Required Report - Public distribution

**Date:** 3/17/2008

**GAIN Report Number:** RO8005

RO8005

**Romania**

**Retail Food Sector**

**Annual**

**2008**

**Approved by:**

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

FAS Bucharest

**Prepared by:**

Carson Marries

International Intern

Monica Dobrescu

Agricultural Specialist

**Report Highlights:**

Romania is the second largest Eastern European country in the EU,
following Poland. The Romanian retail market is experiencing tremendous
growth. According to Eurostat, the Romanian retail trade expanded by
13.9 percent in 2007, or seven times the rate of growth in the European
retail market as a whole. While this growth is impressive it is in part
due to the low starting point. Only recently has modern retail reached
Romanians outside the major cites. 2007 saw a major push of retail
chains into smaller Romanian cities. With a greater proportion of the
Romanian population having access to modern retail, agri-food imports
have surged. Although the EU market is largely closed to U.S. exporters
of meat and meat products, promising export prospects remain. The best
of these are distilled spirits, almonds, and fruit juice.

Includes PSD Changes: No

Includes Trade Matrix: No

Annual Report

Bucharest \[RO1\]

\[RO\]

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 10](#ii.-road-map-for-market-entry)

[Diagram. How goods flow 11](#diagram.-how-goods-flow)

[III. MARKET STRUCTURE 12](#iii.-market-structure)

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

[Hypermarkets 13](#hypermarkets)

[Supermarkets 13](#supermarkets)

[Wholesalers / Cash&Carries 14](#wholesalers-cashcarries)

[Hard Discount shops 14](#hard-discount-shops)

[B. TRADITIONAL MARKETS 14](#__RefHeading___Toc193613277)

[IV. COMPETITION 15](#iv.-competition)

[V. BEST PRODUCT PROSPECTS 17](#v.-best-product-prospects)

[Category A: Products Present in the Market Which Have Good Sales
Potential
17](#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
18](#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 

Romania has continued its macroeconomic stability and growth. Over the
past few years the government has made the necessary economic reforms to
gain entrance to the European Union. This monumental event was
accomplished on January 1^st^ 2007. As with many of its neighbors,
Romania's accession to the EU has lowered the Government appetite for
reform. This is likely to dampen long term growth, but with some of the
lowest costs in the EU, GDP growth in Romania will likely out perform
most of its EU competitors.

The economy continued to grow in 2007, though the rate slowed to 6
percent compared to 7.7 percent in 2006, see Chart 1. The service and
construction sectors continue to be the most important engines for
growth in Romania.

**Chart 1. Gross domestic product growth (percent), 2003-2007**

![](media/image2.wmf){width="5.99375in" height="3.25in"}

*Source: National Institute for Statistics*

Romania's economy continues to converge toward European norms. Services
now represent about 50 percent of the economy, up from 46 percent in
2004. As the economy expands this number is likely to rise. Agriculture
saw its contribution to the national economy shrink yet again. A
combination of poor weather conditions and delayed government reforms
has seen the agricultural sector (including forestry) decline from 13
percent in 2001 to only 6.6 percent in 2007. Regardless of its relative
decline the agricultural sector still employs roughly a third of the
population and is therefore important to the overall economic well-being
of the country.

Romanian GDP per capita rose to USD 7,800 in 2007 (up from USD 1,585 in
1999), Romania is a middle-income country. As a result of the increasing
food-products prices, determined by an extremely low crop production and
increasing world prices, the inflation rate rose from 4.9 percent in
2006 to 6.6 percent in 2007. The trade deficit widened by 45 percent in
2007, to USD 29 billion (18 percent of GDP) -- tripling in only three
years (2004-2007).

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

  -------------------------- ---------- ---------- ---------- ---------- ----------
                             **2002**   **2003**   **2004**   **2005**   **2006**

  Agri-Food exports (FOB)    434        568        730        833        1,074

  Agri-food imports (CIF)    1,174      1,738      2,042      2,513      3,035

  Balance                    -740       -1,170     -1,312     -1,680     -1,961

  Exports as percentage of   37         32.7       35.7       33.1       35.4
  imports                                                                
  -------------------------- ---------- ---------- ---------- ---------- ----------

Source: Romanian Customs

Investors' excitement at the approaching EU integration of Romania was
shown by the 74 percent increase in FDI in 2006, reaching USD 13.3
billion. While median estimate of the FDI for 2007 indicates a decrease
of USD 2 billion from the 2006 levels, forecast suggest this level of
investment will continue over the next few years.

According to data provided by the National Institute for Statistics
(Table 2), 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.

