Romania and its 19.3 million consumers, as indicated by last year's census, offer increasingly viable market opportunities for those who know how to take advantage of them. But does anyone still know? We ask this question because the market chaos has brought even the most skilled managers to despair. And if we think about those who work in the meat and dairy sectors, the chaos seems even greater, pointing towards a path that leads to their downfall. Can it be avoided? With the understanding that this article uses information up to May 9 of this year, let's hope that yes, the disaster can be avoided if there is a desire to do so.

A neutral opinion

In an analysis conducted by the United States Department of Agriculture, it is rightfully stated that Romania's strategic location, improved business climate compared to the pre-European Union period, international port facilities, and increasing consumer demand have contributed to the growth of the gross domestic product.

During the forecast period until 2025, the average real annual GDP growth is estimated to be 3.3%, as estimated by the government specialists we are quoting to provide a general overview of the Romanian market, considering that they are more balanced than others and certainly more balanced than those here.

Romania's rural population is the largest among EU member states and accounts for approximately 45% of the national population. Romania's rural poverty level is also the highest in the EU, at over 70%.

Although agriculture contributes to a decreasing share of Romania's macroeconomy (currently around six percent of GDP), it still represents 20.8 percent of the total workforce.

Production accounts for 19.7% of GDP and employs 19.6% of the workforce, but approximately 80% of the banks in Romania are foreign-owned, with three out of the four largest banks headquartered in Austria.

Romania's average annual GDP growth has been over six percent on average as investments increased after joining the EU. A boom in consumer spending was driven by rapid loan growth, leaving many Romanians vulnerable when the global financial crisis hit.

The economy struggled in the early years of the last decade but eventually gained momentum in 2015 when strong fiscal stimulus, domestic demand gains, and a stable labor market provided support.

The economy picked up pace towards the end of 2017, with Romania's real GDP growth being the fastest in the EU. GDP moderated to 4.4% in 2018 and 4.1% in 2019 as private consumption and exports also moderated, while fixed investments strengthened.

Demographic data of consumers

Currently, Romanians aged 35 to 39 have the highest incomes in the country, although by 2030, the age group with the highest income will be 40-44 years old. Considering these age groups, the demand for goods and services related to family, such as transportation, education, and household products, will increase rapidly.

Consumption patterns for individuals in their 20s tend to focus more on food and beverages, entertainment, and communications. As people in their 20s and 30s start to settle down and start families, they become more interested in family-oriented product categories.

According to the latest data from the National Institute of Statistics (INSSE), the average monthly income per household was $1,346, and per person, it was $530. Total monthly household expenses amounted to $1,137, representing approximately 84.5% of total income.

34.9% of household consumption expenses were for food and non-alcoholic beverages. 8.5% of the average income was spent on alcoholic beverages and tobacco, while only 1.4% was spent on hotels or restaurants.

The retail market

Romania's food retail market was valued at approximately $31.1 billion with more than 3,800 stores in 2020. Four major players hold approximately 60% of the total market share, including Kaufland, Carrefour, Lidl and Profi.

Romania is one of the first five European countries in the growth of retail trade per unit of space, after Turkey, Russia, France and Italy. The retail sector in Romania has grown from 50 to 100 square meters per 1,000 inhabitants, just in the last four years.

According to European Supermarket Magazine, retail sales in Romania started 2023 rather slowly, registering a 2.8% increase in February, with the overall sales figure boosted by a 7.4% increase in food sales for March .

As in other European markets, inflation affected Romanian households, the annual inflation rate in March 2023 being 14.5% higher than in the same month of the previous year. However, recent wage increases have managed to offset this somewhat, indicating that Romania is better placed than other CEE markets to face inflationary challenges.

Ranking of hypermarkets

To paint a better picture of the food market in Romania, here is the ranking of the ten retail supermarket chains in Romania, according to the last available turnover for the whole year. The data was provided by Retail-Index.

