troubled economies of the peripheral Eurozone and that Raiffeisen had a sovereign exposure of less than EUR 10 million to Spain and Portugal together, and another EUR 474 million to Italy. However, the bank has no sovereign exposure to Greece and Ireland and expects to end this year in profit. In the first half of 2011, RBI reported a consolidated profit of EUR 615 million. Volksbank will also get a capital injection of EUR 100 to 200 million this year, or early next year, according to Johann Lurf, president of the directorate at Volksbank Romania. The lender will boost its solvency rate, which currently stands at 12 percent, added Lurf. Volksbank reported a net profit of EUR 1.3 million at end-August. ∫ Ovidiu Posirca
BANKING
Volksbank rolls out EUR 2 million branding campaign
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olksbank, the sixth largest lender in Romania by assets, with a total value of EUR 4.7 billion, is to roll out a branding campaign, aimed at promoting the functionality and transparency of its banking services functional. The lender also launched a new savings scheme, which offers bonuses on deposit interest rates and options for automatic transfers to a savings account, on specific dates. Lucian Cojocaru, vice-president of Volksbank, said that the new brand image would cost EUR 2 million, with EUR 200,000 being spent on merchandising for the bank’s 140 branches nationwide. Since the beginning of this year, the lender had closed 42 units and reduced its headcount by 100 to approximately 1400. Johann Lurf, directorate president at Volksbank Romania, said the network was the right size for its business needs, and no expansion was planned in 2012, given the economic forecast. However, he added that foreign investors are coming back, and looking at Romania with much more interest
than a year and a half ago, but that it will take time until the investment flow starts again. “We have knowledge of investment in agriculture, and the construction business is also starting again,” said Lurf. He also told BR that the lending market will continue to slow down next year, with no dramatic growth expected. “We are seeing a more conservative approach, with more focus on savings and deposits, while the lending segment will still be at a low level, for the whole banking sector as well as for Volksbank,” predicted the banker. Under the newly designed strategy, Volksbank will address both the retail and corporate segments, and will also create a new line of services for small enterprises. According to Cojocaru, the bank currently has 140,000 retail clients and 3,000 in the corporate sector. At the same time, the lender will have ten networks controlled by regional centers, which will grant more autonomy in managing the budgets. ∫ Ovidiu Posirca
6 NEWS
www.business-review.ro Business Review | October 17 - 23, 2011
PARTNER CONTENT
Renewable energy support scheme support scheme may be revised, in order to avoid the risk of over-compensation, should the actual internal rate of return exceed a pre-estimated rate ranging between 9.9% and 11.8%. In its meeting of 13 October 2011, the Government pushed some last legislative amendments, which the Parliament would be shortly called to sanction. Thereafter, significant secondary regulation would still be needed and a new accreditation procedure is to be passed before generators may benefit of the new scheme. Nevertheless, the level of interest in the business supported by the new scheme has not faltered over the time and the grid is exceedingly buzzing with green farms connection requests. Transposition of the third legislative package Romania has joined a large pool of 17 member states who have failed to transpose as yet the third energy package by the renewed deadline, which prompted from the European Commission the launching of a new infringement procedure. The stakes are high, as the third legislative package aims to reach further and fast into the core of energy establishment of each national market and unlock the last barriers to liberalization and common market creation and functioning. Among the essential triggers – all of which have considerable impact for Romania – there are the requirements of legal unbundling or independence in operation of transmission from supply and generation, the sanctioning of an independent regime and of larger attributions for the national regulatory authority, the removal of regulated prices, regulated contracting and other arrangements limiting the exercise of eligible statute for the consumer, the definition of public sector obligations and of the support for the category of vulnerable consumer.
