The Romanian Market for Sweet Peppers

Target Market Confirmation Study

Conducted by CAMIB for USAID/CNFA’s

Agribusiness Development Project

April 2006

1

CONTENTS

Key Observations and Recommendations

Background

Production Trends

Import trends

Market Access

Information on on Companies Interviewed

Supermarkets

Wholesalers

Sources of Supply and Seasonality

Seasonality

Major Clients and Markets

Produce Requirements and Preferences

Size

Packaging

Logo/Brand

Quality Requirements

Varieties and Trends

Marketing and Quality Standards

Prices

Major Competitors

Moldovan Produce: BUYER’S Perceptions and Recomendations

List of Reference Materials

Annexes

Imports of sweet pepper to Romania by major suppliers, 2001-2005

TABLES AND FIGURES

Table 1. Major European exporters to Romania, 2001-2005 MT

Table 2. The seasonality of sweet pepper supply to Romania

Table 3. Packaging options for sweet pepper

Table 4. Import prices for sweet pepper, registered at the Customs, 2001-2005

Table 5. Low Season Prices for Sweet Peppers in Romania

Table 6. Romanian Import Minimum and MaximumPrices (by Source) 2005 – March 2006

Figure 1: Romanian sweet pepper imports from Moldova...... 4

Figure 2. Romanian sweet pepper exports to Moldova...... 5

Figure 3: Sweet Pepper Sizing Classification...... 9

Key Observations and Recommendations

The key observations resulting from this study are that both wholesale outlets and supermarkets in Romania import sweet peppers. They are importing from the Netherlands, Spain, Israel, Italy, Turkey, Syria, and Morocco, and the main factors determining significant import from these countries are:

  • domestic production cannot meet the market demand, especially the off-season:
  • price is more competitive in comparison with domestic and other foreign suppliers prices;
  • consistency of these suppliers in quality and deliveries;
  • proper packaging that preserves the quality during transportation.

Many of the interview participants did not have much experience working with sweet peppers imported from the Republic of Moldova. A few respondents expressed their interest in importing sweet pepper from Moldova, provided the suppliers prepare offers with the indication of the following parameters:

  • Price
  • Quantity
  • Quality
  • Assortment
  • The point of destination

This implies that suppliers will have to meet the following requirements:

  • Delivery of specified quantity of product;
  • Consistency in supply
  • Attractive price and consistent quality

Starting from January 2007 when Romania will become a full member of the EU, Moldovan sweet pepper suppliers will have to meet the requirements of the European Union.

The study revealed that in order to export sweet peppers from Moldova to Romania the following documents should be submitted at the Romanian border:

  1. Contract on the delivery of goods;
  2. Freight documents, official acts accompanying the goods and containing information regarding the purpose of trip and the characteristics of goods;
  3. Commercial documents – official acts regarding the costs of transported goods;
  4. License
  5. Authorizations
  6. Conformity certificates
  7. Origin certificates
  8. Repatriation declaration
  9. Expertise acts

The Romanian retail market is growing. The risks and constraints on the market are classified by PricewaterhouseCoopers (PwC) on the basis of the Survey conducted in Romania in 2005, as insignificant. At the same time the sales volume per capita in Romania is USD 630 as opposed to USD 2000 per capita in Hungary, CzechRepublic or Poland.

There were 5 hypermarkets, 80 supermarkets, and 30 discount shops registered in Romania in 2004. Today the most important players on the market are as follows:

  • Metro, owing 23 cash and carry outlets, whose net sales acounted to € 1,039 bln. Metro also owes seven Praktiker bricolaj shops, which have a sales volume of about € 62 mln in 2005;
  • Carrefour, owing 4 hypermarkets, the net sales of which accounted to € 222 mln. in 2004;
  • Rewe, owing 15 supermarkets;
  • Billa and four supermarkets XXL Mega Discount.

Background

Production Trends

In 2005 world aggregated pepper production (sweet and hot peppers) was 25 million MT. In 2005 China was the largest producer of peppers (12.5 million MT), accounting for 50% of world production. Mexico (1.85 million MT), and Turkey (1.7 million MT) each accounted for another 14.5% of global production, followed by Spain (0.95 million MT) - 3.8% and the United States (0.98 million MT)- 3.9%. Other important producing countries included: Italy, France, Greece, Israel, Hungary, Bulgaria, Romania, and the former Yugoslavia, as well as a great many African, Asian, and Central and South American countries (Source: FAOSTATS).