1. Lidl & Kaufland: Turnover: EUR 5.35 billion (2020)

2. Carrefour: Turnover: EUR 1.91 billion (2021)

3. Profi: Turnover: EUR 1.89 billion (2020)

4. Mega Image: Turnover: EUR 1.52 billion (2021)

5. Auchan: Turnover: EUR 1.29 billion (2021)

6. Metro C&C: Turnover: €1.2 billion (estimated, 2021)

7. REWE: Turnover: EUR 1.01 billion (2021)

8. Selgros: Turnover: EUR 810 million (2021)

9. Cora: Turnover: EUR 315 million (2021)

10. CBA: Turnover: N/A

Three white areas

If we are to analyze the meat sector, we must make a clear distinction between poultry, sheep, beef and pork. This is because, for the first three areas, Romania is not bad at all, being in the "white" area.

Fortunately, in terms of poultry meat, Romania provides its own consumption needs. Indeed, there were fluctuations, when excess poultry meat was brought from Poland or when Ukraine benefited from the derogation to export to the European Union market without customs duties.

But, here, according to the latest synthetic data provided by the INS, in 2022, 9.7% less poultry meat was brought to the Romanian market. In addition, the ANSVSA did its job very well and acted efficiently, limiting and eradicating in time the bird flu outbreaks that were confirmed on the territory of Romania.

We are best with mutton. In fact, Romania remains at the forefront of sheep breeders in the European Union, and what is not consumed here is exported, even if we are talking about live animals.

This spring there was indeed a certain blockage in the area of sheep exports to Arab countries. But, following the intervention of MADR officials and following a visit to Romania by representatives of Jordan, first of all, being accompanied around the country by specialists from the ministry but also by representatives of ANSVSA, exports were unblocked.

As for the price of mutton, ram or lamb, with which the sheep came to the market around Easter, we believe that they were nothing more than an attempt to force the note. However, they also admitted that they are not breaking the bank at all, since they can sell without stoppages in the Arab area.

Everything is to stop falsifying documents related to breed, meat quality, checks, etc., as they did in the spring of this year, before the ban imposed by the Jordanians.

As for the beef, we are not bad here either. Production is constantly increasing, and exports have also increased, even spectacularly, we could say, since the INS announced that in Q4 2022, 91% more was exported than in the same period last year. And anyway, as everyone knows, both in the area of mutton and beef, consumption in Romania is low.

The black area

The situation with pork is completely different, where the disaster is continuous, from the moment African Swine Fever entered Romania. Currently, Romania imports approx. 80-85% of its consumption needs, and domestic farms are no longer able to cover only 15-20% of the needs. Under these conditions, no matter how patriotic some of the processors prove to be, they would still have to import meat-raw material, in order to have something to support production.

From the point of view of prices, if in the summer of 2022 they were very low, they began to rise at the farm gate, with the owners of industrial holdings having hopes of recovery. But when we talk about them, we mean the ones that still exist, because, as we know, the PPA wreaked havoc.

The number of outbreaks, however, has decreased greatly. There are, however, numerous cases of ASF in wild boars, and this raises fears for the autumn, in the sense that outbreaks in domestic pigs are likely to multiply again.

However, the outbreaks in domestic pigs were in households. The latest data transmitted by ANSVSA spoke of nine outbreaks in individual households and one alone in a commercial holding.

A hope of recovery would have been brought by the so-called "Pig Law", but the hopes were somewhat lost, since the Chamber of Deputies eliminated the limit of animals that can be raised in a household, from here drawing the conclusion that, although a new Regulation regarding the movement of animals entered into force, the black trade will continue, and may even increase in the future.

Let's not forget a news published by Meat.Milk and which talked about the fact that, only in the first four months of 2022, and only in Ialomița county, more than 8,000 pigs had been sold without legal forms. And that meant not only evasion, but also, above all, an attack on public health and, of course, on animal health!

However, the country's deputies thought that the elections were approaching and it would not be good to get involved with the peasants who, even if they are escapists, are the ones who can bring a lot of votes.

Consumption has stagnated

Regarding the consumption of meat and meat products, the tendency of consumers to turn to cheap products must be remembered. A proof of this is that the consumption of own brand products has also increased.

However, as indicated by the INS, the end of 2022 found the meat market on the rise. Not by much, by only 0.2%, but at least it wasn't a loss. For a period of time, however, the market for meat and meat preparations was bad after the winter holidays.

In a way, it's natural, consumption decreases after Christmas and New Year's and, with the Easter Lent, the decrease is accentuated. But this year, due to the spread of alarmist information, such as huge price increases, the population took a step back.

