Energy Drink Market in Romania Essay

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This document is for information purposes only, and should be read by the person to whom it has been given. The p y , y , y p recipient must use it for his/her information only and must not disclose it, or any of its contents, to any other person. This document should be returned to Barbarossa Romania in the event that the recipient decides not to proceed with his/her investment in the transaction described. This document does not constitute, and should in no way be construed or held out as constituting, an offer or invitation to subscribe for, or to purchase, shares or securities in any corporation, company or partnership.

Any subscription for securities will only be made in accordance with all relevant investment documentation, when dully entered into and exchanged. The reader of this document should bear in mind that project of this nature may pertain certain risks. Most importantly, the Forecast presented in this project may not be in line with future results. All projections forecasts and estimates contained in this brochure are prepared on the basis of current information projections, information, legislation, market and tax practice in Romania.

This brochure includes information obtained from external resources, and this information has been reproduced accurately from these sources. Barbarossa Romania accepts no responsibility for its accuracy or completeness.

This brochure and the statements in it do not constitute investment advice, and prospective investor should consult their Own legal financial tax or market advisers in relation to their participation in this investment and in particular how this legal, financial, investment, Investment affects their own position. No guarantee, warranty or undertaking as to actual results that may be achieved during any period has been made or implied by Barbarossa Romania, any Companies included in this document or any of their representatives.

Likewise, none of them has guaranteed, warranted or undertaken to financially support any of the liabilities or any Companies included in this document any period. thi d t i d Project Barbarossa. Information Pack Red Devil Romania Operations 2 Table of Contents Page 1. Executive Summary 2. Romania in Figures 3. 3 Retail Market Romania 4. Energy Drinks Market Romania 5 co o Consumption 5. Alcohol Co su p o Romania o a a 6. Challenges & Opportunities 7. Conclusion 8. Company & Management 5 9 12 20 25 5 29 31 33.

3 Section 1 Executive Summary 4 Section 1 Executive Summary Executive Summary Red Devil lets you deal with devilish pressure and get pleasure out of life. SC Barbarossa SRL, intends to be the distributor of Red Devil Energy Drinks in its Romania operations. We believe that being a niche product, Red Devil can be a success story in the dynamic Romanian Market, with 21. 5 Mils of population. 55 % of this population is living in the cities. GDP per capita in Romania is USD 11. 755 (IMF 2009), 2009) almost only 30 % that of EU EU. The total all food and drink market in Romania is expected to worth Euro.

31. 6 billion in 2010, made up of Euro 25. 3 billion in retail (80. 0%) and Euro 6. 3 billion (20. 0%) in foodservice. In Europe, Romania had a 2. 0% share of the market for a 4. 3% share of the population. Total Retail Market has nearly doubled between 2004-2008, making 2004 2008, it a potentially very lucrative market, from € 21. 37bn in 2004 to € 38. 97bn in 2008. Only with modern retail networks and national distributors, aprx. 50 % of the total market is reachable in short term. Expectancy for volume of the Romanian energy drink market to be € 50 mils in 2010.

Energy drinks consumption p y gy gy p in Romania is very low, around 0. 37 liters per capita, compared to other European Countries. The consumption has increased with a rapid movement from 1. 3 million liters in 2003 to 8 million liters in 2008 and is still increasing 15 % y-o-y. Average comsumption for customer is 2,14 cans in the same day and in terms of quantities that are familiar with Romans 0. 25-liter cans represent 67% of total sales. Project Barbarossa. Information Pack Red Devil Romania Operations 5 Section 1 Executive Summary Executive Summary.

We believe that Red Devil can monopolize market leadership in alcho energy segment as there is no competition alcho-energy available in current market. Also using the popularity 3-4% marketshare can be obtained in non-alcoholic energy drink market. Besides Romanian Market, Barbarossa intends to extend the investment in Bulgarian and Moldavian Markets. Market Markets Bulgaria has a population of 7. 5 mils and 70 % of the population leaves in cities. Bulgaria is geographically very close to Romania and very similar in demography. Moldova also has a high-end product focused customer group. Project Barbarossa.