Romanian vegetable production, including sweet peppers, is carried out in the open field and under glass or plastic. In the last 15 years sweet pepper and other vegetable production decreased significantly. The volume of the greenhouse sweet pepper production was 200,000 tons in 1991, while in 2004 it was 80,000 tons due to high energy prices (FAO, Final report on greenhouse crops in the SEE countries, 2004).

Import trends

According to the Eurostat statistics, Hungary, the Netherlands, and, to a lesser extent, Spain, Italy, Greece, and Poland have been the major Romanian importers over the last five years.

Table 1. Major European exporters to Romania, 2001-2005 MT

PARTNER / PERIOD / GERMANY / SPAIN / FRANCE / HUNGARY / ITALY / NETHER -
LANDS / POLAND
2001 / VolumeMT / 35 / 3 / 21 / 0.50 / 209
2002 / VolumeMT / 103 / 36 / 279
2003 / VolumeMT / 48 / 82 / 313
2004 / VolumeMT / 1 / 2 / 12 / 7 / 30 / 218
2005 / Volume, t / 21 / 88 / 23 / 565 / 80 / 476 / 67.60

Source: Eurostat Comext

According to the State Customs Department of the Republic of Moldova, sweet pepper exports to Romania increased by 69% in 2005 compared to 2004, reaching 81 tons, and 56% more in value terms (USD18.2 thousand)). The average export prices in 2004-2005 were in the range of USD0.22-0.23/kg. See Figure 1 below.

Figure 1: Romanian sweet pepper imports from Moldova

Source: the State Customs Department, Republic of Moldova

Small volumes of Romanian sweet peppers (c.15MT in 2004 and 22MT in 2005) are exported to Moldova. See Figure 2 below.

Figure 2. Romanian sweet pepper exports to Moldova

Source: the State Customs Department, Republic of Moldova

Market Access

Romanian regulations require that local importers obtain prior approval from phytosanitary officials for fresh fruits and vegetables.

When/ifRomania joins the EU in 2007, sweet peppers produced in Moldova and exported to Romania will attract a 0% tariff, under the EU’s GSP+ system (Generalised System of Preference Plus System), a trade agreement established between the EU and Moldova.

At present Moldova has 0% tariff for benefiting from the Trade Agreement between Moldova and Romania which is valid to January 2007.

Information on on Companies Interviewed[1]

Supermarkets

  1. Cora SRL The Cora brand is becoming increasingly recognized internationally. There are 81 Cora hypermarkets in France, Romania, Hungary, Belgium, and Luxembourg, and the group is continuously expanding. Corastarted in 2003 as the biggest hypermarket in Bucharest. Cora supermarkets’ annual turnover amounts to €4.8 billion, accounting for about 50% of the total group’s turnover (€ 10 bln. in 2004).
  2. Billa SRL In Romania the Eurobilla group is represented by the network of Bila supermarkets. This network is the leader in food and nonfood retail trade in Romania. Since February 1999, when the first Billa supermarket was opened in Bucharest, Billa aimed to meet all of its consumers’ needs. Using modern technologies and effective management, Billa succeeds in ensuring for itself a big market share and a permanent development trend. At present Billa’s network has 18 branches all over Romania. Every supermarket is about 1000-2400 square meters. Billa network is a part of the German concern REWE, that comprises about 1000 supermarkets in Austria and, through Eurobilla, 300 supermarkets in Italy, Czech Republic, Slovakia, Romania, Croatia, Ukraine, Bulgaria, and Russia.
  3. Univers'all Univers’all is the brand name of the first exclusively national Romanian supermarket network. The first supermarket opened in 2002. Univers’all is a relatively new player in retail trade, offering a big assortment of food and nonfood products in large commercial areas. Univers’all network has 6 supermarkets all over Romania and a hypermarket in Bucharest.
  4. Kaufland Romania SCS Kaufland Romania SCS is a Romanian JSC with headquarters in Bucharest. The Kaufland concern is one of the successful german retail firms. The Kaufland concern is represented by 600 supermarkets in Germany, CzechRepublic, Slovakia, Poland, Croatia, and Romania. These selfservice supermarkets have a total commercial surface of between 2 500 sq.m. and 12000 sq.m. and are known as „Kaufland“, "KaufMarkt“ and „Handelshof“.
  5. Superkarket Mara The Supermarket Mara is the first supermarket in Focsani, Vrancea region. It was created in 1999. The second supermarket opened in 2004. It is a part of the most powerful romanian group - Rosca Grup.

