The Summary of the Ph.D.

thesis BREAD MARKET IN ROMANIA by post-graduate IONESCU (BIGIOI) Diana-Stefania

CONTENTS
INTRODUCTION CHAPTER 1 : HISTORY AND IMPORTANCE OF BREAD 1.1 1.2 1.3 2.1 2.2 2.3 2.4 2.5 A HISTORY OF BREAD IMPORTANCE OF BAKERY PRODUCTS IN FOOD CONSUMPTION BAKERY SECTOR EVOLUTION IN ROMANIA THE MARKET CONCEPT CHARACTERISTICS OF AGRO FOOD PRODUCTS THE DEMAND THE SUPPLY THE PRICE

CHAPTER 2 : THE MARKET A THEORETICAL APPROACH

CHAPTER 3 : THE CEREALS MARKET IN ROMANIA, EUROPEAN UNION AND IN THE WORLD 3.1 CHARACTERISTICS OF DEMAND AND SUPPLY OF AGRO-FOOD PRODUCTS 3.2 3.3 WHEAT IMPORTANCE THE CEREALS MARKET IN ROMANIA

3.4 THE CEREALS MARKET IN THE EUROPEAN UNION AND IN THE WORLD 3.5 3.6 IMPORTANCE OF A UNIFIED AGRO MARKET CONCLUSIONS

CHAPTER 4 : COMPARATIVE ANALYSIS OF BAKERY MARKET IN ROMANIA AND IRELAND 4.1 4.2 4.3 4.4 4.5 4.6 4.7 THE BAKERY MARKET IN ROMANIA THE BAKERY SECTOR BREAD PRICE DEMAND AND INCOME CORRELATION - CONSUMPTION SUPPLY COMPETITION CONCLUSIONS

CHAPTER 5 : RESTRUCTURING OF BAKERY MARKET IN ROMANIA WITH REGARD TO EUROPEAN UNION INTEGRATION 5.1 5.2 BAKERY PRODUCTS CONSUMPTION SURVEY IN ROMANIA QUALITY IN ROMANIA AND EUROPEAN UNION

5.3 KEY WORDS

CONCLUSIONS

CONCLUSIONS AND PROPOSALS BIBLIOGRAPHY ANNEX ANNEX 1 - PRICES ANNEX 2 - DEMAND ANNEX 3 BAKERY PRODUCTS CONSUMPTION SURVEY TABLE OF TABLES TABLE OF FIGURES

KEY WORDS
Food and agrifood markets are mechanisms which allows people and enterprises to trade, normally governed by the theory of supply and demand. Equilibrium Price represents the price at which the supply of goods equals demand. Product is anything that can be offered to a market that might satisfy a want or need. However it is
much more than just a physical object. It is the complete bundle of benefits or satisfactions that buyers perceive they will obtain if they purchase the product. It is the sum of all physical, psychological, symbolic, and service attributes.

Demand is how much a consumer is willing and able to buy at each possible price. It is the combined desire, ability and willingness on the part of consumers to buy goods or services. Demand is determined by income and by price, which is, in part, determined by supply. Supply is the quantity of a product or service a producer is willing and able to offer for sale at each possible price. Supply and Demand are part of microeconomic theory, the partial equilibrium supply and demand economic model originally developed by Alfred Marshall that attempts to describe, explain, and predict changes in the price and quantity of goods sold in competitive markets. Elasticity is the ratio of the incremental percentage change in one variable with respect to an incremental percentage change in another variable. Elasticity is usually expressed as a positive number (i.e., an absolute value) when the sign is already clear from context. Customer is someone who purchases or rents something from an individual or organization. Market Survey - is a collection of data and information from a sample of customers and potential customers. The data and information are analysed and inferences made about the population at large. An Enterprise is defined as the smallest combination of legal units that is an organisational unit producing goods or services, which benefits from a certain degree of autonomy in decision making, especially for the allocation of its current resources. An enterprise could be a sole legal unit. A Local Unit relates to all local units engaged in industrial activity, which have on average three or more person engaged during the year. A local unit is defined as an enterprise of part thereof situated in a geographically identified place. The different geographical locations in which an enterprise conducts industrial activities are treated as separated local units. Persons Engaged relates to proprietors, directors and family members working in the business together with full-time and part-time employees. A Household is defined as a single person or group of people who regularly reside together in the same accommodation and who share the same catering arrangements. Wages and Salaries is defined as the gross amount paid to employees before deduction of income tax, employees contributions to social security, etc. Other Labor Costs includes employers contribution in respect of social welfare, superannuation, social expenditure, training costs, etc. Turnover is the net amount (excluding VAT) invoiced to customers after the deductions for trade and quantity discounts and allowances for returns but not cash discounts. 4