## Retail Market 

The Romanian modern retail trade continues to lag neighboring countries.
However, with 26 percent growth in the retail sector in 2006, Romania is
converging with the economies of central Europe. As the graph below
shows Romania's growth is starting from a modest beginning. As of
September 2007, Romania has only 25 sqm per 1,000 people of modern
retail space as measured by gross leasable area (GLA).

**Chart 2. Current Shopping Center Stock/ 1,000 people in EU**

![](media/image3.wmf){width="5.91875in" height="3.420138888888889in"}

Compared to the European average of 170 sqm it is obvious that Romania
can continue to expand its retail sector.

The rapid growth in Romania's retail sector is shown in Table 2, below.
In 2001, total retail sales were valued at USD 9.8 billion and it
expanded to USD 29.9 billion in 2006. It is unlikely that the Romanian
retail sector will continue to grow at such a rate (205 percent in 5
years) but, growth over 10 percent a year for the foreseeable future is
widely expected. This growth will be fuelled by increasing purchasing
power and expanding modern retail.

**Table 2. Total retail trade value, 2000-2006, USD million**

  ----------------- ---------- ----------- ----------- ----------- ----------- -----------
  Retail Sales      2001       2002        2003        2004        2005        2006

  Food Retail       4,425.34   4,698.45    6,126.84    7,522.67    11,375.10   13,183.87

  Non-Food Retail   5,346.02   5,937.77    7,367.65    9,587.36    12,946.09   16,671.74

  Total Retail      9,771.36   10,636.22   13,494.49   17,110.03   24,321.19   29,855.61

  Food sales (% of  45.29      44.17       45.40       43.97       46.78       44.16
  Total)                                                                       
  ----------------- ---------- ----------- ----------- ----------- ----------- -----------

*Source: National Institute for Statistics and FAS*

**Chart 3. Total retail trade value, 2001-2006**

![](media/image4.wmf){width="6.447916666666667in"
height="3.2743055555555554in"}

As the data indicate below, in 2007, 53 percent of retail was part of
the modern retail sector, compared to 23 percent in 2004. This growth
has even outstripped government and market research firms' predications.
Chart 1 is the primary explanation for this extraordinary growth. The
low starting point has allowed international retail firms ample
opportunities in Romania. However, deeper market penetration in the
major cities has resulted in two basic strategies for firms considering
additional expansion.

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

2006 Vs 2007

  --------------------------------------- --------------- ---------------
  **Retail format**                       **2006**        **2007**

  Supermarkets                            22%             16%

  Wholesalers/C&C                         6%              11%

  Hypermarkets                            11%             18%

  Hard discounts                          1%              8%

  Traditional Market                      38%             33%

  Mini-Market                             12%             6%

  Specialty Stores                        2%              8%

  Other formats                           7%              0%
  --------------------------------------- --------------- ---------------

*Source: GfK & Incoma Research*

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

### 

![](media/image5.wmf){width="6.145138888888889in"
height="3.3541666666666665in"}

The first of these strategies is to replace supermarkets with
hypermarkets in the first-tier cities and Bucharest. The result is
indicated in Table 3, where the size of supermarkets share in modern
retail actually declined, after years of strong growth. This strategy
allows the hypermarkets to compete with the cash & carry store with
regards to product breath, while offering consumers better high end
goods at reasonable prices. The second strategy is for hard discount
firms to move to smaller cities to compete with cash & carry for rural
consumers and traditional markets and kiosk owners business. As the
following table shows, the highest penetration of modern retail is to be
found in smaller second and third-tier cities.

**Table 4. Distribution of Modern Retail**

  ------------------ ------------------- ------------ --------------------
  City               Population          \# of Stores Store/100,000
                                                      Residents

