BusinessMagazin

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  • Not a happy time for Happy Tour

    The first year in the portfolio of GED investment fund was complicated for Happy Tour. The agency almost lost its leading position on the travel market, changed its management and organisation, and, to top it off, travel budgets were cut. This cut managed to halve the market in the first few months of the year. Actually, quite few of the expectations of Gabriel Ionescu, general manager of Happy Tour recruited by GED Eastern Fund II to run a future group of travel agencies intended to be the undisputed leader of the market, came true. GED’s plans at the moment it recruited Gabriel Ionescu were made soon after the takeover of the leading travel agency, Happy Tour (December 2007, in a deal put at 10 million euros), which should have been followed by other acquisitions on the business travel market. Meanwhile, GED’s plans changed, and the investment fund told BUSINESS Magazin ”currently we are not considering (to buy i.e.) any Romanian travel company,” and that ”in six months, we expect to complete one or two new deals, though none of them related to travel industry,”
     

    Traducere de Loredana Fratila-Cristescu si Daniela Stoican
     

  • Supermodels and financial crisis

    Last September, Romanian top model Diana Dondoe was on the cover of the first issue of the lifestyle supplement of the Wall Street Journal (WSJ) business daily. Although the headlines of the newspapers she was dressed in (Diana wore a dress created by designer Roland Mouret and made entirely of Wall Street Journal pages) announced the recession, the crisis in Romania was nothing more than a topic for the press back then. Several months later, with the crisis in full swing, Diana Dondoe told BUSINESS Magazin what the current economic situation looked like seen from the height of the catwalks or beyond the glamour of the advertising campaigns of the major brands, considering the behind-the-scenes motto of the fashion weeks in New York, London, Milan or Paris in terms of model fees was ”half price”. Designers hired fewer models and brands cut their promotion budgets.

    For a model, the fashion market is divided into two important fields – fashion shows and advertising campaigns. ”I can say I can feel a decline in the payment for campaigns. But I prefer to work less and do other things unrelated to fashion, to focus on other interests, such as continuing my education at NYU (New York University i.e.).” As for shows, the Romanian top model, ranked among the top five models of the world last year, says they have not been part of her regular schedule for the last three seasons, and that she only does two or three major shows per season.

    After having been on the catwalks for six years, she decided to focus on advertising campaigns, which are more profitable. She picked only one show this season, Marc Jacobs, at the New York fashion week. After all, the fashion week in the crisis city was one of the most affected events by the current situation of the economy. Even before the end of 2008, designers like Vera Wang and Betsey Johnson had announced they would not participate to the Bryant Park event where a show may cost up to 750,000 euros, opting instead for a traditional and much cheaper presentation in their own showrooms. All in all, there were 30 fewer designers attending the event compared with last year.
     

    Traducere de Loredana Fratila-Cristescu si Daniela Stoican

  • The rise and fall of a broker

    Everyone knows Petru Prunea, 63, to be an authoritative leader and a man with a strong personality. His employees at Broker know it best, as they had ended up smoking in the bathrooms of the company’s headquarters on 119, Calea Motilor in Cluj- Napoca, like high-school kids, after he had banned smoking on the premises.

    However, the company he founded and has run since 1994 was shaken by the biggest scandal on the capital market after 2000 at the beginning of the year, after the head of the Deva office of Broker was found to have defrauded customers by almost one million euros. An extensive probe of the National Securities Commission, the supervisory authority of the capital market, followed and found problems at other branches, too, leading to the harshest penalties on the Stock Exchange thus far: total fines worth 843,000 RON (200,000 euros) for the company and 22 of its employees and a five-year suspension for Prunea from the capital market. How did Petru Prunea, who developed one of the biggest businesses on the capital market, with about 10,000 customers and 15,000 shareholders, end up being held responsible for such serious wrongdoings? Those who have worked with him say that everything stemmed from his wish to control everything and from not having delegated part of the responsibilities as the firm was growing.