Gross Value Added is the production value (i.e. total turnover adjusted for changes in own account, capital assets and stocks of finished goods and goods for resale without further processing less purchases of goods for resale without further processing) less intermediate consumption (i.e. total purchases adjusted for changes in stocks of materials and fuels less purchases of goods for resale without further processing). Gross Output is the net selling value of all goods manufactured in the year, whether sold or not, including work done and capital assets manufactured for own use. Industrial Input covers the costs (excluding VAT) of the industrial materials, industrial services, fuel and power used in the production of the output. Net Output is the difference between gross output and industrial input (it is a better measure of the relative economic importance of the different sectors than gross output) Reminder of Net Output is the difference between net output and wages and salaries. It is the fund from which dividends, deprecation, labor costs (other than wages and salaries), interest, taxes and all other expenses are paid. .

SYNOPSIS OF THE MAIN PARTS OF THE PAPER

The main goal of this work is to present and perform a comprehensive analysis of the bakery sector and identify the main potential of this sector in Romania. This work is written clearly and it is easy to read, so all readers that want to know more about the bakery sector can understand the work herewith. The paper starts with an INTRODUCTION where the author presents briefly the work carried out during this paper. The first chapter of this work, called HISTORY AND IMPORTANCE OF BREAD presents a short history of bread starting with antiquity, going through medieval times, stopping by in the industrial age and finishing with the modern times. The introductory chapter continues with a few topics about the importance of bakery products in food consumption and concludes with the evolution of bakery sector in Romania. The second chapter, called THE MARKET A THEORETICAL APPROACH, is dedicated to theoretical analysis of the market and market concepts. In this chapter the author presents the theoretical aspects of demand and supply as well as the price equilibrium and elasticity of supply and demand. The third chapter of this paper, called THE CEREALS MARKET IN ROMANIA, EUROPEAN UNION AND IN THE WORLD presents and analysis of cereals market. Because the bakery products are the final product of cereals products processing, this chapter makes a careful examination of wheat production on national and international levels. In a very original way, the author has presented the cereals production, cereals consumption as well as cereals cultivated areas in Romania, in contrast with same indicators obtained in the EU and the world. In Romania, the wheat production has a contribution between 22.2% (minimum in 1996) and 42.9% (maximum in 1990) to the total cereals production, with an average of 33.5%. In the EU, for similar period of time, the wheat and rye production average contribution is 43% of total cereals production. In the world, the wheat and rye production has an average contribution of 40% out of total cereals production. From a cultivated area point of view, the wheat and rye have an average contribution of 35.6% from the total cereals cultivated areas in Romania. In the EU the percentage is about 30% for wheat and rye, while in the world the average percent is 40%. The cereals production can be correlated with the cultivated area, this being expressed by average hectare production. In Romania, the average wheat production per hectare is between 1.8 tons/ha (in 1996) and 3.2 tons/ha (registered in 1990), with an average of 2.5 tons/ha. In contrast, the current study reveals that in the EU the average cereals production is more than twice as big, with a value of 5.5 tons/ha. The main reason for this difference is obviously the differences in production technology and methodology. This difference cant be explained by differences in whether conditions. Another significant difference between the situation in Romania and EU lays in the differences shown in the evolution of average cereals production. While in Romania the registered production oscillates from year to year in a very random way, in the EU is registered a steady increase in the average values.