ADVERTORIAL
Power generation investments based on selective renewable energy sources and high-efficiency coCristina Filip, generation, if partner PeliFilip commissioned until end of 2016, may benefit of an enhanced support scheme promoted by Romania. After 3 years and 3 legislative enactments and many iterations with Brussels, the European Commission positively assessed the compatibility of the scheme in the light of the 2008 Community Guidelines on State Aid for Environmental Protection. The green certificates scheme tags a variable financial value to each green MW, depending on the generating energy source, separately from the value of the physical trading of the same MW. In the same time, it creates an exchange to allow the generator to actually cash the tag value within a range. The exchange draws on the assumption that the level of demand that the regulation manages to impose on suppliers, through mandatory quotas, meet or exceed the offer of certificates. By this mechanism, the scheme aims to render economically viable for exploitation, from an investor perspective, for a fixed term, selective renewable energy sources. The actual viability calculation depends also on whether the generator is successful in selling its power on the whole-sale market, as the physical sale would secure the injection into the grid and the priority dispatching of the green MW (which is the moment when the financial tag is created to each green MW) and, in addition, would allow the recovery of part of the generation costs. The economics of the investment may be influenced further, as the generators would be closely monitored after commissioning, and the
NEWS 7
www.business-review.ro Business Review | October 17 - 23, 2011
RETAIL
F64 opens SEE’s largest photo store in Bucharest
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RETAIL
Carrefour partners Angst for franchise proximity stores
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arrefour Romania opened its first local proximity store following a franchise agreement with local meat producer and retailer Angst under the name of Carrefour Express. By the end of this year the franchise will be extended to other Angst outlets and by the end of 2012, all of the existing 24 Angst stores and the new ones opened in the meantime will be included in the scheme, said Sorin Minea, president of Angst. Francois-Melchior De Polignac, country manager for Carrefour Romania, said that launching the new store was part of the retailer’s global multi-format strategy and shows the firm’s confidence in the development potential of the local market. For the time being Carrefour plans to extend the proximity network solely through franchise but it did not disclose what other local partnerships it was considering or how many Carrefour Express units would be opened on the medium run. Carrefour also plans to open new units this year in its existing formats – three more hypermarkets and eight more supermarkets. The franchise agreement with the French retailer is a flexible one and the merchandise structure of each store is negotiated individually, said Minea. He added that the partnership with Carrefour was the next step for developing Angst shops, while stressing that his company does not plan to sell its retail network. Among the benefits of the partnership he cited Carrefour’s retail experience, its negotiation power with suppliers as well as its communication power. Three more Angst shops will be opened this year and the expansion will continue throughout 2012. The first Carrefour Express Angst store is located in Domenii Square in Bucharest and has a total sales area of 390 sqm. It sells about 4,000 items out of which 700 are Carrefour products. ∫ Simona Bazavan
Courtesy of F64
ocal photo equipment retailer F64 opened South-Eastern Europe’s largest photography store in Bucharest last week. Located at 45 Unirii Boulevard, the concept store has a surface of 1,300 sqm and is split into areas including photo studio, exhibition zone, relaxation space with a photo bookstore and fish tank, creative space and children’s playground. Marian Alecsiu, general manager of F64 chose not to reveal the investment made in the store. No further outlets will be opened outside Bucharest. “Our clients in the rest of the country can order via our online store,” Alecsiu told BR. The online platform is complementary to the firm’s retail outlet. The premises showcase “the new F64 concept store, and we are expecting 10,000 visitors a month. The commercial space has the capacity to display approximately
The opening of F64’s largest unit coincides with the firm’s tenth anniversary
5,000 products. To start with we will display products from 100 brands in the store,” said Alecsiu. The firm forecasts an annual turnover
of EUR 14 million at the end of 2011, which will represent a 23 percent growth on the previous year. “With the opening of this store, we hope to reach a turnover of ap-
proximately EUR 17.5 million in 2012,” added Alecsiu. F64 started as a store selling second hand cameras. “In fact this concept is still very important today at F64. Clients can come with second hand equipment with a view to renewing their photo-video equipment,” said Alecsiu. At the moment, F64 has 92 employees and so far has had operations in two headquarters. One chunk of the company’s revenues is represented by photography classes. “We are trying to give these classes a practical side, by using our photo studio, which is properly equipped for the purpose,” said company officials. F64 has a market share of 29 percent. The photography market in Romania was worth EUR 20 million in the first half of the year, according to GfK estimations. ∫ Otilia Haraga
www.business-review.ro Business Review | October 17 - 23, 2011
8 INTERVIEW
Efficient energy powers healthy returns for investors For Saolo Spaolanse, president of Schneider Electric Romania, the big challenge is delivering energy-efficient solutions for all sectors of the Romanian economy. He says that such investments will keep operational costs lower despite rising energy prices. Both the real estate sector and the transportation industry can benefit, he adds. ∫ OVIDIU POSIRCA Is Romania a player with potential in the area of energy efficiency, from a financial point of view? I'm sure it is, because energy costs in Romania have increased significantly. For instance, residential energy costs in Romania have risen 70 percent between 2004 and 2011. If you look at big industrial users, with consumption above 1 Gigawatt, energy costs rose 30 percent in the same period and the forecast for 2012 is that they will increase 10 percent and another 30 percent in the next five years. This means that energy efficiency is becoming an ever better deal. For instance, the payback time for an investment in energy efficiency has fallen 30 percent in the last five years, due to the evolution of energy prices. In Romania, we have office building applications; with our energy-efficient solutions, we can reduce energy consumption by 30 percent. We have provided solutions for buildings such as Citygate, Sunplaza and Lakeview.