Wholesalers

  1. METRO CASH&CARRY Metro cash&carry can be found in Europe, as well as in Asia and Africa in such countries as Austria, Belgium, Bulgaria, Czech Republic, China, Denmark, Switzerland, France, Germany, Greece, India, Italy, Japan, Luxembourg, Great Britain, Morocco, the Netherlands, Poland, Romania, Russia, Slovakia, Spain, Turkey, Hugary, Ukraine, and Vietnam. It was the first international retailer that entered the Romanian market (in 1996). The initial plans were to create only 10 cash & carry shops, but at the end of 2005 the network expanded to 23 shops, 4 of which were located in Bucharest with an annual turnover of more than € 800 million.
  1. SELGROS CASH&CARRY There are 38 cash & carry supermakets in Germany and 9 in Poland. The Selgros entered the Romanian market in 2001 by opening its first supermarket in Brasov. Then three other supermarkets opened in Bucharest, Targu Mures (1), Constanta and Timisoara (2). Selgros supermarket in Oradea opened in spring 2005, another one in Cluj-Napoca - in July 2005, followed by one in Arad in August 2005.
  1. ALFREDO TRADING COMPANY Alfredo Trading Company is a Romanian company created in 1992. Its main activity is related to foodstuff import and distribution. The headquarters is situated in Bucharest, but storage and warehouses are located in 5 locations of regional importance. The key departments are Acquisitions, Logistics, and Marketing-Sales. These departments serve the two company divisions: fresh and frozen foodstuff. The Alfredo company owns its brands, which are: “Alfredo” , “Del Gusto” and “Alfresh”.
  1. INTERFRUCT SRL The activity area of the company is fresh fruits and vegetables trade, import, and distribution. The company offers its clients a large assortment of the highest quality fresh fruits and vegetables (over 120 items) every season. They are either produced locally or imported at a good price. The local vegetable products are picked up the same morning they are delivered to consumers. The main clients of the company are supermarkets, medium and small food shops, hotels and restaurants in Bucharest and neighboring areas. The distribution destinations are the following cities: Arad, Baia Mare, Bistrita, Braila, Bucuresti, Caransebes, Cluj, Constanta, Craiova, Dej, Deva, Galati, Hunedoara, Iasi, Lugoj, Oradea, Petrosani, Ploiesti, Resita, Sf. Gheorghe, Satu Mare, Sighetu Marmatiei, Sinnicolau Mare, Timisoara, Turnu Severin, Zalau.
  1. ABBARA TRADING CO The company imports and distributes fresh fruits and vegetables. The products are delivered to all the cities in Romania.

Sources of Supply and Seasonality

The supermarkets buy local sweet pepper produce from wholesalers during the summer season from June-October. It is very convenient for supermarkets and their clients because these peppers are picked up in the morning and are delivered to the supermarkets in a few hours. The Mara Supermarket is supplied by Alfredo Trading Company throughout the season. During the off season period (November-June) the supermarkets Cora SRL, Billa SRL, Univers'all, Kaufland Romania SCS import sweet peppers from the Netherlands, Spain, Israel, Turkey, Syria and Jordan. The supermarkets bear all the import costs (transportation, customs clearance, storing etc). The sweet pepper in the surveyed supermarkets are of different origin, mainly: Turkey (833 tons), Jordan (67 tons), Spain (55 tons), the Netherlands, Italy, Syria, and Morocco.

Major sources of imports varied by individual importer in the period 2005 – March 2006. All respondents claimed that Syria was the leading exporter of sweet pepper to Romanian supermarkets, accounting for about 50% oftotal imports. The second largest source was the Netherlands delivering about 30-60% of sweet pepper – again the percentage depending on importer.Other sources of imports, were Turkey supplying 20-50% of volumes, depending on the importer, Israel (10-25%), Spain (10-20%), Moldova (10% - sixth place), Morocco (5%), and Italy (3-5%).

Seasonality

Table 2. The seasonality of sweet pepper supply to Romania
J / F / M / A / M / J / J / A / S / O / N / D
Romania
Moldova
The Netherlands
Turkey
Syria
Spain
Israel
Morocco
Italy
Source: Respondents data

During theRomania production season, supermarkets sell local sweet pepper production and small quantities of product imported from Moldova. In the off season period supermarkets and wholesalers sell imported sweet peppers and those grown in green houses, which is 7% of total production. Over the last 15 years vegetable production in Romania decreased considerably. The volume of the greenhouse sweet pepper production was 200,000 tons in 1991, while in 2004 it was only 80,000 tons. The total area under greenhouses in Romania is 450 ha. The major crops grown in greenhouses are tomatoes and cucumbers. Expenses on electricity account for 65% of the cost of production. (FAO, Final report on greenhouse crops in the SEE countries, 2004). Both wholesalers and supermarkets sell this production only in Romania and do not export it.

