BusinessMagazin

Category: Bm english

  • What the ideal farm should look like

    Despite the bad news of 2009, Stefan Poienaru remains
    optimistic: he invested more in raw material and worked the land
    more efficiently than in previous years to offset the decline in
    turnover next year. “Those who did not have such a positive
    approach will go through two bad years in a row and prolong the
    ailment,” Poienaru says. “We must not skimp on technology – with
    proper technology you get good results; if the weather helps, too,
    you get outstanding results,” the businessman says.

    Stefan Poienaru, however, is one of the few farmers who can afford
    to make such calculations. Most of the arable land in the country
    is worked by small farmers and subsistence farming accounts for
    more than 90% of the farms. There are but a handful of people to
    have amassed a lot of farming land: Stefan Poienaru, Culita Tarata,
    Ioan Niculae, Adrian Porumboiu and Mihai Anghel own 200,000
    hectares of the cultivated area of the country, that is about
    2%.

    As far as Poienaru is concerned, he evaluates his business at 15-16
    million euros this year, compared with 26 million euros last year,
    with a 7% profitability (about 1.9 million euros). The year 2009
    came with a series of bad news: on the one hand, production stood
    at 35% of last year’s harvest, drought affected the crops, and the
    losses caused by disasters are put at some three million euros.
    Grain prices have not helped farmers, either, as they went down by
    about 20% compared with last year to 0.4 RON/kilogram, while the
    sunflower price fell 30% to 0.7 RON/kilogram. Actually, companies
    in this business said 2009 was the worst year for Romanian
    agriculture.

    Many are blaming the severe fragmentation of plots of land after
    1990. About 60-70% of the total farming land is fragmented into
    tiny bits “and there is no profitability (in it i.e.)” says Mihai
    Anghel, the owner of Cerealcom Dolj. He adds that the potential of
    the Romanian agriculture is to feed 80 million people. “I don’t
    want as much land as I have now. I for one do not believe in the
    future of big farms,” Stefan Poienaru says. The agriculture model
    he sees for Romania is that of a small plot of land, worked by a
    family, where owners know exactly what resources they used and reap
    the benefits of their work in full.

  • The great diversification

    Cristian Beznoska has been running the Elmec Romania business
    for eighteen months. This is his first interview, however, and he
    carefully avoids talking about figures. He uses the word
    “different” when asked how sales went in 2009. He does not like
    such terms as ‘crisis’ or ‘difficult’. In his opinion, one of the
    most important things this year has been the capability to adjust
    the business to the new economic reality: “This year has been one
    when companies could either adjust to different conditions and
    continue on or face greater difficulties, because it was different
    from everything I have experienced in Romania until now.”

    Experiments began with Elmec’s start in Romania, with the opening
    of the Nike store in itself being an experiment. Beznoska remembers
    that there were people standing in two lines in front of the first
    Nike store on Magheru Blvd in December 1999: those who wanted to
    get in and those who merely looked at the windows but did not have
    the courage to enter. Looking back, Cristian Beznoska believes that
    both categories went through major transformations, and both those
    who entered the store in 1999 and those who were watching have
    become more demanding in the meantime and turned into educated
    consumers.

    The consumer change was rather fast to occur, and in the first part
    of the 2000’s, the group wanted to bring several brands in Romania
    simultaneously and set up the Famous Brands stores, the first
    multibrand concept in the country, to that end. Famous Brands was
    “a natural step” Beznoska believes, who feels it enabled them to
    expand the brand portfolio and anticipate a new consumer profile.
    “It was a revolutionary concept for the retail market in Romania,
    which was dominated by monobrand stores.

    Consumers want to have as many options as possible and I don’t
    think anyone should be dressed from head to toe from the same
    company, as if wearing an uniform.” Famous Brands later developed
    from an approximately 180 square metre store to a new level, Famous
    Brands Gallery. The company currently has two such stores set to be
    expanded by about 200 square metres each in the first few months of
    2010.

  • Are Romanians studying abroad willing to come back?

    Although they do hope that things will get better in Romania,
    few of them actually want to return now, “with the definite purpose
    of changing things for the better in Romania,” as one of them
    says.
    Mihai Dudu]= is a student of one of the best universities in the
    world, the Massachusetts Institute of Technology (MIT). He has a
    full scholarship, works in the campus, in research; he is a member
    of the schoolís dance team and wins invention contests.

