Business Review No.43, December 5 - 11

INTERVIEW: Sonia Nastase, general manager of the Howard Johnson Grand Plaza, reveals to BR how she has guided the hotel through the tough times on the five-star market and outlines some of the key changes being made at the HoJo »page 12

TEA MARKET ROMANIANS ARE TURNING OVER A NEW LEAF AND EMBRACING TEA. WE TALK TO KEY PLAYERS ABOUT WHAT’S BREWING ON THE MARKET

ROMANIA’S PREMIERE BUSINESS WEEKLY

DECEMBER 5 - 11 , 2011 / VOLUME 14, NUMBER 43

»PAGE 12 NEWS

INVESTORS URGE ACTION Top businesspeople at BR’s Foreign Investors Forum got together to thrash out a list of measures that the government should take to lead the country out of the economic crisis »page 11

On track Belgian developer Alinso Group has opened an intermodal railway terminal in Ploiesti » page 4 NEWS

Lab launch Software giant IBM has inaugurated its IBM Bucharest Systems Laboratory, the first such facility in Europe » page 6 PLUS

Black art The Black Friday marketing initiative brought a business boost for retailers in the run-up to the festive season » page 6 PLUS Plan your Christmas cultural consumption with the BR events agenda » page 13

www.business-review.ro Business Review | December 5 - 11, 2011

BUSINESS AGENDA December 5 14:00 The Romanian Banking Association (ARB) organizes a press conference to mark the appointment of Florin Danescu as executive president of the association. ARB will also launch a new education program in the financial-banking domain. By invitation only.

December 5 11:00 Vodafone Romania organizes an event to mark the launch of a new online product at Cafe Godot Teatru. By invitation only.

December 7 CEO Clubs Romania holds its official launch in Romania with the "Leadership in High Stakes” conference at which Harvard Medical School professor Dr. Srini Pillay will be one of the guest speakers. By invitation only.

December 7 09:30 Result Development organizes a conference on the cultural features of Romanian employees at Howard Johnson Hotel. By invitation only.

December 7 10:30 Orange Romania organizes a press conference to present the strategy and results of its Care program at Orange Business Center. Philippe Bernard, vice-president sales & care France Telecom, will attend. By invitation only.

December 7 10:30 Bene Group organizes a press conference to mark the launch of a new innovative concept in the office furniture industry at its headquarters in SPark Offices. By invitation only.

December 7-8 The Observer Association for the Development of Continuous Learning and TBWA Bucharest organize a conference to present the results of a project on continuous learning for employees that are at risk on the job market at Ramada Bucharest Parc. By invitation only.

December 7 - 10 Alpha Bank Romania, the National Bank of Romania and the Romanian Banking Association jointly organize the EU-COFILE seminar at Sinaia.

December 9 Rotaract Sparks organizes a one-day conference on social entrepreneurship. The event takes place at the Central University Library in Bucharest.

NEWS 3

NEWS in brief BANKING

Valentino to open first local flagship store

Erste Group Bank has entered into a binding transaction agreement with SIF Moldova to acquire its 6 percent stake in BCR. SIF Moldova will receive: Erste Group shares for over 515 million BCR shares at an exchange ratio of almost 1:128; cash for over 103 million BCR shares at a price of RON 1.0385 per share; and cash for over 33 million 2011 profit shares at a price of RON 0.5 per share. The total cash portion amounts to EUR 28.4 million.

Italian brand Valentino will open its first Romanian flagship store this month in The Grand luxury complex, inside the Marriott hotel in Bucharest.

The shop will be the biggest in The Grand Avenue, at 250 sqm. The investment will come from a Romanian entrepreneur.

The Grand, a multifunctional luxury complex with an area of 85,000 sqm distributed on 13 levels, includes the Grand Offices; the Grand Avenue shopping area; the five-star Bucharest JW Marriott Grand and parking space of 525 secured lots inside and outside the building.

FINANCING

IT& TELECOM

EBRD turns on EUR 17 mln financing tap in Sibiu county

State to recruit consultant for Romtelecom listing

The EBRD has extended a EUR 17.1 million loan to Apa-Canal Sibiu, the water utility company serving residents in 34 administrative units in the south, center and north-west of Sibiu county, as well as those in Fagaras town in neighboring Brasov county. The funds will be used to part-finance the construction, extension and improvement of the water supply and wastewater treatment systems. The project is part of the EU Cohesion Funds program for Sibiu, worth a total of EUR 124 million. It is intended to enable Apa-Canal Sibiu to significantly reduce water leakages, optimize operating costs and bring its wastewater collection and treatment system in line with EU regulations and standards.

The Ministry of Communications has started procedures to recruit a consultant to represent the state in the Romtelecom listing procedure. In an announcement posted on the ministry website in the middle of November, officials stipulated that the consultant will provide legal, economic and technical expertise, evaluating “the benefits of the proposed merger and listing on the stock exchange compared to other possible options for Romtelecom.”

The EUR 200,000 contract will run for six months.

90 percent of projects for EU funds already signed

The drilling and well services division of Rompetrol Group has recently begun drilling operations in Romania, in Filipesti de Padure, Prahova county. Over USD 8.5 million has been invested in the purchase and operation of the drilling unit. The new well is part of a USD 29 million services contract between Rompetrol and OMV Petrom. The company will execute drilling works in Romania through to 2015.

Drilling equipment for the well was provided by the plants at Upet Targoviste and Imut Moreni and also includes specialized Norwegian systems. The unit has a static capacity of 160 metric tons at hooks and can be used at depths of 2,500 meters.

Erste Group takes 6 percent BCR stake from SIF Moldova

The government will attract European funds of at least EUR 6 billion next year, as approximately 90 percent of the projects are contracted, having already passed the auction stage, said Prime Minister Emil Boc. “We are no longer wasting time with evaluations and auctions,” said Boc, speaking on a TV show last week. The PM announced that the government aimed to reach an EU funds absorption rate of approximately 20-25 percent. The current rate is only 3.5 percent.

