BusinessMagazin

Category: Bm english

  • Growth comes from convenience stores

    This is what Vladimir Vava, chief operating officer of Metro Cash&Carry has noticed. He sees in the customers’ ideas a positive trend for the group’s business. He also sees a potential achievement of Metro International’s target for Romania this year, which entails keeping costs at the same level, keeping profits at the same level, boosting sales and offering support to customers. Simply put, Metro International’s target does not take the crisis into account, and Vladimir Vava believes the cash&carry chain can overcome this complicated period, be it a crisis or recession, with the goals achieved.

    Goals are obviously more complex than in the past years, when Vava was working on promoting and making the ‘cash&carry’ concept understood in Romania and on a differentiation from the other players in modern trade. In the past years, however, profit or sales growth were taken for granted, as the consumer goods market was growing by 20 to 30% year by year. Vladimir Vava would rather not talk about the growth pace: ”No one can tell whether we will see growth in line with what we had in the last few years or more moderate; for the time being we are doing everything we can in RON to eliminate the effect of the exchange rate.”

    The optimism of the chief operating officer of the cash&carry chain resides precisely in the specificity of Metro’s customers, as well as in a potential change of consumer behaviour. ”Sales of food are the most important thing for cash&carry. I do not believe we will see a very serious decline, because people continue to eat,” says Vladimir Vava, who believes resellers should take advantage of this situation, of the fact that more and more customers choose to go to convenience stores to save petrol, as well as money, since one usually spends more money in a large store. ”To us it is a very good sign, because our customer is that trader, the owner of the small store, and the growth of their sales generates growth for us, too.”

    Vladimir Vava says that Metro will adjust to the needs of the small shopkeepers as much as possible and will invest more in the private labels of the group this year: ”private brands play a very important role and I am sure private labels are an opportunity for our clients, as they make a difference in their stores.”

  • Airports of the future

    6 years ago, the British were testing the ”eye recognition” (retina recognition) system on the personnel at Heathrow Airport, saying it would speed up check-in and boarding procedures, and, after the spread of the SARS virus (which caused huge losses to the industry) airports in Asia acquired a piece of equipment which would perform a quick passenger scan and identify every trace of fever. Right now, the two technologies are just some of the systems which up until recently seemed to be exclusively the preserve of science fiction, and which are being used on a regular basis.

    After the 2001 terror attacks, airports worldwide invested billions of euros in developing new technologies used to scan, weigh, take the temperature of, memorise and identify every passenger that steps into the airport. In the context of the financial crisis and of the increasingly tight competition among airlines, airports have started to be used as weapons that can make the difference in the fight over market share. All the more since a new social category has developed over the last few years, that of the frequent traveller, which includes businesspeople and keen travellers, who spend a lot of time on the airport or on an aeroplane.

    Such is the case of Marius Ghenea, president of online retailer PC Fun, of Italian Coffee Concept (owner of Testa Rossa coffee shops) and of Orbital Solution, a distributor of thermal comfort equipment, who travels by aeroplane as often as twice a week. Having been on over 2,000 flights in the last 10 years, Ghenea has developed a whole ritual in preparation for the flight. ”I frequently use online check-in services provided by the major airlines because you can print your boarding pass from your home or from your office 24 hours prior to the scheduled time of the flight,” says Ghenea.

    In order to attract customers like Ghenea, airport operators have thought up new technologies every year. For instance, Air France has launched the SmartBoarding technology this year, designed to attract frequent travellers, for whom saving time is essential. The company promises passengers who join the programme that they will be able to board individually at any time they wish, using a gate specially created for this service.

  • The percentage of dark chocolate

    ”I would rather wake up in 2011, but, unfortunately, every morning I find it’s still 2009,” says Jihad Jabra, general manager of chocolate producer Supreme Chocolat. The decline in chocolate sales over the last few months has not been anticipated by chocolate producers, which did not think any segment of the food industry would be significantly affected by the current situation. Whilst in the first part of last year, chocolate producers were complaining about the high costs of raw materials and hoping things would improve, allowing them to invest more in production, the last few months of 2008 proved to them that things could be much worse.

    ”We don’t have all the figures yet, but we have felt a decline in orders from retailers,” says Jabra, for whom the clearest signal was the low demand for chocolate in November, otherwise a month boasting the highest sales. In 2008, however, people tended to put off their holiday chocolate shopping until December, and they didn’t even buy as much as in previous years. ”I think this change came about amid negative information which emerged in October,” says Erwin Vondenhoff, general manager of Heidi Chocolats Suisse. 2008 had started well for everybody, with satisfactory sales and economic growth, the only complaint voiced by producers being related to personnel shortage.