Information Pack Red Devil Romania Operations 6 Section 1 Executive Summary Objectives & Mission Objectives The primary objectives of the business plan for Red Devil are outlined below. ¢ ¢ ¢ To become the sole distributor of Red Devil in Romania Create and increase brand awareness by creating a new alcho-energy drink segment in Romania Generate sales volume of 2 mils. by the end of first year in business and 5 mils. by the end of 5th year with an annual growth rate of 26% for following 4 years. Mission Barbarossa s Barbarossas mission is to offer the finest most innovative products to the Romanian market.

Barbarossa will ensure finest, market alls of their customers expectations are exceeded. By only offering the highest quality product with premium support, Barbarossa will become the premier energy drink importer of Red Devil in Romania. Project Barbarossa. Information Pack Red Devil Romania Operations 7 Section 2 Romania in Figures 8 Section 2 Romania in Figures Romania in Figures Population 21. 5 Mils Bucharest has a population of 2 Mils Following seven cities have Mils. in average 300k population. Biggest 20 city has in total 6 mils population. 55. 2 % Urban 44.

8 % Rural USD 11. 755 (IMF 2009) Bulgaria B l i 608 k H km, Hungary 443 k M ld km, Moldova 450 k km, Serbia 476 km, Ukraine (north) 362 km, Ukraine (east) 169 km. Bucharest Leu. Reference currency is euro. In 2009, average exchange rate was 4. 2373. 5. 4 % (2008) 19 % Distribution of population GDP Per capita Border B d countries ti Capital National Currency Unemployment VAT Romania joined NATO in 2004 and EU in 2007. Project Barbarossa. Information Pack Red Devil Romania Operations 9 Section 2 Romania in Figures Romania in Figures Distribution of population according to ages

Total Population RO Age >80 75-79 70-74 65-69 60-64 55-59 50-54 45-49 45 49 40-44 35-39 30-34 25-29 20-24 15 19 15-19 10-14 5-9 0-4 Total Male 250,000 , 280,000 380,000 383,000 520,000 670,000 700,000 590,000 590 000 870,000 870,000 935,000 800,000 830,000 610,000 656,000 575,000 575,000 10,494,000 Female 430,000 , 420,000 535,000 480,000 605,000 725,000 740,000 595,000 595 000 855,000 850,000 900,000 770,000 790,000 580,000 535,000 550,000 550,000 10,910,000 Total 680,000 , 700,000 915,000 863,000 1,125,000 1,395,000 1,440,000 1,185,000 1 185 000 1,725,000 1,720,000 1,835,000 1,570,000 1,620,000 1,190,000 1,191,000 1,125,000 1,125,000 21,404,000.

Urban Population RO Male 138,000 , 154,560 209,760 211,416 287,040 369,840 386,400 325,680 325 680 480,240 480,240 516,120 441,600 458,160 336,720 362,112 317,400 317,400 5,792,688 Female 237,360 , 231,840 295,320 264,960 333,960 400,200 408,480 328,440 328 440 471,960 469,200 496,800 425,040 436,080 320,160 295,320 303,600 303,600 6,022,320 Total 375,360 , 386,400 505,080 476,376 621,000 770,040 794,880 654,120 654 120 952,200 949,440 1,012,920 866,640 894,240 656,880 657,432 621,000 621,000 11,815,008 Project Barbarossa.

Information Pack Red Devil Romania Operations 10 Section 3 Retail Market Romania 11 Section 3 Retail Market Romania Retail Market Romania EUR Total Retail Market (billions) Grocery Retail Market (billions) Grocery Retail Spending / Capita 2006 32 17 784 2007 35 18 840 2008 39 20 9332009F 41 22 1029 2010F 43 23 1080 2011F 47 25 1184 2012F 51 26 1208 2013F 55 26 1232 2014F 60 27 1256 2015F 64 28 1282 2016F 68 28 1307 2017F 72 29 1333 Market Shares in overall food sales According to distribution channels 2007 6. 9% 37. 6%.

