The ice-cream market in

Romania

Group 116
Contents

1. Introduction ......................................................................................................................... 3

2. Market capacity ................................................................................................................... 3

3. Market evolution ................................................................................................................. 4

4. Market structure .................................................................................................................. 5

5. Product supply .................................................................................................................... 6

6. Imports and exports............................................................................................................. 7

7. Prices and tariffs ................................................................................................................. 8

8. Conclusions ......................................................................................................................... 8
 1. Introduction
In its most basic form, ice-cream is a mixture of cream and/or milk, sugar and sometimes eggs
that is frozen while being churned to create a frozen product. In commercial ice-cream
making, stabilizers, such as plant gums, are usually added and the mixture
is pasteurized and homogenized. The mixture may have flavourings added, from something as
simple as vanilla to fruit or other flavours and pieces of candy.

The ice-cream market in Romania is quite small due to low consumption and high
seasonality. Ice-cream is still perceived as refreshing and not as dessert. As a result, the
market is dominated by medium and low-end products.

2. Market capacity
Potential customers are people of all ages, especially children and people with normal wages.
Families with children, teenagers, and adults all love to consume this frozen dessert. Young
children also consume a wider selection of ice-cream flavours and other frozen desserts.
Adults tend to remain faithful to their favorite ice-cream products. If a child loves this frozen
dessert, he or she will most likely still love ice-cream as an adult. As the youth population
ispredicted to be declining over the next seven years, catering to the adult segment is more
important than ever.

Most adults prefer the same few flavors that they have been eating their entire lives. These
people believe that the extensive variety of ice-cream flavors available today appeals to
children, not adults.

Currently, the annual ice-cream consumption in Romania is one of the lowest in Europe, i.e.
1.6 kg per capita. While ice-cream sales are largely dependent on outside temperatures, it has
been found that 70% of Romanians have eatenice-cream at least once per month, according to
Reveal Marketing Research.

In 2016 the sales volume for ice-cream sold was estimated at 43 million liters and the sales
value was approximately 916 million lei,which represents 1.4% of the total quantity of ice-
cream produced in the EU, making Romania one of the top 10 biggest ice-cream producers
in Europe. It is estimated that in 2021 it will reach 53.4 million liters, registering a growth of
24%.
Ice-cream will remain profoundly affected by weather development, although recent increases
in consumption outside of the summer season and a shift in perception, from refresher to
dessert, will partially mitigate this. Premiumisation and sophistication are going to accelerate,
as private label monopolises price as the main selling point. Now that the partnership between
Alpin 57 Lux SRL and the Latvian investment fund Food Union has been established, new
consolidations and developments are likely, with Betty Ice’s owner hinting at this in early
June 2017.

3. Market evolution
If in 2012 the ice-cream market amounted to 911.7 million lei, the years 2013 and 2014 were
marked by decreases by up to 13%, reaching a value of only 796.2 million lei. However,
starting with 2015, sales have started growing once again; a trend that will continue in the
next five years, when the market will exceed 1 billion lei, according to Euromonitor estimates.

Additionally, the volume of the ice-cream market has registered fluctuations throughout the
years:in 2012 it was rated at 42.8 million liters, and in the following year it decreased by
8.6%. But starting with 2014, the values have begun to increase. As mentioned before, in
2016 the amount of ice-cream sold wass estimated at 43 million liters, and in 2021 it will
reach 53.4 million liters.

The average variation rhythm of sales during 2012-2016 is the following:

  
R   n 1 Y n  1 *100 = 0,099
 Y 
 1 
Yn - sales volume in 2016

Y1 - sales volume in 2012

One step towardsdevelopment on the ice-cream market in Romania is that the Romanian
producer Betty Ice, owned by VasileArmenean, has reached a sales deal with the Anglo-
Dutch giant Unilever, the second largest player in the food industry and the current ice-cream
market leader in Romania.
With 21% of value sales, Unilever South Central Europe SRL remained category leader in
2017, followed closely by Betty Ice SRL and Nestlé Romania SRL, with 20% and 18% of
shares, respectively. Unilever overall performance owed much to new launches, for example
Magnum Double, its premium brand, but also to tub-packaged ice-cream, Magnum Classic,
Almond and White. New versions of Cornetto and Carte d’Or were launched too, all of which
received heavy advertising online and on TV and aided in the company’s performance.

The Romanianice-cream market is estimated to register higher growth in off-trade sales than
on-trade sales during 2015-2020. The 'Impulse Ice-cream-Single Serve' category is the largest
in the off-trade volume consumption, while Artisanal Ice-cream leads the on-trade
consumption. The 'Impulse Ice-cream-Single Serve' is forecast to register the fastest growth in
both on-trade and off-trade consumption during this period. On-trade sales lead the overall
distribution of ice-cream in the country.

4. Market structure
Romania occupies the 10th position on the list of ice-cream producers in Europe. As ice-
cream is perceived as a seasonal dessert here, 80% of sales are made during summer, when
approximately 44,000 tons of ice-cream are produced and sold.

Regarding the segmentation of the target market, ice-cream producers tend to employ
undifferentiated market strategies in order to cater to all types of consumers. Using the
demographic criteria of dividing the market, we can ascertain that women buy the product
more frequently than men and children and young adults with ages between 18 and 24 are
more inclined to want ice-cream than elders. Families with more children have a higher
consumption rate than single people or couples. Income generally has no influence, as ice-
cream is a widely affordable dessert. However, highly educated people prefer more expensive
brands and more elaborate flavours.

