1. Romania is heading towards an annual growth of 4% in 2016. What are the prospects for growth for Caroli Foods Group in 2016 and what are the prospects for 2017?
In 2016, we continued to consolidate our leadership and growth in the market, following our ambition to continuously respond to our consumers’ needs and thus remain their first choice. Our growth for this year was sustained by leveraging key market trends and context. A lower VAT rate and the economic context brought an increase in local consumption, that Caroli Foods Group addressed by customizing offers accordingly. Moreover, our studies showed that Romanian consumers are increasingly concerned with their wellbeing, so they take a more careful look at quality recipes and natural ingredients. We had anticipated this trend a long time ago; as a result, our product development strategy included a strong focus on quality products that came ahead of the market. Our permanent commitment is to deliver the best products at the best prices and we do this by continuous improvement and investments in our production process. As a result, our latest product category launch, EXTRA range under Caroli brand, with more than 80% meat, generated double digit growth in the first half of this year and strongly sustained our growth. Another milestone of this year was the launch of a new range of products with low fat content under Sissi brand. For 2017, we will continue what we have been building in the previous years and we will come up with products and strategies in order to satisfy consumers’ needs. In this way, Caroli aims to offer a great experience to the consumers.
2. The market in which Caroli Foods Group conducts its business has been the subject of one main challenge and opportunity in 2016: the lowering of the VAT rate to a historically low level for food. What was the effect of this factor on your business?
The lowering of the VAT rate generated an increase in consumers’ consumption that was also reflected into our business, but one very important and impactful effect was upgrading the consumer’s choice. The change will bring a real revolution in the market as it generated price reductions of around 10%. Now consumers can choose the products that fit their lifestyle and their wellbeing concerns. We are proud to have built not only a strong business in Romania, but to have helped build the market, as well. 2016 saw a decrease in black market activity and also an increase in loyal competition.
3. Do you think these factors will have impact beyond 2016? Please detail.
Romania was among the countries with the highest increases in the total retail trade volume in September, growing by 9.7 percent compared with the same month of 2015. We have strong reasons to anticipate a continuous growth of 5% and consolidation also in the following years. On top of market conditions, healthier nutrition choices and a balanced lifestyle are on a strong upward trend. The new milestone in this respect will be a responsible consumer, that chooses based on brand values and premium benefits.
4. In 2015, Caroli Foods Group’s turnover almost reached EUR 100 million. Is this an important milestone for the Romanian market and for Caroli Foods Group?
Reaching the 100 million in turnover is, indeed, a milestone in our development. Our positive business growth confirms our leadership position on the market. Going beyond this milestone, this growth brings a new responsibility as market leader and a new challenge for Caroli Foods Group to continue to innovate and develop quality products, to both fit the consumers’ lifestyle and help grow the local market.
5. What investments have you made in 2016 and what do you plan for 2017? What is the determinant factor for investing more in Romania (low financing rates, trust in the economy, etc.)?
In 2016, we’ve invested around 4 million euros in developing new products such as sliced and recipes formulation, but also into our logistic network and supply chain development. For 2017, we are budgeting to double the amount in order to strengthen our mission to remain the consumers’ preferred choice and in order to continue setting new market standards for quality products.
6. Within your group, which business line performed better than expected (and why) and which business line performed worse than expected (and why)?
Overall, all our business lines performed very well. Some of the more established categories (such as Sausages or Specialties) had a spectacular growth of more than 20%. Moreover, new entries such as the Sliced category performed with a promising growth.
Compared with the same period last year, our company has also experienced an increase of 25% in Modern Trade network. This operational increase is due to internal factors, such as offering consistency in products quality, as well as to external factors such as increasing the minimum wage, lowering of the VAT to 9% and growth of the processed meat market.
One of the underlying factors of these growth rates is the strong level of trust in Caroli Foods brand. Our tradition of over 20 years in the market, with a strong commitment for quality products, has sustained this growth throughout the years. We will continue to develop our business strategy in order to reward our consumers for their trust.
The financial outcome for this year comes as a result of the constant effort made by Caroli Foods Group teams across the country to improve the offer of existing products, but also in order to offer a great experience to the consumers with the launch of the new products.
7. What are the major challenges and opportunities in 2017 for Caroli Foods Group? What about for the Romanian market as a whole?
The major challenge we’re facing and the challenge that a lot of the companies are facing locally is access to qualified workforce. It’s becoming more and more challenging for us to find skilled workers and we are putting all our efforts into that direction. The lack of specialized people, a problem economists are referring to as a skills mismatch, has become a growing problem for our economy in big and small firms alike. We believe the government should work hand in hand with associations to find a way of attracting work force in Romania.
8. Do you plan any mergers or acquisitions in 2017? Do you foresee any major mergers or acquisitions taking place on the market in 2017?
As an active and dynamic player on the market, we are always open to new opportunities for growth. We have quite a strong history in M&As in the processed meat business in Romania started by acquiring Gourmet brand in 2001, followed by the acquisition of Maestro (Transylvania market leader) in 2006 and the latest by concluding the joint-venture with Tabco Campofrio in 2010. Therefore, if we believe there is an opportunity in doing an M&A which is in line with our strategy, then we will chase it.