The reality was different: Fortunately, the hypermarkets managed to make enough promotions, consumers being able to buy, for example, boneless pork leg at prices of 19 lei per kg., neck at 18 lei, cutlet at 19-20 lei, etc., compared to the prices of 30, 40 times even 60 lei, announced by some irresponsible televisions.

In the area of meat preparations, consumption also registered a very small increase in this area, but, we repeat, at least it did not go into loss. Of course, the management of the companies also had their purpose: A faulty management led to mediocre results, an efficient management kept the companies afloat.

Chaos on the milk market

In the milk area, we don't shy away from saying that it's chaos. Everything seemed to be on the way, with the entry into force of the Milk Law, and this law seems to give favorable results. The consumption of dairy products seems to be increasing, along with their separation from alternatives, on the shelf.

It remains to be seen how it will be after the Milk Observatory starts its activity, an institution subordinate to the MADR that some dairy farmers are already afraid of, in the sense that they see this Observatory as a tool to manipulate the market, not as a tool of balance.

Part of the fears also come from the fact that, by law, this Observatory will carry out its activity without making public the data it will have, and from this perspective things do not seem to be right, since we are not talking about an institution private, which has the right to keep its operations secret, but about a public institution subject to the rules of transparency.

If we were still talking about dairy farmers, let's say that these days they are going through one of the darkest periods. Desperate that the purchase price of milk is falling, they were among those who, thinking they were delusional, joined those who forced the authorities, namely the Competition Council, the MADR and the Government as a whole, to intervene on the price, in the meaning of limiting it to the shelf.

In this way, it was hoped that more milk would be sold in stores and processors would buy more milk from farmers at better prices. Sometimes, things seem to happen the other way around, as the presidents of the main professional associations in the field say: Claudiu Davițoiu and Ionuț Lupu-Holstein.ro, Petru Bordean-FCBR and Iasmina Blidar-Bovicoop.

At the time when this intervention was requested, but also afterwards, many people were surprised. Because only the market can regulate prices, not an administrative intervention. As evidence, the information received from Eurostat can be cited, which says that, in Croatia, after the state intervened to cap prices on the shelf, inflation increased by 19.4%.

And in Hungary, a country which unfortunately is always given as a positive example, when, in fact, there is a continuous drama there, inflation increased by 62.9%! And, if we're still talking about Hungary, let's also remember the fact that this country has blocked funds for the PNRR, including due to market interventions by the Orban government.

A populist measure

Coming back to us, the Government and the institutions mentioned above thought populist and pretended to support dairy farmers, causing processors and retailers to reduce the price of milk (and only milk, and only for six months!) to shelf, by 20%, the decrease being borne equally. But, how to increase the purchase price of milk, when you collect less!?

Another aspect is added to the chaos in the milk area: the INS announces that in March 2023, 34% less milk was brought to the Romanian market from other countries than in the same month of 2021. Then, what is true? Are Romanian farmers selling less milk or not?

To make the picture complete, let's remember that the same Competition Council launched an investigation on the butter market, suspecting the companies Albalact, Covalact, Dorna lactate (all three of the Lactalis group), Friesland Romania, Lacto Food and Olympus, of colluding to unjustifiably increase the price of this product. In this sense, the president of the Competition Council, Bogdan Chrițoiu, at the time when the investigation was announced, declared for Știrile Pro TV:

"We have suspicions that some producers have taken advantage of the current economic context, namely the increase in inflation, and have agreed to additionally increase the selling prices for some products, thus obtaining higher, undeserved profits. If, following the investigations, we find this kind of practices, we will punish them drastically.

As part of the three investigations, unannounced inspections were carried out at the headquarters and workplaces of several companies on the market for the production and sale of sunflower oil, sugar, and butter."

As a joke, let's note the fact that, immediately after the announcement, in hypermarkets, the price of butter dropped by about 3 lei per 200 gram package. But let's also remember that this is not the first investigation of this kind on the milk market in Romania and that, about six years ago, the same Competition Council fined millions of euros to some of the processors in Romania, some of whom are under investigation even now, also for violating competition laws.

"That's how it is in tennis!", Toma Caragiu would say if he were alive, imitating Ion Țiriac. That's why we ask, arguing the title of this article: Where does the path of Romania's meat and dairy sectors lead, if the law has opened up broad possibilities for illegal pig trade, and the milk and dairy market seems to have slipped out of control? And, above all, who benefits from all these things?