What progress has there been on the project for the implementation of electric vehicle infrastructure in Romania? We are now leading this initiative, and we are working with Renault on a proposal that will be submitted to the Romanian government in the coming days. Clearly, we don't see electric vehicles on the streets yet. But given the need for environmental initiatives, I'm sure that in the coming years electric vehicles will be part of our daily lives. We provide the infrastructure for charging stations, because people use large quantities of energy when recharging electrical vehicles, higher than they are used to using. To charge an electrical vehicle requires the same energy necessary as for a house, fully work-loaded, so the charging process must be very safe. Therefore, a lot of investment is needed in the infrastructure to make it feasible, especially in big cities where we believe electrical vehicles will be most used. How many electrical vehicles do you project will be present in Romania in the next ten to fifteen years? We have today about five million cars reg-
Photo: Laurentiu Obae
Are real estate developers interested in green solutions for new projects? Some of them are. We are increasingly seeing developers looking for green solutions. Energy efficiency is good for the image of the developer – you can use it as a PR initiative, or it can be easier to attract more tenants – but it also makes good business sense. It means that the operational costs of a green building are about 11 percent lower than for a traditional building. A green building is 6.4 percent more valuable than a traditional one. And the rent is also 4 percent higher than for the traditional solution. This combination of low operational costs, the high value of the building and higher occupancy rate is a strong argument for developers to look to green solutions.
istered in Romania, so depending on the source, industry experts estimate that within the next 20 years, between 5 percent – on the conservative side – and 25 percent – on the optimistic side – of new cars will be electric. We can see that, if we add to this existing base another five million cars, electric vehicles will make up between 5 and 25 percent. During recessionary times, are companies looking at cutting energy costs? We have been contacted more and more lately to provide our energy management competence to a wide range of customers, meaning big residential compounds, office buildings, retail, banking and industry, because in a crisis period you need to be more efficient with your operating expenses. In the past, when our customers considered investments in energy efficiency, this usually applied only to the construction and investment phase. We need to have a holistic vision of the investment. When you look first at a building, the life cycle is at least 30 years, with 25 percent of the capital investment happening in the first three years, while the rest of the investment, i.e. the remaining 75 percent, happens in the rest of the life cycle. So our customers increasingly understand the need to look at investments in terms not only of capex (capital), but also opex (operational costs). Is the national grid operator Transelectrica interested in smart grid technologies? It's a common view that investors, energy
players and suppliers, are waiting for the vision to become reality, which is a challenge. So, we need some interesting proposals, but we also need some regulations and clarifications. We need to make our contribution as energy efficiency providers. We help the investor to develop the project, and the investor expects predictability and clear regulations. This is where I believe that the Romanian government can get more involved. This is considered common sense among the energy market stakeholders. What renewable energy solutions does Schneider offer? Schneider is specialized in the management of energy, with operations in over 100 countries. We offer integral solutions for different market segments, occupying leading positions in the areas of energy and infrastructure, industrial processes and data and network centers. The company also has a prominent presence in the domain of applications for the residential segment. We manage, in a proper way, the energy consumption scheme. So we provide solutions, a combination of software and hardware along with our expertise, to ensure the visibility of energy consumption for end-users and their consumers. What is the financial development of Schneider this year, in Romania? In 2011 we are above target; we established growth. We are investing to increase our market share. In the first semester Romanian exports were strong,
CV Saolo Spaolanse January 2011- country president, Schneider Electric Romania Aug 2008-Jan 2011 ISC & residential business director, Schneider Electric Oct 2007-Jul 2007 business development manager, M&A, Schneider Electric Mar 2003- Oct 2007 national sales manager, Schneider Electric Jan 1997- Feb 2003 regional sales manager, Sao Paulo at Roca 1992-1996 BA in Economics, Universidade Federal do Parana and the agricultural performance was better than expected, so we can see that in our performance too. I emphasize that we always like to look at the long term. We have been established in Romania for 15 years, so Schneider has a serious commitment to investing in the Romanian economy. We are not here in an opportunistic way. We have our headquarters in a green building. We have local project engineering, project execution, local engineering residents, and this year we hired 40 people to establish our new regional customer care center, for one of our IT business units. Romania, as a country, is perceived by Schneider as a place to invest. We are here to support Romania in catching up with the EU in infrastructure standards.
