Required Report - public distribution

**Date:** 8/30/2006

**GAIN Report Number:** RO6019

RO6018

**Romania**

**Retail Food Sector**

**Update**

**2006**

**Approved by:**

![](media/image1.wmf)Susan Reid

U.S. Embassy Romania

**Prepared by:**

Monica Dobrescu

Marketing Assistant

**Report Highlights:**

Although Romanian modern retail trade lags behind the neighboring
countries, it is developing rapidly, as consumers tend to spend more
money in modern retail stores. The retail sector is expected to reach
USD37 billion in 2006, of which more than half would be represented by
food. Several well-known international retail chains plan to enter the
market and all the existing chains have expansion plans. Food products
imports continue to grow in 2005 and the first semester of 2006, with an
increasing market share for United States especially for poultry meat,
red meat, distilled spirits, dried prunes, almonds and natural fruit
juices.

Includes PSD Changes: No

Includes Trade Matrix: No

Annual Report

Sofia \[BU1\]

\[RO\]

Table of Contents

[**I. MARKET SUMMARY 3**](#i.-market-summary)

[General Information 3](#general-information)

[Retail Market 4](#retail-market)

[II. ROAD MAP FOR MARKET ENTRY 9](#ii.-road-map-for-market-entry)

[Diagram. How goods flow 10](#diagram.-how-goods-flow)

[III. MARKET STRUCTURE 10](#iii.-market-structure)

[A. HYPERMARKETS, SUPERMARKETS, CASH&CARRIES AND DISCOUNT SHOPS
11](#a.-hypermarkets-supermarkets-cashcarries-and-discount-shops)

[Hypermarkets 12](#hypermarkets)

[Supermarkets 12](#supermarkets)

[Cash&Carries / Wholesalers 13](#wholesalers-cashcarries)

[Discount shops 13](#hard-discount-shops)

[B. CONVENIENCE STORES, KIOSKS 13](#b.-convenience-stores-kiosks)

[C. TRADITIONAL MARKETS 14](#c.-traditional-markets)

[IV. COMPETITION 14](#iv.-competition)

[V. BEST PRODUCT PROSPECTS 16](#v.-best-product-prospects)

[Category A: Products Present in the Market Which Have Good Sales
Potential
16](#category-a-products-present-in-the-market-which-have-good-sales-potential)

[Category B: Products Not Present in Significant Quantities but Which
Have Good Sales Potential
17](#category-b-products-not-present-in-significant-quantities-but-which-have-good-sales-potential)

[Category C: Products Not Present Because They Face Significant Barriers
18](#category-c-products-not-present-because-they-face-significant-barriers)

[VI. POST CONTACT AND FURTHER INFORMATION
18](#vi.-post-contact-and-further-information)

# 

# I. MARKET SUMMARY 

## General Information 

Over the last few years, Romania has achieved important improvements in
its macroeconomic indicators, due in part to efforts by government
authorities in preparation for EU integration. The economy continued to
grow in 2005, though the rate halved, 4.1 percent compared to 8.4
percent in 2004, see Chart 1. Service and construction sectors had the
highest positive contribution to the GDP increase (4.2%), while the
agriculture sector recorded a decrease of 1.7%.

**Chart 1. Gross domestic product growth (%), 2001-2005**

![](media/image2.wmf){width="6.490277777777778in"
height="3.020138888888889in"}

*Source: National Institute for Statistics*

The national economy is quite diversified, with services being the most
important sector in terms of contribution to GDP (roughly 49 percent, up
from 45 percent a year earlier). Agriculture is a key sector,
contributing 13 percent to GDP (2004) and employing more than 30% of the
labour force. Nonetheless, unfavorable weather conditions slowed down
this sector's growth in 2005.

With a GDP per capita of about USD4,500 in 2005 (up from USD1,585 in
1999), Romania is a middle-income country. The inflation rate went down
to 8.6% in 2005 from 9.3% in 2004. Food products prices increased by
5.7% in 2005, while non-food products increased by 9.8% and services
13.1%. For this year, an inflation rate of 5-6% is expected.

The trade deficit in agricultural and food products continued to deepen
in 2005, reaching a new record at USD1.68 billion, 28 percent up from
the previous year (Table 1), with the value of exports covering just 33
percent of the total import value.

**Table 1. Romanian Agricultural and Food Trade, USD million, nominal
prices**

  --------------------------- ---------- ---------- ---------- ---------- ---------
                              **2001**   **2002**   **2003**   **2004**   2005

  Agri-food exports (FOB)     433        434        568        730        833

  Agri-food imports (CIF)     1,206      1,174      1,738      2,042      2,513

  Balance                     -773       -740       -1,170     -1,312     -1,680

  Exports as a percentage of  36         37         33         28         33
  imports                                                                 
  --------------------------- ---------- ---------- ---------- ---------- ---------

Source: Romanian Customs

Investors have been encouraged by the approaching EU integration as
Romania is scheduled to become a member of the European Union in January
2007. Foreign direct investment grew with 34% in 2005 compared to a year
before.

According to data provided by the National Institute for Statistics,
household expenses allocated for food products purchase continue to have
a high percentage in total expenses, although with a slight decrease
from a year before, from 49.6% in 2004 to 47.2% in 2005.

## Retail Market 

Although Romanian modern retail trade lags behind the neighboring
countries, it is on an upward trend as consumers tend to spend more
money in modern retail stores. Although the retail sector has developed
very rapidly, traditional trade still represents around 70% of total
trade.