    ”However, starting in October, we felt a blockage, growth slowed down, with sales lower than the forceful start would have had us expect. It was apparent that consumers moved quickly from emotionally-driven to functionallydriven purchases,” says Jabra. Producers will not be able to offer cautious consumers more attractive prices, quite the contrary: They have accepted that, like most producers in the food industry, they will be forced to increase prices, amid an increase in the cost of raw materials and amid exchange rate fluctuation (which will mainly affect importers, generating a gap between Romanian-produced chocolate, one of whose advantages is that its labour costs are in RON, and imported chocolate).

  • It might be cheaper next door

    At the end of last year, Dragos Raducan, general secretary of the Federation of Romanian Tourism Business Owners (FPTR), told BUSINESS Magazin that the pressure on the prices charged by hotel operators would be heavier this year, so that unless they froze rates at at least 2008’s level, they would lose money. Reactions on the market at the time did not seem to back Raducan’s opinion, but January results made hotel operators change their minds.

    Take-up started to go down by 10-15% in the second half of last year and 2009 estimates point to a constant decline, as a result of a shrinking demand for accommodation and the rising number of hotels. Considering the projects already announced, but regarded with scepticism (because development of many of them has been halted), 12 to 15 hotels will open this year, most of which outside Bucharest. Competition and slow market have upset last year’s trend when the most expensive hotels on the market fared best. Now, hotel owners have started to fight a battle of special offers and lower prices, though lowered by quite small percentages.

    The 10-20% cuts started from the small hotels unaffiliated to international chains, which are the most exposed when it comes to the decline in business travel, because they are not part of international booking chains (the number of rooms affiliated to international chains is quite low, about 3% in Romania, anyway). ”They risk not being able to cover the expenses and then starting to make people redundant. There are big hotels in Prahova Valley that fired 30% of their employees,” Dragos Raducan says. On the other hand, contracts were signed at the same rates in RON last year for the seaside, and in mountain and spa areas rates in RON were kept or raised by 5-8% on average (in some rare occurrences, they were either kept unchanged or rose by 12%).

  • Crisis manager for Tiriac

    Petru Vaduva met the two Tiriacs, father and son, on December 22, 2008 at the recommendation of head-hunter Radu Furnica. On January 7, Petru Vaduva was already in his office, having replaced the former CEO, Anca Ioan, who left the position in October.

    The new manager is calm and recounts the facts plainly, like a surgeon, about his business expertise abroad and about the challenges of the new job. He does not grin, he does not frown, he does not rush it. He speaks as confidently about bankruptcies of tens of millions of dollars as he speaks about philosophy and the restructuring of the business he has been running for only a few weeks.

    His appointment came as a surprise to the business environment in Romania, because few people had heard about or met the manager to whom Ion Tiriac decided to entrust the group put at 2 billion euros last year. Furthermore, Ion Tiriac is thought to be a businessman who likes to have the final (and most important) say in strategic decisions. And strategic decisions are what is needed in what looks to be the most difficult moment of the last ten years for the consumer and financial fields, where most of Tiriac group’s businesses are grouped. With a keen interest in molecular biology, Petru Vaduva left Romania alone to go to college in the United States in 1982. After college he started doctoral studies at Columbia University, but three years into it he realised it would never fulfil his American dream.

    ”Considering the situation back home, and the fact that my duties to my family were much more important than those of a young American studying biology and wanting to save the world from cancer, I decided to change my path,” Petru Vaduva recalls. At first he thought he would do business in biotechnology and worked for a year on neuro-research projects in a specialised company. He also got into an MBA at the Yale University (one of the most prestigious such programmes in the world) and was hired by JP Morgan after graduation.

    During his JP Morgan tenure he spent four years and a half involved in the Latin America ”project”, which had him live in New York but regularly fly to the Latin American countries 40% of the time, where he experienced both a boom and the crisis of 1994. The crisis in Mexico was just the beginning and Petru Vaduva went from crisis to crisis, which he considers to be part of the nature of his job of specialist in developing countries. He was in Asia for the following crisis, and then in Moscow and was no stranger to the dotcom crisis either.

    His return to Romania started in the second half of the nineties, when he got a job offer in Russia. Convinced he was getting closer to Romania this way, he took the job with an investment banking group in 1997, which did not survive the crisis in that country. Back in Romania at the first signs of crisis with plans to start an investment fund, he accepted Ion Tiriac’s offer and now would not provide figures about what or how will happen. He admits, through, that the strategy of the group will be focused on two pillars from now on: not losing money and keeping the market share.

    Restructuring is another key element of Petru Vaduva’s strategy at the helm of Tiriac Holdings, although he admits it may sound a bit negative somehow. ”The company grew – as many businesses in developing countries did, a bit chaotically and the challenge of this job is precisely restructuring. When crisis comes, you start seeing all the holes that had not been visible before. (…)”

    In brief, Vaduva’s plan is as follows: the group will not enter other fields of business over the coming period, will not sell any of its existing divisions and will not start a real estate project in the coming months.