  Alba Iulia         66,747              5            7.49

  Arad               167,980             7            4.17

  Bacau              179,507             6            3.34

  Baia Mare          140,581             6            4.27

  Barlad             70,499              2            2.84

  Bistrita           83,114              4            4.81

  Brasov             281,375             7            2.49

  Braila             216,814             4            1.84

  Bucharest          **1,931,236**       66           3.42

  Cluj               305,620             9            2.94

  Constanta          305,550             9            2.95

  Craiova            300,587             6            2.00

  Deva               68,487              4            5.84

  DR Turnu Severin   109,134             3            2.75

  Focsani            100,782             2            1.98

  Galati             296,697             4            1.35

  Giurgiu            69,479              3            4.32

  Hunedoara          71,902              3            4.17

  Iasi               316,716             5            1.58

  Lugoj              45423               3            6.60

  Miercurea Ciuc     42,085              2            4.75

  Oradea             205,956             6            2.91

  Petrosani          44,658              2            4.48

  Piatra Nemt        108,940             1            0.92

  Pitesti            170,217             3            1.76

  Ploiesti           231,620             10           4.32

  Resita             86,070              5            5.81

  RM Valcea          111,658             5            4.48

  Satu Mare          114,678             5            4.36

  SF Gheorghe        62,021              3            4.84

  Sibiu              154,452             5            3.24

  Targoviste         90,339              6            6.64

  Targu Mures        146,448             6            4.10

  Timisoara          303,796             12           3.95

  **Average**                                         3.76
  ------------------ ------------------- ------------ --------------------

*Source: FAS*

Bucharest, with a per capita income of more than three times the
national average has seen accelerated growth of modern retail. The
latest retail developments in Bucharest have been designed to take
increased consumer sophistication and spending power into account. As
can be seen in the table below, modern retail formats grew every year,
with a total increase from 38 percent in 2004 to 57 percent 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/image6.wmf){width="6.498611111111111in"
height="3.5506944444444444in"}

The situation in Bucharest is similar to the situation in Romania in
general, in that the strong recent growth in modern retail has not
saturated the market. Bucharest, as of January 2008, will have 217 sqm
(GLA) per 1,000 people of modern retail space. When compared to other
regional capitals, below, it is obvious that additional retail
development will continue in the future.

**Table 5. Modern retail density**

  ----------------------------------- -----------------------------------
  City                                GLA/ 1,000 People

  Warsaw                              500

  Prague                              400

  **Bucharest**                       217

  Cluj                                404

  Galati                              80
  ----------------------------------- -----------------------------------

*Source: Jones Lang Lasalle*

**Table 6. Most actively expanding firms**

  --------------------- --------------------- ----------------------------
  Compania              Existing Network      Planned 2008 expansion

  Real Hypermarket      9                     6

  Auchan                1                     4

  Carrefour             7                     3

  PIC group             2                     2

  Kaufland              28                    4

  Penny Market          36                    25

  Billa                 25                    5

  Spar                  11                    9

  Plus Discount         42                    22

  Artima                19                    8

  Mega Image            20                    4
  --------------------- --------------------- ----------------------------

*Source: local media company announcements*

Note the two firms with plans to expand by over 20 stores in 2008. Both
are hard discount operations with a stated strategy of expanding in
cities of less than 100,000 people.

### 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 150-250 products under CLEVER private label. 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.

###### 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 allow    EU accession imposed new barriers to
  more Romanians to access modern    entry for U.S. products. Notably in
  retail                             poultry and red meat products

  Increasingly wealthy and           The relatively low purchasing
  sophisticated consumers desire an  consumer power, only a small segment
  expanded product range             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 U.S. when
                                     entering the Romanian market
  ---------------------------------- ------------------------------------

With two new chains entering the Market in 2007, Spar and Auchan, the
competition for customers has increased. This has driven the chains into
smaller cities and to develop customer loyalty programs. The likely
long-term outcome of this increase competition is lower prices for the
consumer and more competitive pricing for floor space for new product
line.