PROPERTY EUR 250 mln shopping mall to open in Bucharest in 2013 Irish investment group Caelum Development will invest about EUR 250 million in opening the ParkLake Plaza shopping mall in east Bucharest. The project, which should be completed in Q4 2013, will be located on Liviu Revreanu Boulevard, near IOR/Titan Park. ParkLake Plaza will have a lettable area of approximately 67,000 sqm. The shopping center’s main anchor will be a 15,500-sqm Cora hypermarket.

The facility will include over 200 stores and an area of approximately 3,000 sqm for dining, restaurants, cafes and fast-food units as well as a Cinema City multiplex. It will also feature 10 tennis courts and football pitches and a children’s playground connected to Titan Park.

WEEK in numbers

13.3 billion RON, or 2.4 percent of GDP, is Romania's budget deficit in the first ten months of 2011, according to the Ministry of Public Finance

3rd is the spot taken by Romania among the most corrupt EU states, behind Greece and Bulgaria, according to Transparency International’s Corruption Perceptions Index (CPI)

POWER

network to Bucharest, are using the system and works are under way to further expand it in Bucharest. Baneasa is one of the Bucharest areas already under the telecontrol system.

Rompetrol starts local drilling operations for OMV Petrom

FMCG

Enel opens EUR 90 mln center for electricity distribution Enel has launched a new telecontrol center that allows technicians in Bucharest, Ilfov and Giurgiu County online control of primary stations and other components of the high and medium tension grids. This is intended to contribute to a better management of disruption in the distribution of electricity to end consumers.

The implementation of this project started in 2009. Some 14 stations have already been modernized to allow online control and another 19 stations are in the final stages of modernization. Around EUR 90 million has been spent so far on the implementation of the system in Muntenia. Giurgiu and Ilfov County, the adjacent

Tnuva could exit local market Tnuva is considering selling or closing down its local dairy business due to heavy losses, according to the Israeli publication Globes quoting sources from inside the company. This could be one of the first measures taken by new chairman Shlomo Rodev although no official announcement has been made so far.

The Israeli dairy producer is estimated to have invested about EUR 60 million locally since 2005 with the goal of establishing an integrated business, from milk production to product distribution, under the Tnuva and Yoplait labels. The intention was also to use the Romanian company as a bridgehead for Tnuva’s international operations.

While the company hoped to reach yearly sales of EUR 50 million by 2008, the figure did not surpass EUR 20 million according to Globes. Following the economic crisis the company had to compete against lower cost dairy imports, while Tnuva Romania Dairies' output was 50 percent more expensive per liter than that of other local dairies.

In March this year Tnuva closed its cow farm in Adunatii-Copaceni (near Bucharest) which covered 25 percent of the milk production of its Popesti Leordeni factory, also due to financial considerations.

The company announced at that time that despite posting losses for several years it was not planning to leave the local market.

www.business-review.ro Business Review | December 5 - 11, 2011

4 NEWS EU

Romania hangs onto Euro zone ambitions despite EU debt crisis

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uropean finance ministers from the 17 countries that use the Euro met last week in Brussels to draw up an assistance plan for the debt-ridden economies of the Euro zone. The European Economic, Monetary Affairs and Euro Commissioner, Olli Rehn, told representatives of the mass media, “We are now entering a critical period of ten days to complete and conclude the crisis response of the European Union.”

The finance ministers agreed to increase the function of the European Financial Stability Facility (EFSF), but failed to increase its capital to EUR 1 trillion, while the financing sources are also uncertain. Rehn warned, “There is no silver bullet that will get us out of the crisis.”

Earlier this month, the Romanian president, Traian Basescu, said during an event organized by The Economist on Romania's future economic potential, “We are maintaining the objective of joining the Euro zone in 2015, as it has useful accession targets for Romania.”

Basescu said that the country has understood that the Maastricht criteria – budgetary deficit and inflation below 3 percent and a public debt level below 60 percent – are not enough to be competitive in the Euro zone.

“I understand the mobilizing role of our accession to the Euro zone, but we have to be careful that we do not make a mockery of ourselves through our persistence in this area and lose the credibility we still have,” said Florin Pogonaru, chairman of the As-

sociation of Romanian Businesspeople (AOAR), during the Foreign Investors Forum, organized by Business Review last week.

The recent announcement made by the Austrian Central Bank requiring Austrian lenders to cut further financing for their branches in CEE will also generate more uncertainty in the Romanian financial system.

Basescu warned Austrian banks during The Economist event, “If you are preparing to leave the Romanian economy underfinanced during the current crisis, we will take it as lack of fair play in your dealings with Romania.”

The president of the supervisory board at UniCredit Tiriac Bank, Dan Pascariu, commented during the Business Review event, “Subsidiaries of international banks in CEE, which have been considerably financed in the last decade, will have to be weaned and find their own food. So, they will have to appeal more to internal resources.”

However, banks will be forced to increase the interest rate for loans as the deposits available in the market have posted weak growth rates in the last three years.

Pogonaru added that Romania still has 15 percent of banks with local capital such as CEC Bank and EximBank, which need to be capitalized through state aid. Pascariu responded that CEC’s loan-to-deposit ratio is 60 percent, allowing the lender to finance Romanian SMEs, which have little breathing space at present. ∫ Ovidiu Posirca

LOGISTICS

Private inter-modal railway terminal opens in Ploiesti

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elgian logistics, commercial and industrial real estate developer Alinso Group has opened an independently managed inter-modal railway terminal in Ploiesti following an investment of approximately EUR 7 million. For the beginning four trains will be operated each week but the company estimates the figure will reach several trains per day after the second phase of the project is completed. The Allianso Terminal Ploiesti will be operated in partnership with Rail Cargo Austria.

“We want to offer an attractive, sustainable rail service portfolio with the goal of actively shifting transports from road to rail and bringing new rail transports to Romania,” said Erik Regter, board member of Rail Cargo Austria. He added that his company intends to develop a pipe, meaning a high frequency network of trains from north-western Europe to Romania, not only for intermodal but also for conventional cargo.

