Romania ranks first in the European price increase ranking, and amid the sharp decline in the purchasing power of Romanians, producers and traders are competing in offers per hundred grams, a marketing strategy that has as its main focus the loyalty of customers exhausted by the effects of record inflation, shows an analysis made public on Monday.
“The approach of Christmas and New Year’s holidays has triggered an unprecedented bidding war between large stores in Romania. Amid the sharp decline in the purchasing power of Romanians, producers and retailers are competing in deals per hundred grams, a unique marketing strategy that has as its main focus the loyalty of customers exhausted by the effects of record inflation in Romania,” shows an analysis carried out by the consulting firm Frames.
“The end of 2024 finds Romania in first place in the European price increase ranking. For 10 months now, our country has experienced the largest price increases in food, clothing, footwear, electronics, household appliances and especially services among all EU countries”, the analysis reveals.
According to the latest data from the National Institute of Statistics (INS), the annual inflation rate rose to 5.11% in November 2024, from 4.67% in October. Food prices rose by 5.11% compared to November 2023, non-food products by 5.15%, and services by 7.56%.
After a Black Friday that was more anemic than ever in terms of the number of products sold, the Christmas shopping season promises to be at least as challenging for retailers, but especially for customers, according to Frames analysts.
Given that a decent Christmas meal for four people, with sarmale, steak, cozonac, drinks and other seasonal delicacies, exceeds 1000 lei, it will be a real challenge for many Romanians to manage to spend their holidays “like in the good old days”.
Although salaries have increased compared to previous years, Romanians remain the Europeans who spend the most on food. According to Eurostat, over 25% of monthly income is allocated to food, a percentage well above the European average. Food producers and retailers seem to have understood this challenge, proof that they have launched, in recent days, a series of promotional campaigns adapted to the population’s increasingly reduced purchasing power – we see more and more promotions not per kilogram or per piece, as in the past, but per hundredth of a gram.
“We will have, perhaps more than ever, a Christmas per hundredth of a gram. People will go and buy by the slice, by the piece, by the handful of classic holiday goodies. It is the result of the bankrupt, cynical policy of the Romanian state to stimulate inflation, price increases, in order to increase budget revenues and dilute its historical debts,” indicates the Frames analysis.
The decline in sales in Romanian retail began two years ago, but in 2024 it intensified significantly, with many stores, especially small ones, struggling to cope with the challenges generated by sales volumes below expectations.
Frames consultants refer to a recent study by GFK which showed that, in the first half of this year, there were significant decreases in volumes sold in certain basic categories, such as: bread, oil, frozen foods, butter, breakfast cereals, beverages (mostly carbonated juices, coffee, energy & isotonic drinks, juice drinks and cider).
Moreover, 85% of Romanian shoppers said they were concerned that prices could continue to increase, as revealed by the latest wave of the “Behavior Change” report, launched by Consumer Panel GfK. Thus, four out of ten households in Romania remain in the “budget squeeze” zone, being forced to limit their spending on consumer goods in order to fit into the available budget or are unable to cover their current needs. Thus, products on sale have come to have a value share of over 20% in total FMCG purchases made by households (excluding items in the fresh food category), according to data from Consumer Panel Services GfK Romania. More precisely, one in five lei spent by Romanians on shopping goes towards consumer goods on sale.
“Christmas 2024 will be a promotional one”
“Christmas 2024 will be a promotional one, for millions of Romanians. Hypermarket private label products will probably be in the foreground, especially since the price-quality ratio has improved significantly. All estimates show that, overall, we will have a more austere Christmas than ever, a sign of the increasingly reduced purchasing power in Romania”, shows the Frames analysis.
Although the average net salary in October reached 5,268 lei, up by 40 lei (+0.8%) compared to September 2024 (the latest statistical data), purchasing power remains at a low level, and Romania ranks second in terms of the lowest average hourly wage in the European Union, with just over 10 euros/hour, which makes managing expenses a continuous challenge for the population.
“The average wage increase does not reflect the difficult financial situation of more than half of the Romanian population, for whom the real income/person does not exceed 3,000 lei. And we are not talking about pensioners, where it is a real tragedy, but about active people, employees who see their incomes increasingly diluted by record price increases in Romania,” say Frames experts.
According to data from the market research company NielsenIQ, Romanians spend 30 billion euros annually on consumer goods, i.e. on food, non-alcoholic beverages, alcoholic beverages and non-food goods, namely personal care and household products. In the first nine months of this year, sales of such FMCG items increased by 16.2%, the advance being actually supported only by price increases, in a market where consumption has decreased.
Dumbflation or Wokeflation or Poorflation? Pick any and they fit.