ovidiu.posirca@business-review.ro
www.business-review.ro Business Review | October 17 - 23, 2011
9
10 FOCUS
www.business-review.ro Business Review | October 17 - 23, 2011
DIY mania builds retailers’ hopes A market drop of 20 percent, an increase in VAT and belt-tightening consumers have not scared away DIY newcomers. Business Review finds out why. ∫ ANDREEA CEASAR
Courtesy of Praktiker
It is said that Romanians love to believe that they all have craftsmen’s skills. And this belief has brought investments by seven of the biggest European do-ityourself (DIY) retailers, making it the most overcrowded market in Central Europe, says Nicola Szekely, country manager of bauMax Romania. BauMax, Bricostore, Hornbach, Obi, Praktiker, Mr. Bricolage and the latest entry Leroy Merlin have all spotted the potential of the EUR 1.3 billion market, a figure recorded in 2010 after a 20 percent drop year on year. “There are two important needs in Romania: the need to save money and the need and desire for people to do work by themselves,” adds Szekely. And as the country’s 1.2 million public sector workers and 5.4 million pensioners have seen their incomes drop considerably, DIY stores seem to have found the right niche market. The lack of subsidies for heating Romanian households and the high cost of energy will push citizens to look for new methods to reduce consumption, say players, and the subsequent investing in new heating systems or thermal insulation for their own flats will manifest as new investments in DIY products. In addition, as the number of middle class buyers who can afford a mortgage has fallen, interest in repairing and modernizing existing homes has increased. “Almost 80 percent of Romanian citizens plan to improve their homes in the next five years, through renovation or major repairs,” says Alexandru Ciobanu, president of BCR Banca pentru Locuinţe. His view has support from the bauMax representative: “In Romania consumers’ plans to improve their current homes over the next 12 months have held up better than their intentions to purchase a home. Moreover, household consumption is still very low, but the consumer confidence indicator has shown
Romanians are said to be big fans of DIY some improvements over recent months.” The great expectations of DIY retailers for the coming period also reflect the improvements in the living standards of Romanian citizens likely to come during the elections. This should boost expenditure on renovating homes, rather than buying new ones. Moreover, according to the housing bank BCR Banca pentru Locuinţe, the home loan saving system has increased its number of clients from 265,000 in 2009, to 390,000 in 2010. Around 70 percent of the people now putting money into such a system – which encourages saving, supports refinance loans and the improvement of the building fund, and
gives home state premiums of 25 percent of the annual saved amount – plan to use the money they have saved plus a loan to modernize, refurbish and carry out major repairs on their current homes in three or four years. This, once again, is good news for DIY sales.
Prices take a hammering These good perspectives have brought a new competitor onto the shrinking market of the past two years, one keen to become leader of its field. French retailer Leroy Merlin has opened a 16,500-sqm store in Bucharest after investing EUR 28 million, with the motto: “Amazing prices for a comfortable home”. “We didn’t
pursue the company or ask Leroy Merlin to come to our retail park. The company came to us and decided that the area and our project were both perfect for its store in Romania,” says Panico Panayi, president of Nova Imobiliare, the developer of retail center Colosseum. “Despite the obvious drop in sales on the DIY segment, the French retailer decided to enter because it believes in the Romanian construction market. The shop’s results will determine the next investments. But, like Leroy Merlin, we also believe in the potential of this market,” comments Daniel Guzu, founder of paint producer Fabyo and general manager of Duraziv, the producer of paints and adhesives for construction, whose products have recently found their way onto Leroy Merlin shelves. The firm is entering the most competitive market in Central Europe, so its strategy is to offer the best prices on the market. “On average our prices are 20-30 percent lower than the next lowest market price,” said Philippe Hauville, managing director of Leroy Merlin Romania, adding that the