Tremendous increases were recorded in retail trade during the last 4
years. Official statistics on turnover obtained by retail outlets are
available until 2004 (table 2). In 2002, total retail sales were valued
at USD 10.9 billion and they reached USD17.5 billion in 2004 (60%
increase). The sector remains on a strong positive trend and as it will
be seen further in this report many international chains plan to
enter/expand on the Romanian market. We estimate the retail sales value
will reach about USD37 billion in the end of 2006.

**Table 2. Total retail trade value, 2000-2004, USD million**

+-------------------+--------+--------+---------+---------+---------+
| ##                | **     | **     | *       | 2003    | 2004    |
| #### Retail Sales | 2000** | 2001** | *2002** |         |         |
+-------------------+--------+--------+---------+---------+---------+
| > Food retail     | 4,392  | 4,477  | 4,847   | 6,293   | 7,699   |
| > sales           |        |        |         |         |         |
+-------------------+--------+--------+---------+---------+---------+
| > Non-food retail | 5,453  | 5,408  | 6,125   | 7,567   | 9,812   |
| > sales           |        |        |         |         |         |
+-------------------+--------+--------+---------+---------+---------+
| > Total retail    | 9,845  | 9,885  | 10,972  | 13,860  | 17,511  |
| > sales           |        |        |         |         |         |
+-------------------+--------+--------+---------+---------+---------+
| > **Food retail   | **     | **     | *       | *       | *       |
| > sales**         | 44.6** | 45.3** | *44.2** | *45.4** | *44.0** |
| >                 |        |        |         |         |         |
| > **(% in total   |        |        |         |         |         |
| > sales)**        |        |        |         |         |         |
+-------------------+--------+--------+---------+---------+---------+

*Source: National Institute for Statistics and FAS*

##### 

**Chart 2. Total retail trade value, 2000-2004**

![](media/image3.wmf){width="5.134722222222222in"
height="3.020138888888889in"}

According to the data illustrated below, in 2006, 33% of retail belonged
to modern retail, compared to 23% in 2004. Although it proves a
significant increase, it is still a low percentage compared to other
neighboring countries. For instance, considering the indicator number of
hypermarkets for a million habitants, Romania would rank very low with
0.4, while Poland would have 4.5 and Hungary 7.5. Nevertheless, given
the infancy of the retail market, analysts forecast a higher rate of
development for Romania than for the region or EU countries. Thus the
modern retail trade is expected to exceed 50% of total retail sales in
2010, compared to 33% in 2006.

### 

**Table 3. Retail market structure, Romania**

**2004 vs. 2005 vs. 2006**

+-----------------------------+---------------+----------+------------+
| **Retail format\***         | > **2004**    | >        | > **       |
|                             |               | **2005** | 2006**\*\* |
+-----------------------------+---------------+----------+------------+
| Supermarkets                | > 13%         | > 16%    | > 17%      |
+-----------------------------+---------------+----------+------------+
| Wholesalers/C&C             | > 7%          | > 7%     | > 6%       |
+-----------------------------+---------------+----------+------------+
| Hypermarkets                | > 2%          | > 4%     | > 6%       |
+-----------------------------+---------------+----------+------------+
| Hard discounts              | > 1%          | > 2%     | > 4%       |
+-----------------------------+---------------+----------+------------+
| Boutiques                   | > 43%         | > 43%    | > 42%      |
+-----------------------------+---------------+----------+------------+
| Kiosks                      | > 2%          | > 2%     | > 1%       |
+-----------------------------+---------------+----------+------------+
| Street vendors              | > 6%          | > 5%     | > 4%       |
+-----------------------------+---------------+----------+------------+
| General stores              | > 6%          | > 5%     | > 4%       |
+-----------------------------+---------------+----------+------------+
| Other formats               | > 20%         | > 16%    | > 16%      |
+-----------------------------+---------------+----------+------------+

*Source: GfK Romania;\*FMCG monitored categories*

*\*\*January-June 2006*

**Chart 3. Retail market structure, Romania, 2004-2006**

### 

![](media/image4.wmf){width="6.5in" height="3.4625in"}

Modern shopping is better represented in Bucharest, where consumers
earning higher incomes are more willing to respond to the novelty
represented by large shopping centers, hypermarkets, supermarkets, and
other such outlets. As it can be seen in the table below, modern retail
formats grew every year, with a total increase from 38% in 2004 to 57%
in 2006.

### 

**Table 4. Retail market structure, Bucharest,**

**2004 vs. 2005 vs. 2006**

  ------------------------------ ----------------- ----------- --------------
  **Retail format**\*            **2004**          **2005**    **2006**\*\*

  Supermarkets                   18%               20%         23%

  Wholesalers/C&C                6%                4%          5%

  Hypermarkets                   13%               23%         27%

  Hard discounts                 1%                2%          2%

  Boutiques                      29%               28%         24%

  Kiosks                         6%                3%          1%

  Street vendors                 9%                6%          7%

  General stores                 2%                1%          1%

  Other formats                  16%               13%         10%
  ------------------------------ ----------------- ----------- --------------

*Source: GfK Romania;\*FMCG monitored categories*

*\*\*January-June 2006*

**Chart 4. Retail market structure, Bucharest, 2004-2006**

![](media/image5.wmf){width="6.498611111111111in"
height="3.5506944444444444in"}

**Internet sales**

Sales through the Internet started to develop recently. Currently there
are around 600 virtual stores. Although only 10% of them sell food
products, it is expected that in few years the percentage will double.
The total sales value through Internet is estimated at USD25 million,
but it is expected to exceed USD70 million in the near future.

