Romanian food retail market - BERAGUA food retail market.pdfTitle Romanian food retail market Author...

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Case study Introduction to the Romanian food retail market

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Page 1: Romanian food retail market - BERAGUA food retail market.pdfTitle Romanian food retail market Author Marta Created Date 2/24/2015 6:15:26 PM

Case study – Introduction to the Romanian food retail market

Page 2: Romanian food retail market - BERAGUA food retail market.pdfTitle Romanian food retail market Author Marta Created Date 2/24/2015 6:15:26 PM

Distribution of the Romanian population

2 Source: Census 2011- Romanian National Institute of Statistics

Total population in Romania amounts to 20.1 mn of inhabitants according to the last National Census. Approximately 46% of Romanians live in rural areas and c.56% live in small towns (below 20,000 inhabitants), while large cities (over

100,000 inhabitants) account for only 28% of the population

Inhabitants, number of localities and % of rural population - % by population ranges

<5,000 5,000-10,000 10,000-20,000 20,000-50,000 50,000-100,000 >100,000 Total

# localities 2,492 479 115 55 21 20 3,182

inhabitants of localities 6,685,141 3,160,756 1,490,993 1,647,397 1,488,239 5,649,115 20,121,641

% population 33.2% 15.7% 7.4% 8.2% 7.4% 28.1% 100%

% population cum. 33.2% 48.9% 56.3% 64.5% 71.9% 100.0%

Rural population 6,577,381 2,395,932 266,725 22,813 0 0 9,262,851

% rural 98.4% 75.8% 17.9% 1.4% 0.0% 0.0% 46%

% of rural population by regions

58%

54%

43%

10%

46%

Moldavia South Transylvania Bucharest Total

Distribution of population by regions - %

Moldavia;

4,629,763;

23%

South;

6,430,465;

32%

Transylvania;

6,789,250;

34%

Bucharest;

2,272,163;

11%

Page 3: Romanian food retail market - BERAGUA food retail market.pdfTitle Romanian food retail market Author Marta Created Date 2/24/2015 6:15:26 PM

10% 12% 20% 18% 22% 18%

10% 22%

42%

60%

82%

100%

<10,000 10,000 - 20,000 20,000 - 50,000 50,000 - 100,000 >100,000 Sofia

% of population % cumulative

Romania – Distribution of the population - benchmark

3 Source: National Statistics Institutes and Beragua

Distribution of population by ranges - %

Distribution of population by ranges - % Poland

Bulgaria

24% 19% 19% 9%

24%

4%

24%

44%

63% 72%

96% 100%

<10,000 10,000 - 20,000 20,000 - 50,000 50,000 - 100,000 >100,000 Warsaw

% of population % cumulative

The vast majority of the Romanian population lives either in the smallest towns of less than 10,000 inhabitants (c.33%) or in the capital of the country (c.28%), being the share of people living in the medium/large sized-cities substantially lower than

in Bulgaria or Poland

Distribution of population by ranges - % Romania

33%

16% 7% 8% 7%

28% 33% 49%

56% 65%

72%

100%

<10,000 10,000 - 20,000 20,000 - 50,000 50,000 - 100,000 >100,000 Bucharest

% of population % cumulative

Page 4: Romanian food retail market - BERAGUA food retail market.pdfTitle Romanian food retail market Author Marta Created Date 2/24/2015 6:15:26 PM

Rural population in Europe – benchmark

4 Source: Eurostat and Bulgarian National Institute of Statistics

Amongst the 27 members of the EU, Romania is the third country with the highest percentage of rural population (46% of the total)

Percentage of total population living in rural areas - %

57%

47% 46%

43% 43% 43% 43% 42%

39% 38% 36%

29% 27%

22% 20%

17%

13%

Slovakia Hungary Romania Czech

Republic

Greece Finland Slovenia Denmark Austria Poland Portugal France Bulgaria Sweden Italy Germany Spain

Page 5: Romanian food retail market - BERAGUA food retail market.pdfTitle Romanian food retail market Author Marta Created Date 2/24/2015 6:15:26 PM

Geography and main cities

5 Source: Romanian National Institute of Statistics

The ten largest cities have a combined population of circa 4.3 million inhabitants (21.3% of the c.20.1 millions of the Romanian population), including Bucharest with 1.88 mn inhabitants

Bucharest

Galati

Brasov

Constanta Craiova

Timisoara

Cluj-Napoca

Iasi

Ploesti

UKRAINE

HUNGARY

SERBIA

BULGARIA

MOLDOVA

8,275,835 inhabitants (41.1% of total population).