store will have almost 300-400 products on promotion every month. It is a similar story elsewhere. “We also have a great sales team which investigates the best price offers and tries to obtain from producers the lowest prices on the market,” says Szekely of bauMax. Which invites the question: how can Leroy Merlin’s single shop achieve its promised amazing prices? According to company representatives, this is a matter of strategy. No other DIY retailer has 90 percent local suppliers, like Leroy Merlin does, the company says. These suppliers are ready to suffer to be on Leroy Merlin shelves, and in fact those of any other DIY store. The number of residential building permits issued fell 5.6 percent to 27,167 in the first eight months of 2011 from the same period of last year, according to the National Statistics Institute (INS). Also,
FOCUS 11
www.business-review.ro Business Review | October 17 - 23, 2011
Photo: Laurentiu Obae
Courtesy of Duraziv
Courtesy of Leroy Merlin
Hauville Phillippe, managing director of Leroy Merlin Romania
Daniel Guzu, founder of paint producer Fabyo and general manager of Duraziv
Nicola Szekely, country manager of bauMax Romania
from January to July the volume of new construction works dropped by 4.2 percent and maintenance works by 1.7 percent, while repairs increased by 10 percent. Against this background, it is no secret that suppliers’ interest in DIY is growing stronger and stronger. “We believe that Romanian producers were pressed to reduce their prices so much by the Leroy Merlin sales team. But there is an issue. Although, initially, customers will come, attracted by the low selling prices, they will also look for other services, services which for example they can find at Dedeman and Hornbach. So, as Leroy Merlin is present in the market just with one shop, I don’t
know how the firm will manage to keep the prices lower than the rest of its competitors,” says Ileana Nicolae, general manager of Sika Romania, local subsidiary of Swiss group Sika, a producer of specialist building chemicals. Although the company’s products are specialized, during the crisis it has been one of many firms that have reoriented some sales from a niche market to a wider one, that of DIY. And figures show that this decision was a positive one as Sika’s DIY sales as a percentage of total sales doubled in 2010 in comparison with 2009, to reach 20 percent. “DIY stores are and will continue to be very attractive for suppliers thanks to the
advantageous exposure of products, the great number of ways in which you can promote your products, thanks to the national coverage, and, an essential element in this period, the secure income they bring,” said Guzu.
Writing on the wall? Although suppliers are showing great interest in the DIY scene, in 2010 the market dropped by 20-30 percent, and expectations are that it will remain at last year’s level in 2011. The drop was felt differently by players. According to the Ministry of Finance the most profitable DIY network doesn’t belong to a foreign retailer as
might be expected, but to a homegrown one. In 2010 Dedeman posted, throughout its 21 units, profit of over EUR 36 million thanks to its aggressive expansion campaign, which has continued in 2011 with another three stores. Today its network consists of 24 outlets, and by 2015 the number should exceed 40. The management of Bricostore and Hornbach’s stores have made them into the second and third most profitable companies in their field, posting EUR 4 million and EUR 3.3 million in profit respectively. While Praktiker’s high brand awareness has made it the leading name in the sector, the firm was in the red last year, recording a EUR 7.4 million loss in 2010. Obi’s seven stores have continued to see income fall since 2009, and figures show that it has lost over EUR 18.3 million in 2011. BauMax and Mr. Bricolage have also reported losses of EUR 3.9 million and EUR 2.2 million respectively. Looked at on a per-outlet basis, Obi is currently faring worst, with an average per-store loss of EUR 2.6 million, while for Praktiker the average loss per outlet is EUR 273,000. And even though the market’s potential is high and retailers are trying to keep prices low, the end-consumer generates a process of natural selection. “In three years there will be fewer competitors than now. I would not be surprised if the number of stores fell in the next period,” says Nicola Szekely, admitting that the Romanian DIY market is no promised land for investors.