    He has a promising future and is happy with his life as it is now.
    Would he be willing to return to Romania? “No. I am not tempted to
    go back to my country. I for one want to become as good as I can in
    what I do and I would not have the resources for that in Romania.”
    This is his answer and the answer of many other Romanians, either
    students or people who completed their education abroad and chose
    to stay there.

    Both the business community and the government want to find
    leverage to make experts trained abroad return home. The problems,
    however, come up when trying to figure out what positions could be
    given to these young people upon their return. The state granted
    approximately 150 Special Scholarships of the Romanian Government
    (BSGR) from 2004 through 2007, with 100 students completing the
    programme already. To qualify for the scholarship, the students
    were required to return to Romania to take management positions in
    the public sector for three to five years. Only a mere 20 students
    are working in the local public sector for the time being, and such
    scholarships have not been very tempting for Dudu]= or for the
    friends he talked with, either. That is because, he believes, it is
    hard to choose what you want to do between 22 and 28 when you are
    18.

    Andrei Caramitru, managing partner of the local office of
    consultancy firm McKinsey, pointed out in a previous conversation
    with BUSINESS Magazin that attracting Romanian elites from abroad
    is a joint responsibility, of the state and private companies. As
    far as the latter are concerned, they not only do not try to get
    such a graduate, but most of them, except for multinationals, do
    not even realise how important such a thing is.

    The consultant said that what is essential for education is the
    cooperation between the public and the private sectors, using the
    Canadian or Swiss model (Caramitru went to college in Switzerland
    and lived there for 13 years), where the government thoroughly
    researches what fields need personnel, disseminates the data to the
    educational system and always adjusts supply to meet demand. To do
    that, however, Caramitru went on, we would require more practical
    and vocational schools, which could supply personnel exactly where
    the economy needs it.

    In some cases, though, the need to recruit staff for a specific
    company leads to greater initiatives. In August, the Dinu Patriciu
    Foundation and the League of Romanian Students Abroad launched the
    joburilaorizont.ro project in order to get Romanian graduates
    abroad to come home. The foundation has been granting 100
    scholarships worth 15,000 dollars for master or doctoral studies
    abroad every year since 2008.

    The students are bound to come back and work in Romania either in
    the public or the private sector for a period equal to that spent
    studying. This year 32 students who got a scholarship are expected
    to come back until December. Out of them, says Tincu]a Baltag, the
    general manager of the foundation, 16 have already returned and
    some have even managed to get a job with multinational companies.
    “One of them informed us he would start his own business, which
    will create several tens of jobs,” Baltag says.

  • Top performing managers

    Almost two years ago, towards the end of the first year after EU accession, Liliana Solomon, head of the local branch of the Vodafone group issued a warning to the managers enthusing over consumer spending euphoria and the potential of a 21 million-people market with a rising purchasing power during a meeting organised by BUSINESS Magazin.

    ”Those that make a difference in business are the people who think of ”what if”, not those who say they will grow next year, anyway,” said Solomon, who has a financial background and had worked for major telecom operators in London for years, coming back home in 2005 to take the reins of Vodafone Romania.

    The only participant to that discussion that shared the same opinion was her good friend Mariana Gheorghe, a former EBRD banker, who had taken the reins of the biggest company in the country, Petrom, in 2006. On the other side of the fence were executives in consumer goods, financial services, IT and real estate industries, all of them enthusiastic about the higher than expected results that were about to be achieved in 2007, Romania’s first year of EU membership.

    Less than two years on, the Romanian economy is in full recession, the Gross Domestic Product fell by 7.6% in the first quarter and by 8.8% in the second, heading towards the first annual decline since 2000, a period during which it has tripled (in nominal value). The total number of the unemployed will exceed 800,000 at the end of the year (according to official estimates), compared with only 400,000 last year, whereas arrearage and the acute lack of cash have become ordinary components of the Romanian business landscape.

    Against this background, BUSINESS Magazin intends to bring into the spotlight the managers of the most profitable companies and their business networks, in an attempt to analyse the structure of the Romanian economy, as shown by the ranking of the top performing private companies.

