how could Traditional consumption Stimulate the bakery industry?
10.4 Diversification and competition: Two key studies
The Bread Factory Dobrogea SA Constanta was privatized in 1995. The shareholders of the company were the association of employees (96 per cent) and individuals who bought shares by public bid. A first step taken after privatization table 10.2 Bread production, on a monthly basis, 2000–2003 (in thousands
of tons)
year Jan. Feb. Mar. apr. May June July aug. Sept. oct. nov. Dec.
2000 142.7 142.7 186.8 145.6 145.8 146.8 147.0 147.0 156.0 155.6 153.4 150.9 2001 149.7 148.5 153.8 135.1 139.1 138.3 138.9 138.9 136.7 137.8 134.9 132.3 2002 130.6 129.1 131.3 131.0 129.8 129.5 132.8 132.8 130.6 132.4 130.3 130.2 2003 128.4 128.1 131.4 131.4 132.7 132.2 134.5 133.8 133.6 135.6 313.2 130.7 Source: Romania’s Statistical Yearbook (2003 and 2004), National Institute for Statistics.
table 10.3 Imports of milling and bakery products, by countries of origin, 2002–2004 (in millions of euros)
years total austria Belgium France Germany Italy netherlands Spain Milling
& baking products
2002 9.9 1.0 0.3 0.7 3.8 0.1 2.7 0.4
2003 9.0 0.3 0.2 1.0 2.5 0.6 2.7 1.1
2004 8.2 0.3 0.2 0.5 1.8 0.7 3.1 0.9
Source: Romania’s Statistical Yearbook (2003 and 2004), National Institute for Statistics.
was the restructuring of production and personnel, and investments worth $12 million were made.
The factory in Constanta has two mills with a total milling capacity of 520 tons/
day. These mills were modernized first in 1994, then again in 2000, by purchasing advanced milling technology, with the Buhler trademark. The milling capacity of the factory is still higher, 610 tons/day: added to the 520 tons milled in Constanta are another 90 tons/day representing the production of the mill from Medgidia.
At the same time, the factory in Constanta also includes a corn mill with a daily capacity of 50 tons. Of the produced flour, 40 per cent goes into bread production, the remaining quantity being sold separately. Dobrogea flour achieved a 20 per cent share on the Romanian market, the trading of this product having also the main weight in turnover. As regards the local bread market, Dobrogea has a share of 82 per cent, and the trade with this product represents 32 per cent in turnover.
In total, Dobrogea has 21 production units, both in Constanta and in the rest of the county.
in order to keep its leading position on the domestic market, dobrogea has also focused its attention on research activity, which is carried out within a separate division. Thus, in 1993, Dobrogea produced the first enzymatic ameliorator for baking ‘Dan-Do-Pan’ which enjoyed a great success among Romanian and foreign bakers. The ameliorator gives bread freshness, volume and aroma. Since 1999, Dobrogea has also produced flour correcting, which gives this product a rather homogeneous character. Last but not least, it should be noted that all the bread produced by dobrogea is mineralized and enriched in vitamins, by which 40 per cent of the daily vitamin requirements for the human body is ensured, according to a recent study by Hoffman La Roche.
Since October 2000 Dobrogea SA has complied with ISO 9001 for the management of quality. Dobrogea made investments totalling almost €11 million, all in technology. In the Dobrogea mill €3.6 million were invested for the production line modernization. The fully automated manufacturing line for biscuits, producing 20 tons of biscuits per day, cost €4.2 million.
table 10.4 Share of the milling and baking industry within the industry of food and beverages (%)
1998 1999 2000 2001 2002 Share of the milling and baking industry 36.5 23.2 26.9 24.6 22.1 Out of which:
milling 4.9 5.0 9.2 5.9 5.4
baking and pastry 26.1 12.7 12.5 13.3 9.6
biscuits and cookies 1.6 1.8 2.0 1.4 2.4
pasta 0.4 0.3 0.3 0.4 0.5
other 3.5 3.3 2.8 3.6 4.3
Source: Romania’s Statistical Yearbook (2003 and 2004), National Institute for Statistics.
Another €3 million were invested in a production line for bread, delivering 30 tons of bread daily. The investment in the new line consolidates Dobrogea’s position on the market and allows it to lower the price for this product. Dobrogea has 70 per cent of the bread sales and 60 per cent of the flour sales in the county of Constanta, as well as 22 per cent of the national flour market.
