Business Review No. 26, July 18 - 24 by Business Review

Grape expectations: In an interview with BR, Halewood Romania’s managing director, Dan Muntean, pours forth on the wine company’s new import business »page 8-9

ROMANIA’S PREMIERE BUSINESS WEEKLY

July 18 - 24, 2011 / VOLUME 16, NUMBER 26

ROMANIA’S ONLINE ACCESS STRATEGY THE AUTHORITIES ARE TRYING TO GET MORE ROMANIANS ONLINE, WITH OVER HALF THE PUBLIC PREVENTED FROM USING THE NET BY THE LACK OF INFRASTRUCTURE »PAGE 7

The local furniture market is hoping that discounts and rising domestic demand will bring an improvement in business »pages 10-12

RESTAURANT REVIEW Things went swimmingly when our critic dived into new eatery Osho Fish. But where does it rate on the scale? You’ll sea by reading the full tail » page 13

3Q Brand awareness: HP Networking’s CEE sales manager, Gunther Brand, talks team, growth and strategy, and gives his analysis of the local market » page 4

NEWS Stamp of approval: The Romanian Post has posted growth after restructuring measures were delivered, as set out in the latest IMF agreement » page 6

Courtesy of COS

POLISHING UP ITS ACT

www.business-review.ro Business Review | July 18 - 24, 2011

NEWS 3

NEWS in brief

Courtesy of Florin Vitzman/ Star Management

IMAGES of the week Fans Keep the Faith as Bon Jovi rock Bucharest Bon Jovi’s ﬁrst concert in Romania attracted an entranced audience of over 50,000 fans, who clapped, danced and sang along to the band’s hits in front of what was once the biggest symbol of communism: the People’s Palace. During the concert, fans sang Happy Birthday to guitarist Richie Sambora, whom it was feared might be a no-show after he entered rehab earlier this spring. Perhaps the most memorable part of the evening was when Jon Bon Jovi took a Romanian ﬂag from members of the audience and draped it across his back, to the delight of his “brothers and sisters,” as he called the crowd.

IT&TELECOM Televoice takes on iPad Romanian company Televoice will launch a tablet under the Evolio brand that it expects to be a serious competitor for the Apple iPad. The Evolio Neura, which runs on the Android 2.2 operating system, will be available in stores from July 25 at a recommended retail price of RON 1,499 for the Wi-Fi version and RON 1,899 for the 3G version. The tablet is 25x19x1.4 centimeters and weighs 780 grams (the 3G version) and 760 grams (the Wi-Fi version).

Power Net estimates EUR 15 mln turnover in 2011 Power Net Consulting estimates it will post a turnover of EUR 15 million this year, a 25 percent growth compared to the figure in 2010. The company’s target is for at least 40 percent of its turnover to come from private sector projects, and it is focusing on developing IT infrastructure for private firms. This year, it intends to expand its portfolio of clients among local average-sized companies that can derive added value through improving their IT infrastructure.

Antena Group seeks EUR 60 mln in damages from RCS&RDS Antena Group is suing internet, telephony and TV company RCS&RDS, which it accuses of having laid restrictions on the broadcasting of TV station Antena 1. The

WEEK in numbers

50,000 cars drive over the recently opened Basarab flyover every day

50 kg of gold have been sold by BCR and Piraeus Bank since the beginning of July

13 new stores will be opened locally by Penny Market, Rewe’s discounter store, by the end of the year, from a total investment of EUR 45 million

firm is seeking damages of EUR 60 million, as part of a lawsuit against the cable company for violating the legal framework for broadcasting ‘must-carry’ channels. Antena 1 alleges it suffered since its ratings were far lower than had its shows aired free of charge. The broadcasting law categorizes Antena 1 as a must-carry channel, which means that it should be broadcast without technical or financial restraints. “In spite of this, RCS&RDS imposed fees on the public in order to access this channel, as well as other must-carry TV channels, transforming them into financially-restricted channels,” said Antena group officials.

POWER

M&A

Renault’s Dacia sales slow 3 percent in ﬁrst quarter

Recovery expected in Romanian M&A market ‘in 2012’ The Romanian M&A market should experience a significant recovery in value and deals in 2012 following post-crisis market repositioning and consolidation, says the management consulting firm, A.T. Kearney. The local M&A market declined by 66 percent in total deal value between 2008 and 2010 after surging by 39 percent between 2002 and 2008. Between 2004 and 2008, Romania saw dynamic growth in M&A activities in terms of total deal value, number of transactions and average deal value, but the latter plunged when the economic crisis began.

Hidroelectrica borrows EUR 110 million from EBRD Hidroelectrica SA, the largest electricity producer in Romania, will receive a EUR 110 million loan for the repair of six hydropower units at Stejarul Bicaz HPP. The EBRD will provide EUR 70 million of the total financing, with EUR 40 million being syndicated via commercial banks – Erste Bank and Caixabank. The upgrade will ensure a new life cycle of at least 30 years for the entire power plant, according to the EBRD. The total project cost is estimated at EUR 136.9 million.

Sales of Dacia cars and light commercial vehicles fell 2.9 percent in the first quarter of this year to 176,956 units, from 182,153 in the same period of last year, according to Renault. The number of Dacia models sold in the first six months of the year declined 2.1 percent from 169,901 units to 166,374. During the same period, Renault Group registered a slight 1.9 percent increase in car and light commercial vehicle sales, to 1.347 million. The Dacia brand registered a 2.5 percent rise in sales on European markets, preserving its 1.6 percent market share. The Duster model, which was launched in April 2010, had notched up almost 71,000 sales in Europe by the end of June, according to Renault. Dacia is sold exclusively in Europe and the Euromed Region.

www.business-review.ro Business Review |July 18 - 24, 2011

4 NEWS PROPERTY

3Q Guenther Brand AFI Europe Romania begins work on AFI Business Park Cotroceni

Photo: Laurentiu Obae

FI Europe Romania has begun work on the first building of the future AFI Business Park Cotroceni, the firm has announced. The project will comprise five class A office buildings with the first set to be delivered next summer. The building will have a total leasable area of approximately 11,000 sqm. The rent will be EUR 14 per sqm for prelease contracts and EUR 15 after that, said David Hay, CEO of AFI Europe Romania. The Advisers/Knight Frank will manage the leasing process for the block. Hay said that although the economic CEE sales manager in HP Networking context remains difficult, banks are more What size is the HP local team and how open to financing real estate projects. many staff members are on the net- “Banks are much more cooperative and I think they have changed their attitude. If working team? Overall, we have over 3,000 people working you compare the situation with what in Romania. In terms of networking, we was happening a year or even six months ago the situation is much better. A lot deare part of an organization called Enterpends on the developer and the project,” prise Business, which encompasses hardware, software, networking and services. he said.