Most of the Internet sales are paid upon goods delivery, in cash, not
on-line through credit cards. Romanian consumers do not sufficiently
trust the on-line transactions system, this being perceived as unsafe.
As companies develop specific programs for increasing the security of
such transactions, customers' confidence in using this payment system
will rise.

**Card transactions**

According to the National Bank of Romania, there are currently around
8.25 million cards issued by commercial banks in Romania. The total card
transactions value reached USD11 billion in 2005, of which over 90% were
cash withdrawal. The highest number of cards has been issued in
Bucharest - 2.03 million -- according to data available in June 2006 (a
double number compared to 2004).

As the number of retail outlets accepting card payments increases,
non-cash transactions will increase in importance.

**Private labels**

Private labels have been developed for the main food and beverages
categories: cooking oil, flour, canned food, processed meats, peanuts,
ketchup, mustard etc.

The main retail chains selling products under Private label, both food
and non-food products, are: Carrefour (Marca 1), METRO (Aro and METRO
Quality), BILLA (CLEVER), Cora (Winny), Mega Image (365), KAUFLAND
(K-Classic), PROFI and PLUS.

Billa sells around 150 products under CLEVER private label and it is
expected that another 100 items will be introduced by the end of the
year. Kaufland sells around 800-900 items under its private label
K-Classic, out of the total products range of 15,000. Profi sells around
250 items incorporated in its private label PROFI, mostly fresh products
and staple products, while PLUS DISCOUNT sells around 350 items under
its private labels, representing 35% of the total product range.

According to market sources, the proportion of private label products
counted for almost 1% of total sales volume in all retail formats in
2005, while in the modern retail, private labels represent about 6%.

###### Advantages and Challenges facing U.S. Products in Romania

  ---------------------------------- ------------------------------------
  **Advantages**                     **Challenges**

  The growing retail industry is     There are very high entry-costs to
  looking to diversify the range of  supermarkets for new product lines
  food products                      as well as additional marketing
                                     costs (advertising, discounts)

  The retail expansion will generate The approaching EU integration led
  higher food sales                  to imposing new import requirements
                                     on food products imports, which are
                                     in many cases impediments for US
                                     exporters

  Consumers returning from abroad    The relatively low purchasing
  have more sophisticated tastes     consumer power, only a small segment
                                     of population affording buying
                                     novelty or very-good quality
                                     products.

  Weak U.S. dollar makes U.S.        EU member states benefit of tariff
  products more competitive          preferences compared to US when
                                     entering the Romanian market
  ---------------------------------- ------------------------------------

During the last year many retailers had to re-think their expansion
strategy, especially in Bucharest and big cities, since securing sites
for construction became more difficult. Due to both land availability
for large plots and land price, some of the retail chains oriented their
expansion strategy towards smaller cities throughout the country.

As more international retail chains are expected to enter the market,
additional pressure will be added on the existing chains, which will
eventually create new opportunities for suppliers.

# II. ROAD MAP FOR MARKET ENTRY

Retailers source their food and beverages products mostly from local
suppliers, either domestic producers or importers. However, few
supermarkets work directly with exporters, especially when dealing with
private label products.

### Diagram. How goods flow

![](media/image6.png)

One option for entering the market would be to work directly with
importers or distributors, which are direct suppliers for these
retailers and are familiar with existing legislation, trading practices
and customers. Most importers/distributors have distribution channels
with national coverage.

Small stores purchase food mostly from wholesalers/Cash&Carries. As the
major part of retail structure is still made by the small food stores,
it is important that the exported products reach these wholesalers.

Another type of strategy would be that the U.S. exporter find an
exclusive, local representative. In this case, the representative would
be totally dedicated to one company's segment of products and be
responsible for all promotional activities (advertising, sampling).

Given the expansion of modern retail, some supermarkets and hypermarkets
started to develop their own logistical centers hurting distributors.
However, as the small kiosks and traditional stores will be reduced, but
will not disappear, the distributors will still play an important role
in the retail market. In the medium and long run, market concentration
and consolidation is expected among distributors, as some of the
companies might not have enough resources to fulfill the increasing
needs of retailers.