# 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/image7.png)

One option for entering the market is for 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 is for that the U.S. exporters 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    | **    | **C    | **Locations  | **P       |
| Name and    | ership** | Total | urrent | (Cit         | urchasing |
| Outlet      |          | Sales | no. of | y/Regions)** | Agent     |
| Type**      |          | (\$M  | out    |              | Type**    |
|             |          | il)** | lets** |              |           |
+-------------+----------+-------+--------+--------------+-----------+
| > **METRO   | > German | > \$  | > 23   | > Bucharest  | >         |
| > C         |          | 2,240 |        | > (4) and 16 | Importer, |
| ash&Carry** |          | >     |        | > other big  | > Direct, |
|             |          | > \(2 |        | > cities     | > Di      |
| [ww         |          | 006\) |        |              | stributor |
| w.metro.ro] |          |       |        |              |           |
| (http://www |          |       |        |              |           |
| .metro.ro/) |          |       |        |              |           |
+-------------+----------+-------+--------+--------------+-----------+
| >           | > German | > \$  | > 17   | > Bucharest  | >         |
|  **SELGROS, |          | 753.6 |        | > (3) and 14 | Importer, |
| > C         |          | >     |        | > big cities | > Direct, |
| ash&Carry** |          | > \(2 |        |              | > Di      |
|             |          | 006\) |        |              | stributor |
| [www.se     |          |       |        |              |           |
| lgros.ro](h |          |       |        |              |           |
| ttp://www.s |          |       |        |              |           |
| elgros.ro/) |          |       |        |              |           |
+-------------+----------+-------+--------+--------------+-----------+
| > **C       | French   | > \$  | > 11   | > Bucharest  | >         |
| ARREFOUR,** |          | 1,186 |        | > (5),       | Importer, |
| >           |          |       |        | > Brasov,    | > Direct, |
| > **Hy      |          | \(2   |        | > Cluj,      | > Di      |
| permarket** |          | 007\) |        | > Iasi,      | stributor |
|             |          |       |        | > Constanta, |           |
| [www.carref |          | \$744 |        | > Ploiesti,  |           |
| our.ro](htt |          |       |        | > Braila     |           |
| p://www.car |          | > \(2 |        |              |           |
| refour.ro/) |          | 006\) |        |              |           |
+-------------+----------+-------+--------+--------------+-----------+
| > **CORA,   | >        | > \$  | > 3    | > Bucharest  | >         |
| > Hy        |  Belgian | >     |        | > (2) and    | Importer, |
| permarket** |          | 377.3 |        | > Cluj       | > Direct, |
|             |          | > (   |        |              | > Di      |
| [           |          | 2006) |        |              | stributor |
| www.cora.ro |          |       |        |              |           |
| ](http://ww |          |       |        |              |           |
| w.cora.ro/) |          |       |        |              |           |
+-------------+----------+-------+--------+--------------+-----------+
| > **        | > German | > \   | > 31   | > Bucharest  | >         |
| KAUFLAND,** |          | $55.3 |        | > (2), Iasi  | Importer, |
| >           |          | >     |        | > (3),       | > Direct, |
| > **Hy      |          | > \(2 |        | > Timisoara  | > Di      |
| permarket** |          | 006\) |        | > (2) and    | stributor |
|             |          |       |        | >            |           |
|             |          |       |        | > other      |           |
|             |          |       |        | > cities     |           |
|             |          |       |        | > (23)       |           |
+-------------+----------+-------+--------+--------------+-----------+
| **MEGA      | >        | > \   | > 22   | > Bucharest  | >         |
| IMAGE,      |  Belgian | $88.9 |        | > (19),      | Importer, |
| Su          |          | >     |        | > Ploiesti   | > Direct, |
| permarket** |          | > \(2 |        | > (1)        | > Di      |
|             |          | 006\) |        | > Constanta  | stributor |
|             |          |       |        | > (2)        |           |
+-------------+----------+-------+--------+--------------+-----------+
| >           | > German | > \$  | > 28   | > Bucharest  | >         |
|  **BILLA,** |          | 439.6 |        | > and main   | Importer, |
| >           |          | >     |        | > cities     | > Direct, |
| > **Su      |          | > \(2 |        |              | > Di      |
| permarket** |          | 006\) |        |              | stributor |
+-------------+----------+-------+--------+--------------+-----------+
| *           | Turkish  | >     | > 7    | > Bucharest  | >         |
| *G'MARKET** |          |  \$79 |        | > and Iasi   | Importer, |
|             |          | >     |        |              | > Di      |
| **Su        |          | > \(2 |        |              | stributor |
| permarket** |          | 006\) |        |              |           |
+-------------+----------+-------+--------+--------------+-----------+
| **ARTIMA,   | >        | > \$  | > 22   | >            | > Direct, |
| Su          | Romanian | 114.8 |        |  Medium-size | > Di      |
| permarket** |          | >     |        | > cities in  | stributor |
|             |          | > \(2 |        | > the        |           |
|             |          | 006\) |        | > western    |           |
|             |          |       |        | > side of    |           |
|             |          |       |        | > Romania    |           |
+-------------+----------+-------+--------+--------------+-----------+
| > **REAL,   | > German | > En  | > 21   | > Bucharest, | >         |
| > Hy        |          | tered |        | > Timisoara  | Importer, |
| permarket** |          | > in  |        |              | > Direct, |
|             |          | >     |        |              | > Di      |
|             |          |  2006 |        |              | stributor |
+-------------+----------+-------+--------+--------------+-----------+
| > **XXL     | > German | >     | > 5    | > Bucharest  | > Direct, |
| > Mega      |          |  \$62 |        | > ,          | >         |
| > Discount, |          | >     |        | > Dambovita, |  Importer |
| > Hard      |          | > \(2 |        | > Sibiu,     |           |
| >           |          | 006\) |        | > Buzau,     |           |
|  Discount** |          |       |        | > Braila     |           |
+-------------+----------+-------+--------+--------------+-----------+
| > **Plus,** | > German | >     | > 50   | > Bucharest  | >         |
| >           |          | \$186 |        | > and        | Importer, |
| > *         |          |       |        | >            | > Direct, |
| *Discount** |          | (2007 |        |  medium-size | > Di      |
|             |          | fi    |        | > cities     | stributor |
|             |          | scal) |        |              |           |
+-------------+----------+-------+--------+--------------+-----------+
| >           | >        | > \$  | > 35   | > Center,    | > Direct, |
|  **PROFI,** |  Belgian | 107.3 |        | > southern   | > Di      |
| >           |          | >     |        | > and        | stributor |
| > *         |          | > \(2 |        | > Western    |           |
| *Discount** |          | 007\) |        | > part of    |           |
|             |          |       |        | > Romania    |           |
+-------------+----------+-------+--------+--------------+-----------+

