Capital increases, new partnerships with producers and importersof fast moving consumer goods have been distribution companies'main strategies in 2009 to keep their turnovers from declining andbank instalments from rising.
The FMCG market did not lost its dynamism last year, because bigplayers tried to offset the turnover declines as a result of theconsumption decline by attracting new suppliers. The biggestopportunities came from importers: Macromex took over distributionof Algida ice cream, Interbrands included Bourjois cosmetics andLove Plus condoms in its portfolio, and Elgeka-Ferfelis startedlocal distribution of automotive lubricants Shell.
Whereas up until 2008, big distributors did not even have thetime to think through measures to boost efficiency of the businessbecause their turnovers rose by 20-30% a year and importers wereknocking on their door with partnership proposals almost on a dailybasis, last year shareholders of big distributors put cost cuttingat the top of the priority list. They dropped warehousing space,reorganised sales departments and brought money into the company inorder to diminish the value of bank loans.
Interbrands and Lekkerland Convenience each received 3 millioneuros in capital boosts in 2009 in order to diminish their bankloans.
"The decision was made in order to boost their financialindependence in the context of a rise in bank loan interest ratesover the course of last year. The rise in a company's own financingresources allows for better cost planning over the next period,"explains Narcis Mihai, general manager of Lekkerland Romania, acompany with a 62.7 million-euro turnover in 2008.
The same explanation was given by Rand Sherif, CEO ofInterbrands, who said last year that reducing the company'sindebtedness level was very important considering that the increasein the cost of loans and the depreciation of the RON against theeuro generated additional costs, with sales going down.
Over the last three years Interbrands, the biggest player on theRomanian distribution market, which brokers over one billion eurosin sales a year, has reshaped its business model, which entailedmassive cost cuts.
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