This is how one building in the project will look like

The CEO added that there is still room for new office and commercial projects in Bucharest and the rest of the country, noting that the vacancy rate in the central-west area of Bucharest is only seven percent for class A office buildings. The AFI Business Park Cotroceni project is located at the crossroads of Timisoara and Vasile Milea Boulevards, and will be connected to the AFI Palace Cotroceni commercial center. Hay said the company plans to begin a new building from the project each year. At the beginning of 2012, AFI Europe Romania hopes to start work on the AFI Palace Ploiesti shopping mall and a second mall in Arad. Other projects include AFI Palace B.Noi, which will be a mall in the Bucurestii Noi neighborhood of Bucharest, and another business park on the grounds of the former Inox factory, also in the capital. ∫ Simona Bazavan

We have a couple of hundred people working in networking in Romania. What are the main areas of focus for growth in Romania? In some countries, where we have quite big teams for networking, we have already started verticalizing – which means some people do just public sector, others just oil & gas and others finance. In Romania, as we are building the team, we still have a kind of mix, but the growth areas are certainly the public sector, telecom, service providers and finance, which is typically one of the most dynamic fields, and we should never underestimate small and medium businesses. What we can say is that the public sector and finance are really big fields for us. Our large accounts represent about 60 percent and SMEs the remaining 40 percent. The number of projects in the public sector is normally less than in other verticals because of the long planning and budgeting time and because normally they’re bigger. What is the difference in HP’s approach to Romania and other markets? In smaller countries like Azerbaijan, Croatia, Serbia and Slovenia there’s a different focus than in countries with a higher population such as Ukraine, Russia, Romania and Poland. There are different investments going into these countries. For a smaller country, you have a basic setup. You do less direct customer touch because you don’t have the time, you rely more on the partners. In a bigger country, the focus is to understand the market much better. In terms of investments, when you look at the partner community, it is much bigger, so more money goes there as well. That means the pre-sales and sales education of the partner, all the programs you run with the partner. In smaller markets we try to sell more standard products in terms of services, like installation. Installation services are normally the same, they can be done by HP but they are mostly done by our partners. In bigger countries where you have bigger customers, you start customizing your services. otilia.haraga@business-review.ro

R&D

National Authority for Scientific Research launches EUR 3 mln technology project

he National Authority for Scientific Research (ANCS) has launched a project intended to help form public policies in the field of durable innovation. Called the Development of the ANCS’s Capacity to Devise Public Policies in the Domain of Innovation and Technological Transfer for Ensuring a Durable Socio-Economic Development, it is being financed from the European Social Fund through the Administrative Capacity Development Operational Program 20072013. The total value of the project is over EUR 3.1 million (RON 13.4 million), excluding VAT. Of this sum, the amount covered by the European Social Fund is just under EUR 2.7 million (RON 11.4 million). The contribution from the ANCS is EUR

470,000 (RON 2 million). The project will be implemented over 24 months by the ANCS in partnership with the Romanian Association for Technological Transfer and Innovation (ARoTT). Its aim is to develop the administrative capacity of the ANCS to improve the process of devising, monitoring and evaluating public policies in innovation and technological transfer. The ANCS will establish a national network of managers in innovation in central and local public administration. It will train 465 employees from local councils. Eventually, the ANCS will develop a national standard for the process of technological transfer, which will include standard procedures for the dissemination of technological information and transfer.

Last but not least, a platform will be created for collecting data and providing relevant statistics. The total financing from the state budget for the National Plan for Research, Development and Innovation 2007-2013 (the main instrument through which the ANCS is implementing the National Strategy for research, development and innovation) amounts to RON 15,000 million, according to official ANCS information. Out of this sum, HR gets RON 1,350 million of financing; Capacities RON 2,025 million; Ideas RON 2,700 million; Partnerships RON 5,400 million; Innovation RON 2,025 million; and Sustaining Institutional Performance RON 1,500 million. ∫ Otilia Haraga

CITY

Night buses to serve Bucharest passengers The Bucharest Autonomous Transportation Administration (Regia Autonoma de Transport Bucuresti, or RATB ) will introduce special night buses starting from the night of July 15-16. The move comes in response to huge public demand, according to RATB officials. The nocturnal lines will have their main terminal at Piata Unirii and will run every 30 minutes from 23.00-01.00 and 05.00-06.00, and hourly between 01.00 and 05.00. “Public night transport brings advantages to passengers from a social standpoint, through reduced travel costs, as well as for the touristic development of the capital city, especially as the old center is visited a great deal at this time of year,” said Adrian Crit, RATB general manager.

He added that the night buses would help make the Romanian capital more international and dynamic. “The city’s development component needs to be taken into consideration as well. This move will generate financial benefits for companies that are open throughout the night, and will also help people who work at night who will now be able to take public transport from downtown Bucharest to peripheral areas. This project helps put Bucharest among major European cities,” said Crit. ∫ Corina Dumitrescu

All day and all of the night: a city bus

For more details on the routes and times of Bucharest’s new night buses please check www.business-review.ro/city

www.business-review.ro Business Review | July 18 - 24, 2011

6 NEWS POSTAL SERVICES

Romanian Post to restructure 1,400 jobs, start bank and insurance company

Photo: Laurentiu Obae

Daniel Neagoe, general manager of the Romanian Post

he Romanian Post, the state postal service, has announced that it will restructure 1,400 positions. The employees affected will not necessarily be made redundant but could be redeployed within the organization, according to Daniel Neagoe, general manager of the Romanian Post.