Source: FAS, Market research companies, Specialized Magazines

#### 

#### Hypermarkets

*[Hypermarkets]{.underline}: Stores with more than 2,500 sqm (25,000
sq.ft) selling a wide variety of food and non-food items.*

Carrefour was the first Hypermarkets chain to enter the Romanian market.
Opening its first store in 2001, its growth has been impressive.
Turnover has grown from 95 million Dollars in 2002 to over one Billion
dollars in 2007. Carrefour plans to continue its expansion in Romania.
In august 2007, Carrefour began the process of acquiring Artima. This
acquisition allows to Carrefour to enter the supermarket segment as
well. Additionally, Carrefour intends to invest \$100-200 million in
2008 as opportunities arise.

Louis Delhaize group currently operates 2 Cora hypermarkets in Bucharest
as a result of USD100 million investment. The group opened another
hypermarket in 2007 outside Bucharest, in Cluj-Napoca. Its product range
counts about 50,000 items, of which about 20 percent represent imported
products.

Real, the hypermarket division of METRO, opened its first hypermarket in
Timisoara in 2006. A late comer to the Hypermarket segment has plans
expand quickly. Real currently has a network of 14 stores, with plans to
expand to 21 stores by the end of 2008.

Kaufland, the hypermarket division of Germany\'s Schwarz Group, has
developed one of the most extensive networks in Romania. 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). Kaufland currently plans to invest
over USD 160 million in 2008. Medium term plans include 5 new stores for
Bucharest by 2009.

The Dutch retailer SPAR opened its first hypermarket in Tg. Mures in
2006. The French retailer Auchan intends to invest \$80-100 million into
Romanian retail space over the course of 2008, almost doubling its
network from 5 to 9 Hypermarkets. The expansion is expected to continue
with 20 stores by 2010.

 

#### Supermarkets 

*[Supermarkets]{.underline}: Stores with between 400 sqm and 2,500 sqm
(4,000 to 25,000 sq ft) selling a wide variety of foods and non-food
household goods*

The German company Rewe opened its first Billa store in 1999 and
currently the chain includes 28 outlets (with 6 outlets opened in 2007).
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
7 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.

Mega Image has decided to focus on large markets, attempting to attract
customers with ease of access over size and selection. Their average
store is small, approximately 600 sqm.

They have a current network of 22 stores in only 3 cities. The near term
plans are to create 2 new stores in Bucharest and to develop a logistics
center near Bucharest.

The Dutch retailer SPAR opened its first supermarket in Arad in 2006,
followed by 12 more other stores in the central and western part of the
country. For 2008 the company plans to expand with 12 more outlets.

#### Wholesalers / Cash&Carries

*[Cash & Carry]{.underline}*: *Membership style retail/wholesale stores
with a varied selection of products sold under a warehouse style format.
These stores have a broad product range in the food and non-food area.*

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 17 outlets with a product range of
35,000 items each, both food and non-food. They intend to open 4-5 new
outlets over the coming years, at least 2 are planned to 2008.

#### Hard Discount shops

*[Hard discounters]{.underline}: Small supermarkets with a limited range
of low cost products, often private label.*

Following the Central European model, many discount shops have begun
focusing their expansion in smaller cities.

Plus, developed by the German group Tengelmann, entered the Romanian
market in 2005 and currently has a network of 50 stores. The average
investment per store is around USD1.8 million, though this is expected
to increase as construction prices rise. They intend to have 170 stores
by 2010.