Oradea

<2.5 mn inhabitants

>2.5 mn inhabitants

Area population

2.6

1.8

2.5

3.3

2.4

2.1

3.1

2.3

A ‘logistic’ radius of 250 km from Bucharest concentrates c.8.3 million of inhabitants, this is c.41% of the total country population.

The biggest cities Population Distance, km

Bucharest 1,883,425

Cluj-Napoca 324,576 439

Timișoara 319,279 561

Iași 290,422 396

Constanța 283,872 223

Craiova 269,506 228

Brașov 253,200 171

Galaţi 249,432 239

Ploiești 209,945 62

Oradea 196,367 584

Total 4,280,024

Page 6: Romanian food retail market - BERAGUA food retail market.pdfTitle Romanian food retail market Author Marta Created Date 2/24/2015 6:15:26 PM

Average expenditure per capita by region

6 Source: Romanian National Institute of Statistics

Galati

Brasov

Constanta Craiova

Timisoara

Cluj-Napoca

Iasi

Ploesti

UKRAINE

HUNGARY

BULGARIA

MOLDOVA

Oradea

Bucharest

Average monthly expenditure per capita – 2013 RON

The richest areas of Romania (measured in

terms of average per capita expenditure) are

concentrated in Bucharest, the Central

and the Western regions (which include the

two second largest cities of the Country –

Timisoara and Cluj-Napoca), while the

poorest areas are the Eastern regions and

the area of Craiova.

However, the dispersion in terms of

expenditure per capita is moderate:

Bucharest household expenditure is only 31%

higher than the Country average and c.44%

higher than the poorest region.

1,060

898 869 830 811

756 739 734 704 31%

11% 7%

2%

-7% -9% -10%

-13%

Bucharest West Center North-West Average South South-West North-East South-East

Page 7: Romanian food retail market - BERAGUA food retail market.pdfTitle Romanian food retail market Author Marta Created Date 2/24/2015 6:15:26 PM

4.8%

2009 2010 2011 2012 2013 2014F 2015F

Total grocery market EUR bn % growth

Grocery market – evolution and prospects

7 Source: PMR and Planet Retail

Total food retail market in Romania experienced a 6.3% CAGR in the period 2009-2013 and it is forecasted to grow at 5.1% CAGR over the period 2013-2015

The total grocery market in Romania amounted showed a good resilience during the economic downturn.

According to PMR, the Romanian grocery market will grow at a 5.1% CAGR during the 2013-2015 period, c.2% above the estimated inflation for the same period (average of 3.2% 2013-2015).

Evolution of Romanian grocery market – 2009–2015F – EUR bn

Page 8: Romanian food retail market - BERAGUA food retail market.pdfTitle Romanian food retail market Author Marta Created Date 2/24/2015 6:15:26 PM

GDP per capita evolution – benchmark

8 Source: IMF

GDP per capita evolution – 2007-2013 CAGR – Constant prices – Benchmark

With EUR6,709 Romania had the second lowest GDP per capita of all its CEE peers in 2013, only above Bulgaria, showing a 1.1% CAGR during the 2007-2013 period. Nevertheless, country’s GDP per capita is forecasted to show one of the

highest growths between 2014 and 2019, in line with Slovakia, Bulgaria and Poland and well above other more developed countries in the area such as Czech Republic or Hungary

GDP per capita – 2013 benchmark- EUR

GDP per capita evolution – 2014F-2019F CAGR – Constant prices – Benchmark

3.5% 3.4% 3.3% 3.3%

2.1% 1.9%

Poland Bulgaria Romania Slovakia Czech Republic Hungary

2.9%

1.7% 1.6% 1.1%

-0.3% -0.4%

Poland Slovakia Bulgaria Romania Czech Republic Hungary

14,199

13,332

10,093

10,085

6,709

5,518

Czech Republic

Slovakia

Hungary

Poland

Romania

Bulgaria

Page 9: Romanian food retail market - BERAGUA food retail market.pdfTitle Romanian food retail market Author Marta Created Date 2/24/2015 6:15:26 PM