This statement contradicts the June announcement by the minister of communications, Valerian Vreme, that around 2,000 employees, making up 6 percent of the total number of employees in the organization, would be affected by the process, some of whom would be laid off. In related news, a government proposal that was under consultation in June for the Romanian Post to form the basis of a bank, the Romanian Post Bank, and an insurance company, Romanian Post Insurance, has moved a step closer to becoming reality. “Romania is not yet a market that is saturated with banks. At this moment, there is still room for one more bank, especially in rural areas,” said Neagoe at a press conference last week. So far, the reorganization of the Romanian Post has involved bringing seven external profit and support subsidiaries back under its own control, which saw 146 management positions go and the wage bill decrease by RON 110,000 per month. The Romanian Post has started the process of reorganizing its network of branches. The first stage, which has already been completed, saw the axing of 900 units without any job losses being incurred. The second phase, which is imminent, involves the closure of 402 subunits and 47 rural post offices, which will save approximately RON 50 million per year.

Romanian Post projects to deliver higher revenues From 2012, the Romanian Post will provide financial-banking services from its branches l Implementing a business model that allows the sale of general insurance in its offices. Currently, a pilot project is being trialed at 500 branches, which will double by the end of 2011. Eventually, the Romanian Post will found its own insurance company l Selling lottery tickets during the first quarter of 2011, under a contract with the Romanian Lottery l Re-launching the rapid courier service which will see a 30 percent growth in the number of clients and revenues compared to 2010 l The development of electronic commerce l The modernization of 85 percent of the POS network for more rapid transactions and lower costs The general manager has also announced that the company is once again in

profit as of July, as certain contracts signed during the reign of the National Liberal Party (PNL) have been cancelled. “The losses posted in 2009-2010 were generated first of all by burdensome contracts closed from 2007-2008 by the PNL government, which totaled approximately EUR 500 million,” Neagoe said. However, a press release from the Romanian Post mentions four contracts with a total value of only EUR 441 million. These were: the EUR 350 million contract for monetary processing and transport, signed with G4S, which has been suspended; a EUR 45 million deal covering air mail, written off on February 16; a building maintenance contract signed with UTI and cancelled on June 20; and a cleaning services contract signed with Romprest, also torn up on June 20, with the latter two amounting to EUR 46 million. The Romanian Post has 35,000 employees and runs a network of 6,105 branches. It posted a turnover of EUR 327 million last year and losses of EUR 29 million. In 2009, the firm suffered losses of EUR 43 million. In the first quarter of the year, the Romanian Post also reported losses of EUR 3.5 million, on a par with those registered during the same period of 2010, while the turnover was approximately EUR 80 million. ∫ Otilia Haraga

www.business-review.ro Business Review | July 18 - 24, 2011

LINKS 7

State forges ahead with internet access strategy Romania has recently been chided by European officials for the pitiful degree to which it provides internet access to its population, with more than half of Romanians unable to get online. The telecom regulator is taking steps to remedy this situation, announcing that it will place at the disposal of the operators a number of national and county licenses in the 3400-3800 MHz bandwidth in the years to come. ∫ OTILIA HARAGA

Courtesy of ANCOM

”That 54 percent of the Romanian population does not have access to the internet is unacceptable. In Europe, only 26 percent of people do not go online. The internet is important, not only from an economic but also a social viewpoint,” said Neelie Kroes, vice-president of the European Commission and European Commissioner for the Digital Agenda, during the conference the Digital Agenda for Romania. Kroes stressed the importance of hiking the internet penetration rate in all European states, which will boost the competitiveness of the European market. However, the Romanian authorities are making promises.”We have committed to boost the internet access rate to over 90 percent by 2015 and we will cover at least 90 percent of the 3,648 blank areas (en – areas with no internet access),” assured the minister of communications, Valerian Vreme. ”Romania is in seventh place in the ranking of countries that have adopted advanced technologies. We are also in 16th spot for broadband internet connections, and last year broadband connections increased by 6 percent – but it is not enough,” conceded Vreme. One of the stipulations of the EU Digital Agenda, which comes under the umbrella of the 2020 European Strategy, is to supply high speed internet to the citizens of the European Union as well as covering areas that are disadvantaged from the point of view of electronic communications. ”The growth in the internet penetration rate is necessary not only in Romania but also at European level, since currently 26 percent of European citizens do not use the internet. Moreover, we have to focus on those who risk lagging behind, more precisely those with low incomes and little education who live in underprivileged areas. The digital evolution is our chance to ensure economic growth,” said Kroes. According to data from the National Authority for Administration and Regulation in Communications (ANCOM), there has been growth in internet access. The number of fixed broadband internet connections went up by 6 percent last year compared to 2009, reaching 3 million in total at the end of 2010. At the same time, the number of mobile internet connections performed even better, soaring by 37 percent to reach 4.02 million at the end of 2010. The degree of penetration of fixed broadband internet connections was 14 per 100 inhabitants at the end of last year. The rate of penetration per 100 house-

Catalin Marinescu, president of telecom regulator ANCOM holds had reached 36.8 percent. Meanwhile, the telecom regulator is making plans to award national and county licenses in the 3400-3800 MHz bandwidth. This falls under the Strategy Document for the Implementation and Development of BWA Systems Nationally, which is to be rolled out between 2011 and 2020. In the case of the national licenses, ANCOM is planning to start a selection procedure next year which will award three national licenses in the 3410-3600 MHz bandwidth and another four in the 3600-3800 MHz range. County licenses will be in the bandwidth 3410-3600 MHz and will only be assigned from 2014. This will also take place after a selection procedure is organized in every county for three such licenses. The winners of the national licenses have the right to use them for a period of ten years from issue. The rights to use the radio frequencies are granted from Jan-

uary 2014. The winners of the county licenses be able to use them for a period of eight years. The rights to use the radio frequencies will be granted from January 2016. “It is still premature to estimate the extent to which the gap between the urban and rural environments will be closed after the awarding of these licenses,” Catalin Marinescu, president of ANCOM, told BR. This is because the project is in a very early stage. The public consultation has just closed, and no taskbook has yet been drafted. ”Up to this point, the authority has received observations from two interested parties. After the end of the public consultation procedure, ANCOM will publish a cross-section of the comments on its internet page,” said Marinescu. ”We are awaiting with interest the drawing up of the strategy and conditions for the assignment of the licenses in the 3400-3800 MHz bandwidth but also