Rail Cargo Austria also operates from a similar terminal on Romania’s border with Hungary. Regter said his company was interested in similar projects in the country and is looking to work with the Romanian Railway Company (CFR).

The first completed phase of the Al-

lianso Terminal Ploiesti project has 19,500 sqm, a rail track length of 1,130 m and total storage capacity of 1,028 TEU. The scheme will cover 10 ha with a storage capacity of 5,000 TEU and 2.2 km of rail track and will be completed in 2013.

The facility is intended to become a hub for cargo delivered by standard TEU containers (both normal and temperature-controlled) and unitized bulk cargo.

It offers access to the DN1, DN1A, DN72 and the future A3 Bucharest-Ploiesti highway.

The terminal is also located close to the Ploiesti West Park business park which has been developed by Alinso in partnership with local firm Piritex.

Ploiesti West Park has a total construction value of buildings and infrastructure works of EUR 750 million for the duration of the project.

Among the companies present in the park so far are Lufkin Industries, a Texan-based provider of oil & gas equipment which is building a EUR 126 million production plant on 33 ha of land, American Toro, an irrigation equipment manufacturer also building a factory there, Unilever and British American Tobacco. ∫ Simona Bazavan

www.business-review.ro Business Review | December 5 - 11, 2011

6 NEWS LINKS

IBM inaugurates Bucharest Systems Laboratory

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MEDIA

Ex politician buys stake in media outlets

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ormer politician Cozmin Gusa became the main shareholder in PSV Company, former Petromservice, last month, just hours before businessman Sorin Ovidiu Vantu, union leader Liviu Luca and the firm’s managers were arrested for embezzlement in the Petromservice case.

Gusa announced last week that he and Maricel Pacuraru had bought Elbahold, which owns 54 percent of PSV Company, gaining through this transaction a 20 percent stake in the Realitatea TV and OTV as well as other media licenses for local radio and TV stations and dailies such as Ziua and Gardianul. GMG Media Box, a firm owned

by PSV Company, acquired 19.9 percent of Ocram Televiziune, which holds the license for OTV, back in 2010. “Unfortunately the paid price for the stake – EUR 40 million – was an incredible price for Romania. Our interest is to see if the money was used in a profitable manner,” Gusa told hotnews.ro.

He added that his company has no intention of getting involved in the editorial policy of the two media outlets but that he is looking for ways to make a profit from the stake in order to pay some of Petromservice’s debts and make it a profitable business.

Referring to the scandal over Vantu’s arrest, Gusa strongly denied allegations that the transaction was made to the benefit of the controversial businessman. He added that the new PSV, controlled by himself and Pacuraru, is a party to the state’s case against Vantu and the other co-defendants, who are suspected of embezzling over EUR 83 million from the company. ∫ Simona Bazavan

The first mass Black Friday, the day after the US holiday of Thanksgiving, when a series of retail promotions kick off the Christmas shopping season, took Romanian IT&C retailers slightly by surprise, with a record number of visitors often jamming websites and generating unexpected sales estimated around the EUR 20 million figure overall.

Courtesy of Flanco

T giant IBM has announced the inauguration of the IBM Bucharest Systems Laboratory, the first location in Europe dedicated to developing and testing the company’s hardware and software equipment. “IBM Bucharest Systems Laboratory represents an example of excellent capabilities to develop the products, combining unique abilities with last-generation technologies, instruments and processes,” said Andrew Currier, director of IBM Bucharest Systems Laboratory.

The facility will use the capabilites of Blade Network Technologies, a company acquired by IBM in 2010. The 100-sqm laboratory will employ 125 highly trained specialists who will develop software products such as IBM Networking Operation System and VMready. The firm will improve its virtualization, administration and optimization of data networks capabilities.

The laboratory is located in Bucharest Corporate Center, and joins the existing IBM Business Analytics laboratory, which was created after the software firm acquired Clarity Systems in 2010. The facilities will collaborate to offer optimized solutions to manage the explosive growth in data volume. ∫ Otilia Haraga

Black Friday shopping spree sharpens retail competition

Black in business: the retail initiative brought out shoppers in their droves

∫ OTILIA HARAGA

affected by Black Friday in a country with an emerging economy like Romania,” say Koyos.ro officials.

“The Black Friday concept has already been Other retailers agree. “There is defitested successfully on larger markets, esnitely an impact of starting the Christmas pecially in the United States, where the season earlier, but, at the same time, I belaunch of the Christmas sales season takes lieve that Black Friday also has many merplace on Thanksgiving weekend, a long its for consumers. For instance, it allows weekend that starts in the USA on Thursthem to make acquisitions at very good day and gives Americans more time for prices before Christmas, so it is a type of shopping,” Marius Ghenea, president of the ‘earlier Christmas’,” says Ghenea.

FIT Distribution group, tells BR. “Black Friday marks the opening of the Local retailers believe the day has left holiday shopping season, being the day its mark. “The Black Friday phenomenon with the highest number of promotions in is one that will certainly stick in the histothe year and, in this respect, it is a mere ry of retail in Romania,” Violeta Luca, marketing director at Flanco, tells BR. starting point for end of year promotions,” adds Burloiu.

In Romania, Black Friday was pioneered by The stores of traditional retailers were eMAG and Flanco, but other retailers quicktaken by storm. More than 200,000 cusly jumped on the bandwagon. Since this tomers came to Flanco over the weekend, year was only a starting point, not all reof whom 60,000 made a purchase. The tailers participated in the initiative. But, ircompany reported sales of over EUR 6.8 respective of this, Black Friday had knockmillion over the Black Friday weekend, on benefits for all. shifting over 60,000 products. “The level “As in other parts of the world, Black Friof the Black Friday weekend sales is equivday has been the biggest shopping event in alent to the total sales in a normal month Romania, exceeding all expectations. The such as February or June,” says Luca. unexpected effect of this campaign was an Competitor Altex received over 1 million increase in sales for all retailers on the market, not only those involved in Black Friday,” visitors in its shops during the weekend and Irinel Burloiu, marketing director of eMAG, the volume of sales registered by the retailer tells BR. The shopping fever short-circuited websites, with many users complaining that they did not get their turn. However, Ghenea says, “We should not criticize too harshly issues that might have occurred in Romania. This type of problem is pretty normal for a Black Friday situation; such Altex: TV sets, gadgets, smartphones, difficulties also hit big websites such as laptops, tablets and cameras Amazon, Walmart and others in the USA, PCGarage: notebooks, PC tablets and even during the 2011 edition.” other IT products Of course, with so many sales one eMag: plasma and LCD TV sets, notewonders: is there any money left in the conbooks, cameras and white goods sumer’s pockets for the Christmas shopping Flanco: TV sets, notebooks and washing spree as well? machines “It is possible that Christmas sales will be

BLACK FRIDAY

Best sold product categories

hiked 100 percent compared to the previous weekend.

