Eco food market still too ‘green’

Newsroom 10/06/2008 | 16:00

At European Union level, the market of ecological products totalled EUR 5.2 billion last year, having surged by 15 percent compared to 2006. Romania is a far cry from consumers such as Denmark, Switzerland, Austria and Germany, where a longer tradition, in-depth information on nutrition and higher incomes lead to greater consumption. Instead, it ranks among the top exporters of eco food. Romanian exports of eco products reached EUR 80 million last year, having soared by 60 percent compared to the previous year when their overall value was EUR 50 million, as estimated by the Ministry of Agriculture.
Producers of ecological products in Romania can choose to mark their products with the national logo “ae” (standing for “ecological agriculture”), currently used by 64 producers. However, from January 1, 2009, producers will be compelled to use the communitarian logo for ecological products. Given that the EU logo resembles the logo of a private local company, they may obtain a respite until 2010, according to Teodora Aldescu, advisor in the Ministry of Agriculture.

New eco food stores open as more people go green
At this point, there are just a few stores fitting this profile in Romania, including Naturalia, Leacul and Pukka Food in Bucharest, a store in Timisoara and one in Sibiu.
The Naturalia stores owned by Dr Pavel Chirila, three of which are located in Bucharest, and one in the Voluntari area close to Bucharest (and next to the Naturalia Medical Center), were opened since “We were struck by the high number of illnesses caused by conventional food products, products with additives, refined or hyper-processed,” he tells Business Review. Chirila says setting up a store on a surface of about 25-30 sqm costs around EUR 15,000 and the rent in a central area amounts to some EUR 1,000 per month. “We plan to open other stores as well but it is difficult in other cities since, at least in the beginning, direct involvement is needed and producers of eco food find it easier to send their products to Bucharest than to other cities in the country.”
Natura Land, a supplier of ecological products, has announced plans to open a supermarket and a restaurant with organic foods. Radu Panait, general manager of Natura Land, tells Business Review the venue will be somewhere in the center of the city and will most likely open at the end of summer. The supermarket will cover 100-150 sqm and will have on offer around 1,000 dry and fresh ecological and natural products. For an investment of roughly EUR 100,000 in interior design, equipment and an internal production lab for ecological bakery and pastry products, the supermarket will fill a void in the local market which is still less developed than in other European countries. The supermarket will also have a small cafeteria and in the spring of 2009, the veggie restaurant will open its doors. “I will start with the supermarket cafeteria, see how that goes and then in spring 2009 I will also open the restaurant,” says Panait. A restaurant of this kind would be a first on the Romanian market but Panait is optimistic since he says “there are consumers, as the trend is to eat healthier.”
In 2007, Natura Land posted a turnover of EUR 1 million and this year a 30 percent growth is foreseen. At this point, Natura Land is a supplier for most hypermarkets and supermarkets that operate locally such as Carrefour, Real, Auchan, Metro, La Fourmi, Mega Image, Gima, Nic, Angst, Economat, Cristim and Artima. “I will introduce even more products in hypermarkets and supermarkets because there will be more of them that will wish to expand their offer,” says Panait. In addition, Natura Land caters for the HORECA industry (JW Marriott, Novotel, Ibis, Crowne Plaza, Howard Johnson, Ana Pan stores). Products are either imported or grown locally. Panait says 10-15 percent of the population are consumers of eco-food, but not exclusively. “We want to take this ratio up to 50 percent and also address the middle class, not only those with fat salaries and managerial positions,” he adds. Currently, the organic food market is far below 1 percent of the total food market, while in European markets “it exceeded 15 percent long ago.” “We foresee in the future at least a 50 percent increase year on year so that in about three years, it will represent approximately 2 percent of food products,” says Ionut Teglas, general manager of the Leacul store, owned by businessman Dan Raileanu.
He says greater information on this subject can do the trick and boost sales. “If everybody was aware that the active substances in a bio product are eight times higher, while the price is at most double the price of a standard product, then the perception of the price would be shaped by other indicators,” says Teglas.
With an initial investment of EUR 50,000 for a store of 75 sqm, the Leacul store (a name which is the Romanian equivalent for ‘cure' or ‘medicine') is a destination for ‘eco-foodies.' It opened three months ago and has so far posted a turnover of RON 250,000 but this is expected to double by the end of the year. Teglas tells Business Review three other new locations will open, including one in a supermarket of 200 sqm, which will appear this year under the brand. “We will also set up a franchise system to consolidate the ‘Leacul' brand next year.” With more than 1,000 products – cheeses, vegetables, fruit, sweets, baby food, spices, teas, juices, sauces, bread, semi-cooked food, honey and pasta – brought from local distributors (20 percent) and external ones (80 percent, from brands such as Sonnentor, Biotta and Weleda), Leacul will soon enrich its offer with prepared soups, ice-cream, more vegetables and cosmetic products.
“What is heartening is that we have customers that are used to consuming this type of products on European markets, some of whom are from cities other than Bucharest. Others see it as a trend. A third category is occasional consumers who introduce in their diet about 5-10 percent organic products,” says Teglas. Eco-foodies are “pioneers, leaders” in nutrition, as Ghinescu, co-owner of the Pukka Food store, bills them. These are people with incomes above the average, given that they have to take out of their pocket between 30 and 100 percent more money than they would pay for a conventional product. “When they become available in Romania, eco meat products will probably be 200-300 percent more expensive than standard ones,” says Ghinescu.
Moreover, the eco-food consumer has higher education, nutrition knowledge above average, and is preoccupied with health, theirs and their family's too. “People often embrace the green values through understanding the impact that contemporary lifestyle has on the environment. They dare experience new things and are non-conformist,” she says. Pukka Food was opened six weeks ago by associates Bogdana Ghinescu and Ileana Muntean, following an investment of EUR 90,000 which went into a space of around 40 sqm. It collaborates with internal eco food suppliers such as Cortina for eggs, the Eminescu Trust for apple juice, Naturalia for bread and Asi Nature and LaDorna for dairy products.
The store also has European suppliers such as Green & Black's from where it gets organic chocolate, and LaSelva, supplying it with olive oil and Italian specialties. Baby food is bought from Organix. “Dairy products, bakery products, honey, sweets, eggs and cereals are in great demand,” says Ghinescu, adding that the store will soon sell fresh food and vegetables and meat that are certified accordingly.
Given that this is a young market, the offer of eco food is generally still non- diversified and information on this subject is scarce. “There are few ecological products that have the necessary power to sustain advertising campaigns with mass impact,” says Ghinescu. Moreover, there is still not the fierce competition that exists in FMCG, but rather competitors complement each other and fill voids in the market.
Ghinescu says she has witnessed firsthand growth on developed markets such as Great Britain where over the last five years there was between 12-15 percent growth year on year on this segment. Another example of a fast-growing market is the United States where there was a 20 percent boost annually over the last ten years. Having lived for a while in England, Ghinescu decided to open this business together with her associate, Muntean, especially as they have small children and are keen to give them the right nutrition. Even countries in the region such as Poland and the Czech Republic have a more mature market with which Romania cannot compete.