# III. MARKET STRUCTURE

## A. HYPERMARKETS, SUPERMARKETS, CASH&CARRIES AND DISCOUNT SHOPS 

***[Company Profiles]{.underline}***

+-------------+----------+-------+-------+---------------+-----------+
| **Retailer  | **Own    | **    | **Cu  | **Locations   | **P       |
| Name and    | ership** | Total | rrent | (Ci           | urchasing |
| Outlet      |          | Sales | no.   | ty/Regions)** | Agent     |
| Type**      |          | (\$M  | of    |               | Type**    |
|             |          | il)** | outl  |               |           |
|             |          |       | ets** |               |           |
+-------------+----------+-------+-------+---------------+-----------+
| > **METRO   | > German | > \$  | > 23  | > Bucharest   | >         |
| > C         |          | 1,560 |       | > (4) and 16  | Importer, |
| ash&Carry** |          | >     |       | > other big   | > Direct, |
|             |          | > \(2 |       | > cities      | > Di      |
|             |          | 005\) |       |               | stributor |
+-------------+----------+-------+-------+---------------+-----------+
| >           | > German | >     | > 13  | > Bucharest   | >         |
|  **SELGROS, |          | \$570 |       | > (3) and 10  | Importer, |
| > C         |          | >     |       | > big cities  | > Direct, |
| ash&Carry** |          | > \(2 |       |               | > Di      |
|             |          | 005\) |       |               | stributor |
+-------------+----------+-------+-------+---------------+-----------+
| > **C       | > French | >     | > 6   | > Bucharest   | >         |
| ARREFOUR,** |          | \$545 |       | > (4), Brasov | Importer, |
| >           |          | >     |       | > (1)         | > Direct, |
| > **Hy      |          | > \(2 |       |               | > Di      |
| permarket** |          | 005\) |       | Ploiesti (1)  | stributor |
+-------------+----------+-------+-------+---------------+-----------+
| > **CORA,   | >        | > \$  | > 2   | > Bucharest   | >         |
| > Hy        |  Belgian | > 221 |       |               | Importer, |
| permarket** |          | > (   |       |               | > Direct, |
|             |          | 2005) |       |               | > Di      |
|             |          |       |       |               | stributor |
+-------------+----------+-------+-------+---------------+-----------+
| > **        | > German | >     | > 11  | > Bucharest   | >         |
| KAUFLAND,** |          |  \$20 |       | > (1) and     | Importer, |
| >           |          | > (   |       | > other       | > Direct, |
| > **Hy      |          | 2005) |       | > cities (10) | > Di      |
| permarket** |          |       |       |               | stributor |
+-------------+----------+-------+-------+---------------+-----------+
| **MEGA      | >        | >     | > 17  | > Bucharest   | >         |
| IMAGE,      |  Belgian |  \$67 |       | > (15),       | Importer, |
| Su          |          | >     |       | > Ploiesti    | > Direct, |
| permarket** |          | > \(2 |       | > (1)         | > Di      |
|             |          | 005\) |       | > Constanta   | stributor |
|             |          |       |       | > (1)         |           |
+-------------+----------+-------+-------+---------------+-----------+
| >           | > German | >     | > 19  | > Bucharest   | >         |
|  **BILLA,** |          | \$312 |       | > and main    | Importer, |
| >           |          | >     |       | > cities      | > Direct, |
| > **Su      |          | > \(2 |       |               | > Di      |
| permarket** |          | 005\) |       |               | stributor |
+-------------+----------+-------+-------+---------------+-----------+
| *           | >        | >     | > 4   | > Bucharest   | >         |
| *G'MARKET** |  Turkish |  \$50 |       | > and Iasi    | Importer, |
|             |          | >     |       |               | > Di      |
| **Su        |          | > \(2 |       |               | stributor |
| permarket** |          | 005\) |       |               |           |
+-------------+----------+-------+-------+---------------+-----------+
| **ARTIMA,   | >        | >     | > 15  | > Medium-size | > Direct, |
| Su          | Romanian |  \$80 |       | > cities in   | > Di      |
| permarket** |          | >     |       | > the western | stributor |
|             |          | > \(2 |       | > side of     |           |
|             |          | 005\) |       | > Romania     |           |
+-------------+----------+-------+-------+---------------+-----------+
| > **        | >        | >     | > 11  | > Sibiu,      | >         |
| UNIVERS'ALL | Romanian |  \$44 |       | > Suceava,    | Importer, |
| > and       |          | >     |       | > Tg-Mures,   | > Direct, |
| > UNI'ALL,  |          | > \(2 |       | > Iasi        | > Di      |
| >           |          | 005\) |       | >             | stributor |
| Supermarket |          |       |       | > Constanta   |           |
| > and       |          |       |       | >             |           |
| >           |          |       |       | > Bucharest,  |           |
| Convenience |          |       |       | > Timisoara   |           |
| > Stores**  |          |       |       |               |           |
+-------------+----------+-------+-------+---------------+-----------+
| > **XXL     | > German | >     | > 5   | > Bucharest , | > Direct, |
| > Mega      |          |  \$49 |       | > Dambovita,  | >         |
| > Discount, |          | >     |       | > Sibiu,      |  Importer |
| > Hard      |          | > \(2 |       | > Buzau,      |           |
| >           |          | 004\) |       | > Braila      |           |
|  Discount** |          |       |       |               |           |
+-------------+----------+-------+-------+---------------+-----------+
| > **Plus,** | > German | > N/A | > 22  | > Bucharest   | >         |
| >           |          |       |       | > and         | Importer, |
| > *         |          |       |       | > medium-size | > Direct, |
| *Discount** |          |       |       | > cities      | > Di      |
|             |          |       |       |               | stributor |
+-------------+----------+-------+-------+---------------+-----------+
| >           | >        | >     | > 21  | > Center,     | > Direct, |
|  **PROFI,** |  Belgian |  \$55 |       | > southern    | > Di      |
| >           |          | >     |       | > and Western | stributor |
| > *         |          | > \(2 |       | > part of     |           |
| *Discount** |          | 005\) |       | > Romania     |           |
+-------------+----------+-------+-------+---------------+-----------+

Source: FAS, Market research companies, Specialized Magazines

#### Hypermarkets

Carrefour entered the Romanian market in 2001. In 2002 it had a turnover
of USD95 million, while in 2005 it reached USD545 million. Carrefour is
planning to open a new hypermarket in Constanta this fall, in addition
to the 6 existing outlets, while next year the chain will be expanded
with 3 more outlets (one in Bucharest and two in Iasi).

Louis Delhaize group currently operates 2 Cora hypermarkets in Bucharest
as a result of USD100 million investment. The group intends to open
another hypermarket this year outside Bucharest, in Cluj-Napoca. Its
product range counts about 50,000 items, of which about 20% represent
imported products.

Real, the hypermarket division of METRO, opened its first hypermarket in
Timisoara in 2006. The second hypermarket was opened in July this year
in Constanta, with a surface of 6,000 sqm and around 30,000 displayed
items. The company intends to open 6 new outlets during 2006 in
Bucharest, Constanta, Oradea, Sibiu.