    ”If Mr. Prunea had the inspiration to work more closely with the members of the board of directors in making decisions, maybe things wouldn’t have got where they are now,” says Anton Ionescu, 68, Broker’s third shareholder, who controls 4.16% in the company. He took over as chairman of Broker in March, after a ‘coup-de-palace’ whereby he and other members of the Board of Directors, who in turn were significant shareholders of the firm, ousted Prunea from the helm.

    ”Prunea regarded himself as the undisputed owner of the firm; he wanted to control everything and maybe this is what caused what happened to him. There wasn’t any trouble at first, the trouble started as the company was growing. When you already have hundreds of employees, very much money and the power is in the hands of only one man, trouble begins,” Ionescu explains. He says he joined Broker as a shareholder in 2005, after having concluded his political career as a deputy, which included a short stint as Transports Minister of the Radu Vasile Cabinet in 1998.

    ”I had known Petru Prunea for many years, as we were co-workers when I was the dean of the constructions faculty (of the Technical University of Cluj – i.e.). I was happy with the idea of working together, because he was one of the first people to have taken the step from socialism to the capitalist economy and founded this brokerage firm,” Ionescu recalls his first meeting with Broker.

    ”People change, they no longer communicate, no longer work with others like they used to, and show sides of their personality that may have not been visible in the beginning,” says Ioan Cartis, 73, the principal shareholder of Broker, with 8.22%.

    Petru Prunea says he has always taken shareholder opinions into account, when they showed common sense, but believes he is the only member of the board capable of running Broker, given his expertise with the capital market, after the fourteen years of almost constant growth of the firm he has run.

    A day before CNVM’s verdict, Prunea said he was thinking of stepping down as chief executive of Broker, and even sell his shares, after having been ousted as chairman by the other board members, two of which had been brought into the company by him. Now, he is determined to stick with Broker, even though he says CNVM’s penalties against it and against him could prove fatal for the firm.

  • Some thrive in crisis

    Small prices to some degree marginalized Romanian cosmetic products, which consumers with increasingly high incomes were not very keen on buying. In 2009, price should be their trump card, according to Elena Cremenescu, founder of Elmiplant producer, now held by Greek group Sarantis. Cremenescu hopes this crisis will open up new opportunities on the market, referring mainly to the fact that, under the pressure of the devaluation of the Romanian currency, multinationals will increase prices in RON, and this will turn some of the customers towards cosmetics manufactured in Romania, which are cheaper.

    Elmiplant has a crisis strategy ready, whose main points entail launching new products (for skincare and bodycare). This year’s launches will boost the group’s products from 80 to over 100, following a half a million-euro investment. Elmiplant’s founder expects a 25-30% turnover increase in 2009, in line with the trend that has already been apparent in January and February. ”It seems a lot, but we are relying for this on all the products we will relaunch and on the advertising budget set aside, of 15% of the turnover,” explains Elena Cremenescu.

    Another Romanian player which is expecting growth, but of 10% (to 2.75 million euros), is Gerocossen, whose shareholders however admit that their profit margins now amount to 13%, as opposed to 20-25% last year. The largest Romanian cosmetics producer, Farmec, has a more conservative approach, expecting a 5% turnover rise, from 24.4 million euros last year, in the context of the economic crisis. Mariana Sinitaru, marketing specialist of the company, says the cosmetics industry is less exposed to the effects of the crisis, because consumers are not willing to give up daily care, even though a change in consumer behaviour will be noticeable, in that consumers will migrate to more affordable products.

    According to information provided to BUSINESS Magazin by representatives of the producer, Farmec preserved its growth rate last year, reaching comfortable growth rates: 30.3% for cleansing products, 25.7% for face care products and 9% for body care products.

