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Slovakia Food and Drink Report Q1 2010
Business Monitor International, Dec 2009, Pages: 73
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 BMI’s updated Business Environment Ratings (BER) matrix for Q110, Slovakia dropped from third to fifth position out of the 15 major regional markets, which now include Turkey. 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. Additionally, Slovakia remains mired in recession, though we believe that the country’s stable banking sector, strong coalition government and ongoing eurozone fiscal and monetary stimulus will help ensure that the economy avoids two consecutive years of negative growth. Going forward, we project Slovak real GDP to expand by 1.5% in 2010, before posting an average annual rate of expansion of 3.3% through 2014.
The above also bodes well for the development of food and beverages values in the country over the same period, as we expect food consumption value to reach EUR5.42bn (US$6.77bn) by 2014, growing by some 15.66% 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. However, the coming two years are also expected to witness low single-digit value growth of food consumption values (of under 3%), following developments such as the prices of foods and non-alcoholic drinks in Slovakia falling by 5.9% year-on-year (y-o-y) in August 2009, and low inflation.
However, the economic slowdown and the increasing pressure placed on local producers by retail chains engaged in price wars, in a bid to keep consumers, have taken their toll on some companies. In September 2009, one of the leading Slovakian poultry producers – Hydina ZK – declared bankruptcy, blaming its demise on the very fact that retailers are forcing suppliers to cut prices to below-cost levels. The development has, on the other hand, benefited its compatriot, poultry producer Podtatranska hydina, which considerably improved its market position in the country by moving into the gap left by Hydina ZK‘s bankruptcy. Similarly, falling prices are held responsible for the lower wheat and barley production in the country, which fell by 17% and 21%, respectively, as reported by the Slovak Agricultural and Food Chamber (SPPK).
On the other hand, economic downturn has had less of a negative impact on some industry sectors. According to global market research company Nielsen, bottled water consumption in Slovakia increased by 3.8% y-o-y for the year ended July 2009, with sales revenues climbing by as much as 35.5% y-o-y. Installation of a growing number of water coolers, dispensers and pumps will contribute to this trend over the longer term, as will the introduction of new products, especially as foreign and modern retailers increase their presence across the country. In fact, Germany’s Rewe Group recently announced that it will invest EUR40mn in new store launches and refurbishments in Slovakia in 2009, building seven Billa supermarkets and refurbishing a further ten.
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