While remaining a stable market in principle due to its nature, Romania’s food and beverages market is stagnating in size these days due to subdued domestic consumption. Retail sales in the rolling 12 months ending June 2013 were up 1.8% year on year but still 16.7% below the average level in the latest pre-crisis year 2008. Wages are stagnating at the best and the employment is recovering slightly, thus lagging well below pre-crisis levels. Bank debt service, scarce consumer credit [if any] and rising utilities fees put additional pressure on households’ budgets.

Pressures on the disposable incomes have been particularly strong in H1/2013 – actually the strongest since the beginning of the recession in 2008, except for the episode when the government cut by 25% the public wage cut in mid-2010. Real wages contracted in each of Q1 and Q2, particularly in the private sector. Food retail sales contracted by 1.2% on an annual basis in Q2 for the first time after five quarters in a row of positive growth rates. High prices of vegetables due to damaged crops contributed to sales’ dynamics – but at least this constraint is likely to vanish with the bumper crop at home and abroad that are likely to push down the prices.

Outlook for the food market’s growth remains mixed as the domestic demand is unlikely to pick up any soon; on the upside, lower prices could stir consumption volumes and help food processing industry on short term. On longer term, the market holds serious expansion potential - -still depending on the incomes and general economic expansion.

Romania’s food exports are primarilly in the sector of cereals, oilseeds and live animals. Diversification and stronger exports of processed foods is desirable but there are little if any grounds to expect such shifts in the near future.

The output of the food and beverages industries has been on moderate rise for the past couple of years though. Nonetheless, recent deterioration of domestic consumption must have had a negative impact. The potential for the industry stems from i. better use of raw vegetal crops [including for the development of animal breeding sector] and ii. positioning of domestic processed products [for end-users] as high-quality products as compared to largest part of the imported goods.