BusinessMagazin

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  • 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.”

  • 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
     

  • 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
     

  • Simplify, Simplify, Simplify!

    On more than ten years after they launched unit-linked policies (which also include an investment component, in addition to the insurance) on the Romanian market, the Dutch at ING Asigurari de Viata (ING Life Insurance) are preparing to radically simplify their offer. ”We are revising some of the products in view of reducing their price, which also entails a simplification,” Cornelia Coman, general manager of the insurer that holds around a third of the market, told BUSINESS Magazin.

    The simplification occurs in terms of the product (the client can choose only from a few types of benefits, insured sums or duration of the contract) or in terms of the risk assessment process and sale, where the ”risk assessment questionnaire is simplified”. Coman has noticed, as have other players in the life insurance industry, that Romanians are increasingly hard to persuade to trust sophisticated financial products, such as life insurance linked to investment funds, but not only. A lack of confidence in financial institutions can be noticed, she says.

    This trend and the clients being less and less willing to spend a lot on products that are not absolutely necessary have been quick to produce effects on the insurance market: ”Profitability of sophisticated products will be very low this year,” says Sanziana Maioreanu, general manager of Signal Iduna, one of the players which have recently entered the market. So, after several years of trying to persuade clients to buy increasingly complex insurance products, companies now find themselves having to adapt as they go along. It is not only their business plan that changes (strongly affected by the consequences of the economic crisis), but also the product structure and the sales structure.

    ”We have to focus on mass needs, which remain in the area of traditional products,” says Frans van der Ent, CEO of Eureko, leader of the life insurance market. According to beginning-ofthe- year plans, increasingly more companies will, this year at least, adopt the policy of simple, easy to understand, and, not least, cheaper products.
     

    Traducere de Loredana Fratila-Cristescu si Daniela Stoican
     

  • Malls start to shrink

    Almost one year after the Italians at Immobiliare Grande Distribuzione (IGD) bought the Winmarkt shopping centres from NCH investment fund, the head of the company that manages them says, calmly, that the difficult economy period is hurting his stores less than others. ”Other mall-type centres have a tenant mix that generally sells more expensive products than the consumer’s buying power,” Antonio Di Berardino says.

    However, he admits that the crisis affects everybody, ”including us”. The traffic in the 15 Winmarkt centres dropped by 17% in January, by 19% in February and preliminary March data reveal a 20-21% decline. Even so, IGD’s first year in Romania will end this month a ”little better than the target initially set”, which was 19.3 million euros in revenues from rents.

    At this level, the annual yield in euros of the Italians stands at more than 10.5%, which is good even in the current context, when average investment yields are estimated in a report of real estate consultant CB Richard Ellis, at 8.5% for the best commercial properties. ”I was the first IGD manager that came in Romania in August 2007. I am not sorry for the price we paid. Maybe we could have negotiated it better in half a year, but that no longer matters now.”

    The acquisition of the Winmarkt stores from investment fund NCH was the second biggest transaction on the commercial property market of Romania – 182.5 million euros. What matters now, Di Bernardino says, is improving the tenant mix, especially in terms of selection of anchors, that is the major tenants, which are food, home appliances and IT product retailers. Winmarkt signed to bring Carrefour Express in three stores and Domo in its store in Bistrita, with four contracts of the electronics retailer being extended (the company operates in four Winmarkt stores, where its contracts are to expire in 2011). The Domo stores are set to be moved to the upper floors to free up the space in the basement or ground floor for a supermarket and, on the other hand, to boost traffic to the other floors, Di Berardino explains.

  • Dividend exchange

    The period when companies announced the dividends they were going to disburse from last year’s profi t overlapped the best performance of the Bucharest Stock Exchange in the last four years, with the BET index having increased by 25% in March, while the SIFs gained more than 30% on average. The companies that announced they would disburse hefty dividends, with 15-20% yields, such as aluminium profile maker Alumil Rom Industry (ALU), aluminium producer Alro Slatina (ALR) and BRD Groupe Société Générale (BRD) have witnessed some of the highest increases on the Stock Exchange lately, while the SIFs (financial investment companies), which will get record dividends from BCR and BRD this year, have soared again.

    This is the first time in the last few years when the investors on the Stock Exchange can get such high yields for their shares just from the dividends they generate. For instance, the dividends from Alumil give investors a 20% gross yield, higher than the interest rate offered by banks for one-year RON deposits. Another eight major companies, including Alro and BRD, offer dividends whose yields stand at 10 to 18%. The best yield of the dividends on the Stock Exchange last year amounted to 8% and the highest profit from dividends in 2007 was 5.2%. ”We have a situation we had not seen on the Stock Exchange for years. On the one hand, stock prices plummeted in the past year, as a result of the economic crisis, and on the other, we have issuers that posted high, even record high profits in 2008, so that net earnings per share are high compared with the share prices.

    Under the circumstances, disbursing dividends, even though not that high, make it possible to get attractive yields, similar to those of the bank deposits. Considering dividends will be disbursed over the next six months, one may say that yields are even higher than those of deposits,” explains Alin Brendea, trading manager of Prime Transaction brokerage company.