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Kazakhstan Food and Drink Report Q2 2010
Business Monitor International, Jan 2010, Pages: 53
The Kazakhstan 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 Bahrain's food and drink industry.
With oil prices trending higher on the back of improving global demand conditions, we expect the Kazakh economy to return to positive growth in 2010, which comes as welcome news for the country’s food and drink industry. The global economic downturn took its toll on Kazakhstan, with the economy estimated to have contracted by 1.9% in 2009 as deflating asset prices, deleveraging and subdued external demand took their toll. However, there are signs that the situation is improving, as discussed in BMI’s recently published Kazakhstan Food & Drink Report for Q210.
In what is very big news for the country’s underdeveloped mass grocery retail (MGR) sector, in October, German wholesale giant Metro Group launched its first Cash & Carry store in the country. This is a landmark move likely to speed up Kazakhstan’s transition to organised retail. Spurred on by untapped demand for wholesale retailing, Metro is believed to have earmarked funds to launch a further 15 stores over the coming years at a cost of about EUR15mn each.
The first Western European retailer to enter Kazakhstan, Metro joins Russia's Vester and Turkey's Migros Turk in an industry dominated by domestic players. Metro's self-service wholesale retail business will look to capitalise on the rapid development of the country's service and retail sectors both formal and informal. Meanwhile, our forecasted increase of 54.3% to KZT2,749bn (US$18.55bn) in food consumption through to 2014 should lead to significantly strengthened demand for wholesale retail particularly in the main urban centres. Taking into account that GDP per capita is expected to more than double to US$14,000 by 2018 and that the vast majority of its food and drink industries have yet to saturate, Kazakhstan remains one of the most promising growth vehicles in the Commonwealth of Independent States (CIS) region.
However, despite the many opportunities that exist, the market is not without its challenges. Kazakhstan is the ninth-largest country in the world, with a territory greater than Western Europe, and is the largest landlocked country in the world, which has major implications for imports, exports and the retail sector as does its sheer size, particularly given the poor state of internal infrastructure. Another barrier is the lack of consumer familiarity with many packaged food products, as traditional eating and shopping habits remain entrenched.
Nevertheless, there are many signs that this is gradually changing and investments by the likes of Metro will help bring on this change. Set to stock up to 15,000 food items under one roof which are likely to be sourced mostly from domestic producers, we believe that the retailer's entry is likely to bring producers and consumers into greater alignment by significantly strengthening internal trade systems currently held back by weak supply chains. While the highly underdeveloped present state of the MGR industry probably means that Kazakhstan is unlikely to attract top tier Western European retailers, it remains a promising market for emerging market orientated retailers intent on diversifying.
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