“It is a good start for the holiday season and we estimate we will surpass the EUR 200 million net sales we have set ourselves as a target for this year,” says Dan Ostahie, president of Altex.

The largest online store in Romania, eMAG, had a record number of 100,000 unique visitors at the same time and a total of 1.1 million Romanians accessed the store website that day, “which is 10 times more than usual,” says Burloiu. eMAG posted sales of EUR 8 million on Black Friday. In total, 90,000 products were ordered in just one day. “The entire Black Friday Stock (30,000 products) was cleared in several hours of the morning – by 13.00,” says Burloiu.

Another online retailer, Koyos.ro, is also boasting high sales. “Koyos.ro was among the first online stores to organize Black Friday promotions, in 2010. The growth in sales in 2011 is because more online retailers have joined in Black Friday and the media coverage has also increased,” say company officials.

This year’s Black Friday Koyos posted sales that were three times higher than last year. Over that weekend, the site had in excess of 100,000 visitors, six times more than on a regular weekend. Some 95 percent of the products had gone to buyers by the end of promotion. “Like all the other retailers, we also saw some peak traffic moments, especially in the first part of the day. We managed to meet the vast majority of the orders, but some customers ordered too late and the products they wanted were no longer in stock,” say company officials.

A big player on the online market, FIT Distribution has also reported a good profit for its online store PCGarage. “There were record sales, the highest level so far, and the traffic on the site that day was 300 percent higher than in an average day,” Ghenea tells BR. “Normally, this kind of sales happen in about a week.”

On Friday, there were more than 83,000 visitors to the PCGarage website, which experienced some problems due to the high traffic.

FIT Distribution also embraced Black Friday fever with discounts offered as part of Cyber Monday, another concept imported from overseas.

However, of the two discount events, retailers expect that Black Friday will have the greater impact in Romania. “If we look at the country that generated these concepts, Cyber Monday brought sales of just USD 1 billion in the United States, while Black Friday generated sales of USD 52 billion. In Romania, estimations for Black Friday’s takings this year are around EUR 10 million.

otilia.haraga@business-review.ro

8 FOCUS

www.business-review.ro Business Review | December 5 - 11, 2011

Cold season brings tea sales to a boil The Romanian tisanes and tea market has grown this year and is expected to do so even more by yearend, as the cold weather is exactly the industry’s cup of tea. A consequence of changes in lifestyle and consumption habits during the happier times before the crisis, sales volumes are estimated to continue brewing, going up by about 5 percent in 2012. ∫SIMONA BAZAVAN Whether tea is bought for curative reasons or for the mere pleasure of drinking it, the local market has significantly evolved in recent years, both in terms of the range of products and demand. Tisane (e.n. a herbal or plant infusion usually not made from the leaves of the tea bush) producers and tea distributors have constantly diversified their product portfolio while consumers are beginning to see tea as more than a hot drink. Nevertheless, seasonal variations in sales volumes continue to be high and the cold season brings significant sales increases.

“There are strong seasonal differences.

In the cold months from October to March we see the highest sales. Compared to the summer months, sales can rise two and a half fold,” Cora representatives told BR. At Metro Cash & Carry sales go up by as much as 20 percent from October, according to the company.

Despite the variations, overall sales have risen in the past year. For the French retailer the increase is 4 percent, with 90 percent of the sold volumes being tea bags and the rest loose leaf. Also, 8 percent of the sold volumes are private label tea produced for Cora by manufacturers like Fares and Kalpo.

Pharmacies also report growth. Compared to last year, Help Net outlets have registered a 6 percent increase in tea sales so far in 2011. “As the cold season is favorable for this product category, we expect growth to reach 8 percent by yearend,” Monica Fusea, acquisitions director at Help Net, told BR. As for the varieties sold in pharmacies, she says that the most popular teas are those for weight loss, detoxification, anti cramps and digestion. Weight control and fruit tea are especially popular in summertime while in the cold season consumers prefer relaxing and calming varieties that contain linden, St. John's Wort, chamomile or marigold. Overall, Romanian consumers are turning to more natural products, she adds.

The upward trend is expected to continue in 2012 on all distributions channels, although constant value sales are predicted to grow at a slower rate than volume sales, reflecting consumers’ reduced purchasing power. According to data from Nielsen Romania, the main producers of tisanes are Fares, Belin, Celmar, Larix and Plafar, while Unilever with the Lipton brand, Twinings, Belin, Fares and Kalpo are the main names in tea.

The British Twinings brand is imported and distributed in Romania by General Parma Food. “This year we have seen a sales increase of 20 percent which is well beyond our expectations,” company representatives told BR. The best sold Twinings varieties in Romania are lemon-flavored green tea teabags followed by black tea, English breakfast

ing unit so that at least the products that are made of local raw materials can be produced here. A lot depends on the Common Agriculture Policy (CAP) for 20132020 and the financial support the company could get from the EU, he added.

Sonnentor organic teas are sold locally only through specialized shops and selected partners. Best selling products for the firm include green and white tea, ginger tea and cold season and babies’ varieties. In recent years the company has posted constant growth of about 12 percent.

While in 2010 Sonnentor Romania registered a turnover of more than RON 800,000 (approximately EUR 186,000) and a profit of RON 27,000 (approximately EUR 6,200), this year the figures will grow to EUR 200,000 turnover and EUR 10,000 profit.