The average cereals production in the world is situated at about half the registered average production in the EU, being situated at similar levels as Romania, at 2.5 tons/Ha, for the studied period of time. In this chapter, the author also conducts an analysis of the production break-down for each member country in the EU, in the year 2004. Out of the member countries, France stand outs with a record production of about 24.30% of the total production in the EU. Next country is Germany, with a contribution of 17.64%, followed by Poland with a contribution of 10.23% out of the total crop production in the EU. In a comparative analysis, the author reveals that Romania, for the same year, is situated somewhere between Poland and UK, Spain and Italy, with a hypothetical contribution of about 9 % (24403 thousand tons). In Romania, wheat import levels continue to increase year on year. In contrast to this, the state continues to subsidize farmers in an effort to sustain and encourage increases in production levels. The reasons for this is due to the that wheat farmers production capacity is low due to the excessive fragmentation of land (a natural consequence of returning the land to its owners) which leads to low yields, high production costs (costs of work and fuel) and other factors related to stocks, distribution and commercialization. As a net effect, wheat farmer incomes are low. In the fourth chapter, called COMPARATIVE ANALYSIS OF BAKERY MARKET IN ROMANIA AND IRELAND the author presents an original and comprehensive comparative analysis between the bakery sector in Romania and Ireland. The analysis is done by looking at the bakery sector in both countries in the context of price, demand and supply and competition comparisons. This analysis is of a vital importance to understand all the aspects and variability that can influence the bakery market on national and international level as well as the anticipation of consumption demands that could occur in the context of EU integration. In Romania, the manufacturing industry turnover has an almost constant average contribution of 65% to the total turnover from industry, for the analyzed period of time (1999 2003). The food industry contributes 22% of the total turnover from the manufacturing industries. The bakery industry contributes about 18% of the total turnover from the food industry, with an approximate constant rate of change during the analyzed period of time (18% in 1999 and 18.6% in 2003). In 1999, the real production value from bakery sector was 10031 billion lei, while in 2003 the real value of production from the bakery sector was 13854 billion lei. In Ireland, the manufacturing industry has an approximate constant contribution to the total turnover from the industry, of about 95% (during the analyzed period of time 1991-2002). The real turnover value obtained from food industry grows from 11755 million euros in 1991 to 28026 million euros in 2002 (the base year is 1991). In the same time the contribution of food industry to the total turnover from manufacturing industries goes down from 40% in 1991 to about 20% in 2002. The contribution of the bakery sector to food sector turnover goes also down from 50% in 1991 to 24% in 2002. Those facts do not indicate a degradation of food or bakery sector, but rather the fact that manufacturing industry in Ireland goes through a much accelerated development. This fact is demonstrated by the real value of the turnover value for the food and bakery sector over the analyzed period, which is presenting minor variations. In Romania, the number of enterprises in the bakery sector grows from 3378 in 1999 ( 31% of the number of enterprises in food sector) to 4017 in 2003 (37.58% of the number of enterprises in the food sector). In Ireland, the number of enterprises has grown very little,

