Snack giants move into Romania
Romanian snacks market in anticipation of strong growth in the next
few years, though analysts warn that growth is far from that of the
Czech Republic, the regional market leader, and will require
patience.
The two companies have used their joint venture, Snack Ventures Europe (SVE), to buy Romania's leading snack food producer and distributor, Star Foods, which includes well known domestic brands including Star Chips potato chips and Mr. Snacki corn snacks.
PepsciCo said SVE planned to use Star Foods' factory near Bucharest as a hub for servicing the whole country with high-quality snacks and that it was encouraged by Romania's "rapidly growing market".
Mike White, PepsiCo International's chairman and chief executive, went further by saying that the deal "offers us a great strategic platform for serving consumers across Romania and the Balkan region".
But White's enthusiasm was tempered by analyst John Band of market research group Datamonitor. While he agreed that Romania was an emerging snacks market, he stressed that it was possibly up to 10 years behind the fast-growing snacks sectors in the Czech Republic and Poland where market value was forecast to rise from $187 million and $339 million in 2003 to $260 million and $393 million respectively by 2008.
Nevertheless, Band said the move by PepsiCo and General Mills was good forward planning and that "it makes sense for PepsiCo to get in there now and see what sort of things people will and will not buy". He said he did not have market figures available.
Star Foods' good distribution network will be crucial to SVE's success due to the fragmented and localised nature of the Romanian food industry. In 2001 the top 10 food manufacturers in the country only had a combined market share of 14 per cent, according to market analysts Euromonitor.
Snacks market growth will also inevitably be tied to the disposable incomes of Romania's 22 million population. A recent report by the US Investor Services group says Romanian GDP per capita remained one of the lowest in central Europe and "as a result, living conditions are difficult".
However, if Romania joins the EU in 2007 as planned then this situation will probably be improved and the country may become a more accessible and attractive market for multinational firms like PepsiCo and General Mills. A number of other big international firms have already established joint ventures with, or bought in to, domestic producers based on market potential, including Kraft, Nestlé and Danone.