andreea.ceasar@business-review.ro
12 AUSTRIAN
www.business-review.ro Business Review | October 17 - 23, 2011
European financial turmoil puts Austrian investors on standby Cautious but optimistic was the general state of mind of company representatives attending the third Austrian Business Forum organized by BR last week. Against the looming debt and banking crisis in Europe, Austrian investors have became even more guarded in handling their local business but remain confident that growth will follow. ∫ SIMONA BAZAVAN
All photos: Laurentiu Obae
“We would have seen much stronger positive development in 2011 if no other external factors had hit,” said Edith Predorf, commercial attaché with the Austrian Embassy to Bucharest. The opinion was shared by Nicola Szekely, country manager for Romania of the DIY retailer bauMax Romania, and Reinhard Zeitlberger, head of the Austrian corporate customer department at Raiffeisen Bank. Szekely pointed out that unlike three years ago, the situation in Romania is now more sustainable. Should international events not take a turn for the worse, 2012 could be a much better year, he added. “We don’t think that there is any negative news coming from inside Romania. (…) The only thing that we need right now is some good sentiment. The Romanian consumer needs a couple of months without bad news,” he went on. Zeitlberger noted that Raiffeisen Bank expected the Romanian economy to grow by about 1.5-1.6 percent this year, down from the 3 percent hike predicted at the beginning of 2011. For 2012 the Austrian bank foresees similar growth of about 1.6 percent. While some of the recent domestic economic climate can be blamed on external factors, it also goes to show the vulnerability of the local economy. “What we’re seeing now is how much Romania depends on foreign capital, and this shows that the basis of the Romanian economy is not as stable as it should be,” said Prof. Dr. Joerg Menzer, managing partner of Noerr Romania and also the event’s moderator. Taking a more optimistic tone, Eva-Simone Perauer, managing director of Marketing – Austria, said that a recent survey conducted by her company found the general economic sentiment to be improving. Furthermore, out of the respondents, 80 percent said that had they known the outcome of the economic crisis that hit the Romania three years ago, they would still have chosen to invest here. However, many company representatives present at the event voiced their concern that despite the improving general sentiment, optimism has yet to translate into action. Looking at how Austrian companies have handled the past year in Romania, Markus Imgrund, senior project manager with Horváth & Partners, said that after focusing their attention on cost control, firms are now concentrating on marketing and sales and a more thorough customer analysis. “Companies are no longer trying to push their products into the markets and find customers for that, but rather focusing on what their present customers need and trying to segment their customers,” he said. Taking the analysis a step further, Karim Kheirat, country manager of ICAP Romania, revealed that from a total of 936 local
Things can only get better: Austrian investors voiced guarded optimism at the BR event companies with more than a 30 percent Austrian shareholding, 57.6 percent have not changed their commercial risk class between 2010 and 2011, 22.7 percent have seen a risk increase while 19.6 percent of the firms have managed to decrease their risk class. Taking an overview of Austrian FDI in Romania so far, Predorf stated that Austria is Romania’s second biggest source of foreign capital after the Netherlands with EUR 9.2 billion invested so far, which accounts for about 18 percent of the total stock. EUR 363 million was invested last year. The main industries where Austrian companies are seeing growth are alternative energy, R&D, industrial modernization, tourism infrastructure and industry. The third Austrian Business Forum was organized last week at Ramada Plaza Bucharest. The event gathered around 60 company representatives and was sponsored by Raiffeisen Bank, Noerr Romania and Horváth & Partners. For more information about future BR events please go to www.business-review.ro/events.
simona.bazavan@business-review.ro Markus Imgrund, Senior project manager at Horváth & Partners “Firms now also have a plan B – they’re preparing for growth but also have better risk management approaches”
Edith Predorf , Commercial attache with the Austrian Embassy to Bucharest
Karim Kheirat, Country manager of ICAP Romania
“Even though we’re not seeing many newcomers, there is a lot of reinvesting from existing players of Austrian background”
“Large local Austrian companies have a better rating than the smaller ones and are also better prepared to face the crisis”
Eva-Simone Perauer, Managing director of Marketing Austria
Nicola Szekely, Country manager of bauMax Romania
“It is still fashionable to be pessimistic but there are good signs that the economic situation will improve”
“So long as the European situation remains stable, 2011 should be a much better year for Romania”
Prof. Dr. Joerg K. Menzer, Managing partner of Noerr Romania “We saw an influx of investments in the first semester but on the other hand we’re seeing existing players slowing down their activity”
Reinhard Zeitlberger, Head of the Austrian corporate customer division at Raiffeisen Bank “Romania and the other CEE countries are expected to outgrow Western Europe by about 1.5 percent”
CITY 13
www.business-review.ro Business Review | October 17 - 23, 2011
DESIGN
New guard seizes initiative at furniture fair SIM With plans to refurbish a multi-purpose residential room, BR’s reporter discovered a battle between old and new at the expo SIM (Salonul International de Mobila), Romania’s first exhibition of international furniture manufacturers.