Kaufland, the hypermarket division of Germany\'s Schwarz Group, one of
the leading players on the European retail market, invested so far about
USD250 million in Romania in 11 stores. The first Kaufland outlet in
Romania was opened in the summer of 2005 in Bucharest. The average
selling space per store is 3,500-5,500 sqm. Kaufland targets equally
cities with more than 100,000 people and smaller cities if opportunities
exist. Outlets have been opened

in the South (Bucharest, Ploiesti), but especially in the
central-northern region (Rm. Valcea, Alba Iulia, Timisoara, Baia Mare,
Tg. Mures, Galati, Cluj Napoca, Hunedoara, Satu Mare).

### 

The Dutch retailer SPAR intends to open its first hypermarket in Tg.
Mures this year, followed by 6 more other stores in the central and
western part of the country (Resita, Rm. Valcea, Deva, Arad, Medias,
Odorhei). For 2007 the company plans to expand with 20 more outlets,
five of which in Bucharest.

Auchan, the French retailer, is expected to enter this fall the Romanian
market by opening in its first hypermarket Bucharest, with an investment
of USD48 mill. The product range will count about 60,000 items. The
retailer plans to open at least 2 hypermarkets per year, in Bucharest as
well as other big cities.

#### Supermarkets 

The German company Rewe opened its first Billa store in 1999 and
currently the chain includes 19 outlets (with 5 outlets opened in 2005).
The surface of the stores is 1,000-2,400 sqm/store, about 10,000 items
being displayed.

The first GIMA store was opened in 1998 and the group currently manages
4 outlets in Bucharest and Iasi. In 2005, the company changed the outlet
name from Gima to G'market. It carries about 40,000 items and the
average store size is 5,000 sqm. The company recorded a turnover of
USD50 million in 2005, compared to USD35 million a year before.

### 

Artima chain is mostly present in Transylvania with 15 stores and plans
to reach 55 stores over the next 5 years. INTER' EX opened its sixth
store in April this year in Rm. Valcea, while Mega Image plans to open 5
new stores this year.

There are a few other supermarket chains developed by local investors,
such as Ethos in Bucharest (9 stores), Etti in Timisoara (5 stores),
Diana in Braila (4 stores) etc.

#### Wholesalers / Cash&Carries

Target costumers of this sub-sector are HRI entities, private commercial
companies and small traders/stores.

Metro entered the Romanian market in 1996, selling about 35,000 items,
mostly from local suppliers. Selling products under own labels, which do
not require significant advertising and partnerships with local
suppliers, is part of the retailer's strategy, the group operating the
most well-known private label ARO.

Selgros C&C Romania consists of 13 outlets with a product range of
35,000 items each, both food and non-food.

#### Hard Discount shops

Following the same trend as in Europe, this segment continued expansion
over the last year.

MiniMAX Discount developed by Red&Yellow, intends to open about 30
stores this year, 10 of which are in Brasov, Buzau, Calarasi, Campulung,
Cernavoda, Hunedoara, Mangalia, Oltenita, Pucioasa and Turnu Magurele.

Plus, developed by the German group Tengelmann, entered the Romanian
market in 2005 and currently has a network of 21 stores. The average
investment per store is around USD1.8 million. The company, targeting
cities with over 40,000 inhabitants, intends to open 19 more stores this
year.

Penny Market, a brand of the German Group REWE, along with XXL Mega
Discount, is currently a chain of 16 outlets. For 2006, the company
plans to open 15-16 more stores. Penny Market stores have a surface of
750 sqm and a product range of 1,200 items, of which food products count
for about 80%. Most of the suppliers are domestic. Penny Market targets
cities with less than 20,000 inhabitants.

Profi plans to open 8 new stores outside the Transylvania region this
year.

## B. CONVENIENCE STORES, KIOSKS

The convenience stores sector is expected to further develop, as there
will be necessary shopping besides the weekly/monthly visit in modern
trade formats. Location, daily schedule and product freshness are the
main factors positively influencing this trend. Although daily purchases
are small, this is offset by the frequency of shopping.

Developed by a local group, Uni'all chain includes four convenience
stores in Constanta with selling space of 400-800 sqm and about 4,500
displayed items.

More specialized stores emerged on the retail market as well. A company
specializing in bakery products opened 5 convenience stores under the
concept "Neighborhood Bakery" and plans to open 15 more stores by the
end of this year. The product range includes only food products,
especially hot and cold bakery products.

The foreign company LOULIS developed a similar chain of specialized
stores, under the name Family. However, the company recently started a
re-branding process for its 28 stores renaming them Belforno Fresh,
exclusively offering fresh bakery products.

## C. TRADITIONAL MARKETS

The competition between the traditional and modern retail remains very
strong, especially for food products. About 25% of shoppers frequently
go to the traditional/open-air markets, especially for fresh fruits and
vegetables. In cities, about 50% of shoppers buy the fresh fruits and
vegetables and dairy products from traditional markets, while only 20%
prefer to purchase them from hypermarkets.

One strength of traditional trade is that access to modern retail in
rural areas is very limited.

Competition will become tougher after EU integration when the imported
products will become more competitive compared to domestic products.
However, in the same time, certain food categories of U.S. origin might
become less competitive as Romania will adopt the EU duty rates.