Penny Market, a brand of the German Group REWE, along with XXL Mega
Discount, is currently a chain of 50 outlets. 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 percent. Most of the suppliers are domestic.
Penny Market targets cities with less than 20,000 inhabitants. The plan
over the next 12 months, by March of 2009, is to have 80 stores in
Romania.

## B. TRADITIONAL MARKETS

Traditional markets have managed to find some niches in Romania where
they are able to stay compete. Even in cities, traditional markets
continue to attract more than 50 percent of the market for fruits and
vegetable.

Traditional markets continue to have strength in rural areas, where
residents do not have access to modern retail. With the current push of
modern retail into second-tier cities, traditional markets are going to
be under more pressure.

The EU has decided not to strongly enforce some of the laws that will
affect many of the Traditional markets. In Rural areas, meat and other
goods (cheese products) can still be found at traditional markets. As
increased compliance with EU law comes into affect some of the mentioned
products will no longer be sold in traditional markets.

# IV. COMPETITION 

+--------------+-------------------+----------------+-----------------+
| **Product    | **Major Supply    | **Strengths of | **Advantages    |
| Category /   | Sources**         | Key Supply     | and             |
| Total Import |                   | Countries**    | Disadvantages   |
| value 2006** |                   |                | of local        |
|              |                   |                | suppliers**     |
| **(thousands |                   |                |                 |
| USD)**       |                   |                |                 |
+--------------+-------------------+----------------+-----------------+
| Pork meat    | Germany (18%)     | Good quality   | Insufficient    |
|              |                   | meat;          | domestic        |
| Import 2006: | United States     |                | supply; low     |
|              | (8.4%)            | Consistent     | quality and     |
| Th. \$       |                   | supply; Short  | high prices     |
| 412,470      | Canada (23%)      | distance for   |                 |
|              |                   | EU member      |                 |
|              | France (9%)       | states         |                 |
+--------------+-------------------+----------------+-----------------+
| Poultry meat | United States     | Very           | Ability to      |
|              | (28%)             | competitive    | provide the     |
| Import 2006: |                   | prices         | market with     |
|              | Brazil (48%)      | (especially    | fresh poultry   |
| Th. \$       |                   | for chicken    | meat; branded   |
| 114,318      |                   | leg quarters)  | products; high  |
|              |                   |                | prices for      |
|              |                   |                | domestic        |
|              |                   |                | production      |
+--------------+-------------------+----------------+-----------------+
| Beef         | Brazil (92%)      | Good quality   | Very few        |
| (chilled and |                   | meat; few      | specialized     |
| frozen)      | Austria (2%)      | sources in the | beef farms;     |
|              |                   | region;        | reduced and     |
| Import 2006: | Germany (1.1%)    | ability to     | seasonal supply |
|              |                   | meet EU        | (during fall)   |
| Th. \$       |                   | requirements   |                 |
| 76,420       |                   |                |                 |
+--------------+-------------------+----------------+-----------------+
| Frozen fish  | Norway (26%)      | Competitive    | Species in      |
| and seafood  |                   | prices;        | demand are not  |
|              | Taiwan (14%)      | favorable      | domestically    |
| Import 2006: |                   | currency       | produced;       |
|              | United States     | values         | domestic        |
| Th. \$       | (4%)              |                | species are     |
| 70,907       |                   |                | mainly          |
|              | United Kingdom    |                | seasonally      |
|              | (2%)              |                | available       |
|              |                   |                |                 |
|              | Canada (5%)       |                |                 |
+--------------+-------------------+----------------+-----------------+
| Meat         | Hungary (32.5%)   | Proximity      | Well-establish  |
| products     |                   |                | meat-processing |
|              | Spain (23%)       |                | industry able   |
| Import 2006: |                   |                | to supply a     |
|              | Czech R. (1.1%)   |                | large variety   |
| Th. \$ 9,101 |                   |                | of products;    |
|              | United States     |                | highly          |
|              | (1.2%)            |                | 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 2006: | (14%)             | good quality   |                 |
|              |                   | products       |                 |
| Th. \$ 9,023 | Indonesia (6%)    |                |                 |
+--------------+-------------------+----------------+-----------------+
| Processed    | Thailand (65%)    | Preferential   | Underdeveloped  |
| fish         |                   | duties; good   | fish-processing |
|              | Poland (11%)      | quality        | units; low      |
| Import 2006: |                   | products for   | production      |
|              |                   | reasonable     |                 |
| Th. \$       |                   | prices         |                 |
| 27,915       |                   |                |                 |
+--------------+-------------------+----------------+-----------------+
| Pet food     | Hungary (52%)     | Preferential   | Emerging stage  |