Modern retail network Traditional stores 55. 5% Market places Break-down of modern retail network in all overall food sales 2007 9. 4% 13. 3% Cash & Carry Hypermarkets Supermarkets 12. 0% Metro group expects hypermarket sales to grow M t t h k t l t by 42. 8 % between 2009 and 2013 Project Barbarossa. Information Pack Red Devil Romania Operations 12 Section 3 Retail Market Romania Retail Market Romania.

Metro group expects hypermarket sales to grow by 42. 8 % between 2009 and 2013 The Romanian retail market contracted in 2009 due to the international economic crisis but is expected to pick up again in 2010. Comparing the density of hyper/supermarkets outlets per 1 mio inhabitants of CEE countries, Romania is on the 4th place with a density of 34 outlets/1 mio inhabitants, the retail market undergoing significant changes in the dynamic environment of the market area.

The retail market universe in Romania was very dynamic during 2002-2008. The modern trade growth rate was more than 400 percent, while the traditional trade dropped by 10 per cent The total retail universe in Romania percent cent.

decreased by 9. 4% in the off premise channel. Hypermarkets g p g g products consists of This segment will be profitable and will gain more costumers in the future. The range of p over 50,000 goods. About half of the sales in hypermarkets represent food sales. The networks of hypermarkets will develop with few new shops per year. Carrefour was the biggest player so far, being pushed by German retailers Real and Kaufland (Lidl &Schwartz group).

Also French group Cora is existing in the market with significant turnover. Project Barbarossa. Information Pack Red Devil Romania Operations 13 Section 3 Retail Market Romania Retail Market Romania.

Cash & Carry Target costumers of this sub-sector are HRI entities, private companies and small traders/stores. The range of products consists of 15,000-35,000 products. This segment is considered to have reached saturation and is expected to loose some of the individual consumers in favor of hypermarkets and supermarkets.

Cash & Carry Sales & Stores In € million 1245 1039 762 525 350 211 25 996 1996 102 224 628 1,429 1997 99 1998 998 1999 999 2000 000 2001 00 2002 00 2003 003 2004 00 2005 005 2006 006 Dominated by Metro who is also the top retailer in Romania. Metro entered the market in 1996. Selgros is the other player in market which has only 25 % of Metro sales.

The market doesnt show very big opportunity p y y y g pp y of further growth. Project Barbarossa. Information Pack Red Devil Romania Operations 14 Section 3 Retail Market Romania Retail Market Romania Supermarkets The total number of outlets of this type in Romania is 4. 500 stores, while the market demand should be 2. 000 stores. The major part of sales in supermarkets (80%-90%) is made of food sales. Rewes Billa, Mega Image, Interex are the main players.

Discounters This segment is expected to record a large increase over the next few years, as the purchasing power is still low. The major part of sales is made from food sales (80%). Rewes Penny and the Tengelmanns Plus are the biggest players.

In 2010 Tengelmann sold the Plus Network to Lidl & Schwartz Group. Besides current existing network Lidl is heavily investing for additional stores. Also Mega Image added new concept Red Market to the market. Project Barbarossa. Information Pack Red Devil Romania Operations 15 Section 3 Retail Market Romania Retail Market Romania Retail Market Share by Outlet Market places 7% Metro 11% Rewe 7% Carrefour 4% Lidl & Schwarz Cora 3% 1% Tengelmann 1% CBA Auchan 1% Intermarche 1% 5% Traditional stores 54% Delhaize 5% Project Barbarossa. Information Pack Red Devil Romania Operations 16 Section 3 Retail Market Romania Retail Market Romania.

Distribution Companies Interbrands Marketing & Distribution is the largest company selling consumer products in Romania Interbrands Romania. is part of the group Sarkis with the activities of trade, controlled by brothers Raymond and Sarkis Elias Sarkis, Lebanese origin, who founded the business in 1989. The company entered the market with U. S. manufacturer Procter & Gamble, which was his first partner, in 1993. The company has a turnover more than one billion euros.

Main competitors are Interbrands Top Brands Distribution, Astral Impex, Aquila Group, Macromex, Agroalim and Whiteland. Project Barbarossa. Information Pack Red Devil Romania Operations 17 Section 3 Retail Market Romania Distribution in the Night Clubs & Discos.