strategies related to other frequencies (800MHz, 2600MHz). Based on this information, we will draft an internal strategy,” Orange representatives told BR. The early stage of the project is also the reason why other telecom operators such as Vodafone, Cosmote, Romtelecom, RDS&RCS and UPC have refrained from making any official position known to BR. Next year, ANCOM will start the selection procedures for the national licenses, which will take place in two stages. In the first phase, interested parties will submit to the telecom regulator their firm request to acquire a license in the bandwidth of 3.5 GHz or 3.7 GHz. The second stage will be the actual selection, but this will only occur if the number of bidders is higher than the number of available licenses. If the number of bidders is smaller or equal to that of the licenses on sale, offers will no longer be evaluated and licenses will be granted directly to participants. Since BWA systems can replace other technologies on radio support used in rural areas, and taking into account the need to reduce the digital gap, operators will be compelled to guarantee that they will make it a priority to cover a certain ratio of small towns and rural areas. The towns and localities to be covered will be selected by operators from a list issued to them by the telecom regulator before the start of the selection procedures, added Marinescu. The minimum coverage obligations for the national licenses must be fulfilled in several development stages – one year, three years and five years from when the licenses are issued. In the case of the county licenses, the basic coverage criteria will have to be met in development stages of one, two and three years from issue.

otilia.haraga@business-review.ro

INTERNET ACCESS Romanian Figures 3,648 localities in Romania have no internet access 3 million – the number of ﬁxed broadband internet connections at the end of 2010 4.02 million – the number of mobile internet connections at the end of 2010 Data from ANCOM and the Ministry of Communications

8 INTERVIEW

www.business-review.ro Business Review | July 18 - 24, 2011

Uncorking potential in a far from vintage year

Photo: Laurentiu Obae

A winemaker is only as good as its least expensive varieties, says Dan Muntean, managing director of Halewood Romania, paraphrasing the Alsatian wine producer Jean Hugel. And this is good advice to follow considering that in the past couple of years Romanian wine companies have been forced to adapt to a shrinking market. Muntean gave BR his verdict on the market and shared the scoop on Halewood’s new import business.

∫ SIMONA BAZAVAN How much wine did Romanians buy in 2010 and how has consumer behavior changed? In Romania, wine is a culture-related product so consumers kept buying, but unfortunately they switched to less expensive varieties. Sales of medium priced wines were the hardest hit, we think. Looking at the total value on different

segments, the market has shrunk between 5 and 30 percent but actual consumption has decreased less I would say. It is however important to mention that it is impossible to put together statistics that show the actual size of the local market – the legal market, household production and the black market. What is interesting is that very few people realize how large the Romanian market really is. Up until last year, Ro-

mania held eighth position in the world in terms of consumption. It was then surpassed by Russia and China, two countries with considerably larger populations. Therefore, the local market is very important but this also shows that Romanians drink very cheap wine. If one were to transpose to Romania the same consumption of a country with a similar population, let’s say Australia, then the local market would grow five times in value.

How do you see consumption evolving this year? Wine is a product of civilization, it goes hand in hand with the consumer’s feelgood factor. If the consumer is feeling happy and has the income to go out, throw parties and generally drink good quality wine, then consumption will go up. Other than the fact that next year there will be elections, I personally don’t see a recovery before the second half of

INTERVIEW 9

www.business-review.ro Business Review | July 18 - 24, 2011

2012. The exchange rate will also have a say in the matter and we’re facing rough times on the EU internal market. So, it is very hard to speak about consumption increases or decreases outside the general economic outlook. This may sound pretentious, but another factor that counts is education. The more educated the average person, the more wine is drunk. Trends count too although this is less visible in Romania. Is it hard to sell Romanian wine on foreign markets? It is harder to sell Romanian wine than many other varieties. I have to come back to this mantra – wine is a product of culture. It acts like an ambassador for a country. A buyer in a supermarket in Germany, for example, has only a few seconds to make a choice. Price is of course an important factor but so is the image the consumer has of the country from where the wine comes. And from our perspective this is a setback. There are many people who know very little about Romania, its beauty and its opportunities, and still have negative stereotypes concerning the country. A strong tourism industry would help as people would return home and would look for Romanian wines in the shops. Still, we are optimistic and there have been some improvements in the past years, with more interest coming from foreign consumers and foreign media. We have also been involved in a promotional project in the US supported by European funds, and another in the UK with the Romanian Winegrowers Association that we would like to extend in other European countries. How do you think Romanian exports will develop over the coming years and what is Halewood Romania’s strategy? Exports hinge on several factors. The local market has decreased in recent years. Also, if the euro wins ground against the leu, then it makes even more sense to export. The trouble is that this doesn’t happen overnight. It is a long-term process. Each year we export about 35-40 percent of our wine output and the same will happen in 2011. We export to the UK and other European countries but also for some years now we have sold our wine in South-Eastern Asia and more exotic countries like Singapore and Thailand. We also export considerable volumes to China. However, China is predominantly a commodity market. I believe that aside from the import of big-name European wine varieties, it will not grow into a steady and reliable market. At the end of 2010 you set up a new company, Halewood International Premium Imports. What is its strategy regarding imports and how is this segment faring? Back in England, our mother company, Halewood International, is one of UK’s largest independent drinks manufacturers and distributors. Its portfolio includes about 1,400 products and wines are only a small fraction of this. We wanted to import some of these products but because we didn’t want to create confusion in the market we set up this new company that will cover everything related to imports. But even before Halewood International Premium Imports, we brought to

Romania wines from producers like Antinori, Hugel & Fils and Bodegas Torres, which are part of the Primum Familiae Vini, an association of familyowned wineries. With Antinori we have also set up a mixed company in Romania, which owns 100 hectares of vineyard and which will soon begin to produce. We also bring wines from outside Europe, from producers like Concha y Toro, Trapiche in Latin America and Villa Maria in New Zealand. We estimate that imported wines count for no more than 5 percent of the local market. This will change as Romanians travel more, and experience and learn more about foreign wines. This will also have a positive impact on the local market. Why did the ﬁrm decide to invest in its own network of stores, the Winery Outlets? We look at these stores as a means to promote ourselves and not necessarily a way to boost sales. It is easiest to sell when one is in direct contact with the final buyer who also has the option to choose from

our entire product portfolio. And we can also sell the wines at attractive prices. There are nine Winery Outlets so far and over the coming years we will probably open about 20, 30 new units. We also have the online store where we have had orders from countries like New Zealand and Brazil, but again, the purpose is not to alter the balance sheet. Our focus and core activity has always been winemaking. All the connected activities like the stores and the pension at Azuga have been centered on getting people to taste the wine. What can you tell us about the results you obtained last year and this year’s targets? We are a family company and the numbers are not that spectacular. Especially when one compares them with the approximately EUR 500 million turnover reported by Halewood International, the mother company in England. Last year we registered a turnover of less than EUR 10 million but we managed to grow on a decreasing market. Sales