2007 2008 2009 2010 2011 2012 2013

GDP current prices Grocery market Food Inflation

Grocery market evolution vs. Food CPI and GDP

9 Source: PMR and Romanian National Institute of Statistics

During the 2007-13 period, the Romanian grocery market has grown at a considerably higher pace than the GDP. Furthermore, the Romanian food retail market evolution in real terms has been significantly positive during the period

analyzed, growing by c.5pp above the increase of the food CPI

Romanian grocery market evolution vs. GDP and Food CPI – 2007-2013 – % of growth Grocery market evolution vs. Food CPI and

GDP – 2007-2013 CAGR

9.0%

10.8%

4.4%

GDP current prices Grocery market Food Inflation

1.8pp

5.4pp

Page 10: Romanian food retail market - BERAGUA food retail market.pdfTitle Romanian food retail market Author Marta Created Date 2/24/2015 6:15:26 PM

80% 79% 75% 65%

57% 53% 51% 50% 40%

32%

20% 21% 25% 35%

43% 47% 49% 50% 60%

68%

Hungary Czech Republic Slovakia Poland Romania 2015 Romania 2013 Russia Romania 2010 Bulgaria Ukraine

MGD Non-organized

Grocery market – organized vs. non-organized

10 Source: PMR and Beragua

47% of the food retail market is controlled by traditional retailers, which have lost c.31pp of market share since 2005. According to PMR forecasts, the pace of traditionals will decline to 2pp per annum in the 2013-2015 period

Sales market share organized vs. non-organized – Evolution 2005-2013

Sales market share organized vs. non-organized – Benchmark 2013

22%

50% 53% 57%

78%

50% 47% 43%

Romania 2005 Romania 2010 Romania 2013 Romania 2015

MGD Non-organized

Evolution of MGD – pp per annum

c.4pp c.2pp

Page 11: Romanian food retail market - BERAGUA food retail market.pdfTitle Romanian food retail market Author Marta Created Date 2/24/2015 6:15:26 PM

37% 25%

48% 34%

45% 35%

52%

21%

39%

40%

49%

31%

22%

27% 45% 16%

57% 33%

19% 22% 18%

30%

26% 17%

30% 18%

23%

5% 4% 2% 14%

3% 3% 2% 4% 5%

Bulgaria Czech Republic Hungary Poland Russia Slovakia Ukraine Romania Average

Convenience Discounters Hypermarkets Supermarkets

Grocery market – MGD market share by retail segments

11 Source: Euromonitor, PMR and Planet Retail

Supermarkets and discounters are the most

dynamic food retail segments in the Romanian

market

Hypermarkets are the leaders in the modern retail in Romania (c.44% of MS).

Supermarkets, followed by discounters, are the most dynamic food retail segments in the Country and have posted the highest progression in the period 2009-2013.

On the other hand, C&C have lost c.8 pp of MS in the last 5 years, posting the highest MS decline of the organized segments.

Sales market share by segments – Benchmark – 2013 (*)

Sales market share evolution by segments

Compared to the average of our benchmark, Romania presents two specificities in terms of MS by retail segments:

Hypermarkets represent 57% of the MGD sales compared to 33% of the average.

Substantial lower share of supermarkets compared to our benchmark (21% vs. 39%).

2009 2010 2011 2012 2013 Sales

CAGR 09-13

C&C 30.3% 26.8% 25.0% 25.1% 22.5% 2.9%

Convenience Stores 2.5% 2.5% 2.3% 2.2% 3.0% 9.4%

Discounters 11.8% 10.4% 10.5% 10.3% 14.0% 15.6%

Hypermarkets 44.4% 46.6% 48.5% 49.1% 44.3% 10.8%

Supermarkets 10.9% 13.7% 13.7% 13.3% 16.3% 22.5%

Note(*): Average excluding Romania. Excluding C&C.

