On a market where international retailers target supermarkets, the owners of the biggest Romanian networks in food-orientated retail have indicated that they are not in any rush to sell. So why are Romanian investors not following the example of investment funds that sold their retail businesses, which have forecast lower profit margins during the coming years?
One reason could be the asking prices. Owing to the experience gained through deals on foreign markets, investment funds wield more power in negotiations with bidders than domestic investors do. As a result, domestic networks prefer expansion to boost sales, and implicitly their market value. Several months ago, the manager of La Fourmi, a network then controlled by Global Finance investment fund, said Romanian supermarket owners had unrealistic expectations concerning the value of their companies. La Fourmi was recently sold to Mega Image for 18 million euros, a price Carrefour considered too high.
"We were not willing to pay what they wanted," stated Jacobo Caller Celestino, former manager of Carrefour Romania. He also anticipates some exits from the supermarket segment of several international players in the coming years.
Why should an international retailer sell, given that the supermarket segment is still undeveloped domestically? "They could sell because they anticipate a time when the segment will no longer be attractive because of competition," explains Caller.
So far, no player on the supermarket segment has posted a growth rate that matches the average rate seen by discount and hypermarket segments. However, the large domestic supermarket networks have signalled that they want to keep up with retail development. After Ion Soloman, who owns of the biggest domestic supermarket network announced he no longer wanted to sell the company, the owner of Primavara network, Ion Avram, said he intended to further invest in the development of retail operations. Investments in expansion have so far reached 10m euros.
The nine Primavara stores last year registered sales worth 33m euros and a profit rate close to the average profitability rate of domestic retail, according to Avram. Primavara supermarkets are operated by Can Serv (controlled by Ion Avram), which is also developing the Primavara housing complex in the Drumul Taberei district of Bucharest. Can Serv shareholders will invest in a second housing complex in Bucharest, built on land in the Lujerului area, which was acquired for 23m euros.
In their turn, the owners of Pic supermarket network, Cornel and Ilie Penescu, dismiss the idea of an exit and intend to make further investments to expand the network, despite their French and German rivals' aggressive expansion policy. Overall, the total number of modern retail stores rose by 97 in 2007 and reached almost 370.
Primavara
The owner of the network says he will make further investments to develop retail operations
The network will expand this year, but the targeted locations have not been disclosed
Expansion investments have so far reached 10 million euros
The network's nine stores posted sales worth 33m euros last year and a profit rate close to the domestic retail average
Primavara supermarkets are operated by Can Serv, which is controlled by Ion Avram
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