http://simexpo.ro
Turning the tables on the old designs
∫ ANDREEA OVANEZIAN
editorial@business-review.ro 1 The Faculty of Interior Architecture is a ten-year-old department of the Ion Mincu University of Architecture and Urbanism 2 Aurica Sereny citations from video interview at Simexpo.ro; APMR data for 2009 and 2010 based on first ten months of the year; 2011 data not yet available
http://simexpo.ro
Organized by the Romanian Furniture Manufacturers Association (APMR), September’s expo at Romaero-Baneasa hosted approximately 150 exhibitors in three pavilions dedicated to furniture, accessories and wood-processing equipment. They included manufacturers, wholesale and retail distributors, designers and architects. Although I anticipated a quick visit to SIM, I lingered far longer as I discovered several ‘flowers’ blooming in this field of airport hangars. Among ‘the young, the new and the interesting’ at the expo, I found several resources that warranted follow-up. First there was the free consultation from a graduate of the school of interior architecture which yielded a blueprint for my room and practical advice for proper bookshelf construction. I also met an enterprising team of Romanian and British designers with fine arts backgrounds, who ‘rescue’ and restore antiques, adding their own eclectic touches (Chambres D’Or). Then I found a variety of Austrian glass and metal laminates for wall décor, as well as an array of Dutch natural fiber wallpapers, sold through both retail and wholesale distributors (Theta Furniture & More, Gelu Trading Company). Additional finds included a Romanian manufacturer of curved cabinets and shelving (Romvitrine); a local distributor of electric fireplaces (Seminee Electrice) produced in Canada and Italy; a Romanian CAD program with furniture design capabilities (LxCAD); and softwaredriven equipment for industrial woodprocessing that carves furniture as if lovingly handmade (local distributor EET). Among ‘the old and the staid’ at the expo, I was surprised by the ample display of heavy wood furniture (in traditional, rustic and classical styles) which did not seem to draw much visitor interest. Since I am not partial to this type of furniture, I question whether a significant customer segment still exists to sustain production, and I wonder if these manufac-
turers are having trouble breaking with past trends. Moreover, I would have liked to get the heavy wood clan and the avant-garde designers together at the expo, to brainstorm some fresh designs evoking the future rather than my grandparents’ décor. “I don’t think these manufacturers think they need our help,” a young designer whom I spoke with mentioned discreetly. According to the president of APMR, Aurica Sereny, one of the goals of the expo was to provide exhibitors with the opportunity to meet potential business partners, compare competitor offerings, identify enduring market trends and improve their future offerings. Suggesting the need for change, Sereny reveals that many of the Romanian furniture makers who relied solely on the domestic market have become insolvent. Meanwhile the export market has continued to provide some manufacturers with a refuge during the crisis. In 2010, Romanian furniture exports increased 117 percent (with Germany the largest market), while domestic consumption decreased 20 percent and industrial production fell 4 percent as compared to the previous year. In 2011, while furniture production for the retail market has seen a small improvement despite the crisis, production for institutional customers (hotels, offices and developers) has suffered a substantial decline due to uncompleted real estate projects. Although 2010 was not a good year for the Romanian furniture industry, Sereny remains optimistic about 2011 based on her members’ feedback from their exhibitions abroad, and their anticipation of market recovery for their multinational institutional customers.
Sofa so good at the furniture expo
www.business-review.ro Business Review | October 17 - 23, 2011
14 IN TOUCH FILM REVIEW
WHO’S NEWS
The Matador
Claudia Nemat
Bullish performance: Pierce Brosnan stars as a hit man in this quirky black comedy
∫ DEBBIE STOWE Directed by: Richard Shepard Starring: Pierce Brosnan, Greg Kinnear, Hope Davis On at: Cinema Union, Mon (16.00), Tues (18.00), Thurs (20.00), Sat (18.00), Sun (16.00) Like bank robbers, hit men belong to that breed of cinematic criminal that is always a bit charming, rather than the scum they are likely to be in real life. In Bruges, Wild Target and Red have mined the friendlyhit-men-on-one-last-job genre for blackly comic material in recent years. But while the latter two somewhat misfired (ha ha), The Matador, like In Bruges, was more on target (ho ho). It’s a few years old now, but getting a run out at Cinema Union this week. Also like In Bruges, this offbeat action comedy is astutely cast. Our jaded hit man Julian is Pierce Brosnan, who has to draw on all his Bond charisma and leading man looks for his character to get away with this much murder and misogyny. Bumbling along beside him is Danny, played by Greg Kinnear, a hapless everyman salesman hoping to secure the big contract that he and his wife are relying on to stay afloat financially. Kinnear has struggling ordinary Joe off pat (see the wonderful Little Miss Sunshine if you haven’t already), and he and Brosnan (who got an Oscar nod for his role) complement each other capably. Julian and Danny strike up an unlikely, almost Lost in Translation-ish friendship
ISSN No. 1453 - 729X
Business Review welcomes information for Who’s News from readers. Submissions may be edited for length and clarity. Get in touch at simona.bazavan@business-review.ro
while staying in a trendy Mexico City hotel for business, respectively an assassination and a sales pitch. The Matador – whose title comes from a bullfight they attend – makes good use of this and other locations, which add a colorful backdrop to the story, supported by an energetic soundtrack. It’s not an entirely satisfying film – Julian might be handsome and amiable, but he still kills strangers for money. A comparison made at the bullfight – that the bull is lucky if it’s dispatched cleanly by a professional because the death is honorable – doesn’t really hold water: yes, it’s probably better to be killed instantly than in a botched job, but surely it’s better still not to be killed at all? A few of the one-liners and background scenes verge on the misogynistic, and – unsurprisingly in a hit man movie – proceedings can get rather violent. But leaving aside this moral murkiness, The Matador is an understated, quirky movie. Julian’s bonding with Danny and his wife and the twists in the two men’s bromance hold the attention despite the film’s leisurely pace, and if you enjoy black comedy there is a lot to laugh at here. While at times, especially towards the end, The Matador veers towards cliché and sentiment, overall it feels like a fresh film, one that takes risks and doesn’t pander to the lowest common denominator audience. A subtle treatment, unusual premise and fine performances mean the movie kills you softly rather than blasts you away.