Page 12: Romanian food retail market - BERAGUA food retail market.pdfTitle Romanian food retail market Author Marta Created Date 2/24/2015 6:15:26 PM

Breakdown of retail segments by population range

12 Source: Census 2011, Companies info and Beragua

Discounters have a strong presence in small towns, while the footprint of supermarkets in medium-sized cities is still limited. Hypermarket is the predominant format in all the population ranges, especially in cities above 50,000

inhabitants

% of sqm by retail segment by population range - %

28%

19% 16% 18%

29%

37%

44%

63% 69%

55%

34% 37%

21% 13%

6%

1% 1% 0% 1% 10%

<20,000 20,000-50,000 50,000-100,000 >100,000 Bucharest

Supermarket Hypermarket Discount Convenience

Discounters have a very strong presence in towns below 50,000 inhabitants, while in larger cities and especially in Bucharest, their presence diminishes sharply.

The supermarket model is still highly underpenetrated in Romania, showing a higher footprint than discounters only in cities above 100,000 inhabitants and in Bucharest.

Hypermarket is the predominant format in all the population ranges, mainly due to the broad expansion of Kaufland, accounting for more than 55% of the MGD sqm in cities above 50,000 inhabitants.

The modern convenience segment represents 10% of the stores in Bucharest but is marginal in smaller cities.

Page 13: Romanian food retail market - BERAGUA food retail market.pdfTitle Romanian food retail market Author Marta Created Date 2/24/2015 6:15:26 PM

89% 86% 85% 77% 77% 74% 71%

59% 59%

30%

11% 14% 15% 23% 23% 26% 29%

41% 41%

70%

Romania 2011 Romania 2012 Romania 2013 Hungary Slovakia Czech Republic Bulgaria Ukraine Poland Russia

% Top 5 % Rest

Grocery market – Top 5 MGD concentration

13 Source: PMR and Beragua

Top 5 market share – Benchmark 2013 – %

Highly concentrated market: Top 5 players represent

85% of the MGD

The concentration in the Romanian MGD market i high but has slightly decreased: in 2013 Top 5 players accounted for c.85% of the total MGD sales, c.4pp less than in 2011. However, Romania still shows the highest level of concentration of our benchmark, being well above all of its CEE peers, specially Ukraine, Poland and Russia.

This decrease in concentration is mostly explained by the acceleration of growth of medium-sized players, such as Mega Image and Profi.

Page 14: Romanian food retail market - BERAGUA food retail market.pdfTitle Romanian food retail market Author Marta Created Date 2/24/2015 6:15:26 PM

Grocery market – sales density benchmark

14 Source: PMR, Planet Retail, Companies info and Beragua

Sales/SQM – Benchmark 2013 – EUR th(*)

4.9

4.5

4.2 4.2 4.1

3.5 3.5

2.9

2.6

1.9

Average

3.6

Kaufland Lidl Profi Mega Image Penny Market Billa XXL Carrefour Market Unicarm CBA

Overall sales densities of mature Billa stores (c.EUR3.5 th) lag considerably behind most top both international and domestic peers, being only above the figures of Carrefour Market, Unicarm and CBA

Page 15: Romanian food retail market - BERAGUA food retail market.pdfTitle Romanian food retail market Author Marta Created Date 2/24/2015 6:15:26 PM

Grocery market – MGD SQM density

15 Source: PMR, Planet Retail and Beragua

Romania still lags substantially behind Central Eastern European countries

in MGD SQM density

The density of MGD SQM in Romania still lags substantially behind Eastern European countries, which implies that there is still room for further expansion of modern formats in the near future, underpinned by the overall economic growth and the decline of traditional food retailers

SQM / 1,000 inhabitants MGD – Benchmark 2013 (*)

465

293

257

222

129

103 96

71

Average 219

Hungary Czech Republic Poland Slovakia Russia Romania Bulgaria Ukraine

-116 sqm

Note(*): Average excluding Romania. Excluding C&C.