|              |                   | tariffs for    | for domestic    |
| Import 2006: | The Netherlands   | certain types  | processing      |
|              | (6%)              | of pet food;   | units;          |
| Th. \$       |                   | well known     | prohibition of  |
| 92,076       | Austria (4%)      | brands         | bone meal usage |
|              |                   |                | in commercial   |
|              | Germany (4%)      |                | animal feeding  |
|              |                   |                |                 |
|              | United States     |                |                 |
|              | (1%)              |                |                 |
+--------------+-------------------+----------------+-----------------+
| Frozen       | Belgium (44%)     | Good quality   | Low domestic    |
| vegetables   |                   | products at    | supply; absence |
|              | Poland (25%)      | good prices;   | of competitive  |
| Import 2006: |                   | attractive     | processing      |
|              | Hungary (17%)     | packages       | units           |
| Th. \$       |                   |                |                 |
| 13,170       |                   |                |                 |
+--------------+-------------------+----------------+-----------------+
| Fruits and   | Ireland (16%)     | Preferential   | Good local      |
| vegetables   |                   | tariffs for    | fruits          |
| juices       | The Netherlands   | certain types  | production;     |
|              | (12%)             | of juices;     | low-value       |
| Import 2006: |                   | very good      | investment in   |
|              | Austria (14%)     | quality        | proc            |
| Th. \$       |                   | products;      | essing-industry |
| 21,677       | Brazil (7%)       | attractive     |                 |
|              |                   | packages       |                 |
|              | Hungary (7%)      |                |                 |
|              |                   |                |                 |
|              | United States     |                |                 |
|              | (.8%)             |                |                 |
+--------------+-------------------+----------------+-----------------+
| Breakfast    | Poland (41%)      | Proximity;     | Domestic supply |
| cereals      |                   | reasonable     | available in a  |
|              | Germany (21%)     | prices; well   | very narrow     |
| Import 2006: |                   | known brands;  | range and       |
|              | Hungary (4.2%)    | attractive     | relatively low  |
| Th. \$       |                   | packages       | quality         |
| 13,180       | United States     |                |                 |
|              | (.2%)             |                |                 |
+--------------+-------------------+----------------+-----------------+
| Diary        | Germany (29%)     | Proximity;     | Long tradition  |
| products     |                   | free access on | in milk         |
|              | France (10%)      | the local      | production;     |
| Import 2006: |                   | market for EU  | increasing      |
|              | Poland (15%)      | member states  | investment in   |
| Th. \$       |                   |                | milk processing |
| 51,131       |                   |                |                 |
+--------------+-------------------+----------------+-----------------+
| Wines        | France (9%)       | Preferential   | Very good local |
|              |                   | tariff quotas; | production in a |
| Import 2006: | Italy (15%)       | competitive    | relatively      |
|              |                   | prices         | large variety   |
| Th. \$       | R. Moldova (65%)  |                |                 |
| 36,808       |                   |                |                 |
|              | Hungary (1.3%)    |                |                 |
|              |                   |                |                 |
|              | United States     |                |                 |
|              | (0.01%)           |                |                 |
+--------------+-------------------+----------------+-----------------+
| Distilled    | United Kingdom    | Good image for | Focus on low    |
| spirits      | (51%)             | consumers;     | and             |
|              |                   | free access on | middle-income   |
| Import 2006: | United States     | the local      | consumers       |
|              | (16%)             | market for EU  | sustained by    |
| Th. \$       |                   | member states  | strong          |
| 52,057       | Germany (7%)      |                | promotional     |
|              |                   |                | campaigns       |
+--------------+-------------------+----------------+-----------------+
| Sweetened    | Austria (37%)     | Preferential   | Very limited    |
| and flavored |                   | tariffs; very  | investment in   |
| water        | Poland (4.8%)     | good quality   | this area;      |
|              |                   | products       | highly          |
| Import 2006: | Hungary (22%)     |                | protected       |
|              |                   |                | market          |
| Th. \$       | United States     |                |                 |
| 30,905       | (3.6%)            |                |                 |
+--------------+-------------------+----------------+-----------------+
| Beer         | Germany (34%)     | Free access on | Strong local    |
|              |                   | the local      | industry;       |
| Import 2006: | The Netherlands   | market for EU  | strong brand    |
|              | (15%)             | member states  | awareness       |
| Th. \$ 3,436 |                   |                | supported by    |
|              | Belgium (11%)     |                | heavy publicity |
|              |                   |                | campaigns       |
|              | Poland (1.3%)     |                |                 |
+--------------+-------------------+----------------+-----------------+