# IV. COMPETITION 

+--------------+-------------------+----------------+-----------------+
| **Product    | **Major Supply    | **Strengths of | **Advantages    |
| Category /   | Sources**         | Key Supply     | and             |
| Total Import |                   | Countries**    | Disadvantages   |
| value 2005** |                   |                | of local        |
|              |                   |                | suppliers**     |
| **(thousands |                   |                |                 |
| USD)**       |                   |                |                 |
+--------------+-------------------+----------------+-----------------+
| Pork meat    | Germany (20%)     | Good quality   | Insufficient    |
|              |                   | meat;          | domestic        |
| Import 2005: | United States     |                | supply; low     |
|              | (15%)             | Consistent     | quality and     |
| Th. \$       |                   | supply; Short  | high prices     |
| 388,103      | Canada (15%)      | distance for   |                 |
|              |                   | EU members     |                 |
|              | France (11%)      | states         |                 |
+--------------+-------------------+----------------+-----------------+
| Poultry meat | United States     | Very           | Ability to      |
|              | (48%)             | competitive    | provide the     |
| Import 2005: |                   | prices         | market with     |
|              | Brazil (36%)      | (especially    | fresh poultry   |
| Th. \$       |                   | for chicken    | meat; branded   |
| 131,432      |                   | leg quarters)  | products; high  |
|              |                   |                | prices for      |
|              |                   |                | domestic        |
|              |                   |                | production      |
+--------------+-------------------+----------------+-----------------+
| Beef         | Brazil (77%)      | Good quality   | Very few        |
| (chilled and |                   | meat; few      | specialized     |
| frozen)      | Austria (10%)     | sources in the | beef farms;     |
|              |                   | region;        | reduced and     |
| Import 2005: | Germany (6%)      | ability to     | seasonal supply |
|              |                   | meet EU        | (during fall)   |
| Th. \$       |                   | requirements   |                 |
| 53,042       |                   |                |                 |
+--------------+-------------------+----------------+-----------------+
| Frozen fish  | Norway (23%)      | Competitive    | Species in      |
| and seafood  |                   | prices;        | demand are not  |
|              | Taiwan (12%)      | favorable      | domestically    |
| Import 2005: |                   | currency       | produced;       |
|              | United States     | values         | domestic        |
| Th. \$       | (9%)              |                | species are     |
| 64,576       |                   |                | mainly          |
|              | United Kingdom    |                | seasonally      |
|              | (9%)              |                | available       |
|              |                   |                |                 |
|              | Canada (7%)       |                |                 |
+--------------+-------------------+----------------+-----------------+
| Meat         | Hungary (30%)     | Tariff quotas; | Well-establish  |
| products     |                   | proximity      | meat-processing |
|              | Spain (23%)       |                | industry able   |
| Import 2005: |                   |                | to supply a     |
|              | Czech R. (11%)    |                | large variety   |
| Th. \$ 7,740 |                   |                | of products;    |
|              | United States     |                | highly          |
|              | (1.6%)            |                | protected       |
|              |                   |                | market          |
+--------------+-------------------+----------------+-----------------+
| Nuts,        | Turkey (16%)      | Proximity; low | Products not    |
| peanuts,     |                   | prices;        | available on    |
| almonds,     | Iran (33%)        | favorable      | the local       |
| pistachio    |                   | currency       | market          |
|              | United States     | value; very    |                 |
| Import 2005: | (14%)             | good quality   |                 |
|              |                   | products       |                 |
| Th. \$ 7,128 | Indonesia (6%)    |                |                 |
+--------------+-------------------+----------------+-----------------+
| Processed    | Thailand (57%)    | Preferential   | Underdeveloped  |
| fish         |                   | duties; good   | fish-processing |
|              | Poland (15%)      | quality        | units; low      |
| Import 2005: |                   | products for   | production      |
|              |                   | reasonable     |                 |
| Th. \$       |                   | prices         |                 |
| 17,965       |                   |                |                 |
+--------------+-------------------+----------------+-----------------+
| Pet food     | Hungary (53%)     | Preferential   | Emerging stage  |
|              |                   | tariffs for    | for domestic    |
| Import 2005: | The Netherlands   | certain types  | processing      |
|              | (6%)              | of pet food;   | units;          |
| Th. \$       |                   | well known     | prohibition of  |
| 72,267       | Austria (5%)      | brands         | bone meal usage |
|              |                   |                | in commercial   |
|              | Germany (5%)      |                | animal feeding  |
|              |                   |                |                 |
|              | United States     |                |                 |
|              | (1%)              |                |                 |
+--------------+-------------------+----------------+-----------------+
| Frozen       | Belgium (45%)     | Good quality   | Low domestic    |
| vegetables   |                   | products at    | supply; absence |
|              | Poland (25%)      | good prices;   | of competitive  |
| Import 2005: |                   | attractive     | processing      |
|              | Hungary (14%)     | packages       | units           |
| Th. \$ 8,792 |                   |                |                 |
+--------------+-------------------+----------------+-----------------+
| Fruits and   | Ireland (24%)     | Preferential   | Good local      |
| vegetables   |                   | tariffs for    | fruits          |
| juices       | The Netherlands   | certain types  | production;     |
|              | (17%)             | of juices;     | low-value       |
| Import 2005: |                   | very good      | investment in   |
|              | Austria (14%)     | quality        | proc            |
| Th. \$       |                   | products;      | essing-industry |
| 14,612       | Brazil (8%)       | attractive     |                 |
|              |                   | packages       |                 |
|              | Hungary (7%)      |                |                 |
|              |                   |                |                 |
|              | United States     |                |                 |
|              | (2.2%)            |                |                 |
+--------------+-------------------+----------------+-----------------+
| Breakfast    | Poland (40%)      | Proximity;     | Domestic supply |
| cereals      |                   | reasonable     | available in a  |
|              | Germany (12.5%)   | prices; well   | very narrow     |
| Import 2005: |                   | known brands;  | range and       |
|              | Hungary (11%)     | attractive     | relatively low  |
| Th. \$ 7,137 |                   | packages       | quality         |
|              | United States     |                |                 |
|              | (2%)              |                |                 |
+--------------+-------------------+----------------+-----------------+
| Diary        | Germany (35%)     | Preferential   | Long tradition  |
| products     |                   | tariffs (lower | in milk         |
|              | France (16%)      | or exempted)   | production;     |
| Import 2005: |                   | for certain    | increasing      |
|              | Poland (11%)      | types of       | investment in   |
| Th. \$       |                   | cheese from EU | milk processing |
| 37,775       |                   | members states |                 |
+--------------+-------------------+----------------+-----------------+
| Wines        | France (32%)      | Preferential   | Very good local |
|              |                   | tariff quotas; | production in a |
| Import 2005: | Italy (25%)       | competitive    | relatively      |
|              |                   | prices         | large variety   |
| Th. \$ 9,217 | R. Moldova (15%)  |                |                 |
|              |                   |                |                 |
|              | Hungary (9%)      |                |                 |
|              |                   |                |                 |
|              | United States     |                |                 |
|              | (0.5%)            |                |                 |
+--------------+-------------------+----------------+-----------------+
| Distilled    | United Kingdom    | Good image for | Focus on low    |
| spirits      | (49%)             | consumers;     | and             |
|              |                   | preferential   | middle-income   |
| Import 2005: | United States     | tariffs for EU | consumers       |
|              | (13%)             | member states  | sustained by    |
| Th. \$       |                   |                | strong          |
| 43,706       | Germany (9%)      |                | promotional     |
|              |                   |                | campaigns       |
+--------------+-------------------+----------------+-----------------+
| Sweetened    | Austria (40%)     | Preferential   | Very limited    |
| and flavored |                   | tariffs; very  | investment in   |
| water        | Poland (15%)      | good quality   | this area;      |
|              |                   | products       | highly          |
| Import 2005: | Hungary (10%)     |                | protected       |
|              |                   |                | market          |
| Th. \$       | United States     |                |                 |
| 14,201       | (10%)             |                |                 |
+--------------+-------------------+----------------+-----------------+
| Beer         | Poland (14%)      | Tariff quotas  | Strong local    |
|              |                   | for EU member  | industry;       |
| Import 2005: | The Netherlands   | states         | strong brand    |
|              | (17%)             |                | awareness       |
| Th. \$ 2,678 |                   |                | supported by    |
|              | Germany (17%)     |                | heavy publicity |
|              |                   |                | campaigns       |
|              | Belgium (15%)     |                |                 |
|              |                   |                |                 |
|              | Poland (14%)      |                |                 |
+--------------+-------------------+----------------+-----------------+