Soft drinks Quadrant Amroq Beverages SA SA, RioBucovina SRL Red Bull Romania SRL Alcohol suppliers Vlad Exim SRL (Stella Artois, Becks and Bergenbier). Alma Tim Distribution SRL, ( wines Cotnari Jidvei and Murfatlar) DG Imprest SRL (Jack Daniels whiskey, JB and Ballantines, gin and spirits brand Beefeather (Finlandia vodka Brand and trademark Stalinkaya and tequila brand Sauze).

All Brands Distribution SRL (Also distributes Chivas Regal Ballantines, specialized in clubs) Former Regal, Ballantines clubs). Former distributor of RedBull. Others Top Brands Distribution SRL ( p (Philip Morris cigarette brand ) p g Intersnack Romania SRL (Chio chips). Alka CO (toasted almonds pistachios Nutline range).

Project Barbarossa. Information Pack Red Devil Romania Operations 18 Section 4 Energy Drinks Market Romania 19 Section 4 Energy Drinks Market Romania Energy Drinks Market Romania The total food and drink market in Romania was worth Euro 24. 6 billion in 2007, made up of Euro 20. 3 billion in retail (80. 0%) and Euro 5 1 billion (20. 0%) in foodservice In Europe Romania had a 2. 0% share of the (80 0%) 5. 1 (20 0%) foodservice. Europe, 2 0% market for a 4. 3% share of the population EUR Total Retail Market (billions) y (billions) ) Grocery Retail Market ( Non Alcoholic Beverages Alcoholic Drinks 2006 32 17 2007 35 18 1. 9 4. 7 2008 39 20 2. 1 5.

2 2009F 41 22 2. 3 5. 8 2010F 43 23 2. 5 6. 1 2011F 47 25 2. 7 6. 8 2012F 51 26 2. 8 6. 9 2013F 55 26 2. 9 7. 1 2014F 60 27 2. 9 7. 3 2015F 64 28 3. 0 7. 5 2016F 68 28 3. 1 7. 7 2017F 72 29 3. 2 7. 9 Energy drinks market ? Romania (million liters) 9. 00 8. 00 7. 00 6. 00 5. 00 4. 00 3. 00 2. 00 1. 00 ? 2003 2004 2005 2006 2007E 2008E 2009E 2010F Real Annual % Growth 2006 2007 Food Expenditure Non-Alcoholic Beverages Alcoholic Drinks All Food & Drink 12. 3% 17. 3% 18. 8% 13. 8% 13 8% Project Barbarossa. Information Pack Red Devil Romania Operations 20 Section 4 Energy Drinks Market Romania Energy Drinks Market Romania.

Total size of the market is expected to be around EUR 50 Millions. Millions Energy Drinks Market Romania (million liters) 2003 Volume Total Volume Per Capita 1. 30 0. 06 2005 2. 50 0. 12 2006 3. 00 0. 14 2007 5. 00 0. 23 2008 8. 00 0. 37 2009 7. 50 0. 35 Energy Drinks Market Romania (million liters) Mixed w Alcohol * 2003 Volume Total Volume Per Capita 0. 46 0. 02 2005 0. 88 0. 04 2006 1. 05 0. 05 2007 1. 75 0. 08 2008 2. 80 0. 13 2009 2. 63 0. 12 In terms of quantities that are familiar with Romans 0. 25-liter cans represent 67% of total sales. * There in no alcho-energy drink brand or product available in the market. Assumptions are based on self-made cocktails.

cocktails Project Barbarossa. Information Pack Red Devil Romania Operations 21 Section 4 Energy Drinks Market Romania Energy Drinks Market Romania Sales acc to channels 2005 Romania Grocery stores 11% Hypermarkets & Supermarkets 14% Kiosks 4% HoReCaDi 52% Gas stations 19% Situations of energy drink consum ption Russian Market 2007 At a party 17. 6% After a sleepless night 13. 8% At a night club 13. 7% Driving 11. 6% At night w ork 5. 7% Ntg mentioned above 49. 0% Dont know D k 6. 3% 6 3% Till 2005, the retail segment had the minority of the energy drink sales in the market in Romania. In 2005 retail sales balanced HoReCaDi sales.

