M&A''s expected in sugar industry by the end of 2007

Emilian Dobrescu, the general representative of Agrana group, the biggest player on the domestic sugar market, says the market will witness acquisitions, mergers and even the complete takeovers of some domestic companies through international transactions.

“The battle on this market will not be fought for the actual acquisition of a plant, because it is not the metallic structure that producers left standing on the market will be interested in, but the quotas allocated to the plants they want to take over,” says Emilian Dobrescu.

According to the general representative of Agrana Romania, there will no longer be nine sugar plants in Romania in 2008. “There are many possibilities for those that will not survive on the market: they will either close, sell or abandon the sector, thinking of the hefty compensations the European Union grants to those leaving this sector,” Dobrescu also says.

Romania has negotiated with the EU a quota of 440,000 tonnes of sugar, below consumption posted in 2005 (560,000 tonnes), of which only 110,000 tonnes come from the domestic production of sugar beet. The rest of 330,000 tonnes represents the raw sugar refined in Romanian plants, and part of uncovered consumption will be filled by imports. Sugar consumption in Romania is estimated at 27 kg per capita, compared with 39 kg, the average in the European Union.

“There will be no shocks after integration because sugar has already reached a European price. We will most likely witness a price drop, which can be reflected in shelf prices in case the domestic retail sees competition from the Hungarian one,” considers Dobrescu.

On the domestic market, only two companies have invested in the creation and promotion of a brand. Agrana Romania owns Margaritar and Coronita brands, while Zaharul Oradea holds Diamant brand. The other plants did not consider the time was right for the creation of a brand on the sugar market.

Nonetheless, Agrana has decided to invest in the promotion of its two sugar brands.

“The brand gives you the competitive edge. The idea of investing in a brand is to provide additional services to your customers, precisely because it”s services that sell the product,” Dobrescu says.

As part of its strategy meant to add to the services it offers to consumers, Agrana will invest approximately 5 million euros over the following period, to build a logistic centre near Bucharest.