For the frozen baking and pastry products, Dobrogea has a market share of 80 per cent at the local level and 40 per cent at the national level. The company has 12 factories in the county of Constanta, 1.250 employees, and had a turnover of
€72 million in 2005, up by 25 per cent compared with 2004.
Since the Loulis Group entered the romanian market in 1999, the company has invested over €80 million. The company made its first profit only in 2005.
However, the profit did not exceed 2 per cent of the turnover. In 2004, the company’s investments focused on the modernization of the manufacturing line for sliced bread, on the implementation of Hazard Analysis of Critical Control Points (HACCP) norms on food hygiene and safety – imposed by the EU – and on building up a production line for frozen dough.
The company will continue to invest this year, too, but will direct funds of about
€1.7 million to marketing and distribution activities. When entering the Romanian market, the Loulis Group took over the retail chain belonging to the Titan S.A.
milling and baking unit. The company has thus diversified its production and distribution activities towards retail activities.
The Loulis Group management decided on a different approach for the bakeries, transforming them into a new identity, ‘Family’. The image of the retail chain was related to the milling and baking activity of the company through the slogan ‘Bread and more’.
In 2005, the company’s management decided to rebrand the shop network. A stronger name was thus created through the association with Belforno, the brand Loulis holds on the baking segment, adapted, of course, to the specificity of the retail chain.
Fresh bakery products made by loulis, be they traditional products or new assortments designed for the modern consumer, satisfy the most diverse preferences.
These products are made of selected ingredients, using premium technology based on special recipes. The range of products includes:
Bread: super loaf, extra loaf, mini diet, white bread, unsalted bread, home-made bread, traditional bread;
Specialties: milk roll, extra roll, rye roll, fibro pan;
Pastry with various fillings: cheese, vanilla, apples, cocoa, chicken;
Starting in February 2005, Loulis S.A. is launching new types of fresh bread, under the Belforno Fresh brand: Whole grain bread, Black bread, and Extra Loaf.
In the second half of 2005, Loulis penetrated a new market, that of frozen dough. The company’s management considered that its tradition in baking/pastry
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inherited from Titan S.A., complemented by solid knowledge acquired from the biggest company in the field in Greece, Katselis Sons (a shareholder of Loulis S.A.), represents a real advantage for activating on this market. The frozen dough production line, located in the industrial unit of Cernica, became operational last summer. At first, the products were addressed to the Loulis retail chain, under the Belforno Frozen brand. Starting in 2006, Loulis S.A. is targeting clients who would like to sell freshly-baked pastry products in their shops.
10.5 Conclusion
The small producers will be obliged to adjust to the new requirements, despite their low financial power. The small bakeries can only remain on the market if they meet the consumers’ requirements, addressing a certain niche exclusively, and if they respect all the food safety rules. The small producers’ best chance is to focus on the traditional and organic products, that is, on the value-added products.
The producers’ opinion is that, at an overall level, the market will grow – not on a quantitative basis, but first by the consumers seeking quality products with value added, and then, by the increase in the bread price, as romania joins the EU. The processors in the milling and baking industry expect the following phenomena to appear after Romania joins the EU: 1) concentration in the milling industry; the number of companies on the market will reach only several hundreds in a couple of years; 2) the large industrial bakeries, the small ones, and those from the super/hypermarkets will coexist. However, their number will be significantly reduced, depending on the quality of products and the assurance of food safety; 3) bread consumption will decline over several years, from 113 kg/capita to 90–95 kg/capita; 4) only 10–20 per cent of the producers who are active at this moment will be able to continue their activity after Romania joins the EU; 5) the increase of prices after the accession will go hand in hand with the increase in industry profitability; 6) the quality of products is expected to rise faster than prices.
references
Fattouh, L. D. B. (2005), ‘Concentration in the banking industry and economic growth’, Macroeconomic Dynamics, vol. 9, nº 2, pp. 198–219.
Irwin, D. A. (2006), in World Trade Review, vol. 5, nº 3, Published online by Cambridge University Press, 19 Oct 2006, pp. 489–491.
Stiglitz, J. E. and Charlton, A. (2005), Fair Trade for All: How Trade Can Promote Development, New York, Oxford University Press.
Vikström, M. L. P. (2002), ‘The determinants of structural change: Transformation pressure and structural change in Swedish manufacturing industry 1870–1993’, European Review of Economic History, vol. 6, nº 1, pp. 87–110.