CV Dan Muntean 1999 – present: general director of Cramele Prahova/Halewood 1997 – present: general director of Halewood Romania Vinuri 1997 – present: director of Halewood International, UK 1992 – 1997:: commercial director of Halewood International, UK

volumes were higher but at lower per unit values. In 2011 we hope to see a five percent growth. As for the profit, we have reinvested it. Winemaking requires constant investments and we have made them, launching new products and constantly upgrading the quality. We are aware that we have to cut costs and be more efficient in order to align ourselves to a more and more internationalized market where every penny counts.

simona.bazavan@business-review.ro

www.business-review.ro Business Review | July 18 - 24, 2011

10 FOCUS: Furniture Market

All in all, Sereny expects the crisis to end when three factors improve: capital, workforce and productivity. “In order to reach a growth rhythm close to the potential, these conditions must be met through a flexible and stimulating fiscal system to bring investments and encourage local capital. Romania needs a coherent strategy to stimulate labor market participation,” she argues.

Ofﬁce furniture manufacturer puts discounts on the desk

Courtesy of RUS SAVITAR

Furniture companies like Rus Savitar have suffered a torrid ride in the last few years on the back of a weak property market

Furniture ﬁrms ﬁnd comfort on domestic market Although the prospect of growth is back on the table in other areas of the economy, furniture firms are just hoping to reach results similar to last year. This market is highly dependent on the construction field and domestic purchasing power, and since neither are showing signs of revival, growth seems highly unlikely, although some increase in demand is expected internally, experts tell BR. ∫ CORINA DUMITRESCU The furniture market has been declining for the last three years, says Aurica Sereny, president of the Romanian Furniture Manufacturers Association (Asociatia Producatorilor de Mobila din Romania, or APMR). “The value of the domestic furniture market has been over EUR 950 million for the last three years. In 2008, it started at EUR 1331.4 million, rose to EUR 1134.1 million in 2009 and EUR 962.2 million in 2010,” says Sereny, adding that the crisis was felt the most in “the absorption of local, as well as imported

products.” The APMR president has some reasons for optimism however. “In 2011, we are hoping to see a revival in domestic demand for products. The proper functioning of things depends on purchasing power, since residential construction does not show any signs of improvement. People cannot replace their furniture, although many would like to, since living standards are stagnating.” A return to normality in the functioning of the economy is expected, continues Sereny, who foresees a modest rise in the furnishing of kindergartens, schools, offices, commer-

cial spaces, pensions medical and beauty cabinets. From an HR perspective, the picture is gloomy, continues the president. “The number of employees active in the furniture industry fell significantly following the start of the financial crisis, over 20082010. In 2009, the reduction from 2008 was drastic , at 21.3 percent, while over 2009-2010 it declined 9 percent, so that by the end of 2010 the industry employed 48,500, the lowest figure in the last 20 years. In the first two months of 2011, the situation improved, with the number of employees reaching 49,600 people.”

Corporate Office Solutions (COS) has been selling office furniture in Romania for 14 years. Christophe Weller, managing partner of COS, tells Business Review that while the rising cost of raw materials has affected business, he does not really regard this as an issue. “Every manufacturer has had to increase their prices due to the increase in the cost of raw materials, so nobody really lost out in terms of competitiveness compared to each other. The consequence was felt more in our profit margins. In order to alleviate the impact of the price increase on our customers, we absorbed some of it ourselves, bringing our margins down. Also, we convinced our manufacturers to try not to pass on the whole price rise themselves.” Discounts have helped, Weller adds. “Manufacturers have been ready to offer deeper discounts than before in order to make the actual increase lower than the announced amount. This is mostly happening on the furniture and floor covering segments. Our partners have been very supportive and understanding so we don’t lose a project on price. For the fit-out part – partitions – prices have remained the same, if not lower for some products, since the crisis has persuaded manufacturers and contractors to cut their prices in order to survive.” Concerning the financial aspects of the business, the COS official says his firm is in line with the market, as the company expects similar results to last year. “In 2010, we registered a turnover of EUR 12 million. This year we expect to reach the same figure, and although it will not be easy because the market is smaller and competition is fiercer than ever, the EUR 12 million target is possible, thanks to our turnover, reflecting carpet, partitions and M&E installations.” The company’s main investment remains the showroom, continues Weller. “We are continuously investing in our showroom, by introducing the latest products launched by our furniture, carpet and partitions manufacturers.” Another strategy for development is more niche-oriented, addressing the peripheral office markets. “We have developed our range in terms of furniture, floor and wall covering solutions as well as fit-out in order to address the needs of the health, hospitality and education sectors.” Neither cutting personnel nor reloca-

“Manufacturers have been ready to offer deeper discounts than before in order to make the actual increase lower than the announced amount,” Christophe Weller, managing partner of COS

www.business-review.ro Business Review | July 18 - 24, 2011

12 FOCUS: Furniture Market Key figures for the furniture market*

Courtesy of MINUZZO

EUR 1331.4 million – 2008 market value EUR 1134.1 million – 2009 market value EUR 962,2 million – 2010 market value EUR 822.5 million – sales of internally manufactured products in 2008 EUR 809.9 million - sales of internally manufactured products in 2009 EUR 641,1 million - sales of internally manufactured products in 2010 EUR 508.9 million – value of furniture imports in 2008 EUR 324.2 million - value of furniture imports in 2009 EUR 321.1 million - value of furniture imports in 2010 31.7 percent – increase in exports of wooden products 7.2 percent – increase in imports of wooden products