# V. BEST PRODUCT PROSPECTS 

# 

## Category A: Products Present in the Market Which Have Good Sales Potential 

+-----------+--------+--------+-------+-------------+----------------+
| **Product | **2005 | **2005 | **I   | **Key       | **Market       |
| C         | Market | I      | mport | Constraints | Attractiveness |
| ategory** | Size** | mports | t     | over market | for USA**      |
|           |        | (MT    | ariff | de          |                |
|           | **(MT  | /HL)** | r     | velopment** |                |
|           | /HL)** |        | ate** |             |                |
+-----------+--------+--------+-------+-------------+----------------+
| Fish &    | 87,000 | 67,311 | 2     | Seafood     | Good           |
| seafood,  | MT     | MT     | 0-25% | consumption | perspectives   |
| fresh and |        |        |       | is limited; | for            |
| frozen    |        |        |       | low         | f              |
|           |        |        |       | purchasing  | ish-processing |
|           |        |        |       | power;      | industry       |
|           |        |        |       | consumers'  | expansion;     |
|           |        |        |       | preference  | market access  |
|           |        |        |       | for species | maintained     |
|           |        |        |       | in a lower  | after EU       |
|           |        |        |       | supply      | access         |
+-----------+--------+--------+-------+-------------+----------------+
| Pork meat | 4      | 1      | 0-20% | EU import   | Competitive    |
|           | 25,610 | 92,490 |       | re          | prices; high   |
|           |        | MT     |       | quirements; | proce          |
|           | MT     |        |       | growing     | ssing-industry |
|           |        |        |       | demand for  | needs.         |
|           |        |        |       | fresh meat  |                |
+-----------+--------+--------+-------+-------------+----------------+
| Nuts      | N/A    | 2,403  | 0     | P           | Increasing     |
| /peanuts/ |        | MT     | -135% | referential | processed      |
|           |        |        |       | tariffs for | product range; |
| almonds/  |        |        |       | certain     | very good      |
|           |        |        |       | competitors | quality        |
| pistachio |        |        |       |             | products vs.   |
|           |        |        |       |             | competitors;   |
|           |        |        |       |             | tax exemptions |
|           |        |        |       |             | for certain    |
|           |        |        |       |             | tariff         |
|           |        |        |       |             | positions      |
+-----------+--------+--------+-------+-------------+----------------+
| Distilled | 8      | 22,927 | 3     | High        | Lower duties   |
| spirits   | 00,000 | HL     | 5-60% | tariffs,    | after EU       |
|           | HL     |        |       | high        | integration;   |
|           |        |        |       | excises and | very good      |
|           |        |        |       | health tax  | image for      |
|           |        |        |       | in          | consumers      |
|           |        |        |       | troduction; |                |
|           |        |        |       | market      |                |
|           |        |        |       | affected by |                |
|           |        |        |       | fiscal      |                |
|           |        |        |       | evasion     |                |
+-----------+--------+--------+-------+-------------+----------------+

In 2005, United States continued to be the poultry meat import leader
with a market share of 48% (USD63 million) in total imports. During the
first semester of 2006, US poultry meat exports reached almost USD26
million. However, starting with June 8, 2006, the EU health certificate
model was enforced by the Romanian veterinary authorities leading to a
total ban on U.S. exports, as no U.S. poultry plants are approved for
export to the European Union.

