Vel Pitar renegotiates contracts, avoids downsizing

Vel Pitar, one of the leading bakery producers on the Romanian market, ended last year with a 15% turnover decline in euros, although the volume of sales was similar to the 2008 level.

The turnover decline had to do both with the significant devaluation of the RON, and with the price cuts made last year.

"2009 was a difficult year and unfortunately 2010 will not be easy, either. Everybody says people will always eat bread, however hard the times may be, but things are not as simple as that. You cannot be an island of happiness in an ocean of despair. We in turn had problems with suppliers and financing, which is now more expensive and more difficult to obtain, as well as with a series of clients who were no longer able to meet their payment requirements," explains George Frincu, president of the Vel Pitar group.

Frincu did not reveal the group's consolidated results, but, according to ZF calculations based on data provided by the company, Vel Pitar's turnover revolved around 130 million euros.

The Vel Pitar official says that, despite its turnover decline, the producer did not resort to layoffs or pay cuts last year, preferring instead to streamline production processes in order to cut the use of raw materials, as well as utility consumption (electricity, gas, fuels).

"In addition, we have redefined our markets and reorganised our logistical activity. We transported more products by coming up with more efficient routes, we renegotiated contracts with suppliers and the rent we pay. What we did was look more carefully at internal processes, and restructured our costs, which is very difficult for a group with 12 plants and 4,500 employees," explained the president of Vel Pitar, a company that holds 8% of the Romanian bakery market and 15% of the milling market.

Another problem that the bakery producer faced was the fact that the black market rose from 30-34% at the beginning of last year to around 40% at present, according to company data.

"Last year small producers found refuge on the black market, which is normal when the economy no longer grows and the rush for money becomes one's main concern. However, we managed to preserve our profit margins at the 2008 level. Vel Pitar's production was not less significant, either, because the level of activity was similar," the manager added.