Competition from hypermarkets does not pose threat
Large players such as hypermarkets and supermarkets have pumped up their offer with eco food but store owners do not fear the potentially dangerous competition that they pose to their business. “Hypermarkets only have reserved ‘shelves' for eco products, whereas we have ‘gondolas' reserved for these products, so our offer is more diversified,” says Teglas. Moving on to another level, customer interaction, which is almost non-existent in hypermarkets and is reduced in most cases to information on where products are placed, is another strength of a specialized store. In specialized stores, one can gather information on several levels such as general info on what bio products are or details on their tastes, and how their consumption can improve your health. “Each of them has their own cards up their sleeve but I don't really see a direct competition between the hypermarket and the eco store. It all has to do with the communication applied by each,” says Teglas.
Real Romania pledges to diversify its range of bio products “at the same pace as the demand for this segment of products.” Compared with Real stores in Germany, which have 900 products on sale, here the offer is still low, says Adriana Pita, head of corporate communication & PR at Real Romania. Eco food sales in Carrefour Romania are “negligible,” says Andreea Mihai, marketing manager, with the most popular eco food items being dairy and eggs.
She says that there remain barriers in the way of the development of this market such as the still low-scale production, a reduced range of products, higher prices (up to 150 percent more) than for standard products, low level of consumer information and low promotion level, but there is great potential in the medium and long term.

By Otilia Haraga

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