Special brew “Romanian consumers’ behavior has changed in the past two years in the sense that they are no longer looking for medical reasons to consume tea but simply indulging in the pleasure of drinking it.

For this reason consumption tends to Is it tea you’re looking for? Romanians are increasingly turning from coffee to tea depend less on the season, because whoever loves tea will not only drink it in winprofits and the authorities have anand infusions, whereas in the UK black tea tertime in order to get warm, but will nounced plans to privatize it. is the best selling kind. About 40 Twinings drink it daily for the pleasure of giving The Ministry of Economy, the comproducts are imported to Romania. The oneself some important ‘me time’,” Liliana pany’s main shareholder, estimates that selection is made from the top internaHrenciuc, owner of the Triangle d’Or delthe firm will exit insolvency by the end of tional varieties and based on the British icatessen store and tea house in Bucharest, this year and the privatization process will producer’s recommendations. told BR. begin in 2012.

Despite the popularity of internaFor the past five years the company For the first time in many years the tional brands such as Twinings and Liphas been bringing the famous Mariage Frcompany has reported profit for the first ton, Romanian producer Fares and local eres French teas to Romania. Hrenciuc half of this year – approximately EUR distributor Novaplus, whose product says that the best sold products are green 60,000 – on a turnover of about EUR 1.4 portfolio includes the Belin, K.Lehmanteas flavored with various fruit, flower million after posting roughly EUR 142,000 Zauberer and Artifex brands, led tea petals or spices. sales in 2010, according to Euromonitor. of losses last year. The firm has fewer than “I don’t think we can talk about a real 100 employees and several production Romanian company Fares is the main local tea culture, but rather a cup of tea units in Bucharest, Brasov and Cluj. player on the local tisane market having is an excuse to socialize, a way to spend Other investors are doing it on a smallinvested in product development as well time with friends in a pleasant manner. er scale, but with far better results. The loas distribution in recent years. In addition We are glad that in our tea house the racal organic market has been growing in to tisanes the company also manufactio between tea and coffee consumptures tinctures, various supplements, the past few years and organic tea is no extion is 95 to 5,” the owners of Green Tea, ception, with an estimated 20 percent syrups and other phytotherapy prodanother tea house and tea boutique in growth rate for the past year. ucts.

Bucharest, told BR. Nevertheless, more Austrian Sonnentor Krauterhandels Almost 16 years since its privatization, and more local consumers are trying GmbH set up a branch in Romania in 2006 the company is a success story and one premium brands. following five years of previous experiof the most popular local brands. And de“Tea consumption has remained relaence working with local farmer Csaba Szaspite the crisis, it has managed to post tively constant in the past two years, with kacs in Reghin, Mures County. Sonnentor growth. For last year it reported a perhaps a decrease of 5 to 10 percent, but Romania is owned by Johannes Gutmann, we blame this decline on the fact that turnover of RON 32 million (approxiSonnentor’s founder, Szakacs and Thomas mately EUR 7.72 million) compared to there are now more retailers on the preWeinraub who is also the general manager RON 30.38 million (about EUR 7.18 milmium segment,” they added. Green tea of the local subsidiary. The company lion) in 2010. So far this year Fares has and flavored green tea are the best sold vadoesn’t just sell its products locally but seen a 30 percent increase in sales, acrieties with the price averaging at RON 10 also gets its raw materials from here. cording to media reports. for 50 grams.

At present the company exports local Fares was privatized in 1995, sepaGreen Tea is a family firm opened in organic plants, fruit and spices from 100 rating itself from what later became the 2007, owned by Alina and Ciprian Pescaru.

Plafar national company (SN Plafar), hectares of land to Austria and the Czech The company’s plans for the coming Republic where the tisanes and tea are which also produces tisanes and other years are to consolidate the business and processed and packaged. homeopathy products. Like many other increase the share of online sales.

Weinraub told BR that the firm intends state companies, its evolution, however, to set up a local production and packaghas not been so healthy in terms of simona.bazavan@business-review.ro

www.business-review.ro Business Review | December 5 - 11, 2011

10 BR EVENTS: FIF

Foreign investors plot Romania’s 2012 economic map Romania has taken some of Europe’s toughest austerity measures in the last two years, and the process is ongoing. However, the lack of any stimulus for companies may cripple the economic growth of 2 percent forecast for 2012, although the flexible workforce could prove to be a valuable asset. These were among the pronouncements made by members of the foreign investors’ community who gathered last week at the Foreign Investors Forum organized by Business Review.

State must dos l 3 percent reduction of the CAS, contributions that employers have to pay for social insurance, as a reaction to the 5 percent increase of VAT to 24 percent.

All photos: Laurentiu Obae

Stand and deliver: speakers spoke frankly about what they think the government ought to be doing to get business moving again

∫ OVIDIU POSIRCA Florin Pogonaru, chairman of the Association of Romanian Businesspeople (AOAR), acknowledged that Romania has been able to implement difficult measures, such as the 25 percent reduction in salaries for public workers, but lacks the ability to do the easy things. “The 5 percent VAT increase should have gone hand in hand with a 3 percent reduction in CAS, (employer contributions for social insurance). The CAS reduction could have given an advantage to local firms,” he said. Pogonaru added that Romania has remained mired in austerity in order to please others, and that the government is paying little attention to the problems facing the business environment.

“As the Austrian Central Bank recently announced its intention to cut financing for the Romanian subsidiaries of Austrian banks, Romanian companies are already starting to have issues in taking out loans,” he commented. The association chairman believes that following the announcement of the Austrian Central Bank, the authorities should have gone to Brussels to discuss state aid for Romanian companies. This could be done by recapitalizing Romania’s CEC Bank which could then provide loans to small companies.

Cost of lending to increase “At present, not only countries, but also financial systems are under pressure, partly through their own fault, but also because they believed in the sovereign risk,” said Dan Pascariu, president of the supervisory board at UniCredit Tiriac Bank. He expects most European banks to increase cap-

Dan Pascariu, president of the supervisory board, UniCredit Tiriac Bank “Western banks will finance business in Romania on the basis of a large yield-to-risk ratio” Saulo Spaolanse, general manager, Schneider Electric Romania “From my discussions with the expat community, we have very good people in Romania, with both technical and learning skills” Tim Smith, head of EMEA trade credit practice, Marsh “I see the global view of Romania as quite positive.