Major Clients and Markets

It is important to note that 33% of Romanian population prefer to go shopping to hypermarkets, supermarkets, cash and carry, and discount shops. Only 10% of Bucharest inhabitants go shopping to traditional shops, while 57% adhere to both the old and the new trade concept. (PricewaterhouseCoopers (PwC) Survey, 2005, Modern consumers tendency is to go shopping once a week or more often. It is expected that the competition among retail chains will increase, taking into consideration new actors entering the market. Some international networks have announced their intentions to access the Romanian market this year: Rewe, with its shops Penny Market and Tengelmann with Plus network, and Schwarz group with Kaufland hypermarkets. The main reasons for consumption growth are the average wage increase, tax reduction, and consumer credits growth.

Wholesalers supply products mainly to supermarket chains. Besides supermarkets there are other clients such as medium and small food shops, hotels and restaurans all over the country.

According to the survey, the majority of the respondents have a network of branch offices throughout the country and have their headquerters in Bucharest.

The respondents indicated that both wholesalers and supermarkets (except “Supermarket Mara”) import sweet peppers.

In Romania the market leaders in the imported sweet pepper trade are the cash & carry stores, such as “Metro Cash & Carry”, “Selgros Cash & Carry ”, “Alfredo Trading Company”, “Interfruct SRL”.

As to supermarkets, their network chains are more numerous and the leaders in the pepper trade are as follows: “Carrefour”, “Kaufland”, “Cora”, “Billa”, “Gima”, “La Fourmi“, “Univers’All”, “Artima”.

Produce Requirements and Preferences

Size

Sweet peppers imported from different countries have different size classifications:

Figure 3: Sweet Pepper Sizing Classification

The Netherlands / Spain / Israel / Turkey, Syria
-90/+
-80/+
-70/+
-60/+ / -GG
-G
-M / -XL
-L
-M
-S / -Green ES
-Red ES
-Red MA
-Green MA

Romainian consumers prefer sweet peppers with the dimensions 80/+-90/+ from the Netherlands, G and GG from Spain, L and XL from Israel and Green ES – Red ES from Turkey and Syria.

Packaging

Imported sweet peppers are packaged in wooden, plastic or carton boxes of 3 and 5 kg.

Neither supermarkets nor wholesalers accept sweet peppers in bulk.

Table 3. Packaging options for sweet pepper

Package type / Specifications / Picture
Carton / Bell Peppers are usually packed in standard 5 kg cartons (30x40x19 cm) /
Wooden /

Retail traders prefer to buy sweet pepper in bulk and then pack it into individual retail packs in small polyethylene bags, or on foam plastic palettes over-wrapped with plastic film.

Logo/Brand

There was no preference to any particular sweet pepper logo identified during the survey.

Quality Requirements

The consumers demand sweet peppers of high quality. The production must be accompanied by all types of required certificates (quality, origin etc).

Varieties and Trends

According to this survey, Romanian traders classify imported sweet pepper by color and origin (but not by variety).

The samples of consumer packs in Romanian supermarkets are as follows:

Red sweet peppers
/ Sweet pepper semaphore collection

Yellow sweet peppers
/ Green sweet peppers

The most popular colors of sweet pepper imported from the Netherlands, Spain, Israel, and Italy are:

-Red

-Green

-Yellow

-Orange

The most popular colors of sweet pepper imported from Turkey, Syria and Morocco are:

-Red

-Green

According to the respondents, the pepper imported from the Republic of Moldova is green.

Sweet pepper varieties grown in Romania are as follows:

-Galben timpuriu,

-Galben de Banat,

-Galben uriaş,

-Uria; de California,

-Românesc,

-Calincov verde,

-Bianca

Romanian consumers prefer red sweet peppers. Green and orange sweet peppers are bought in insignificant quantities; in particular, the green ones imported from Moldova create an impression of being unripe.

Marketing and Quality Standards

As soon as Romania becomes a member of the EU Moldovan exporters will have to follow international requirements, such as marketing standards for quality and labeling of fruit and vegetables in the basic regulation EC 2200/96 (28 October 1996). The type and maximum levels for pesticide residues in certain products of plant origin, including fruit and vegetables, are laid down in Council Directive 90/642/EEC. The EU standards for organic food production and labeling are laid down in Council Regulation (EEC) 2092/91.

Prices

The price data from the official Customs statistics shows that the average import price for sweet peppersfluctuates. There was a significantly reduction in prices from all sources during 2005. The Netherlands and France charge more than one Euro per kg, other contries in Europe such as Italy, Spain, and Greece have cheaper prices (Euro 0.21- 0.50), which made the average price amount to Euro 1.08 – 1.64 in 2001-2004 and Euro 0.70 in 2005.