Currently we estimate retail sales to be higher than HoReCaDi sales. Considering the fact that retail market has significantly developed since 2005, we estimate around 30 % of the products are sold in modern retail chains. Almost 37 % of food and drinks sales are realized in modern retail chains. Project Barbarossa. Information Pack Red Devil Romania Operations 22 Section 4 Energy Drinks Market Romania Energy Drinks Market Romania Red Bull Romania SRL RedBull R R dB ll Rom ania i 2003 2005 2. 00 € 10. 00 € € 2. 38 28. 2 23. 8 23 8 15. 5 45. 8 2006E 18. 70 € N/A € N/A N/A N/A N/A 2007 21. 63 € 3. 77 € 21. 2 17. 8 17 8 27. 9 61. 0 2008 24. 47 1. 83 8. 9 7. 5 75 32. 1 57. 0.

Sales Net Profit Gross Profit Margin % Net Profit Margin % Stock rotation days Speed cashing receivables € 2007 Market share 70 %. Currently to be around 50 % % %. Used to be distributed by All Brands Distribution SRL (Also distributes Chivas Regal, Ballantines, specialized in clubs). Sold mostly in small markets. Retailers: Metro, Real, Carrefour etc. Burn Romania is one of the first markets in which entered the energy drink Burn, in 2001 Even in the boom in sales of energy drinks on the retail segment, the largest share in the consumption continues to be owned by out-of-home segment, especially bars and clubs Project Barbarossa. Information Pack Red Devil Romania Operations 23 Section 4 Energy Drinks Market Romania.

Energy Drinks Market Romania Shark Interdrinks Distribution SRL. Small existence in the market. They dont sell alcohol/vodka mixed products in the market. k Rockstar Entered in Romanian Market June 2006. First year turnover around EUR 175K in 6 months, 23 million cans. Production was in Netherlands. Was distributed by Interbrands in almost 3. 000 locations. According to Mike Costache, Costache who introduced the brand to the Romanian Market Red Bull gave a very big order to the plant in Market, Netherlands, and plant misinformed Rockstar Romania about production. The plant didnt/couldnt supply Rockstar brand and the brand got delisted from the market.

Romaqua Group The Romanian producer is thus expanding production of the brewery in Sebes, which it opened in 2008 by having it enter a new market with the Giusto Elektrik brand, positioned on a lower price segment than Red Bull. The new brand is targeting 3-4% for the first year on a market put at 40-50 million euros. No additional investments in production were needed for this launch. Other brands Energia, Ti E i Tiger, M S Max Speed, Ri d Rienergy, B 52 Eff t C B-52, Effect, Crazywolf are th b d you can see i modern retailers. lf the brands in d t il Kerozin, Big party, Xforce, Ozone, Bison, Dark Dog, Control, Watt Energy, Grizzly, Fireball, Euphoria, Adrenalin, Shot, Hell, Carrefour Noname Blue, Bandidos Power are other brands on the market.

Only Energy energize 6, and Bandidos Power are alcohol mixed energy drinks but they almost no existence in the market. Project Barbarossa. Information Pack Red Devil Romania Operations 24 Section 5 Alcohol Consumption Romania 25 Section 5 Alcohol Consumption Romania Alcohol Consumption Romania Recorded adult (15+) alcohol consumption by type of alcoholic beverage (in % of pure alcohol), 2005 39 % spirits, 39 % beer, 22 % wine wine. Adult (15+) per capita consumption, total (recorded + unrecorded) , average 2003-2005 Romania 15. 3, EU 12. 2 (Liters of pure alcohol). Abstainers Males 22 %, Females 51 %, in total population 37 %. In average, on a day when drink, a Romanian consumes 2.

14 drinks. 86 % of Romanians who drunk alcohol in the past year have done the same in the last 30 days days. 31 % of consumers which consumed alcohol in the last 30 days, drinks once a week. 10 % daily, 10 % 4-5 times per week. Only 11 % of consumers drank alcohol once in a month. Considering the population structure of Romania according to ages currently around 2 5 million liters of energy ages, 2. 5 drinks are consumed with alcohol only in the urban areas. In total country this volume is expected to be around 3. 5 million liters. Project Barbarossa. Information Pack Red Devil Romania Operations 26 27 Section 6 Challenges & Opportunities 28.