  • Small-sized plans

    Companies in the apparel and footwear industry believe they will compete on a market whose value will revert somewhere close to the level of 2006. High rents for shops and the consumer spending slowdown, as a result of the crisis, are the main problems those in the field are facing, especially the brands that do not have adequate financial backing. The market had been growing by at least 15% every year since 2006, reaching two billion euros last year. Now, however, such growth has become impossible to attain.

    ”Because of the current economic situation I do not think we will be able to talk about aggressive expansion any longer,” says Adrian Cazu, manager of the footwear and leather accessories store chain Benvenuti, who is contemplating a halt of the development plan and a 20% personnel cutback. ”There will be relocations of stores, changes in the tenant mix in shopping centres, new stores of international retailers that have not been present or have been poorly represented thus far will probably open, but the horizontal development boom in Romania is coming to an end,” Cazu believes. His company, which has 300 employees, manages 34 stores, 31 of which are Benvenuti-branded, two are Enzo Bertini and one is Oxus-branded.

    The expansion map has been set aside, with just a few markings on it: the only stores that will open this year will be those for which a contract has already been signed with mall developers and as such cannot be cancelled. ”What I can say for certain is that we will open our eighth store in Buzau next month,” says Mihai Sindrilaru, chief executive of New Yorker Romania apparel chain. ”We are ready to launch two or three more by the end of the year, but we do not know what the developers are doing, if the projects announced will be completed. The projects were postponed for next year – maybe until the next instalment of the financing, and some were dropped.” Sindrilaru, whose expansion plan in 2007 when the retailer entered Romania was remarkably aggressive – 50 stores by 2012, believes that chains like New Yorker, which have arrived in the last two years, are willing to open but can no longer find adequate retail space.

    Read more about fashion and real estate trends in the ”Piata Imobiliara: Iesirea din criza” (Real estate market: The exit from crisis) catalogue, published by BUSINESS Magazin, which comes out this month.
     

  • Pygmalion in business

    When George Bernard Shaw was writing ”Pygmalion”, he wouldn’t have dreamed that his character would serve as a model for the business world a century later. Shaw’s story is simple at fi rst sight – Eliza Doolittle is a London fl ower girl with no education, who becomes the object of Henry Higgins’s bet, of turning her into a high-class lady after a few intensive lessons in English speaking and several sessions of image change. Aside from movies and stories, the Pygmalion model is now also employed in the business world. Using a few of Higgins’ tricks, image consultants claim they can actually boost a company’s turnover. Whilst on Western markets image consulting for companies is no longer a novelty, it has only this year gained more prominence in Romania, after the job had been previously performed by the PR department or by the manager’s personal advisers.

    Mihaela Berciu and Dana Sota are two of the names that have become involved in image consulting for business. The two have started out more or less the same – with a book. Mihaela Berciu released ”Tinuta pentru succes” (Dress For Success), and Dana Sota ”Frumusetea se invata” (Beauty is Something You Learn) and they have set out to use their showbiz experience to add more glamour to businesspeople. The difference is that Berciu provides image consulting services, while Sota has focused on the beauty area. ”Image consultants fall into three categories – showbiz, business and political. I think in the business world, image is all the more important since it has to be coherent and very rigorous. I felt this service was particularly needed in the business world,” says Mihaela Berciu. Now, she is a consultant at Qualians, where she organises image seminars upon request.

    The seminar, called Executive Presence, takes one day (from 9 to 5), teaches participants basic rules regarding image, how style should be adapted to each career level, and the appropriate style for a business meeting. Dana Sota was also attracted by the unexplored potential of the business world and adapted her message to the fast forward pace of the business world. As a beauty consultant, Dana Sota debuted with a ”trial” workshop, which was attended by 10 women interested in image. ”I started out by explaining the importance of constant skin care, how much can damaged hair or undyed roots can say about the woman in question, how important it is to apply foundation, mascara and lip gloss before leaving for the offi ce. However, for the next few meetings, there will also be stylists, who will show what is suited to each participant, based on their physiognomy, workplace, and basically personalised advice.”