However, I think there should be more transparency around the government and banking”

Florin Pogonaru, chairman of the Association of Romanian Businesspeople “Our competitive advantage is the flexible workforce, but vocational training is necessary” Kurt Weber, managing director, Horvath & Partners Management Consultants “Romania is seen more positively than other countries in the EU, and the financial markets have a favorable opinion about it” Dragos Cabat, managing partner, eFin.ro “We are talking about a two-speed Europe, and hopefully Romania will have a greater speed”

l Increasing lobby activities for Romania's economic interest at a European level and improved negotiation power. l Stimulating lending in the local currency (RON) as the financial system will have less liquidity at its disposal. l

The setting up of a debt registry by the Romanian government in order to reduce the level of arrears.

l

The liberalization of the energy market and bolstering the production of green and efficient energy.

l The introduction of the total cost of ownership criteria in public tenders. l

Enforcement of the fiscal responsibility law and greater transparency.

l Larger investments in vocational education/training. l The setting of industrial policies.

The panel mentioned sectors such as agriculture, tourism, oil & gas, hydro energy, trade and outsourcing. l More transparency in the activity of the government. l The appointment of private management for authorities that are handling EU-funded projects. l

Improved efficiency for commercial representations of Romanian companies abroad.

www.business-review.ro Business Review | December 5 - 11, 2011

BR EVENTS: FIF 11

Representatives of the business community took part in a lively debate ital in the next year. The UniCredit group recently announced a EUR 7.5 billion capital increase for the first half of 2012. Pascariu predicts recapitalization and liquidity problems in the banking sector for next year. “The liquidity will become precarious and more expensive, and here I am not talking only about Romania, but also at European level.” The UniCredit representative added that a significant number of the Romanian subsidiaries of foreign banks have taken out more loans in foreign currency than they have attracted deposits, the reverse of the situation in the local currency, the RON. He forecasts that interest on loans will increase in the coming period, as the quantity of available deposits has increased by only 5 percent in the last three years, although the losses in the banking system have become more pronounced.

The UniCredit president added that in the last three years, since the start of the crisis, demand for credit from retail clients and the corporate sector has dropped dramatically, mainly due to plummeting consumption. However, lending for working capital has remained stable. Pescariu also noted that loan demand from retail clients had dropped by 90 percent from October 2008. “I am expecting the foreign currency resources from international sources to fall a little, but internal resources in RON will exist. Personally, I believe that foreign currency and RON interest will move more into line with each other,” added Pescariu.

He also predicted that loans would become more expensive. “The external loan will become scarce and expensive. I believe that there are internal resources for increasing credit growth and I also believe that Western banks, despite what the Austrian governor says, will find ways to place money where there is the largest yield compared to risk.”

Government should pay companies on time Saulo Spaolanse, general manager of Schneider Electric, a supplier of energy efficiency solutions, said that local entrepreneurs would benefit if the government paid for commissioned projects on time.

Tim Smith, head of EMEA trade credit practice at Marsh, took up this theme, arguing that regardless of legislation and lobbying from companies, governments seldom do so. “Even in Germany, the government doesn’t pay on time, and corporates don’t pay on time either,” added Smith. Pescariu suggested the government set up a debt registry, with certain terms relating to maturity, up to which it can make payments. This commitment should facilitate lending to finance com-

panies, as there will be greater assurance that at some point the money will be recovered by banks. “The debts that companies have to other companies or to the state should be tradable,” added Pescariu.

This measure could also help the government in dealing with the mountain of arrears it has currently run up.

Pogonaru also mentioned Ford and other multinationals as the main beneficiaries of bulk funding from the EU, not structural funds, and said there was not a legal mechanism granting EU financial assistance to SMEs. He noted that the Romanian economy is 70 percent made up of multinationals and foreign capital, while the other 30 percent, excluding the energy companies, consists of small Romanian firms that lack the financial power to access new markets.

Kurt Weber, managing director at Horvath & Partners Management Consultants, acknowledged Romania has done its homework in many areas but further effort is needed on the liberalization of energy markets: the sector needs privatization, and the private managers assigned by the Romanian authorities to head state-owned enterprises (SOEs) will need private shareholders. He added that the liberalization of energy prices will attract investors. On the same theme, Spaolanse said he saw no reason why the state should keep allocating resources to badly managed SOEs.

Flexible human capital Pogonaru argued that Romania’s competitive advantage is the flexibility of its workforce, but that training could be significantly improved. “The government should focus more on vocational training, which is one of the key developers of Romania’s economy.” On the same theme, Weber added that Romania could become an “India of the EU,” as its human resources are suited to customer service, customer care and IT consultancy. The general manager of Schneider added that the expat community in Romania agrees that the country has people with good technical and learning skills.

He mentioned that Schneider Electric Romania had recently opened a new customer relations center for its IT division, hiring 45 people and providing support in 12 languages. Weber concluded that investors should investigate agriculture, tourism, oil and gas. The untapped hydro energy resources could also represent a safe investment. Romania is well positioned between the East and West and could become a serious trader between the two regions.

ovidiu.posirca@business-review.ro

www.business-review.ro Business Review | December 5 - 11, 201

12 INTERVIEW INTERVIEW

Room at the top Sonia Nastase, general manager at Howard Johnson Grand Plaza Hotel, gives Business Review her projections for the local five-star hotel industry and details the measures taken by the group to limit the fallout of the crisis.

CV Sonia Nastase September 2009 – general manager, Howard Johnson Grand Plaza 2005-2009 senior associate, Trend Hospitality 2003-2005 sales and marketing director, Howard Johnson Grand Plaza 1997-2003 assistant director of sales, Hilton Bucharest Education 2006 MBA, Bucharest Academy of Economic Studies ASE and HEC Montreal & University of Ottawa 1996 Bucharest Polytechnic University counteract the negative effects of the downturn on your activity?