Section 6 Challanges & Opportunities Challanges & Opportunities ¢ ¢ There is no alcho-energy brand or p gy product available in the market today. Market supply is directly dependent on self-made cocktais. y pp y y p Romania joined the EU in 2007. Accession increases competition in the grocery market as greater numbers of suppliers consider trading opportunities with the region. Retailers are also stepping up their investments in this large promising market. 40% increase grow is forecasted for major retailers between 2009-2013 As the market consolidates, and competition intensifies there is an increasing pressure on domestic retailers to remain consolidates competitive.

Local retailers and suppliers should look to Central European markets to decide how best to respond to the growing influence of foreign competition. Grocery spend per capita remains significantly lower than in Western Europe and the market is very price sensitive. While this limits the opportunity to improve margins through added-value products, it is an attractive proposition for discounters. Lidl & Schwarz, Rewe (Penny fascia) and Tengelmann (with its Plus fascia) all have plans to develop aggressively their discount format in Romania over the next 5 years.

¢ ¢ Project Barbarossa. Information Pack Red Devil Romania Operations 29 Section 7 Conclusion 30 Section 7 Conclusion Conclusion Energy drinks consumption in Romania is very low, around 0.

37 liters per capita, compared to other European Countries The consumption is still increasing 15 % y o y Given the fact that a significant share of the Countries. y-o-y. sales is still realized in non-retail segment, namely HoReCaDi, it is not easy to fight with current market players. Red Bull and Burn, the former having around 50 % market share.

Total volume of the non-alcoholic energy drinks market is expected to be around EUR 50 Mils Many brands Mils. which had important success in international markets couldnt succeed in Romanian Market due to several reasons. Such as Rockstar and Shark. However, there is no Alcoholic Energy Drink in the market. Currently around 2. 5 million liters of energy drinks are self-mixed with alcohol in the urban areas, and total market expectancy is to be around 3.

5 millions. Given the alcohol consumption behavior of the population, we expect an increase of 70% to 6 million liters in 5 years time. Only with modern retail networks and national distributors we believe that 50 % of the market is reachable in short term, as distribution means.

And with the support of alcoholic energy drinks, 3-4 % market share is achievable also in the non-alcoholic energy drinks segment. It is recommended to position alcoholic energy drinks as the first product in market. Project Barbarossa. Information Pack Red Devil Romania Operations 31 Section 8 Company & Management 32 Section 8 Company & Management Company & Management.

Barbarossa is a fast growing, motivated and dynamic company with the ability to fulfill the expectations of its clients and Partners in a wide range working field Till 2009 Barbarossa had the core business as construction and undersigned field. construction, very big housing projects, retail centers, office buildings. Barbarossa has constructions in US Base in Romania and also Constanta port.

Starting from 2009 the company intends to increase the activity in the retail field. Barbarossa is among the ten most profitable construction companies in 2009 in Bucharest. The company is about to close deals of distribution rights of Hi-Tec athetic sportswear shoes in Romania, and with New Balance for the same context.

Firat ONEN, BSc, MBA CFO Treasury Supervisor Treasury Analyst easu y a ys Assistant Dealer PhD in Economics Mustafa AKDOGAN, BSc Managing Partner Civil Engineer Ata Ozgun, BA Finance Manager Finance Supervisor 33 years old SC Agricantus SRL (Romania) Ford Otosan Mercedes Benz Turk e cedes e u Emlak Bank Marmara University 31 years old SC Barbarossa SRL (Romania).

Yildiz Technical University 30 years old Ford of Russia Ford Otosan FMCG Automotive Automotive uo o e Banking 2007 Today 2004 2007 2001 2004 00 00 1999 2001 2002 Today Construction 2005 Today Automotive 2008 Today Automotive 2004 2008 Project Barbarossa. Information Pack Red Devil Romania Operations 33.

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