  • The proliferation of delicacy stores

    Lately, especially for consumers of foie gras or of luxury chocolate, the operators of a few of these stores have also entered the food & beverage market, by opening restaurants or bars, where the delicacies can be tasted in a purpose-built area, accompanied by the wines that go with them. The openings occur on a market where delicacies were first turned into a business in 2005, when Delicateria Traiteur was launched, following a 100,000-euro investment by Gusto- Elysée Receptions.

    The store, which was based on a concept ”imported” from France, was the first to sell products such as smoked salmon, salmon terrine, Delicateria Traiteur ham, deer, pheasant and selected wines. Delicateria now shares the market with other experienced players such as Le Manoir, French Bakery, Croissant de Paris and Leonidas. In all, there are just over 10 brands that sell luxury food, and they address a maximum of 10% of the population. But delicacies appear to be crisis-resistant, given the large number of shops opened at the end of last year and in 2009. The French bakery and patisserie brand Paul (with over 120 years of tradition) entered the Romanian market at the end of 2008 with two stores (in the Dorobanti area and in Baneasa Shopping City).

    Around 1,000 customers step into the bakery shops daily for croissants, pain au chocolat, macarons or French baguettes. And for 2009, Romanian representatives of the brand expect a 2 million-euro turnover. The beginning of 2009 also saw the opening of Gourmandise Traiteur in the Rosetti area, which sells spices, smoked goose breast, foie gras d’oie, mousse de foie de canard, prosciutto San Daniele, kefir, wines and chocolate. Targeting a segment of the population that does not seem very much affected by the crisis, delicacy stores have also developed the food & beverage area, a strategy which appears to bring customers even closer to the delicacies.

    Chocolat, which has gained its position on the market thanks to its confectionery products and to the bread specialties, has this year expanded by two shops. ”We basically thought up three Chocolat concepts – a 40 square meters store in Dorobanti, another one on 100 square meters in Calea Mosilor, and the 200 square meters flagship store in the old town. Based on how each store fares, we will crystallise a development strategy,” says Tudor Constantinescu, owner and manager of Chocolat Créateur de Goût, who has allocated 250,000 euros for investments in 2009.
     

    Traducere de Loredana Fratila-Cristescu si Daniela Stoican
     

  • A future for Romania

    Theoreticians and analysts have Michael Porter or Robert Reich, politicians have party programmes, entrepreneurs have their own strategies and visions, while journalists take a little of everything. Many people keep repeating that the current economic crisis should be an opportunity for reflection, for catching up on those reforms not done in time and for plans for what to do after the crisis. Can we hope to get a feasible strategy for Romania’s development after the crisis from theories and programmes, from the expertise thus far and from articles in the press? What fields suit us, who should identify them and what should be done?

    Almost all the businesspeople that BUSINESS Magazin has spoken with are talking about the necessity of a national development strategy, with consistency as the key word. The main development sectors are, as you can probably tell, agriculture, information technology and tourism, supported by a solid infrastructure and a quality education system.

    How one should get to such a winning bet list would make for a long discussion. On one side of the fence, of those who support the role of the free market forces exclusively, sits Dinu Patriciu, chief executive of Rompetrol, a firm believer in liberal policies: ”Were we to free the economic environment from constraints, opportunities would be born naturally,” says Patriciu, a billionaire who is the only Romanian still on the Forbes list of richest people.

    More businesspeople, however, believe in the necessity of the involvement of the state in setting economic directions to be followed, in partnership with the business environment, of course. ”The fate of Romania is in the courage with which the government, whatever colour it might be, undertakes the restructuring of public services and businesses from the ground up,” says Marius Stancescu, chairman of Riff Holding International, a business service company.

    ”There are countless models in developed states, we just need someone to do the research and apply the model,” he feels. Otherwise, unless a change of direction occurs, Romania’s economic future will show its ”incurable impotence” in the next ten years. Even pushed forward by EU’s integration mechanisms, if no government takes the risk of fundamental changes and is able to induce the effective use of public resources, we will always be ”the poor relative on a visit to the city,” Stancescu concludes.

