Big distributors sought new suppliers in 2009 to avoid steep sales decline

Capital increases, new partnerships with producers and importers of fast moving consumer goods have been distribution companies' main strategies in 2009 to keep their turnovers from declining and bank instalments from rising.

The FMCG market did not lost its dynamism last year, because big players tried to offset the turnover declines as a result of the consumption decline by attracting new suppliers. The biggest opportunities came from importers: Macromex took over distribution of Algida ice cream, Interbrands included Bourjois cosmetics and Love Plus condoms in its portfolio, and Elgeka-Ferfelis started local distribution of automotive lubricants Shell.

Whereas up until 2008, big distributors did not even have the time to think through measures to boost efficiency of the business because their turnovers rose by 20-30% a year and importers were knocking on their door with partnership proposals almost on a daily basis, last year shareholders of big distributors put cost cutting at the top of the priority list. They dropped warehousing space, reorganised sales departments and brought money into the company in order to diminish the value of bank loans.

Interbrands and Lekkerland Convenience each received 3 million euros in capital boosts in 2009 in order to diminish their bank loans.

"The decision was made in order to boost their financial independence in the context of a rise in bank loan interest rates over the course of last year. The rise in a company's own financing resources allows for better cost planning over the next period," explains Narcis Mihai, general manager of Lekkerland Romania, a company with a 62.7 million-euro turnover in 2008.

The same explanation was given by Rand Sherif, CEO of Interbrands, who said last year that reducing the company's indebtedness level was very important considering that the increase in the cost of loans and the depreciation of the RON against the euro generated additional costs, with sales going down.

Over the last three years Interbrands, the biggest player on the Romanian distribution market, which brokers over one billion euros in sales a year, has reshaped its business model, which entailed massive cost cuts.