Total swine meat imports grew in 2005 by 75% compared to a year before,
reaching USD388 million. Triggered by a high demand from the
processing-industry and a lower supply from EU member states, U.S. swine
meat exports to Romania increased four-fold last year reaching USD 57
million. During the first half of this year, U.S. pork exports increased
by 18% and the trend is expected to continue in the near future.
However, the veterinary order no. 53/2005 scheduled to go into effect on
October 1, 2006 will limit U.S. exports to Romania as only EU approved
red meat processing plants will be able to maintain shipping.

Fish and seafood imports continued the upward trend in 2005 reaching
USD64 million (45% more than in 2004). Nevertheless, frozen fish imports
from United States decreased last year by 27%, mainly due to a lower
availability for mackerel, the most popular oceanic fish species among
consumers. However, U.S. exporters can work with fish importers to
introduce new seafood species on the market, which can substitute the
species in deficit.

The value of nuts, peanuts, almonds and pistachio imported in 2005
increased with 52% compared to a year before. The almond market
continued to be dominated by the United States (88%, USD783,000).

The value of distilled spirits imports grew by 32% in 2005. The United
States is a leader on Bourbon Whiskey, counting for 75% of imports of
this type (USD2.7 million), reflecting an increase of 60% compared to
last year figure.

## Category B: Products Not Present in Significant Quantities but Which Have Good Sales Potential

+-----------+--------+---------+-------+------------+----------------+
| **Product | **2005 | **2005  | **I   | **Kew      | **Market       |
| C         | Market | Im      | mport | C          | Attractiveness |
| ategory** | Size** | ports** | t     | onstraints | for USA**      |
|           |        |         | ariff | over       |                |
|           | **(MT  | **(M    | r     | market     |                |
|           | /HL)** | T/HL)** | ate** | dev        |                |
|           |        |         |       | elopment** |                |
+-----------+--------+---------+-------+------------+----------------+
| Fruits    | 1,0    | 124,300 | 2     | High       | Increasing     |
| and       | 00,000 | HL      | 5-90% | duties;    | demand for     |
| v         |        |         |       | increasing | high-quality   |
| egetables | HL     |         |       | domestic   | natural juices |
| juices    |        |         |       | c          |                |
|           |        |         |       | ompetition |                |
+-----------+--------+---------+-------+------------+----------------+
| Dried     | N/A    | 1,136   | 25    | High       | Consumers'     |
| fruits    |        | MT      | -200% | duties     | tastes         |
|           |        |         |       |            | d              |
|           |        |         |       |            | iversification |
+-----------+--------+---------+-------+------------+----------------+
| Wines     | 3,5    | 46,000  | 60%   | Strong     | Demand for     |
|           | 00,000 | HL      |       | domestic   | niche wine     |
|           | HL     |         |       | and        | varieties sold |
|           |        |         |       | foreign    | through        |
|           |        |         |       | co         | specialized    |
|           |        |         |       | mpetition; | stores         |
|           |        |         |       | tariff     |                |
|           |        |         |       | quotas for |                |
|           |        |         |       | EU member  |                |
|           |        |         |       | states     |                |
+-----------+--------+---------+-------+------------+----------------+
| Meat      | 1      | 3,814   | 4     | Strong     | Demand for     |
| products  | 95,000 | MT      | 0-45% | domestic   | niche products |
|           | MT     |         |       | industry;  |                |
|           |        |         |       | brand      |                |
|           |        |         |       | awareness  |                |
|           |        |         |       | supported  |                |
|           |        |         |       | by         |                |
|           |        |         |       | aggressive |                |
|           |        |         |       | campaigns  |                |
+-----------+--------+---------+-------+------------+----------------+
| Pet food  | NA     | 122,000 | 18%   | Consumers  | Increasing     |
|           |        |         |       | preference | demand as      |
|           |        |         |       | for        | people change  |
|           |        |         |       | well-known | life style;    |
|           |        |         |       | brands     | low interest   |
|           |        |         |       |            | for domestic   |
|           |        |         |       |            | investment in  |
|           |        |         |       |            | manufacturing  |
|           |        |         |       |            | pet food       |
+-----------+--------+---------+-------+------------+----------------+

## Category C: Products Not Present Because They Face Significant Barriers

Breakfast cereals: strong European competitors; extremely high import
duties

Beef: sanitary-veterinary import requirements more stringent

Dried and frozen vegetables: strong European competitors, extremely high
import duties

Sweet products and chocolate: low purchasing power, strong domestic
competition

Sweetened and Flavored water: high tariffs

# VI. POST CONTACT AND FURTHER INFORMATION 

If you have any questions regarding this report or need assistance
exporting to Romania, please contact us at:

Foreign Agricultural Service

American Embassy

7-9 Tudor Arghezi Street, Bucharest, Romania

Tel. +40 21 200.33.74 +40 21 316.03.98

Fax: +40 21 316.59.98

E-mail: <AgBucharest@usda.gov>