The consumption of ice-cream is slightly greater in urban areas than in the rural ones and,
although this aspect is starting to change, there is still a significant difference between
Romania and other European country, where people are less influenced by the bad weather
when purchasing dessert.
After analysing the behaviour of consumers, the main conclusion is that ice-cream is for
everyone. There are, however, some notable observations to be made, such as the fact that
Romanians are quite conservative when it comes to their favourite flavour, the top three being
vanilla, chocolate and wild berries. There is also a certain loyalty maintained towards their
preferred brand. Ice-cream tubs have the highest percentage of sales, closely followed by
cones and popsicles; the innovative ice-cream sandwiches are becoming more popular.
Consumers tend to buy ice-cream and eat it at home or to frequent parks and other similar
establishments with street vendors and ice-cream machines, rather than indulge in ordering it
at a restaurant.

5. Product supply
The Romanian ice-cream market is fragmented, although it has grown steadily over the years.
Until recently, the three leading companies were Unilever and Nestlé, two large international
companies, and the Romanian company Betty Ice. However, circumstances have changed
when the latter was purchased at the beginning of 2018 by Unilever.

As of this year, Unilever owns approximately 40% of the market shares through its three main
brands, Betty Ice, Napoca and Algida, while Nestlé owns 18%. The rest is divided between
local competitors, smaller companies such as Kubo Ice Cream, Macromex, Top Gel and Alpin
57 Lux.

The turnover for Betty Ice in 2016 was of 28 million euros, exceeding the turnovers of Top
Gel, 19.4 mil., and Alpin 57 Lux, 19 mil., by almost 10 million. Kubo Ice Cream registered a
turnover of only 3.8 million euros and was facing insolvency at the time; the company went
bankrupt earlier this year.

The market strategy of ice-cream producers is largely the same. For example, Betty Ice offers
diversity and delivers good quality products at an affordable price, much like other local
companies. Alpin 57 Lux has over 100 types of ice-cream under several brand names, while
Macromex distributes both the foreign ice-cream brand Mars, and its own brands, Corso and
La Strada.

Unilever’s marketing strategy is very effective in that it is a combination of global and local
methods designed to appeal to customers all over the world, with focus on innovation and
human development. Regarding their marketing channels, Unilever’s distribution channels are
developed in order to cover every country in which they operate. Betty Ice distributes its own
products or sells them to retailers such as supermarkets, while Top Gel distributes its products
exclusively through its own channels, directly to the consumers.

Nestlé produces and distributes a variety of products pertaining to the food industry and the
brand is well-known through its extensive marketing campaigns for the array of high quality
products such as coffee, breakfast food or ice-cream. There are two types of distribution
channels which Nestlé employs:

Producer Agents Distributors Retailers Consumers

Producer Bulk buyers Consumers

Ice-cream sales registered by the following retailers: Carrefour, Market, Cora, Metro, Mega
Image, Shop&Go, Penny Market and Profi, have grown by 20.1% during the previous year.

If considering value, the first five producers of ice-cream own 51% of the share market, while
retailers, with their own brands, own 34.4%. Regarding the volume of sales, however,
Unilever, Nestlé, Macromex, Betty Ice and Cicom, a local ice-cream distributor, own 38.7%
of sales, considerably less than the retailer’s share of 52%.

6. Imports and exports

Total volume of imports for the product in 2016 amounted to 44.5 million liters of ice-cream
or 660 million lei.

Imports of ice-creamhave almost doubled, starting from less than 18 million euros in 2009 to
more than 30 million euros in 2016,therefore having the variation rhythm of approximately
6.05.
The most important six import markets for ice-cream in 2016 wereCluj-Napoca, Oradea,
Sibiu, Suceava, Brasov and Bucharest

The total volume of exports for the product in 2016 was equivalent to 7.7 million liters of ice-
cream or 262 million lei.

The four major export markets for ice-cream in 2016 weretwo of our neighbours, Ukraine and
the Republic of Moldova, and Italy and Denmark.

7. Prices and tariffs

Thecurrent average selling priceof ice-cream is approximately 4 lei in Romania.

Theaverage price dynamic over the years is shown in the graph below.

8. Conclusions
 The Romanian ice-cream market is not very developed. Despite the fact that it is a
loved product and everyone is a potential customer, the consumption is still quite low
and very season-based, ice-cream being perceived as a refresher rather than a dessert.
 The consumption in Romania is one of the lowest in Europe but the value and quantity
of sales is very high representing 1.4% of the total quantity produced in the EU,
therefore Romania is in top 10 biggest ice-cream producers in Europe.
 The market evolution has had its ups-and-downs, sales decreasing a lot after 2012 but
starting to grow again since 2015 and it is predicted that the trend will continue in the
next 5 years.
 Romania occupies the 10th position on the list of ice-cream producers in Europe and
since is perceived as a seasonal dessert, 80% of sales are made during summer.
Regarding segmentation, ice-cream producers use rather undifferentiated market
strategies in order to carter all the consumers.
 The market is fragmented, Unilever and Nestlé owning most market shares, the rest
being divided by local competitors.
 The marketing strategy is genereally comprised of offering diversity and delivering
good quality product at an affordable price.
 The imports of ice-cream doubled and the exports are really high as well, especially in
neighbouring countries.
 The prices are not very dynamic but are growing steadily. Despite that, people love
ice-cream and income generally has no influence, ice-cream being a very diversed and
affordable dessert.