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Czech Republic Food and Drink Report Q3 2008
Business Monitor International, July 2008, Pages: 68
In Business Environment Rankings table for the Central and East European (CEE) region’s food and drink environment, the Czech Republic is found in 11th place out of 14 key markets. Major pulls of the market include its strong business environment and a well-established foreign direct investment (FDI) climate and tourism.
However, the country receives far lower scores for its food and drink market and country structure, as its price-conscious consumers spend low amounts on food and drink that is not forecast to experience strong growth. The small size of the population and relative maturity of the market also make this one of the less attractive food and drink markets in the region. Nevertheless, the market is not without its rewards, as illustrated by the amount of foreign interest.
In March 2008, Dutch beer giant Heineken announced its intention to acquire Czech Drinks Union, which produces the national brand Zlatopramen and the regional Breznak, Louny and Dacicky brands. Following the acquisition, which is likely within the first half of the year, the Dutch brewer will have 12% of the local market. Previously, in June 2007, Heineken acquired the Krusovice Brewery from Germany’s Radeberger Gruppe for an undisclosed amount, strengthening its position in the market. In the meantime, in April 2008, Kofola Holding of the Czech Republic and Hoop of Poland announced their merger, creating a regional drinks major under the name Kofola-Hoop Group. Prior to the merger, Kofola was the second-largest soft drinks producer in the Czech Republic and Slovakia, with operations also extending into Hungary and Poland.
The new entity will be in a good position to take advantage of rising demand for mineral water and other ‘healthy’ beverages. Following this merger, Kofola-Hoop will be eyeing further acquisition opportunities. The Czech mass grocery retail (MGR) has also been dynamic in recent months. In March 2008, UK retail giant Marks & Spencer revealed its expansion plans for Central and Eastern Europe, which include a EUR13.6mn (US$21mn) investment in the joint venture (JV) with COMS. The UK company is aiming to open 30 stores in the Czech Republic, Slovakia, Latvia, Lithuania and Estonia over the next few years, which will boost its penetration of the region.
Around the same time, Lidl, a leading discount chain in the Czech MGR sector, reported lower losses for the 2006-2007 business year than in the previous period, indicating that the company is on the road to recovery. Finally, German retailer Rewe is to acquire the Plus discount chain owned by its compatriot Tengelmann, which will rent out the buildings in which the stores are located. Rewe plans on merging with its Penny Market discount chain with Plus stores, aiming to capitalise on the strong growth of sales in the discount sector. The Plus chain had been targeted by UK’s Tesco, which will now face stiffer competition by Rewe.
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