Lessons for 2024 – “I’ve become convinced that investments in technology and innovation truly make a difference.”

Forbes Romania has invited the most important leaders from the local business environment to talk about the lessons learned/experienced in 2023 and the challenges of 2024 in the editorial project #LessonsFor2024.

Tiberiu Stoian, CEO of Exonia Holding

What is the word that best characterizes 2023?

Against the backdrop of overlapping crises from previous years, which had a significant impact on the Romanian business environment through severe disruptions in supply chains, decreased consumer demand, and the generation of economic uncertainty, new fiscal measures and political changes have created an ambiguous atmosphere for investors and entrepreneurs. The numerous electoral rounds scheduled for 2024 have brought political campaigns and political instability to the forefront, generating uncertainty about the country’s political future and potential changes in fiscal policy.

The unstable global geopolitical context, with armed conflicts, tensions between states, and significant changes in the global economy, has heightened uncertainty regarding Romania’s exports, imports, and international partnerships. In this context, the business environment in Romania faces significant challenges and risks, making uncertainty and unpredictability key characteristics of the year 2023. It is essential for company leaders, especially entrepreneurial ones in Romania, to be mindful of these challenges, to adapt their strategies, and to fasten their “seat belts” to navigate through this “offroad” environment.

What were your concerns for the business you lead in the year 2023? What are the results of the company/group’s activities compared to the estimates made at the beginning of the year?

Unfortunately, we have become accustomed to having reasons for concern, and most likely tend to become immune, provided we “vaccinate” ourselves in time with effective measures to counter them as much as possible. Changes in tax legislation can have an impact on the profitability and business plans of companies within the Exonia group. Higher taxes and new regulations may require adjustments to financial strategies, especially in the context of substantial investments that we are currently undertaking.

Fluctuations in demand, production costs, and the availability of financial resources can affect the financial results of many domestic companies. With imminent electoral rounds, political instability can generate uncertainty about the direction of public policies, which could influence the investment and development decisions of our partners.

The state of uncertainty continues to influence consumer demand and behavior, which may require unforeseen adaptations in our company’s marketing and distribution strategies, especially considering that over 70% of the packaging manufactured by Exonia is marketed in Western European countries and the USA.

From the perspective of our financial results for the year 2023, they aligned with the forecasts we made at the beginning of the year, experiencing a slight decrease in turnover due to reduced raw material costs, but especially as a result of the Exonia group’s strategy to increase market share, including through pricing flexibility policies and the development of new partnerships to increase volumes distributed through authorized distributors, both in Romania and in other EU countries. Encouragingly, the implementation of innovations in production processes ensured that profitability indicators, especially those of our biodegradable packaging production division, were not affected.

How have the overlapping crises and the new geopolitical situation (continuation of the war in Ukraine and outbreak of the conflict in Israel) influenced your company’s operations?

The overlapping crises and geopolitical situation, such as the continuation of the war in Ukraine and the outbreak of the conflict in Israel, can significantly influence the activities of companies and entrepreneurs in Romania. Geopolitical tensions can disrupt the flow of goods and raw materials to and from the region. If a company relies on imports or exports from the mentioned areas, it may face difficulties related to supply and increased transportation costs.

Geopolitical conflicts can indeed be associated with currency volatility, which can affect transaction costs and the profitability of companies engaged in international business or with currency-denominated debts. Another consequence could be the increase in oil prices and other raw materials, which can affect the production costs of companies in various sectors.

Geopolitical conflict may lead to increased uncertainty in global financial markets and thus affect investments and capital flows to Romania. Furthermore, it could also affect consumer behavior and preferences. This would have an impact on the demand for products and services of companies, which, in my opinion, would be the most significant consequence. Constant monitoring of international events, diversification of supply sources, and risk assessment can contribute to adapting to these changing conditions and minimizing the negative impact on business activities.

What are the strengths and weaknesses of the business environment in Romania in the current social and economic context?

Because I am an optimist, I prefer to first mention the strengths of the business environment. Skilled labor force is undoubtedly a strong point. Romania has a skilled workforce in fields such as IT, engineering, and the pharmaceutical industry. Additionally, I observe that some Romanian skilled workers are returning to Romania after many years of working in Western European countries. This trend may attract foreign investment and economic development.

Compared to other European countries, Romania offers competitive costs regarding labor force and rents for office spaces or factories, even though not across all sectors (the textile industry has become expensive in Romania and unprofitable for major operators in the field). The IT industry has seen significant growth in recent years, with a well-prepared workforce, attracting many foreign investments. Although there is skilled labor in certain fields, the education system and professional training require major improvements and adaptations to meet market demands. Infrastructure investments are underway, including highways and railway networks, which can improve connectivity and logistics.