Indeed the current economic downturn has reduced the budgets and this trend will continue in 2012. In order to counteract the effects of these measures we have employed greater flexibility and put the focus on identification and adaptation to the needs of our customers. We also kept costs under control and worked constantly to improve our products and services in order to maintain our hotel at the level of our customers’ expectations.

Courtesy of Howard Johnson Hotel

∫ ANDA SEBESI How is 2011 shaping up for the Romanian operations of Howard Johnson?

2011 has been a challenging year both for us and the whole Romanian hotel industry. It was a year when we had to continue the general mobilization of resources as in previous years and to “re-invent” some of the processes, attitudes and perceptions in order to come up trumps to face the current conditions of the local and international market. So our strategies for growth for 2011 focused in parallel on several areas: sales, operations and employees. We also focused on keeping our traditional customers satisfied and attracting new market segments (economic sectors that have not been as prominent so

far and emerging markets).

Last but not least, we invested in training programs for our employees, programs for the monitoring and evaluation of the quality of services we offer, and different re-decoration and renewal projects such as: re-accessorizing and the partial or total recovery of some design elements and facilities of rooms, the re-design of some public spaces like Centro Bar&Lounge and Avalon restaurant, among others.

What turnover have you posted so far and what are your expectations for the end of 2011?

Howard Johnson Grand Plaza Hotel posted a turnover of about EUR 7 million in the first ten months of 2011. It is a similar level to the financial results posted in

the same period of 2010. We expect a turnover of about EUR 8 million by the end of this year.

What is the hotel’s occupancy rate so far?

From January-November 2011 the Howard Johnson Grand Plaza hotel posted an average occupancy rate that was 2 percent higher than in the same period of last year. It was a moderate growth brought about by the summer months and weekends when the leisure segment depended on the international economic situation.

The current economic crisis has significantly reduced companies’ budgets, including those for business travel. To what extent has this affected Howard Johnson and what measures have you taken to

Which business line has the greatest weight in your turnover?

In general it is accommodation, followed by the food & beverage segment, which has about a 44 percent weight, out of which 50 percent is represented by events. But there are also moments when the weight of both business lines – accommodation and food &beverage – was similar.

How do you think Romania’s five-star hotel market will develop next year?

It is difficult to predict the evolution of the market considering the constantly changing economic context. Five-star hotels in Bucharest provide services for the business segment rather than leisure, and on this segment the availability is high while the competition is tight. Business tourism depends a lot on the macroeconomic environment and its attractiveness to multinational companies and other categories of investors. As a result, the more this environment recoups its stability and attractiveness, the more the hotels from our segment will benefit.

We also think that guests will continue to choose a hotel based on the price-quality ratio. It is an indicator from which all of those who continued to provide quality services in this period when the prices declined have won.

anda.sebesi@business-review.ro

www.business-review.ro Business Review | December 5 - 11, 201

CITY 13

CULTURAL EVENTS AGENDA CHRISTMAS CONCERTS Magic Gospel Pearls December 5 19.00, Bucharest National Theater The Magic Gospel Pearls ensemble will take audiences through a show exploring the origins of African-American music up until modern gospel.

Vienna Classic Christmas December 19 19.00, Palace Hall Cast: Don Giovanni - Peter Mattei; Il Commendatore - Kwangchul Youn; Donna Anna - Anna Netrebko

The Strauss Festival Orchestra Vienna will perform characteristic music of 19th century Imperial Vienna, and showcase the contagious rhythm of the waltzes, marches and polkas of Johann Strauss, Robert Stolz Emmerich Kalman and Franz Lehar. The orchestra will be accompanied by soprano Monika Mosser and the Pegani ballet with Beate Cramer and Andrej Milo, choreographed by Raffaela Pegani. Peter Guth will conduct.

Waiting for Christmas with Grigore Lese December 21 19.00, Radio Hall

CHARITY December 12 20.00 JW Marriott Grand Hotel Concordia Humanitarian Organization, a humanitarian, non-political and nonprofit organization, is organizing in partnership with The Grand a charity event called “Who saves one life saves the whole world.”

The event is designed as a traditional luxury auction conducted by Artmark. All the proceeds will go to children from the Concordia Humanitarian Organization. Going under the hammer will be luxury products from Frey Wille, Dunhill, Bang & Olufsen, Davidoff and Le Midi. Money raised from ticket sales – over 120 participants will be attending the event – will also be donated to Concordia.

Children from the Concordia will perform at the event, along with the Roses Orchestra, the Drummers, a folk dance ensemble and an instrumental folk music band.

TOY EXHIBITION ‘From Santa Frosty to Santa Clause’

Traditional Romanian musician Grigore Lese, along with organ player Marcel Costea and groups of peasant carol singers, will deliver a traditional Christmas performance. The vocal and instrumental show, which is meant to offer an alternative to festive Western pop music, includes traditional carols and songs celebrating Christmas themes. Many of the vocal pieces included in the event are part of a traditional musical genre given World Heritage status by UNESCO in 2009.

OPERA Don Giovanni December 7 The Bucharest Opera House will host a live, HD broadcast of Mozart’s opera Don Giovanni from the Milan Scala.

Conductor: Daniel Barenboim (pictured); Staging: Robert Carsen; Sets: Michael Levine; Costumes: Brigitte Reiffenstuel; Lights: Robert Carsen and Peter Van Praet; Choreography: Philippe Giraudeau

The National History Museum of Romania and the Toy Museum Association have put together an exhibition of collectable and historical toys. The exhibition brings together over 500 items, from the 20s to the 90s, grouped by themes: animals, arms, cars, electricpowered toys, musical toys, traditional toys, dolls, robots, trams and trains, rockets and space ships. Besides the items from the collection of the Toys Museum Association, the National History Museum is contributing items such as dolls, cars, teddy bears, toy horses, puppets, and vintage winter decorations.

