Sources inform ''Globes'' that Tnuva Food Industries Ltd. is considering closing its Romanian operations and pulling out of the country after having invested NIS 300 million in the enterprise. Tnuva's Romanian dairy is causing heavy losses, and is one of the first issues that new chairman Shlomo Rodev is tackling. If Tnuva cannot sell the business, it will close it down.
Romania was Tnuva's first target for expansion, with the objective of serving as a bridgehead for international operations based in Israel with branches around the world, as the company's website put it.
Tnuva set up Tnuva Romania Dairies in 2005, together with a European investment bank and a private partner at an investment of €60 million. The goal was to establish a complete system from milk production through distribution under the Tnuva and Yoplait labels. Tnuva planned to reach a turnover of €50 million a year in three years. It didn’t - sales reportedly total no more than NIS 100 million a year (€20 million)
The 2008 global economic crisis hit Romania hard, and Tnuva's venture along with it. Tnuva could not compete against lower cost dairy imports, and Tnuva Romania Dairies' output was 50% more expensive per liter than local dairies. Product quality, cited on the cartons, could not tempt consumers to pay the higher price.
In July 2008, Tnuva bought out its partners in Tnuva Romania Dairies for NIS 60.7 million and assumed full ownership. Tnuva made a NIS 44.7 million write-off on the investment in December 2009 and a further NIS 9.3 million write-off a year a later.
Tnuva declined to comment on the report.
Published by Globes [online], Israel business news - www.globes-online.com - on November 27, 2011
© Copyright of Globes Publisher Itonut (1983) Ltd. 2011