How global trends and lifestyle changes are affecting consumption patterns and business in Romania Highlights Martin Schiere Bucharest March

Five clusters of trends affecting consumer cultures world wide  Rise of the value brand  Mediocre Romanian brands will loose out  From more materialistic to more fulfilment driven  And the subsequent rise of the experience ‘consumption & economy’  Switch from group ideologies to individual idealism  Time stress (not in highlights)  Health & body pre-occupation (not in highlights)

Rise of the value brand And growth of the private label Rise of value brands and ‘pick and choose’ economy Rise of private label (currently 5%-10% of food sales in Romania) Netherlands 15% and rising steadily Growth of private label Will be strongest in Food* Strongest in UK (35% value of food) Value for money Quality for money (Tesco, Ahold, Presidents choice) In Romania 5%-10% of food sale *Sources: The Future of European Food and Drinks Retailing Implications of fast growth formats and private label for brand manufacturers Sadler, S 2006.

From more materialistic to more fulfilment driven And the subsequent rise of the experience ‘consumption & economy’ Basis: psychological, sociological and anthropolicial research (Maslow, Pinto) More contemporary: market research organisations (Motivaction) Within Western Europe amongst 2 nd and 3 rd generation immigrants Eastern Europe –still very much image driven but more subtle Asia –Japan Korea Rise of experience economy, products, rituals Gathering experiences (spending more on travel, FT) ‘Rituals’ the company Nespresso Dunhill *Sources: The Future of European Food and Drinks Retailing Implications of fast growth formats and private label for brand manufacturers Sadler, S 2006.

Romanian firms: mediocre brands will loose out Even in the West strong ‘A’ brands will face a difficult time Strong western A brands still have 5-7 years of growth in such emerging markets as Romania Non-strong emerging market brands under increasing pressure Emerging market firms such as Romanian firms:  Build brands  Think of over encompassing brand strategy  Innovate  Cooperate with other brands (Mc Donald's, Dirk van den Broek – Netherlands)  Private label production  Quality  Innovation Premium segment: Luxury brands Middle segment: Mass A-brands Price segment: Value brands / Private labels *Source: The End of Traditional Mass Brands by Michel Jansen and Roland van Kralingen

Switch from group ideology to individual idealism A more pragmatic approach to ‘being good’ No great ideological themes ‘pick and choose spiritualism Socialism ‘died’ and was not replaced ‘Free market economy' is nuanced (amongst citizens/consumers in western societies) Individual idealism  Combining doing good and doing well  In Netherlands: corporate donations slowly on the rise (Dutch Red Cross)  Anecdotal evidence suggests that this is also the case in Europe  In America philanthropy on the rise (Economist)  Registered increase in interest to do volunteer work For companies in Western Europe:  Ideals are part of the product  BP green energy  Body Shop Emerging economies like Romania:  Not quite there yet (est. 7 yrs)  Public private partnerships (TPG, FAO; WWF& Essent)

Conclusion: Sociocultural structure is changing And the business landscape dependant on consumption, will change as well…  Lifestyle increasingly explains consumer behaviour better  And the behaviour of citizens  Increasing segmentation within society  Opportunities for positioning products and brands outside the ‘luxury-premium-value for money dogma’  Rise of private label  Romanian brands being squeezed between premium and private label  Innovate, deliver quality (even for private label)  Build brands  Rise of experience culture  Brands have to have an emotional experience to endure  Shift in type of products and product benefits  Keep brands fresh  More innovative forms of marketing  Increasingly more expensive to reach consumers, ’10% a year’  Consumers increasingly bored  Consumers increasingly fickle