Gabriel Matei, the president of Consumer Product Network, a company which broke away from A&D Pharma group in 2002, is predicting a price drop for the overall consumer goods market, as a result of Romania's EU integration. The trend is expected to become apparent as late as two years from now.
The still small volume of the domestic FMCG market, the big costs generated by the Romanian infrastructure, along with rallying to new European standards have not been a good enough reason economically to cut shelf prices for FMCG products, which are imported from the European Union, according to Gabriel Matei. "Logistics are much more expensive in Romania than in other Western countries. For instance, a distributor like us can cover Germany with 4-5 warehouses, as the country has a well-functioning infrastructure. In Romania, however, we require local warehouses. We are also navigating through a period of increases in the cost of logistics, as a result of having to meet European standards imposed after Romania's EU accession," adds Matei.
With an estimated business of over 40 million euros for this year, Consumer Product Network distributor is still relying on traditional stores, which hold the biggest share of the total volume of goods distributed. Over 85% of the products distributed by the company, such as Lu biscuits or Scholl personal hygiene products have remained unaffected by the European Union accession, due to the gradual elimination of customs duties over the last few years.
"I think it is very important both for the distributor and for the producer that there is a balance in terms of distribution channels, so that one doesn't have to take too many risks," says Matei. He admits that the aggressive expansion of the big store networks will have significant consequences on the structure of the FMCG market.
"If we look at the relationship that suppliers have with big retailers, one can see that the market is currently polarised. There are many distributors who choose to stop working with certain store chains, because they cannot offer the discounts that retailers require. Distribution to key accounts offers some advantages, but they are dearly paid for," adds Matei.
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