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Croatia Food and Drink Report Q2 2010
Business Monitor International, Jan 2010, Pages: 84
The Croatia 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 Croatia's food and drink industry.
In the Q210 Business Environment Ratings (BER) matrix for the 15 main markets of emerging Europe, Croatia remained in 13th place, above only Ukraine and Bulgaria, and also below the neighbouring market of Serbia. The constraints of the small market (limited by the small and price conscious population), which were exacerbated by the economic downturn, resulted in an estimated 2% year-on-year (y-o-y) dip in 2009 food consumption values as calculated in local currency. Estimated to be worth HRK12.4bn (US$2.36bn), through to 2014, the value of food consumption is forecast to rise by a modest 7.48% in local currency terms. The market is not expected to experience as much dynamism as some of the others in the emerging Europe region, despite the scheduled accession to the EU over the coming few years, although industry consolidation both in the food and drink and the mass grocery retail (MGR) industries will continue apace.
In fact, in December 2009, local press reported that the owner of Atlantic Group (engaged in the distribution and manufacture of healthcare products and consumer goods) is seeking to acquire a 26% stake, currently in state hands, in leading Croatian diversified food conglomerate Podravka. Atlantic had previously indicated that it is interested in merging with Podravka, in a transaction that would create the second-largest food company in the country (behind Agrokor), with an annual turnover in excess of HRK6.5bn. Podravka recently posted a 3% year-on-year (y-o-y) drop in the first nine months of 2009 domestic sales, as economic weakness continued to affect consumers. In contrast, sales in foreign markets rose by 1%, as Podravka increasingly shifts its focus to the more promising markets of South East Europe in particular.
Around the same time, leading Slovenian MGR player Mercator reported that it would acquire Croatian Getro, subject to regulatory approval, as it aims to increase its market share from the current 6%. The company is due to retain all Getro premises and employees, in a transaction termed a 'strategic alliance', as it acquires the Getro brand name. The other major party interested in Getro Croatian food conglomerate Agrokor, the owner of the Konzum supermarket chain pulled out of the bidding race earlier in the year, due to the high asking price. In the meantime, Mercator is also continuing its regional expansion, preparing to enter Macedonia and Kosovo by 2012, as it attempts to increase its foreign presence in order to compensate for the low growth opportunities in its home market.
In terms of the wider economic and political environment, the recent increase in petrol prices will also have an impact on the food and drinks market, as retailers are forced to pass some of the costs onto the consumers, despite previously declining to do so following the value-added tax (VAT) increase. Moreover, although the economy and the tourism industry are to gradually return to growth in 2010, private consumption is recovering more slowly and unemployment levels are still high. In the meantime, Croatia continues to progress towards EU membership, although the pace of reforms in the spheres of corruption and competition policies is unlikely to be sufficient for the target entry in 2012.
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