Parmalat collapse felt in Hungary, Romania

Related tags Parmalat Romania Milk

The collapse of Italian dairy giant Parmalat -and revelations of
massive and widespread fraud - has been felt throughout the world,
not least because the Parma-based group was such an international
player. In central and eastern Europe, Parmalat's two main markets
were Hungary and Romania, and the debate there is now focusing on
the subsidiaries' future.

Enrico Bondi, the administrator of Parmalat, is currently trying to keep the business running in the midst of a major investigation of the $8 billion accounting scandal which brought the company to its knees. But with the Parmalat business spread across nearly 30 countries, questions are already being raised about the future viability of many of Parmalat's foreign units, including those in Hungary and Romania.

In Hungary, the collapse of the parent company in Italy has had a major effect on production at the Székesfehérvár-based dairy, which has been unable to pay its suppliers since mid-November.

Discussions are already taking place with regard to a possible takeover of the plant, with the local dairy farmer co-operatives considered to be the most likely buyers at the moment. French group Danone was also linked to the unit, but has consistently denied any interest in this or any other unit of the bankrupt group.

Press reports in Hungary cite the communications director of Sole, Hungary's second largest dairy group, as saying that any of the leading players in the market would be interested in acquiring Parmalat's business in Hungary, should it eventually be put up for sale.

However, few takers are likely to be found for its liquid milk operations, as there is little scope for improvement in this end of the business. Of most interest is likely to be the dairy products operation (yoghurts, cream).

Parmalat is the sixth largest dairy group in Hungary, with a share of around 5-6 per cent, well behind market leader Friesland Hungária, which has around 25 per cent.

As well as Friesland and Danone, the other leading foreign group on the Hungarian market is France's Bongrain.

The situation in Romania seems to be slightly more normal, with production levels at the two facilities in Bucharest and Baia Mare apparently maintained at pre-crash levels.

There has as yet been little or no discussion of a possible sale of the Romanian business, which makes liquid milk, although a sale is looking increasingly likely as the full extent of Parmalat's financial collapse is revealed.

Related topics Market Trends

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