The offer of frozen vegetables and fruit on the Romanian retail market is dominated by imports, explained by a lack of important local producers. The situation has little chance of changing in the near future, taking into account the value of investments necessary for starting local production, and also the small size of vegetable farms in the country. By Progresiv
Although the market leader is a Romanian brand, the frozen vegetables category is best represented, almost entirely by imported brands, while the most important player on the market are the suppliers and importers of such products.
However, the market is dynamic: the only Romanian producer of frozen vegetables, Frigorifer, was sold last year to Smithfield, especially because of heavy financial losses. Frigorifer’s main brand “Casa Taraneasca” is still being produced in Romania, although there are some products made in Poland as well. At the same time, Smithfield has distributed via the Romanian company Agroalim (which they later decided to shut down) several imported brands such as Hortex, Frosta, Greens or D’Aucy. It is yet unclear whether Frigorifer’s new owner will keep Agroalim’s full portfolio of imported vegetables or will give up some of the brands.
On the other hand, the most important Romanian frozen food brand, Edenia, belonging to Macromex, is produced via a partnership developed by the supplier with Belgian producer Dujardin. Edenia maintains 27% of the current market share of frozen vegetables, placing itself as the number one brand in the category, according to Macromex representatives.
“We are constantly trying to establish partnerships with Romanian producers, but the options are limited,” said Jean Gherman, commercial director with Agrirom, a company which distributes in Romania the Bonduelle brand and its own label Gradena. A similar example is offered by Kaufland, the largest food retailer in Romania, which last year enlisted in its stores the Danish frozen food brand Tomex. The reason is also determined by the large investments necessary to develop an production business.
“Most Romanian producers who own and use agricultural lands are focusing on a small scale production. In order for them to expand the business, they need to invest in quick freezing lines, but such efforts are unattainable for most small producers”, said Andreea Mihai, marketing director with Carrefour Romania.
Single vegetable packs dominate
The Romanian frozen vegetables market is estimated at EUR30m in value terms and 13,400 tons in volume. Although frozen vegetable mixes used for international recipes are gaining ground, it is the single vegetable packs (spinach, peas, and string beans/green beans) that continue to record the highest sales. In terms of consumption, Romania is well behind Western Europe, with 65% of sales belonging to the single vegetable packs, according to Macromex.
As expected, the drop in VAT for foodstuffs has positively influenced the market dynamics.
“During the first quarter of this year we noticed a significant drop, especially in traditional retail, but also in the modern channels, because the quantity of private labels has shrunk. However, once the VAT tax was lowered for foodstuffs, the market started to recover. In the future, we predict an increase in consumption and also the development of modern retail, both of which will be favorable to market development”, said the Bonduelle marketing director.
In modern retail, sales of frozen vegetables have risen by 5.4% in volume and 16.3% in value between February 2015 and January 2016, compared to the same period of the previous year, according to data offered by research company RetailZoom. As such, Carrefour recorded last year a 10% growth of all frozen fruit and vegetables, while the private label segment stagnated. Lowering the VAT has indeed had a positive impact on the category, taking into account the fact that between June and December 2015 frozen vegetables and fruit have grown by 20%, compared to 2014.
Large retail chains encourage bulk sales
If in the case of other food categories, volume sales are encouraged especially via retailers’ own brands, when it comes to frozen fruit and vegetables, they are more and more supported by bulk purchases.
“The bulk frozen vegetables segment has risen in sales due to the large retail chains, which have increased the space allotted to them, in the detriment of packaged frozen goods,” said Monica Rosu, marketing director Bonduelle Romania.
According to RetailZoom, the bulk frozen vegetables category rose 31.7% in value and 42.9% in volume between February 2015 and January 206. For Carrefour, this segment rose 20% between September 2015 and January 2016, compared to the same period of the previous year, a trend which, according to company representatives, will persist in the future.
The most important Romanian player on the bulk segment for the category is Agrosprint, which owns a cold storage and a distribution facility, as well as a packaging line in the country.
However, not all player see the rise in sales of bulk frozen vegetables as a positive aspect.
“The rise of this category is alarming, to say the least. So long as the legal frame allows the presence of bulk goods on the shelves, we cannot do anything but watch it grow. The only need which bulk products cover is that of price, which continues to be a priority for consumers. However, the balance between quality and price is a very weak one,” says Jean Gherman (Agrirom).
Ice Cream Trends in Bulgaria
The companies in the category are using all available tools to attract consumers’ attention to their products. The strong manufacturing focus on innovations and new product launches, year after year, keeps consumers interested, and continued to influence ice cream in 2016. The trend towards co-branding or cooperation between ice cream and chocolate confectionery brands and the trend towards frozen yoghurt with innovative flavors were visible in 2016.
Multi-pack dairy ice cream recorded the highest current value growth of 2016 with a 10% sales increase; however, it was still a category of low importance as it accounted for only a marginal value share of ice cream and frozen desserts. This was because Bulgarians preferred to buy the cheaper bulk dairy ice cream for home consumption. The second-best performance in 2016 was from ice cream desserts, which recorded a rise of 5% in current value sales terms. The category is still novel and further developments are expected.
The average unit price of ice cream and frozen desserts slightly decreased in current terms in 2016, which was the result of the launch of cheaper products. Discounting mainly occurred within the categories of bulk dairy ice cream and single portion dairy ice cream.
Ice cream faces significant competition from confectionery, mainly from countlines and tablets. Ice cream is still seen as an indulgence product. In order to bridge the gap between confectionery and ice cream, some companies such as Nestlé Ice Cream Bulgaria and Unilever Bulgaria EOOD have developed confectionery brands within their ice cream portfolios.
Prospects
Ice cream is expected to continue to be dynamic over the forecast period, with sales set to achieve a volume CAGR of 4% and a value CAGR of 4% at constant 2016 prices. The average unit price of ice cream and frozen desserts is predicted to decline slightly over the forecast period. The presence of private label lines by players such as Lidl, Billa and Kaufland Bulgaria EOOD will prompt other manufacturers to pay greater attention to the lowest price levels.
New product development over the forecast period is expected to be very intensive. It will focus on adding indulgence or healthy characteristics to products. Additionally, while the healthy characteristics of ice cream were not previously a priority for new product development, the increasing health focus among consumers will prompt manufacturers to find ways to come up with lower fat or sugar content, but not compromise on taste.