from 142 in 200 to 157 in 2003. Those numbers confirm a normal behavior for a market with constant variations as the bakery market. The price of bread in both countries shows that the real price of bread goes up for the analyzed periods. The price variations in both countries seem to be tightly coupled with the price of the wheat, indicating that the price of the bread in those countries is still established by the price of the raw materials used in the manufacturing process and not by market mechanisms (supply/demand). The average bread consumption per person in Romania is of abut 330 grams every day, or 120 Kg per year. In Ireland, the average bread consumption per person is 139 grams per day, or about 50 Kg per year. The amount of the bread consumption for both countries has a constant character for both countries, for the analysis period. In Romania, the percentage of food expenses goes down slowly from 46% in 2002 to only 39% in 2003, showing a slow improvement in the quality of life in Romania. In real prices, we can see a slow (but steady) increase in the amounts that the population is spending every year on food products. Same characteristics are presented by the Irish consumption patterns, where a slow (but steady) decrease is revealed in the percentage allocated for bakery expenses out of the total food expenses. Out of the analysis performed on consumption patterns, we can draw a very interesting conclusion. It seems that household consisting of a single person allocate the highest amount of their expenditure for food for bread, from all studied categories. This fact probably has a simple explanation in the fact that the single persons feeding patterns are oriented more towards sandwiches and fast foods, based on high bread content. In general, the expenses on food products (analyzed in real terms) remain constant over the analyzed period, indicating again a market with constant character. In Romania, the evolution of average income per month, in real prices (calculated based on CPI and current value reported by national statistics office) is worrying. The average income per person in 2003 is about 68% of the average income registered in 1990. This true reality reflects the fact that the level of quality of life decreased significantly between 1990 and 2003 in Romania. In Ireland, the evolution of average monthly income shows a steady growth, being the consequence of a healthy market economy. In Romania, production from manufacturing industries shows a constant flat growth rate evolution during the studied period (1998 - 2002), making up 80% out of the total production obtained from industry. The food industry has shows a constant flat growth rate with a constant contribution to production within manufacturing industry of about 20%. The production from the bakery sector has also been relatively constant (with a small decrease) during the analyzed period of time. In Ireland, the production of bakery sector has slightly increased during the analyzed period of time (2001-2003), showing that the bread market in Ireland is not yet saturated. In the fifth chapter, called RESTRUCTURING OF BAKERY MARKET IN ROMANIA WITH REGARD TO EUROPEAN UNION INTEGRATION the presents a study of the potential of bakery market. On the basis of this survey, correlated with results from previous chapters, the author proposes a restructuring for the bakery market with regard to Romania integration in EU. In this chapter, the author has designed and implemented a survey that highlights the consumers preferences regarding the consumption of bread and bakery products. The results 8

of the survey were generated from data extracted from paper based questionaire and edntered into a relational database for analysis. This database is available on CD attached with this paper. Based on the results of an analysis of this data, the author has made a number of recommendations towards a restructuring of the bakery market in Romania. A summary of these recommendations are presented herewith. The consumption of white bread is still the preference in Romanian families, making up 70% of all bread consumed. Thus, the production of white bread should be maintained or intensified. Brown bread and soda bread is also starting to be consumed by Romanian population. The success of brown and soda bread in Romanian market will depend on the proper education of the consumers, mainly to remove the old misconception that brown bread is perceived as the poor mans bread. In addition the bakeries should undertake marketing campaigns to highlight the health improvement dietary qualities of brown and soda bread. Furthermore, it seems that the average Romanian consumer doesnt seem to pay too much attention to the way the bread and bakery products are presented and wrapped, but rather the focus is on the taste of the product. In this respect, the bread products manufacturers should pay more attention to hygienic wrapping in addition to continuously improving the taste of their products. What was also interesting was that 90% of the interviewed population prefers the Romanian bread to the foreign imported bread based on taste comparison. The foreign imported bread seems to be consummated due to lack of Romanian bread, half of the interviewed population regarding it as having good taste, while the other half regarding it as fake and without taste. It looks like the majority of consumers (68%) purchase the bread on quality alone, while only 32% purchase based on price. Seventy percent of interviewed persons usually buy bread from local supermarkets, together with the rest of food products they consume. This fact suggests that the bread producers can deliver the bread to those supermarkets, to reach the end population. Home baked bread, using automatic kitchen appliance seem to be of interest for people living in urban areas, but not for those living in rural areas. However, this opens up an interesting niche for enterprises wanting to commercialize such equipment. The main goal of the restructuration of bakery sector lays in diversification and comercialization of bakery products in a functional market economy, comaptible with priciples, standard and mechanisms of European Union. In the future, the strategic orientation of bakery sector manufacturers should be designed to meet the expectations of the consumers and in the mean time, to meet the quality standards imposed by EU. The resulting products should be competitive on the globalized market. In the chapter CONCLUSIONS AND PROPOSALS the author is presenting the conclusions and findings of the research. The paper continues with a chapter called KEY WORDS that explains all the key terms used during the work. BIBLIOGRAPHY, followed by ANNEX, TABLE OF TABLES and TABLE OF FIGURES conclude the paper.

