The low prices imposed on the market by Romanian companies are trimming down multinationals' hopes of profit. Nestle, the biggest multinational that had an ice cream plant in Romania, last year registered 2.1m-euro losses on this segment and has since decided to close it.
Three of the world's biggest food producers Nestle, Unilever and Mars, have so far proved "cautious" in approaching the Romanian ice cream market. However, Romanian producers say multinationals may become more visible on the market in the following years, but only through the acquisition of domestic firms.
Recently, Nestle announced its plans to relinquish its ice cream plant in Romania in a bid to achieve production cost efficiency in Eastern Europe. About two years after it took over the plant of Glina from Delta Ice Cream Greek company, Nestle decided to transfer production to Bulgaria, about 300 km away from the current site.
"We've analysed all possible options, from expanding the plant at the current location, to a greenfield project. The conclusion we reached, and which follows the company's regional strategy, was to move production to Varna," said Paul Nuber, the company's general manager.
The news did not take Romanian producers by surprise because, they say, the unit had to be relocated considering its position, close to a waste storage area.
"(...) Romanian producers are highly competitive and have brought a very large offer of products onto the market, at low prices (...)," states Vasile Armenean, owner of Betty Ice, the biggest Romanian ice cream producer.
In fact, Nestle Ice Cream noticed as early as 2006 that it needed to adjust its local portfolio to Romanian consumers' needs and budgets. Thus, the company in the past two years has strongly tapped into the mainstream segment, dominated by Romanian producers. However, its price strategy did not allow it to step into the black. In terms of sales, the company retained the top position on the market. The question remains though, will it manage to stay in this position via imports from Bulgaria? "The company's product portfolio will not be hurt by the reorganisation," believes Raluca Predoi, a corporate affairs manager at Nestle.
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