Minuzzo channels Italian style

rising cost of raw materials an issue. “This increase has not affected our relationship with the final customer because retail prices have not been significantly affected.” He is however quite skeptical retion were contemplated in the pursuit of garding the revival of the market. “In 2011, savings, he adds. “From the beginning we the market will remain at the same value, did not consider reducing staff numbers at best. By mid-year, the furniture market will have decreased 20 percent, which as a method of cutting costs. Same for giving up our 1,000-sqm showroom: we may be recovered by the end of the year. were keen to stay where we are. Instead, In terms of value, 2011 will not be a good we looked at other costs which could be year, and the level will stay the same. We do not believe, however, that shoppers decreased without affecting our busiwill be affected by this.” ness performance. For instance, we reneIn spite of this gloomy projection, gotiated the leasing contract for our office Rizea expects a 23 percent increase in as well as the warehouse.” The crisis has also brought about major turnover in 2011, to RON 176 million. The changes in consumer behavior, as was to company’s most significant investment, be expected, adds the managing partner. the commercial director continues, is its human capital. The development strate“Customers have always been very attentive to the money spent on designing their gy is focused on new products and the new offices, but this is even more the case opening of new stores, as well as the opnow. They are definitely aware that each timization of production capacity. Since supplier/contractor will be eager to get the the start of the year, 17 shops have been deal so negotiations are fiercer than opened around the country and in the ever. Another trend is that some furniture next two months, seven new Lem’s outlets will begin trading in Brasov, Sfantul items are now considered as simple commodities. A desk has to be strong, durable, Gheorghe, Reghin, Tiplita, Slatina, Cernpractical and functional. Aesthetics or voda, Constanta and Suceava. Elsewhere on the scene, Casa Rusu high-tech aspects are not so important stores stock the output of furniture mananymore,” he adds. ufacturer Rus Savitar, which has been opThe office furniture manufacturer’s representative does not foresee a market erating on the Romanian market since comeback until 2013 at the earliest. “The 1994. Marius Raia, general manager at Casa Rusu, notes that raw materials prices furniture market will be severely affected this year and next year. Some moves are not just a local issue, but a global one. will happen but without much purchas- A cost reduction obtained from suppliers ing of furniture. It will hit the bottom this through contract renegotiation is one year before starting again in the second way the company has responded. Production optimization has also been a prihalf of 2012 if buildings that are now being promoted actually start being built. ority, along with the introduction of new Real estate agents are getting very busy products, continues Raia. The group registered a turnover of these days, trying to get pre-leases agreeEUR 22 million last year and expects a 10 ments for major new spaces. If they succeed, it will mean, for us, business in 2013.” percent increase “due to investment in the retail chain, as well as in the production line”, says the GM. He tells BR that EUR Residential furniture 5 million will be invested in upping promanufacturers at home with duction capacity for upholstered furniture production optimization and (couches, for example), as this sector new openings Furniture manufacturer Lemet has been was inaugurated successfully in the auon the Romanian market since 1991. Its tumn of 2010, after a lower investment of products are distributed in Lem’s stores. EUR 1.5 million. “Through these investThe general level of the Lemet business in ments we will create 400 new jobs and 2010 was RON 143 million, a 6.5 percent produce 20,000 units per month.” The increase against 2009. The company has company has so far opened seven stores nationwide and invested EUR 4.3 million a network of 103 stores and has so far invested RON 80 million in its factory. Each in retail. For its development, the firm is store requires an estimated RON 300,000. Adrian Rizea, commercial director at preparing a franchise system, which has Lemet and Lem’s, does not consider the already piqued the interest of collabora-

* according to the Romanian Furniture Manufacturers Association

The company’s main focus has been tors and offers have been received, says upping the pace of collection renewal. Raia. It is also focusing on marketing its products on the internet. This however re- “At this moment, a third of the products in the store are permanently new,” says quires an improvement in logistics and a Sucu. He believes the company’s main admedium-term approach, Raia adds. The vantage lies in the dimension of the busicompany’s commercial director believes ness. The owner adds, “Over two thirds of that Casa Rusu’s main competitive advantage is that it also makes its furniture, the products in our stores are made in Romania and the rest are imported from which meant that when VAT was intrusted international manufacturers, so creased the company bore the difference that we maintain strict control of store for a while. prices.” Raia sees a positive aspect to the crisis, an evolution in buyer behavior. “The consumer is better informed and analyzes Constance is the key for the products in greater depth than before.” luxury furniture ﬁrm He adds that market recovery is continItalian luxury furniture manufacturgent on many aspects, such as the gover Minuzzo has a different perspective of ernment’s tax policy, the stability of the the local market, due to the niche on local currency and investment in the crewhich it operates. Claudio Minuzzo, one ation of new jobs. of the two associates of the company, Meanwhile, Austrian furniture comgives the example of raw materials. “It is pany Kika has invested EUR 31 million in well known that on certain market segits first and currently only Bucharest ments, raw materials are not affected by store. Kika’s local CEO, Lars Lund, highcrisis, therefore these will not lose their lights another raw material (besides wood) value. This is also the case with the raw whose price rises have affected the furmaterials used by our company, which go niture market. “There have been costs into make high quality products, starting creases in cotton in particular, and for from the wood essences used for accessome products we have had to raise the sories. We were able to renegotiate our price. But mostly we kept the prices as contracts with these suppliers, suppliers they were and did not pass the increase with whom we have worked for many onto the consumer.” years and will keep on collaborating while Lund also mentions a boost in sales for they provide us with high class products.” the company and has hopeful expectaMinuzzo is more positive about last tions for this year, although he did not disyear than many. “We can consider 2010 a close the company’s turnover. “We had a good year, if we take into account that the small increase in sales last year and we are crisis affected all fields of activity, inseeing a much larger increase this year. cluding the business environment. LookThe biggest rises last year came from our ing at the first trimester of this year, we es‘young style’ department, which saw a 32 timate a 20 percent increase in our percent hike, and lamps, up 26 percent.” turnover by the end of the year, as we The company’s further investments will have just inaugurated a new showroom in focus on new openings. “This year and Bucharest due to the demand and internext we will make an investment in new est expressed in this area of the country stores. We will open one in Constanta next for high class art furniture.” summer and if the purchases of new In terms of investment and developland go well we will open another in ment directions, Minuzzo’s early investBucharest.” ment went into high performance techLund is equally optimistic in his marnology and training costs for employees. ket recovery expectations, an event he There followed periods when the money sees happening in the next twelve months. was spent on business development, conLocal furniture manufacturer and tinues Minuzzo. “This is how the Sibiu trader Mobexpert was founded 17 years business started. The company also owns ago by Dan Sucu, owner and president of its own factory there, for export develthe group. The firm currently has 32 opment.” The last five years, he adds, stores regionally, of which ten are hyperhave seen the firm work towards an increase in the commercial segment, which meant the opening of showrooms, such as Sibiu and Bucharest. Design and unique “Due to the crisis, the products have also been of key imporconsumer is better intance to the company. Minuzzo says that the manufacturer formed and analyzes the has not been greatly harmed by the fiproducts in greater depth nancial turmoil. “Since Minuzzo is orithan before,” Marius Raia, ented toward personalized furniture, we say we have felt the effects of the general manager at Casa cannot crisis. With the advent of the recession our Rusu clients became more selective and gave preference to products able to guarantee long term quality. More than that, in this period we have launched a new showstores, which required an investment of room and have hired new staff members.” EUR 80 million. Last year’s turnover was This positive stance extends to the asEUR 115 million and Sucu expects similar sociate’s prediction for the market reresults for this year, although the market, bound. “Yes, we have high hopes that the he says, continues to decrease. luxury furniture market will soon recovMobexpert also focuses on research er its status and glamour, as our business and development, adds Sucu. “We anfigures largely suggest this is the case. In nually invest a significant sum in the readdition, the continuous refinement of search and development of new products Romanian clients’ deco design tastes is and in technology. It is difficult to calcualso a positive sign that we can expect a late the total value, but all I can say is that business increase and stabilization.” the investment in the industrial platform in Targu Mures and in the Bucharest cencorina.dumitrescu@business-review.ro ters totals EUR 30 million.”