Page 16: Romanian food retail market - BERAGUA food retail market.pdfTitle Romanian food retail market Author Marta Created Date 2/24/2015 6:15:26 PM

Grocery market – density benchmark by segments

16 Source: PMR, Planet Retail and Beragua

The supermarket segment in Romania is underpenetrated compared to our benchmark, showing a strong potential for further development, while hypermarkets figures are almost in line with the average

SQM of per 1,000 inhabitants – Benchmark(*) SQM of per 1,000 inhabitants - Benchmark(*)

SQM of per 1,000 inhabitants – Benchmark(*) SQM of per 1,000 inhabitants – Benchmark(*)

Hypermarkets Supermarkets

Discounters Convenience

319

124 122

76 64 40 34

22

Average 111

Hungary Slovakia Czech Republic

Poland Russia Bulgaria Ukraine Romania

119

104

74 73

60

35 28

12

Average 64

Czech Republic

Hungary Slovakia Poland Romania Bulgaria Russia Ukraine

62

50

40

33

24

18 18 17

Average 35

Poland Czech Republic

Hungary Russia Ukraine Romania Slovakia Bulgaria

46

7

4 4 3 1 1 1

Average 9

Poland Slovakia Bulgaria Russia Romania Czech Republic

Hungary Ukraine

Note(*): Average excluding Romania.

Page 17: Romanian food retail market - BERAGUA food retail market.pdfTitle Romanian food retail market Author Marta Created Date 2/24/2015 6:15:26 PM

-

Grocery market – positioning of Top players

17

Convenience niche is still underdeveloped in Romania, being dominated by traditional players. The only player that made an attempt to develop a sizeable organized convenience

network was MIC.RO, but it went bankrupt in 2012. The current leader is LDP (Metro) with a

lose franchise format.

Price

Source: Companies info and Beragua

+

The discount segment is dominated by Lidl and Penny Market (Rewe discount format), all of them with similar commercial models than in

other European countries.

Asso

rtm

en

t

There are only three supermarket players with national coverage:

Profi, Carrefour Market and Billa. Unicarm is only present in the

Transylvania region, while Mega Image (Delhaize) is concentrated

in the Bucharest region.

C&C segment is only covered by international

players. Selgros (Rewe) operates stores with an

avge. selling area of 9,500 SQM, while METRO stores have an avge. selling area

of 6,800 SQM.

Romanian food retail market is dominated by international Companies in all retail segments. There are only 3 supermarket chains with nationwide coverage (Profi, Billa and Carrefour Market)

NON-ORGANIZED CONVENIENCE (MOM&POPS)

Hypermarket segment is only operated by international players, being Kaufland the leader

of the segment followed by Carrefour. In the segment coexist ‘standard’ hypermarkets (Cora, Carrefour) with price-oriented players (Auchan –

which recently acquired Real hypermarkets –Kaufland and XXL).

Page 18: Romanian food retail market - BERAGUA food retail market.pdfTitle Romanian food retail market Author Marta Created Date 2/24/2015 6:15:26 PM

Recent developments in the Romanian food retail market

18 Source: Companies info and Beragua

Mega Image has expanded at a fast

pace during 2014,and has also developed an

online shopping platform

Penny Market has continued to expand in

Romania

Carrefour has been one of the most active

players in the Romanian market

On September of 2014, Carrefour introduced its Supeco discount store in Romania in the city of Ramnicu Valcea. As of today, the Company has 3 stores in the country, with a selling area ranging from 1,500-2,000 sqm.

During last year, the French group launched a new store concept under the banner, ‘Carrefour Contact’, a small supermarket format present in small/rural areas, designed for complementing the ‘Carrefour Express’ network, more focused in large cities.

Angst decided to withdraw from its franchise agreement with Carrefour, after three years of partnership. This imply Carrefour has lost 22 stores. However, Carrefour has continued to expand its franchise model through the acquisition of Compania Rimini, which will increase its network by 20 stores.

Mega Image followed an aggressive expansion path during 2014, opening 65 stores (mainly in Bucharest) during the first nine months of the year. Notably, the Company acquired 20 Angst supermarkets after the Romanian company ended its partnership with Carrefour.

During last year, Mega Image developed an online shopping platform, in cooperation with Romania’s leading e-commerce operator eMag. The platform also allows the customers to first buy the products online and later collect them in the store.

The Company has declared that it will analyze opportunities to open a new distribution centre in the West of the country in 2015, to help support further expansion.

Penny Market announced that it will continue its expansion in Romania, opening 35 to 45 stores during the period 2014-2015.

Page 19: Romanian food retail market - BERAGUA food retail market.pdfTitle Romanian food retail market Author Marta Created Date 2/24/2015 6:15:26 PM

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