    More than half of the 100 biggest private companies in the country saw their profits increase in 2008, according to data on the Finance Ministry’s website, even though in the second half of the year some star industries of recent years such as real estate, automotive and consumer goods froze, as a result of the deepening global financial crisis and spreading of that turmoil to emerging markets like Romania.

    How much of this trend was because of managers and how much was because of a well-oiled organisation? Radu Furnica, LDS Korn/Ferry Romania and the man who has discovered and recruited some of the most important executives in the country in the course of time, believes it is very hard to establish an immediate causality between profitability of a corporation and its top management.
    ”Simple logic says that those that made the biggest profit also had the best managers. This is not a rule though! On the contrary, most of the top 25 companies by profit are in the upper end of the ranking because they are very large companies, which are hard to beat and which were helped by the market,” Furnica says.

    Consultants, however, say that the personal touch of the person who runs the business is very important in the long run, too, though. Codrut Pascu, head of the local office of management advisory firm Roland Berger says that in order to determine the contribution of the manager, one must look at the extent to which the targets (market share growth, profit, cash flow) were reached, but especially at how the company developed compared to its direct competitors and how prepared the respective companies are to deal with hardships.

  • Gambling market cools down

    However, the streets with a good commercial position have become appealing for several operators of gambling halls, so that each district of large cities has seen at least two-three halls emerge, competing for spaces with banks and drugstores. The crisis fallout and some possible legislative changes will instil some rationale in this market that seemed to know no ending. ”Shall we bring the equipment from Adjud today?

    Is there any room left for them in the warehouse?”, an employee asked the commercial officer of Ritzio gambling hall operator several weeks ago. More than 500 slots have been put out of use from Million electronic casinos since the start of the year in a bid to adjust a business that grew in a very short period of time to the demands of the current market. The Million electronic casinos were brought to Romania in 2005 from the Russians of Ritzio and in 2008 became a market leader in terms of the number of halls and number of slots (over 4,500).

    Like the other major gambling hall operators, Max Bet, Admiral, City Casinos, Ritzio is also forced to renounce part of the halls it opened last year in the wake of investments worth above $75m (54m euros). The economic downturn and a series of legislative changes that will again burden casinos with heavier taxation are likely to once again give a new shape to Romania’s casino market. The market had another boom before, in the ‘90s, but in the first half of 2000 some Fiscal Code changes put most electronic games halls out of business. In 2005 a tough raid by ANAF led to the closedown of the biggest casinos in the country.

    In 2006-2007, there was milder legislation, revenues registered significant growth and Romania this time became attractive for major international groups in the gambling industry.
    While there had been no gambling market, the live casino market had existed, but had stagnated for many years. This latter market also reawakened in 2007 and came to include 23 units countrywide.
    Last year’s big rents were among the main reasons why many gambling hall operators have had to resize their strategy.
     

  • Harry Potter and the order of luxury

    ”Being a rebel is much more fun!” Hermione exclaimed in the ”Harry Potter and the Order of Phoenix” film, happy to have contributed to the school’s rebellion against the teacher that disrupted the activity at the School for Magic. The line is quite unusual for Hermione who portrayed a model student throughout five ”Harry Potter” films. Moreover, it seems that Emma Watson (the actress who played Hermione) has applied the same theory in real life. A little while before the latest film in the franchise, ”Harry Potter and the Half Blood Prince” was released, Emma Watson became the image of Burberry luxury label. Her look was completely different from the schoolgirlish and childish look displayed until then, and seemed to have been inspired by the fashion shows in London rather than anything else.

    The announcement stirred quite a controversy, but comments and analyses that came out after the launch of the photos are actually about the rising appetite of luxury groups for a portion of the commercial potential of the young audience. Because characters like Hermione are models inspiring millions of young people all over the world who contribute to hundreds of millions of euros in revenues (”Harry Potter and the Half Blood Prince” generated 160 million dollars in five days after the opening).

    ”Having known and admired the lovely Emma Watson for quite some time, she was the obvious choice for this campaign who like the images she fronts, has a classic beauty a great character and a modern edge,” Burberry’s creative director, Christopher Bailey, said, commenting on his choice.

