2019, a year to remember?

Two days more of this year and not yet decided on how to answer. But, as all dilemmas are a good starter for conversation, this reminded me of a little practice I had in the past. You see, 10 years ago – in my jolly good old days as a business journalist – I’ve started to play a “game” in the last two months of a year with all the people I entered in contact. The rules were easy: pick top 3 events related to economy or retail and FMCG industry for which you will remember the past year. No searching allowed, no calling a friend [or the PR lady :)]; if it wasn’t top of mind it didn’t make the cut.

Since I’ve changed jobs and worlds two years ago, I’ve miss doing it so I’ve restarted the “game”, albeit in a smaller circle, but still relevant as all the persons asked are highly regarded professionals. As usual, perception and the profile of the company they were representing played a part, but beyond it there were some big themes that came up quite often. So here it goes.

Top 3 retail related

1.      Expansion effervescence was once again on the lips of everyone and for good reason as 2019 was the year with the most openings from international players part. Around 430 new stores, with an investment estimated by ZF.ro at 300 million euros. There is also a feeling of a lot going on and even store innovation, but maybe here the enthusiasm was prompted by the fresh memory of December’s wave of openings: a new take on hypermarket by Carrefour and the new Express store proposal for busy office area or an entirely new concept for urban proximity proposed by Profi, named FiiGo. But there was also mentions about Kaufland’s relaunch of its oldest store in the market, of Mega Image’s #MegaStreetFood [a food court integrated in one of its concept stores], Bringo’s continuos expansion [a shopping app where Carrefour it’s the main shareholder] or the revival of Metro La doi pasi franchise – the third attempt – which seems to have finaly found the right formula as it surpassed the 1.000 threshold in last quarter and still going strong. On the expectation side, it’s the roll out at big scale of the initiative between french retailer Auchan and OMV Petrom, about implementing MyAuchan stores in Petrom petrol stations;

2.      Not few were the ones that pitied the state of local trade, mentioning the acquisition of yet another two local players. One of them, and the most important, was the takeover of Zanfir chain by Mega Image, which was the third most important Romanian retailer business size wise. A fierce full competitor in the Capital retail landscape, Mega Image is now trying to scale its success at national level. So, this transaction had also multiple layers as for the Dutch-Belgian retailer meant also another important step in its national expansion plan, checking in Moldova region. The second acquisition was that between local retailer Pram Maya and Profi, the chain privately owned by Mid Europa Partners investment fund. Profi remains to this day the most active retailer in terms of expansions, responsible for more than half of the openings in the market in 2019;

3.      Last but not least, there was an obvious step up in the way retailers communicate that got the attention. As somebody well said, “they got outside physical stores, they got smarter as they started to talk beyond price, addressing tribes, creating added value thru their initiatives”. What people had in mind? Well, they talked about the buzz retailer made at national size festivals, about their take on own brands or pop-up stores. One project mentioned by many was Maison des Chefs by Mega Image, a restaurant concept where the retailer wanted to take quality ingredients to the next level.

Some additional thoughts

While I do agree with all the above, I think that the devil is in the details. Beyond the title for most expansive retailer and the buzz of new concepts, the two main players in the market – Kaufland and Lidl – continued their march for consolidation [nr. Carrefour is number two if we sum up all its business units]. Both, but especially second, upped their game marking double the usual openings per year. Also, who would have thought of a Kaufland in rural area some years ago or Kaufland in a shopping center? Why are these details so important? I think they mark the end of era, the dawn of the so-called white spaces in retail.

On the other hand, there is also the beginning of an interesting battle for the shopper’s wallet and loyalty [not so many groundbreaking things done in this area so far]. It’s true that for the moment hypermarkets still have the upper hand in Romania, but as time will become more important than money, the power will shift towards supermarkets and, moreover, to discounters which – if it’s not already – must start to be an integral part of the strategy of every manufacturer, one way or another. Another thing expansion related: silently, without big fuss, Supeco – Carrefour’s discount chain – reached 24 units, almost doubling the number had at the end of 2018. Maybe this comes to prove once again the efficiency of such models.

One more and we move on… and this is a personal frustration. It’s true that we have been witnesses to a continuous contraction of traditional retail in the past years, but let’s not forget that when compared to other European countries the share is still quite high [~36% value share] and there are still strong players which are trying to fight back, like Annabella, Diana Supermarkets or Paco Supermarkets, just to name a few. Their efforts should be acknowledged. But that doesn’t mean that we aren’t at a turning point, a point where local retail entrepreneurs must find their place in the market or just accept the defeat. Also, manufacturers must decide if they pitch in to this effort or they choose the “easy” way out of battling wills only with the big retailers.  

Top 3 manufacturer related

1.      One thing that seems to have taken everyone by surprise is Unilever’s acquisition of 75% of Fru Fru business, a 13 years old Romanian start-up known for its take on eating healthy and fresh. While for the food giant this was not its first rodeo down this road, as we have seen the same pattern in other countries, I think that what made an impact was the perception of “something smart and good made by a Romanian entrepreneur once again vanished in the hands of a corporation.” Well, time will tell;

2.      The second topic, manufacturer related [is it though?] is the alignment to some major global trends like: the growing importance of local products, the rise of categories like on the go or bio, the talks about alternative diets like vegetarianism or at least flexitarianism and of course the elusive sustainable… everything. And yeah, regarding the last point, one thing that was mentioned and made me smile was that “the CSR campaigns are starting to become real not be a self-serving outlet and in disguise marketing”. Still, interesting enough, no name of manufacturer was mentioned as being a game changer in relation with one or another trend. Which takes me to the question – and own perception – was it industry driven or a natural, sometimes even late, response to the changes in shopper’s behavior? Also, I will beg to differ when it comes to the idea of alignment when I look at the size of some of these trends have on the global agenda and the depth of the drivers behind [eg. plastic or meat consumption environmental impact etc]. And this if we don’t even mention of the total lack of attention on other major topics like food waste for example;

3.      Number three – and I must confess that this passed my radar entirely – was the activity regarding investments made in Romania by several companies [eg. La Lorraine, P&G etc], seen by many as a reassuring sign of the trust in local market. Not much to comment on that, just that I’ve read – and written – about the Romanian potential for so many years that sometimes it feels like Lady Morgana even more so when you look at the state of foreign investment in general.

To wrap it up

Of course, beyond all the above, there was a lot of talk about inflation rise, down trade and even a possible recession, but as these are part of the inevitable economic cycle, I choose not to make a big thing out of them. And let’s not forget that if you take big businesses reports – retailers and manufacturers alike – almost all registered nice growth in Romania, for some our country being even among best performers in the region.  

This said, do share your view of 2019 of Romanian retail and FMCG landscape: was it a year to remember or just… business as usual?