has been appointed head of Europe for Deutsche Telekom. Born in 1968, she has been a member of the board of management of Deutsche Telekom AG since this month and is responsible for the board area of Europe. The group is a shareholder of OTE, which owns in Romania Romtelecom and Cosmote. Before joining Deutsche Telekom, Nemat spent 17 years working for the consultancy McKinsey&Company. In her last position there, she was responsible for the high-tech sector in Europe, the Middle East and Africa. In addition, Nemat has been responsible for projects in the fields of information and communication technology integration (ICT), sustainable IT, as well as medical technology for international companies. She studied physics at the University of Cologne, where she also once taught in the department of theoretical physics and mathematics.
Khaled El Solh (37) is the new CEO of Caroli Foods Group. He is replacing Haluk Akdemir, who had held the position since 2007, a period that included the local merger with Campofrio Food Group. Akdemir will be appointed member of the joint venture board. El Solh, who has also been a member of the joint venture board since last year, has over 11 years of professional experience with the company, holding various executive positions. Between 2000 and 2008 he served as sales, marketing and logistics executive director and went on to be R&D and business development executive director for the following two years.
Radu Florescu currently president of the Union of Advertising Agencies (UAPR) and CEO of Centrade Saatchi & Saatchi, has also been appointed president of the regional board of the European Association of Communications Agencies
(EACA), which covers countries such as Bulgaria, Croatia, the Czech Republic, Latvia, Lithuania, Poland, Romania and Slovenia. At the same time, Moray MacLennan, CEO of M&C Saatchi Worldwide, was elected president of the association. The EACA is a non-profit organization based in Brussels, which represents advertising and media agencies in Europe. Florescu was elected president of UAPR at the end of last year, and is one of the founders of the union.
Horatiu Pirvulescu has been appointed audit director of the Timisoara office of Ernst & Young. He took over the position earlier this month, having previously worked as financial director for several companies over the past four years. Pirvulescu has extensive professional experience in audit and consulting and has worked for companies both in Bucharest and Timisoara. He is a member of the Association of Chartered Certified Accountants, UK (ACCA), of the Body of Expert Accountants and Authorized Accountants from Romania (CECCAR) and of the Chamber of Financial Auditors of Romania (CAFR).
Alina Serban-Barbu has joined the Pitesti office of the Bostina si Asociatii law firm. She graduated from the Law Faculty of the University in Craiova in 1997 and went on to join the Arges Bar two years later. Between 2004 and 2011 Serban-Barbu worked as legal adviser for Mindbank – ATE Bank Romania – for its subsidiaries in Pitesti and Giurgiu.
Ingrid Bianca Solcan has joined the Suceava office of the Bostina si Asociatii law firm. She graduated from the Law Faculty of the Al. I. Cuza University in Iasi in 2008 and is currently attending master’s classes at the same faculty. Solcan was initially a member of the Bucharest Bar but later joined the Suceava Bar. Her areas of expertise include civil and commercial law, insolvency, litigation, competition and intellectual property.
editorial@business-review.ro FOUNDING EDITOR Bill Avery EDITOR-IN-CHIEF Simona Fodor SENIOR JOURNALIST Otilia Haraga JOURNALISTS Simona Bazavan, Ovidiu Posirca COPY EDITOR Debbie Stowe COLLABORATORS Anda Sebesi, Michael Barclay ART DIRECTOR Alexandru Oriean PHOTOGRAPHER Laurentiu Obae LAYOUT Beatrice Gheorghiu
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