www.business-review.ro Business Review | July 18 - 24, 2011

CITY 13

RESTAURANT REVIEW

Sole provider: the Osho menu

Photos: Laurentiu Obae

Thank cod: It’s easy to carp on about Osho Fish, a plaice that never flounders in its turbot-charged quest to warm diners’ cockles

Deli-cious: pescatorial produce

Well, it’s sure not ﬁsh and chips

They have to clear their huge stock of fish daily. So they rely upon a huge volume of diners. So the paradox is, the more you eat there, the lower the prices will remain! That is a winning formula for both the House and the customers.

Osho Fish, 19 Primaverii Reservations: 021 5683031 MICHAEL BARCLAY When the Osho steakhouse opened last year it caused a sensation with its style and its menu. Now they have opened a fish restaurant next door, and it too will cause a sensation – with its style and menu. The ‘theme’ is similar to its meaty neighbor: namely, it doubles up as a deli as well as a restaurant. So proudly on display on the walls and around the chiller cabinet is a selection of 25 different olive oils, numerous dried pastas, pastes and toasty spreads and massive catering sized tins of anchovies and tuna. And above all, you can buy your fresh fish to eat at home at a special takeaway price. Now let’s get down to the food. There is a printed paper ‘tablecloth’ menu showing the house staple dishes. I defy you not to be shocked, because this is the cheapest fish house in town. Not here the rip-off prices charged by other restaurants who are inadvertently the prisoners of the city’s ripoff fish distributors. The House has cut these rogues out of the loop and imports directly! But before you order from the menu, take a walk around the chiller. They had Alaskan crab ‘legs’, live lobsters, cuttlefish prawns of every size, shrimps in samphire grass and so much more which was disappearing before my eyes as an army of waiters were offloading it. And whilst you are still at the chiller, let your eyes drift upwards to the blackboard where the daily catch is listed. The have a staggering market list of around 90 species, a lot of which simply will not be available on any given day. Hence the House has wisely chosen to write up the fish and their prices in chalk, knowing that they will

have to add or delete items the next day. As a first in this country, they had parrot fish. This exotic blue coral reef eater is so beautiful that if you ask to see it before it is cooked for you, it will break your heart. But get over it quickly because it tastes great. Other fishes that are rarely seen in Romania (and they are on the blackboard) included ‘monkfish’ – a fish so ugly that if asked to see it uncooked you would probably faint, but when the tail is cooked it is simply sublime. Also included were sole, turbot, red gurnard and captain fish. There were also everybody’s favorites of tuna and swordfish. I saw these two beauties before they were cut up into fillets, and I swear to you they were both over 1.5 meters long and weighing in at over 50 kilos! So I started with fresh white anchovies which I soaked in olive oil and went to heaven. I followed this with a Turkish chili salsa which was good, but for my taste it needed spicing up with more blistering chilies. A fish soup followed which was a failure. It was a Romanian version so it had a base of bors and lashings of dill. This would be fine on the Delta, but it did not do justice to the sophistication of Osho! A further failure was the bread which was so mundane that it simply did not ‘fit in’ with its surroundings. But back to good things. Blondie and I gorged on a selection of fishes, all of which were good. The cooking style is Greek, which means it is grilled. The House told me that soon they will extend this to French, so we can look forward to a range of sauces and alternative cooking technique of steaming, boiling in wine and cider, stuffing with savories, fruit and vegetables… and everything else that being ‘Frenched up’ implies. But I have saved the best until last. You see, they have a fixed priced two-

course business lunch at a mere RON 18.5. Look at that price again. How can they do it? Easy. It is a matter of arithmetic and good management. Just as you cannot put toothpaste back into the tube, you cannot put fish back into the freezer. Fresh means fresh. So with a maximum life of 24 hours it has to be eaten. And that is the secret of their low prices.

mab.media@dnt.ro

www.business-review.ro Business Review | July 18 - 24, 2011

14 IN TOUCH CULTURAL CALENDAR

BUSINESS AGENDA

Festivals July 30 Liberty Parade 2011 Venus-Saturn beach (Constanta) One of the top dance festivals in Romania is bringing big names like Sharam, DJ Optick, DJ Allen, Vali Barbulescu, Christian Green, DJ Andi, Liviu Hodor, Vika Jigulina, NTFO and DJ Raoul to the beach between Venus and Saturn resorts in Constanta. Access to the 12-hour house music marathon is free of charge, but for over 18s only.

nounced its 2011 program. Tickets are on sale in the Eventim network, as well as online at www.eventim.ro.

August 13, 14 Summer Well Buftea (near Bucharest) The inaugural Summer Well Festival will host one of the most high proﬁle indie rock bands of the moment, Interpol, at Domeniul Stirbey, in Buftea, near Bucharest. Other top acts at the festival include Plan B, the Noisettes, Mystery Jets, Grafﬁti6, Chew Lips, the Raveonettes, The Wombats, Chapel Club and Alex Clare. Two-day tickets cost RON 99 and are available at easytickets.ro, eventim.ro and from Orange shops.