The exhibition is open until January 4, Wednesday to Sunday, 9.00-17.00, at the National History Museum on 12 Calea Victoriei.

www.business-review.ro Business Review | December 5 - 11, 2011

14 WHOS WHO’S NEWS Anca Jurcovan has been promoted to managing associate at Tuca Zbarcea & Asociatii. She has contributed significantly to the firm’s competition/antitrust practice group and has supported the M&A department on complex antitrust and merger issues impacting on large domestic and international transactions.

For the past seven years, Jurcovan has successfully assisted well-known clients during the antitrust investigations conducted by the Romanian Competition Council and has been involved, on the side of both private and public bodies, in the most important state aid cases on the Romanian market.

Oana Gavrila has been promoted to managing associate at Tuca Zbarcea & Asociatii. As a pleading lawyer for the past seven years, she has advised the firm’s clients on a wide range of corporate/commercial disputes and tax related disputes. In particular, she has gained an impressive body of expertise in representing clients in complex contentious-administrative disputes, especially as regards the cancellation of administrative deeds connected to the award of concession agreements, public-private partnerships and public procurements.

Mihaela Maxim (Ivan) has been promoted to managing associate at Tuca Zbarcea & Asociatii. She has been a pleading lawyer for the past seven years, mainly in relation to commercial law disputes, intellectual property disputes, domestic commercial arbitration cases, as well as labor disputes. Maxim has particular experience in representing clients in complex administrative law cases, especially as regards the annulment of certain deeds issued by administrative, fiscal-administrative and Customs authorities.

Oana Cornescu has been promoted to managing asso-

ISSN No. 1453 - 729X

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 ciate at Tuca Zbarcea & Asociatii. She has over twelve years of experience in legal practice and government services, for seven of which she was legal advisor to the Romanian Ministry of Public Finances. Cornescu mainly specializes in commercial disputes arising from Romanian commercial law relations and domestic/international arbitration (according to the ICC, UNCITRAL and ICSID Rules). In addition, she has represented the firm’s clients in various contentious administrative and fiscal disputes.

Raluca Misu has been promoted to managing associate at Tuca Zbarcea & Asociatii. She has more than seven years of experience in real estate, property and construction matters, having advised the firm’s clients in this sector on a wide range of real estate transactions and large-scale property development projects, including related financing issues. Other major areas of practice include corporate/commercial, mergers/acquisitions and banking/finance (the restructuring of debts resulting from commercial operations).

Jack Zhang has recently joined KPMG in Romania as senior manager with the firm’s China practice team. He has worked for over 13 years in advisory, 11 with KPMG in China and KPMG in Australia. During his career, Zhang has coordinated a wide range of auditing, IPO and due diligence projects in mainland China, Hong Kong and Australia, with a focus on telecommunications, energy, healthcare, airlines and manufacturers. KPMG’s China practice team aims to support Chinese companies seeking to invest or operate in Romania.

Costas Kapetanopoulos who has been Cosmote Romania’s marketing & communication director until now, is leaving the firm to explore new career opportunities.

He joined Cosmote Roma-

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

nia in September 2005. His duties will temporarily be assumed by Panos Makris, chief commercial officer.

Sorana Pintilie has been promoted to senior manager, as coordinator of the payroll & HR Services department of Mazars Romania. She holds a master’s degree in HR management from the Academy of Economic Studies in Bucharest and is an HR inspector certified by the Ministry of Labor. Working for Mazars since 1998, Pintilie has over 13 years of experience in payroll calculation and personnel administration, as well as taxation of expatriates working in Romania. As certified trainer, she has devised and delivered various seminars and training sessions on labor law and social contributions.

Mirela Berechet

Romanian and international taxation.

She also spent more than four years in the accounting field. Before joining Mazars, Gheorghe worked in the tax department of KPMG Romania.

Simona Maria Milos has been appointed partner of RVA Insolvency Specialists SPRL. She is a member of the Bucharest Bar, an International Bar Association, UNPIR and INSOL EUROPE. Milos began her career as a lawyer in 1996 specializing in commercial law and insolvency. Her client portfolio includes Banca Romana pentru Dezvoltare GSG, Bancpost SA, Alpha Bank, Piraeus Bank, the Finance Ministry, Romgaz and Distrigaz SA. She joined the company in 2000 and in 2006 became a founding partner of the SMDA law firm.

Stefan Dumitru

has been promoted to accounting manager, in the outsourcing department of Mazars Romania. A graduate of the Faculty of Economic and Administrative Studies and member of the CECCAR, she has eight years’ experience in the accounting and advisory field for multinational companies (trade of goods, pharmaceutical services, industrial production and food production services – cable TV distribution, IT services, construction services), such as monthly, quarterly and yearly, closing process supervision, periodical and ad-hoc IFRS report preparation and supervision, implementation projects and customization of various accounting software.

has been appointed managing partner of RVA Insolvency Specialists SPRL. He is a member of the Bucharest Bar, International Bar Association and UNPIR. A graduate of the Law Faculty, he began his career in 2004 working for a local law firm. The same year, Dumitru joined RVA Insolvency Specialists. In 2006 he became a founding partner of the SMDA law firm. His client list includes Romenergo, Euroinvest Intermed – Grand Arena Shopping Mall, Piraeus Bank, Banca Romana pentru Dezvoltare GSG, Raiffeisen Bank and SIG.

Ioana Gheorghe

Alexander Nekolar

has been promoted to manager in the tax advisory department of Mazars Romania. A graduate of the Faculty of Accounting and Management Information Systems (ASE), she also holds a master’s degree in Business Administration. She is a member of CCFR and is currently attending the ACCA certificate stage. Gheorghe has five years of experience in advising local and multinational companies on transfer pricing (automotive, wood and furniture, pharmaceuticals, retail, agriculture, services, aircraft industry), and

is the new CEO of Porsche Finance Group, replacing Kurt Leitner, who after four years in Romania is being transferred to the Porsche Group in Greece. Nekolar previously served as CFO and has been in Romania since 2008. Before that he spent three years working for Porsche Bank Group in Vienna, coordinating the financial, legal, IT, and HR departments of Europcar.

Nekolar has a PhD in Economic Sciences from the Vienna University of Economics.

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