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Estonia Food and Drink Report 2010
Business Monitor International, Jan 2010, Pages: 67
Estonia 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 Estonia's food and drink industry.
In the latest Business Environment Ranking (BER) matrix for the Emerging Europe region – which now includes Turkey – Estonia is found in 10th position, out of 15 markets surveyed. The key reason for the worsening of its placement over the past months is the impact of the economic downturn on the small market, numbering only 1.3mn people. The recession in Estonia has resulted in year-on-year (y-o-y) contractions in six consecutive quarters, in what is now the longest recession the country has seen since the immediate post-Soviet transition period. While its Gross Domestic Product (GDP) growth is expected to return to positive territory in H210, the full-year 2010 is also anticipated to witness an overall decline in economic development. The recession is forecast to result in lower food consumption values over the next five years, with the 2009-2014 contraction in US dollar terms expected to be as high as 31.8%. In local currency terms, at just 3.33%, the five-year increase in the value of food consumption will be negligible, as the annual growth only leaves the negative territory in 2010, and even then only for extremely low single-digit figures.
The above factors are already having a profound impact on the country’s food and drink marketplace, especially given its relatively saturated mass grocery retail (MGR) environment. Companies such as multinational Coca Cola bottler Coca Cola Hellenic Bottling Company (CCHBC – which was thought to be planning a market share offensive across the Baltic states in order to compensate for the falling demand for carbonates – and Estonia’s leading spirits maker, AS Liviko – which has finalised a new production and packaging line that will form a base for exports to Japan – are increasingly having to reconsider their strategies.
The downward pressures are especially felt in the alcoholic drinks market, with a focus on spirits, although we expect the sales of wine to benefit as a result. In fact, earlier in the year, Estonian food and beverages conglomerate Altia struck a deal with Spanish Grupo Codorníu to distribute its still and sparkling wine brands in a number of regional markets, including Estonia. Similarly, Liviko recently reported a strong y-o-y increase in its imported portfolio volumes, propped up by the robust performance of Carmen and Cinzano still and sparkling brands, among others.
However, there is no doubt that the medium-term conditions in the Estonian market will remain challenging. Retail sales have been falling, with leading Baltic region-based MGR operator Rimi Baltic announcing a 3.9% y-o-y decrease in Estonia for H109, negatively impacted by the trimmed store hours and lower consumer purchasing power and shifting habits. At the same time, as the importance of Rimi’s SuperNetto discount banner has steadily increased since the start of 2009, we expect the overall MGR sales in Estonia to fall by over 13% y-o-y in local currency terms for the whole year, which is likely to further discourage investment in the market.
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