CURRICULUM VITAE
1.Personal Details Name: Home Address: Contact Address: Diana Bigioi 57 Sceillg Ard, Headford Road, Galway,Ireland 57 Sceillg Ard, Headford Road, Galway, Ireland Mobile: E-Mail: Date-of-Birth: Status: +353-86-3840532 diana@fotonation.com 17/04/72 Married, two children

2. Professional Credentials Qualifications B.Sc. (Economics) 1st class [The Academy of Economic Studies, Bucharest, Romania]; Postgraduate Studies Diploma (Management/Economics) 1st class [The Academy of Economic Studies, Bucharest, Romania]; M.Econ.Sc. (Economics) , [National University of Ireland, Galway] On going IATI (Institute of Accounting Technicians in Ireland) Ongoing Advanced Human Resources Management Classes Studies Details Postgraduate Studies Diploma (Economics /Management): "Management of Agricultural-Nourishment System", Magister/Master in the field Economics awarded in 1997, Academy of Economics Studies, Bucharest, Romania Supervisor: Prof. Dr. Letitia Zahiu, Academy of Economic Studies, Bucharest, Romania. M.Econ.Sc. (Economics): "An Analysis of the Bakery Sector in Ireland", Magister/Master in Economic Science title awarded in 2001, National University of Ireland, Galway, Ireland Supervisor: Dr. Michael Keane, NUI, Galway, Ireland. 3. Skills Good working experience with peoples (during of a Good working experience using Microsoft Office few years of experience with teaching as lecturer in (Microsoft Word, Microsoft Excel) and Internet a Romanian University) tools (Internet Explorer and Outlook Express) Good understanding of Irish accounting system Working experience with Sage and QuickBooks accounting packages Working experience with Call soft, payroll package 4. Professional Work Experience Dates Role Company Duties 02/04-present HR Manager FotoNation Ireland Ltd Payroll, medical insurance and pension advisor Worldwide purchases operation manager Worldwide operation recruitment Travel Expenses controller 08/02-02/04 Accountant FotoNation Ireland Ltd Cash Control Daily balancing of cash for two companies Sales Ledger Postings Coding and Posting of daily sales Petty Cash Control and Petty Cash Analysis Salary Department 12/01-07/02 Accounts Galway Ryan Hotel Cash Control Daily balancing of cash for two Assistent companies Sales Hedger Postings Coding and Posting of daily sales Petty Cash Control and Petty Cash Analysis Ad-hoc Analysis Projects 9/01-12/01 Practice with Galway Ryan Hotel Understood various accounting related operations the Accounts and practices

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9/00 -9/01

9/97 5/00

9/96 9/97

Department Full time position as master student at NUI G Lecturer in Economics Department Lecturer Assistant in Economics Department

N U I Galway

University Spiru Haret, Bucharest, Romania University Spiru Haret, Bucharest, Romania

Daily studies Correction of a number of assignments for various professors in the economics department, specially for Economics Maths Teaching Romanian accounting system and Management Teaching Romanian accounting system and Management

5. References Turlough Rafferty General Manager, Fotonation Ireland Ltd Fotonation Ireland Ltd e-mail:turlough@fotonation.com

Dr. Peter Corcoran Senior Lecturer National Univesity of Ireland, Galway pcor@wuzwuz.nuigalway.ie

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