Contemporary Art Museum June 9-August 28 In between Frames Artists: Adad Hannah, Anetta Mona Chisa and Lucia Tkacova, Bettina Hoffmann, Jason Arsenault, Jerome Delapierre, Perry Bard, Rozalinda Borcila

Classical Music September 1-25 George Enescu Festival The Romanian Athenaeum (among other locations) The major local classical music festival and international competition has an-

Museums June 16-October 16 Contemporary Art Museum, 4th ﬂoor Romanian Comic Book Museum The international events that will take place at the Comic Book Museum include ﬁlm projections held by the Austrian Cultural Forum and the Czech Center in July.

By 31 December 2011 Theodor Pallady Museum (Spatarului Street, 22) Volume and Perspective in the Graphic Creation of Theodor Pallady Part of a cycle of exhibitions begun in 2003 to highlight the graphic work of Pallady, supported by the Seraﬁna and Gheorghe Raut Collection. Cinema July 23 and 30 Contemporary Art Museum 17.00-18.00 Short ﬁlms

WHO’S NEWS Carl Theobald has been named president and chief executive officer (CEO) of Avangate. He has over 20 years of experience in the software industry. Theobald has held senior executive roles at both large enterprise and venturebacked software companies, including stints as a vice-president at Oracle, founder at RubiconSoft and senior vicepresident at Serena Software. At Oracle, Theobald helped establish the CRM division, delivering sales, marketing and eCommerce products. Most recently, as senior vice-president of products and customer service, he launched the first SaaS-based solution at Serena Software.

July 23 The Light Cinema Andre Rieu Live in Maastricht Rieu’s performance, with the Johann Strauss Orchestra, will be broadcast live by the Romanian cinema from Maastricht, the artist’s hometown, at 21.00. A ticket costs RON 50. Liberty Center, the location of the Light Cinema, is at Str. Progresului 151-171. July 1 (premiere) Harry Potter and the Deathly Hallows: part 2 (2011) Directed by: David Yates Plot: The much-awaited final chapter in the long-running film series sees Harry, Ron and Hermione continue their quest to find and destroy the Dark Lord's three remaining Horcruxes, the magical items responsible for his immortality. See next week’s BR for a full review. On at: Movieplex Cinema Plaza, The Light Cinema, Hollywood Multiplex, Cityplex, CinemaPRO, Patria, Samsung IMAX, Cinema City Sun Plaza, Cinema City Cotroceni, Cinema City Cotroceni VIP, Baneasa Drive-In Cinema

July 19 11:00 Bergenbier organizes an event to mark the launch of a new beer brand at Actors Café inside Tineretului Park. By invitation only. July 28 08:40 Cora Romania organizes an event to mark the launch of a new hypermarket at City Park Commercial Centre in Constanta.

HAVE YOUR SAY

Summer in the city Things are getting are getting all summery over here at Business Review as we prepare to launch our Summer in the City issue, featuring the best terraces and coffee shops to cool off, with suggestions of exciting activities, and relaxing pastimes. To this end, we would like to ask for your input on the Bucharest experiences you have had, things worth trying, service experiences and expectations, as well as what you would like to see featured in this special issue. Please drop us a line at editorial@business-review.ro to share your feedback and your tips with Business Review’s chief travel correspondent, Corina Dumitrescu. We look forward to hearing from you!

Business Review welcomes information for Who’s News from readers. Submissions may be edited for length and clarity. Get in touch at simona.bazavan@business-review.ro Romania. He has over ten years of professional experience in advertising. As business unit creative director, Dumitrescu will lead the team responsible for the Cosmote account. Over the past few years he has worked as group creative director at McCann Erickson Romania. While there, he coordinated campaigns for brands such as Coca-Cola, ING Bank, Vodafone, StarBev, Heineken Romania, Flanco and MTV.

Carmen Sebe

has joined the creative team of Ogilvy

is the new chief operating officer (COO) of Avangate. She has led the company since 2005. Sebe will focus on scaling operations to meet Avangate’s international expansion, taking on responsibility for worldwide development and production operations.

ISSN No. 1453 - 729X

FOUNDING EDITOR Bill Avery EDITOR-IN-CHIEF Simona Fodor SENIOR JOURNALIST Otilia Haraga JOURNALISTS Simona Bazavan, Corina Dumitrescu COPY EDITOR Debbie Stowe COLLABORATORS Anda Sebesi, Michael Barclay ART DIRECTOR Alexandru Oriean PHOTOGRAPHER Laurentiu Obae LAYOUT Beatrice Gheorghiu

Titus Dumitrescu

Eight Austrian short movies in eight minutes Enter Paradise for EUR 3.20, All People is Plastic, Copy Shop, WibbelIch&Gluck, Mozart Party 06 (Mozart Minute 15), 3 Minimals (Falling, Boring, Loving)

Camelia Cringus is the new HR director of Grampet Group. With over 17 years of experience in human resources, she will be in charge of the development and implementation of the company’s human resources management strategy. A graduate of the Economics Studies Academy in Bucharest, Cringus started her career in 1994, and has held management positions at several multinational companies. From 2005-2006, she was HR business partner at Alstom Transport International. Then from 20062008, she was VP of HR & Shared Services at Rompetrol Group.

Roxana Grosu has joined Pi2 PR as media relations manager. She has over five years of professional experience in journalism, having

PUBLISHER Anca Ionita EXECUTIVE DIRECTOR George Moise SALES & EVENTS DIRECTOR Oana Molodoi MARKETING MANAGER Adina Milea SALES & EVENTS Ana-Maria Nedelcu, Claudia Munteanu RESEARCH & SUBSCRIPTION Lili Voineag PRODUCTION Dan Mitroi DISTRIBUTION Eugen Musat

covered fields such as diplomacy, tourism, healthcare as well as retail over the years. Grosu graduated from the Letters Faculty of the Craiova University.

Dorin-Ioan Maer has been appointed by transport minister Anca Boangiu as general director and president of the board of directors of CFR Calatori, the national passenger railway company. Maer has previously worked as deputy technical manager of railway company CFR SA. The appointment comes after Boangiu dismissed the former director, Liviu Pescarasu, for irregularities relating to a contract to upgrade diesel multiple units.

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