     

  • How to conquer your own country

    From his unfinished office, deliberately placed at the bottom of the investment list because production and the business welfare come first, Vasile Armenean, owner of the biggest Romanian ice cream producer, is closely coordinating the activity of his 400 employees. From time to time, he glances at the Finance Ministry’s website to see whether his main rival, Nestle Ice Cream, has released its financials. He’s curious to see whether his 20m-euro 2008 sales were bigger than Nestle’s because in 2007 he’d been just one step away from becoming market leader.

    However, Armenean is one of the few Romanians with a comfortable situation. Most Romanian businesspeople, such as Dan Viorel Sucu (Mobexpert), Dragos Paval (Dedeman) or Ioan and Viorel Micula (European Drinks), are rather pressured to find alternatives to overcome a situation that has proved to be more difficult than they had expected. Unfreezing sales, financing current activities, recouping debts, these are just some of the problems that, if not addressed properly, can drive many into bankruptcy. And indeed, the crisis has reduced even further the number of Romanian companies fighting for a leading position in their respective fields of activity.

    More than ever in the past decade, the market is difficult for all companies, either international or Romanian ones. ”All companies need to understand now what their strengths and weaknesses are and, whenever the situation requires it, to react and reposition themselves as quickly as possible,” says Hein van Dam, a partner in the financial consultancy department of Deloitte Balkans.

    At first glance, the balance of strengths leans toward the large groups, due to their finance strength, easier access to loans and the more experienced management teams. However, these assets are not exclusively held by multinationals, say the managers of Romanian companies. Raul Ciurtin, chairman of Albalact, owner, together with his father, of the main stake in the dairy company, says ”the very creation of a consolidated, professional management team, with a modern vision, and particularly the implementation of development policies meeting market needs” were the key to the development of their business.

    He adds that sound policies, investments operated when and where needed and the consolidated team are vital for the development of a company, beside capital, marketing budgets and portfolio expansion.

    All these elements are also found in the businesses of some other Romanian entrepreneurs, who are however coping with other types of difficulties, deepened by the crisis. In the opinion of Dan Viorel Sucu, Mobexpert owner, a major problem for Romanian entrepreneurs is that large companies are not behaving like Romanian firms, not even the Romanian-held entities. At the opposite end, the solidarity of other nations is obvious. Another problem signalled by Sucu is the fact that, in their discussions with banks, Romanian companies are only talking with intermediaries as financial groups they talk to do not make decisions domestically, but abroad. The lack of a powerful Romanian-held bank is viewed by many businesspeople as a major setback for Romania at this point.
     

  • Don’t Knock the RON off it’s Stand

    At the beginning of this year, in the midst of pessimistic economic forecasts and with the recent experience of the October depreciation of the RON, many experts (and BUSINESS Magazin readers, as well) were willing to believe it would be difficult to avoid an evolution of the exchange rate towards 5 RON/euro in the first half of the year. However, when we asked bankers in January to give us an exchange rate projection, not only none of them predicted a rate of over 4.50 RON/euro, but the majority went no further than 4.30 or even 4.10 RON/euro.

    Eventually, reality matched the bankers’ predictions, with the exchange rate remaining at 4.2067 RON/euro on June 30 – decidedly very far from the ideal levels of 3.1 RON/euro in the summer of 2007, but also very remote from the apocalyptic scenarios of 5 RON/ euro or even higher. Now, history seems to repeat itself: after forecasts on the economic progression have changed several times over the last few months, and an 8% economic decline has become an official scenario, while the budget deficit is widening day after day, a collapse of the RON is something that many Romanians, especially those with loans in euros, continue to fear. In this context, it could be considered surprising that most commercial banks officials who agreed to answer BUSINESS Magazin’s questions gave moderate predictions that start from 4.1 RON/euro, and only on a few occasions reach 4.50 RON/euro.

    The explanation lies mainly with the fact that the main pressure factor on the RON last year, the large balance of payments deficit, lost its impact due to the crisis, which caused a slowdown in economic activity and, implicitly, generated a decline in imports. ”The adjustment of the balance of payments’ current account is significant, from 12.5% last year to less than 6%, perhaps even 4% this year – and has been more than 100% covered via foreign direct investment,” says Mihai Bogza, chairman and CEO of Bancpost. However, Bogza says that if the economic policies implemented by the authorities do not fall within the limits agreed with the IMF, the external perception will be that Romania’s economic imbalance will deepen again.