    A cooperation between politics and economy would be ideal, Florin Talpes, chief executive of the BitDefender software developer, believes, as well. Ideal not because it is desirable, but because it has not happened until now. ”Romania’s governments have been showing a great neutrality towards the fields of the future until now. As for the political environment, I don’t think it favours medium to long-term strategy building and consistent application of such strategies,” Talpes says.

    The creator of BitDefender, the antivirus thought to be the best-known Romanian software application, says that a solid economy is a project that takes eight to twelve years and requires vision to begin it. ”However, political changes happen at intervals of less than four years and lead to replacement of all public servants down to school principals.” This means lack of continuity in strategies and renders Romania unable to show consistency in policies other than those imposed the structures we are part of, EU or NATO.
     

    Traducere de Loredana Fratila-Cristescu si Daniela Stoican
     

  • The centre is where the money is

    Doru Bostina, the managing partner of Bostina and Asociatii is one of the few lawyers that have bet on the potential of the markets outside Bucharest. For most law firms, smaller cities did not seem attractive, either because the services needed there were too simple to be of any interest to them or because the financial effort territorial expansion would have entailed was too great. ”Those that stuck in the cliché that big deals are only closed in Bucharest were not paying enough attention,” Bostina said during a conversation with BUSINESS Magazin.

    Of the ten biggest Romanian law firms, only three – Tuca Zbarcea & Asociatii (TZA), Nestor Nestor Diculescu Kingston Petersen (NNDKP) and Bostina si Asociatii operate offices outside Bucharest, too. With 15 local offices that cover all the important regions, Bostina si Asociatii is the leader in terms of territorial expansion that started a few years ago, when few lawyers would look beyond the Capital. ”They should have opened their eyes and seen how many big and mediumsized companies had been reborn after privatisation or after the recession between 1997-2002,” Bostina says. In his case, 10% of the turnover of the last two years was generated by the territorial offices; though it may seem a little at first glance, ”the current crisis may very well diversify and boost demand for business law advice in the rest of the country”.

    The reasons why going beyond the borders of the Capital may turn out to be a winning bet for lawyers, even though it is not profitable on short term, start with the fact that in Bucharest, the centre of many businesses, the most profitable industries as far as lawyers are concerned are frozen for the time being. Law in the big cities, on the other hand, is mostly a ”courtroom” business, and very little of it is done in form of consultancy. ”Naturally, the absence of demand has created a gap in terms of development of consultancy skills and its specific techniques compared with Bucharest,” says Adriana Gaspar, senior partner of NNDKP and managing partner of the Timisoara office. That is why she believes that some clients prefer to receive advice in Bucharest about their businesses in the country.
     

    Traducere de Loredana Fratila-Cristescu si Daniela Stoican
     

  • Free for seekers

    As a result, traffic has gone up on these websites. Revenues, however, did not go up that much. Position: assistant manager. Type of offer: full time. Company name: confidential. Industry: advertising. Salary: n/a. Neither the position nor the few details that come with the ad published at the end of February would have attracted more than a few hundred applicants a year ago. Back then, the human resources market was still working in the employees’ favour, as they had enough better jobs that paid more to choose from.

    The position would not necessarily seem attractive even now, when the advertising industry in particular is suffering from the difficult economic period, except that more than 12,000 people submitted their CVs for it. On the same website, an ad for a regional sales manager for a printing company had more than 2,500 people apply for it. ”Whereas major online job recruitment sites had 200 applicants for a position on the average until now, today their number exceeds 500, depending on the job offered, which shows there are more candidates available,” notes Iuliana Badea, sales manager of Lugera & Makler. Growth is generated, on the one hand, by the high number of people out of a job and on the other hand, by the employees who hope to find a better job in these unstable times.
     

    Traducere de Loredana Fratila-Cristescu si Daniela Stoican