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Slovakia Food and Drink Report Q4 2009
Business Monitor International, Oct 2009, Pages: 70
The Slovakia Food and Drink Report provides industry professionals and strategists, corporate analysts, food and drink associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Slovakia's food and drink industry.
In the Business Environment Ratings (BER) matrix for Q409, Slovakia considerably improved its position and is now placed third out of the 14 major markets in Central and Eastern Europe (CEE). However, the shift occurred mostly due to the fact that other markets are expected to be more negatively affected by the current economic climate, rather than the actual improvement of Slovakia’s absolute score. Nevertheless, key draws to doing business in Slovakia include its pro-business stance and high per capita food and drinks consumption, although its modest population size and the negative trade balance will continue to act as a brake on its progress further up the table. The current economic slowdown in its export markets will also serve to negatively impact on the level of food exports from Slovakia, while the expected expansion of the EU to lower-cost markets will reflect on the country’s reputation as an affordable production base.
Food consumption as a percentage of GDP is expected to decline from an estimated 7.2% in 2008 to 6.5% in 2013, as disposable incomes improve and people spend more on non-essential items. In value terms, food consumption is expected to reach EUR5.23bn (US$6.64bn) by 2013, growing by some 13.97% in local currency terms. While the 2009 market development will remain dependent on wider economic conditions, we still expect a positive performance in local currency terms, although food and soft drinks prices are reported to have fallen by 2.8% in June 2009.
As the effects of the collapse in external demand increasingly feeds through to the wider economy, we expect levels of private household consumption to drop off accordingly, which will further weigh on Slovakia's growth prospects this year. As unemployment continues to surge (latest data shows official unemployment hitting a three-year high of 10.9% in April 2009) and real wage growth contracts, domestic demand will continue to feel the pinch. Overall, we expect the Slovak economy to contract by 4.2% year-on-year (y-o-y) in 2009, down from our previous forecast which saw real GDP falling by 2.5%.
The challenging market conditions are forcing Slovakian mass grocery retail (MGR) players to adapt their strategies. To this end, in June 2009 German Metro Cash & Carry Slovakia announced that it would expand in underserved rural and suburban areas, through partnerships with up to 2,000 independent local retailers, rather than through the expansion of the number of its own outlets. Metro, which already has one training academy, also has plans for two other such centres, which would serve to assist small retailers in the practices of shop-keeping. Given the constraints on value growth expected for the rest of the year, the retailer is clearly targeting volume increases.
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