    And, if, under such a scenario, the IMF would cut off its funding, meant to pad the Romanian National Bank’s foreign exchange reserve, ”it is easy to imagine a scenario where foreign pressure on the exchange rate would escalate so much as to make the current level difficult to safeguard by the central bank,” says Mihai Bogza. As for how the Romanian economy will be affected by the evolution of the crisis worldwide, most bankers see the quality of economic policies to be implemented by the authorities as being decisive, a quality that cannot be judged without taking into consideration the risks posed by the electoral context of the next few months.

  • Warehouses in Crisis

     The beginning of August brought a change in the professional life Vlad Radu Dumitrescu, who had acted as country manager of ProLogis, one of the world’s biggest developers and owners of logistics space. ”It is true that I have stopped working for the company as of August 1. We were a team of eight originally, and now there will be two people left,” Dumitrescu said, without providing details on the reasons behind the team restructuring. According to information in the industry, ProLogis has decided to put an end to plans to develop new logistics spaces, after completing the development of 108,000 square metres in the ProLogis Park Bucharest A1 project, located alongside the Bucuresti-Ploiesti motorway.

    According to Dumitrescu’s previous statements, the developer should have started construction of a new stage of the logistics park near Bucharest, which was supposed to have a 45,000 squaremetre lettable area – out of an overall 300,000 square metres – and was in talks to acquire the land necessary for a similar project close to Arad. Dumitrescu says he had decided back in autumn to scrap the project near Arad, as well as plans to start a new stage of the ProLogis Park Bucharest Park A1.

    The already built area is 100% rented out. The situation is not unique on the market. The local team of Eyemaxx Real Estate is also down from eight to three employees, with Johannes Rudnay, general manager of the Romanian branch, being among those who left. ”At this point, demand for logistics space is not strong,” Andre Hofer, CEO of Eyemaxx, says about the freezing of the company’s development plans. Eyemaxx sold its 50% stakes in two logistics projects in Timisoara and Ploiesti at the beginning of May, as well as three other plots to its former partner, Austrian investment fund Immoeast. Andre Hofer says he does not know if Eyemaxx will develop the projects taken over by Eyemaxx; it is as yet uncertain whether the company will pursue its pre-crisis plans to make 500 million-euro investments in ten logistics parks. The freezing of development plans was manifest in the first six months of the year, when Bucharest and the surrounding area saw only 40,000 square metres of logistics space delivered, compared with 350,000 in the similar period of last year, according to a study conducted by Colliers International.
     

  • The Owner Is Waiting

    It is Tuesday evening and, for the first time in days, it appears it will not rain in Bucharest. This, of course, makes waiters in bars and restaurants in Bucharest’s old town happy. Now, they are busy waiting on clients, who have filled all the outdoor restaurants, although it is not a weekend.

    ”Who do I ask for a drink around here?,” asks a young woman who has just joined acquaintances at a table. ”Me,” says a guy at the table, getting up and stepping into the bar. ”I didn’t know he was a waiter here,” says the young woman, and the explanation comes promptly from another person at the table: ”He doesn’t just wait tables here, he owns the bar with a few of his friends.” The four friends knew one another beforehand – their common passion for motorcycles in fact brought them together.

    ”One spring day we were passing by in the street and we sensed there was money to be made here. So we decided we would set up a motorcycle bar,” recounts Giani Manta (35), one of the four owners of the Jaya Café, which opened in mid-May on Smardan Street. Although none of them had previously had any experience in the field, the decision was very easy to make. ”I had just come back after eight months in Tibet. I went there to recover after 11 years of corporate grind,” says Emil Spataru (35), referring to the time he spent working for the formerly state-held operator Romtelecom.

    He is the only one who was an employee before; Giani Manta has a constructions company and a clothing store, and Mihai Sorin, another shareholder, has a real estate agency. It is not uncommon for bar or restaurant owners in the old centre to moonlight as waiters. The number of places has more than doubled compared with last year, with over 50 bars and restaurants located in the area. Further openings are expected before the cold weather sets in. ”We are hoping to make new openings by the end of the summer,” says Vasi Andreica, developer of the two Coffee Store coffee shops and importer of Moak coffee in Romania.