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Croatia Food and Drink Report Q2 2008
Business Monitor International, March 2008, Pages: 72
The Croatia Food Drink Report provides independent forecasts and competitive intelligence on Croatias food and drink industry.
The Croatian food and drink and mass grocery retail (MGR) markets continues to offer both opportunities and challenges. On the one hand, the approaching membership of the European Union (EU) will support the development of the breadth and depth of the market, as the economy and trade improve. The gradual improvement of operating conditions, and especially the regulatory environment that will have to be fully aligned with EU directives, will provide a safer platform for involvement by foreign players in the country’s food and drink and MGR segments.
In fact, foreign firms have already expressed significant interest in the nascent market. For example, leading Slovenian retailer Mercator is one of the key players in Croatia, in the course of 2007 forming of a joint venture (JV) with local company Plodine as well as purchasing local food retailer Presoflex. Towards the end of the year, Mercator introduced the first self check-out units in its hypermarket in the seaside city of Rijeka. The move carries benefits both in terms of technological improvement and a novelty factor, and is likely to attract more consumers. The company is also targeting higher-income groups with more sophisticated offerings, which are now available in its new store in the capital, Zagreb. In the meantime, the local industry will struggle in the face of rising competition from foreign companies. High production costs, difficult taxation regime for the drinks industry as well as a lack of government subsidy have meant that smaller domestic companies are increasingly emerging as take-over targets. Larger players are looking abroad, with food conglomerate Agrokor interested in the tender for the majority stake in Turkish Migros Türk retailer, which is owned by Koç Holding. Consequently, industry consolidation is likely in the next few years, as the sector matures.
In terms of regional standing, Croatia is found in the middle of the new BMI Rankings for Q208, having improved its position from eleventh in the previous quarter. Croatia offers a significant potential in its drinks market, with relatively high - and growing - per capita consumption. In particular, the bottled water segment, both still and sparkling varieties, has emerged as a promising field. Figures published in December 2007 by consultancy firm Zenith International indicate that the consumption of bottled water virtually doubled between 2001 and 2006, although it continues to lag behind Western European levels. On the other hand, the potential is thwarted by certain economic shortcomings, price consciousness of Croatian consumers and the small overall size of the population.
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