# V. BEST PRODUCT PROSPECTS 

# 

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

+--------------+-----------+----------+--------------+----------------+
| **Product    | **2006    | **2005   | **Key        | **Market       |
| Category**   | Imports** | Imports  | Constraints  | Attractiveness |
|              |           | (        | to market    | for USA**      |
|              | **        | MT/HL)** | d            |                |
|              | (MT/HL)** |          | evelopment** |                |
+--------------+-----------+----------+--------------+----------------+
| Fish &       | 80,389 MT | 67,311   | Seafood      | Good           |
| seafood,     |           | MT       | 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         |
+--------------+-----------+----------+--------------+----------------+
| N            | 3,425 MT  | 2,403 MT | Preferential | Superior       |
| uts/Peanuts/ |           |          | tariffs for  | quality        |
| Almonds      |           |          | certain      | products;      |
|              |           |          | competitors  | increasing     |
|              |           |          |              | demand for     |
|              |           |          |              | processed      |
|              |           |          |              | products       |
+--------------+-----------+----------+--------------+----------------+
| Distilled    | 23,836 HL | 22,927   | High         | Lower duties   |
| spirits      |           | HL       | tariffs,     | after EU       |
|              |           |          | high         | accession;     |
|              |           |          | excises;     | very good      |
|              |           |          | market       | image for      |
|              |           |          | affected by  | consumers      |
|              |           |          | fiscal       |                |
|              |           |          | evasion      |                |
+--------------+-----------+----------+--------------+----------------+

Over the course of 2006, Romania began to implement veterinary orders to
comply with EU regulations. These orders affected poultry and pork most
severely. After years of strong demand for U.S. products, 2007 saw no
U.S. export of these products to Romania.

Starting June 8^th^, 2006 all importation of US poultry ended. The U.S.
establishments must receive EU health certification if they wish to
begin exporting to Romania again. If it was to do so a market of at
least USD 50 million would exist for U.S. products.

U.S. Swine exports were also suspended due to a veterinary order.
Veterinary order 53/2005 went into effect on October 1, 2006. No
noticeable amounts of U.S. Pork have been imported since. The market for
swine has continued to expand in Romania. If the U.S. were to undertake
certification the likely market for U.S. pork would be over USD 60
million.

American Spirits have a strong demand in Romania, particularly bourbon,
which is seen as a luxury good in Romania. Unfortunately, it must
compete with scotch from the UK, where EU trade barriers are not an
issue. As Romanians' income increases, American spirits will fare well.

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

+-----------+------------+----------+---------------+-----------------+
| **Product | **2006     | **2005   | **Constraints | **Market        |
| C         | Imports**  | I        | over market   | Attractiveness  |
| ategory** |            | mports** | development** | for USA**       |
|           | *          |          |               |                 |
|           | *(MT/HL)** | **(      |               |                 |
|           |            | MT/HL)** |               |                 |
+-----------+------------+----------+---------------+-----------------+
| Fruits    | 195,900 HL | 124,300  | High duties;  | Increasing      |
| and       |            | HL       | increasing    | demand for      |
| v         |            |          | domestic      | high-quality    |
| egetables |            |          | competition   | natural juices  |
| juices    |            |          |               |                 |
+-----------+------------+----------+---------------+-----------------+
| Dried     | 785 MT     | 1,136 MT | High duties   | Consumers'      |
| fruits    |            |          |               | tastes          |
|           |            |          |               | diversification |
+-----------+------------+----------+---------------+-----------------+
| Wines     | 71,333 HL  | 46,000   | Strong        | Demand for      |
|           |            | HL       | domestic and  | niche wine      |
|           |            |          | foreign       | varieties sold  |
|           |            |          | competition   | through         |
|           |            |          |               | specialized     |
|           |            |          |               | stores          |
+-----------+------------+----------+---------------+-----------------+
| Meat      | 3,824 MT   | 3,814 MT | Strong        | Demand for      |
| products  |            |          | domestic      | niche products  |
|           |            |          | industry;     |                 |
|           |            |          | brand         |                 |
|           |            |          | awareness     |                 |
|           |            |          | supported by  |                 |
|           |            |          | aggressive    |                 |
|           |            |          | campaigns     |                 |
+-----------+------------+----------+---------------+-----------------+
| Pet food  | 147,193    | 122,000  | Consumers     | Increasing      |
|           |            |          | preference    | demand as       |
|           |            |          | for           | people change   |
|           |            |          | well-known    | life style; low |
|           |            |          | brands        | 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

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>

#