However, there are also many weaknesses characterizing the business environment in Romania. Corruption and excessive bureaucracy, frequent changes in government and tax legislation, as well as political tensions, can represent obstacles to attracting investors and can affect the business environment. There are significant inequalities between regions regarding economic development and access to infrastructure, which can create challenges for companies looking to expand nationwide.

I would conclude that, overall, the business environment in Romania offers opportunities but also challenges. To capitalize on advantages and overcome obstacles, companies must be prepared to manage risks and adapt strategies according to the continuously changing environment. Additionally, a collaborative approach between the public and private sectors can contribute to improving the business environment in the country, although I’m not optimistic that this will happen soon.

Now, ahead of a complex electoral year, what expectations do you have from the Romanian authorities?

Ahead of a year with multiple scheduled elections, I have formulated a series of “demands,” which I make public on various occasions when invited to address representatives of the political environment. It is crucial for the authorities to ensure a stable and predictable political and fiscal climate to instill confidence in investors and entrepreneurs. Frequent changes in fiscal policy and legislation can create uncertainty and clearly discourage investments.

Efforts to combat corruption and improve transparency in public administration should continue. Ethical and fair governance is essential for sustainable economic development and building trust in state institutions. Romania faces numerous structural challenges, such as the healthcare system, education, and infrastructure. My expectations include implementing reforms to address these issues and ensure sustainable economic growth. Investments in education and vocational training are essential to ensure a skilled and competitive workforce.

Authorities should promote initiatives to align skills with labor market requirements. Promoting the business environment should be a priority and currently, it is not. Additionally, authorities should support the business environment by simplifying bureaucracy, reducing administrative costs, and improving conditions for investment and innovation.

In other words, promoting entrepreneurship and innovation should be a priority, but unfortunately, few policymakers realize this, and some are even hostile when it comes to private initiative. Developing infrastructure, including highways and transportation networks, is crucial for efficiently connecting regions and supporting economic development in less developed areas. Moreover, it is a prerequisite for enhancing competitiveness, including for the packaging produced by Exonia, in foreign markets.

It is important for authorities to carefully monitor and manage the country’s financial situation to avoid economic imbalances and maintain financial stability. Additionally, they should establish open communication and hold frequent consultations with us, as representatives of the business community, to understand our needs and concerns, develop policies that promote economic growth, act responsibly, and consider the long-term interests of the country and its citizens.

What are the three main points of your business strategy for the next year?

Diversifying the portfolio of sustainable packaging, 100% biodegradable, is our top priority within the business plan we began implementing in the first part of 2022. Digitalization and innovation represent the second pillar of our factory’s development. I am convinced that investments in technology and innovation really make a difference. We constantly analyze how we can improve business processes and provide innovative solutions to meet customer needs and differentiate their products through our packaging.

Development and maintaining relationships, especially with key account customers, are important aspects, especially considering that Exonia factory’s professional production lines are designed for medium and large volumes. Loyalty of existing customers and attracting new ones is a constant priority. We are working on an innovative marketing strategy and developing new value-added services, which will certainly strengthen relationships with customers and increase their loyalty.

What do you consider will be the biggest challenges globally, but also for the industry/sector you operate in, in 2024?

According to experts, issues related to climate change, including rising temperatures and extreme weather events, could affect the production, transportation, and storage of necessary raw materials, leading to disruptions in supply chains. Loss of biodiversity may affect the natural resources used in our packaging production industry, such as wood, paper, and plant-based raw materials. It could also lead to changes in regulatory requirements for the use of these resources and waste management to combat pollution and promote sustainability. Packaging industry companies need to adapt to the new legislative requirements and find ways to comply with these regulations.

Consumers and company representatives are becoming increasingly aware of environmental issues and are seeking sustainable packaging, which could benefit our industry. For this reason, at the Exonia factory, we are in the testing phase of new environmentally friendly packaging categories with the potential to positively change consumer habits, which we are eagerly looking forward to presenting to the public.

Regarding the sustainable packaging manufacturing industry specifically, improving waste management and increasing the recycling rate of packaging are major priorities and challenges. To be truly sustainable, packaging must be manufactured using efficient resource utilization and have minimal environmental impact. This requires innovations in materials and production processes. At Exonia, we have implemented consumer education programs on the importance of sustainable packaging to encourage responsible choices. The government should implement well-publicized nationwide awareness campaigns on the importance of sustainability.

Read the article on Forbes România (Română)
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