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Czech Republic Food and Drink Report Q2 2010
Business Monitor International, Feb 2010, Pages: 85
Czech Republic 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 the Czech Republic's food and drink industry.
In Q210 Business Environment Ratings (BER) matrix for the 15 key markets of the emerging Europe region, the Czech Republic remains in third position, as its relatively more mature and less volatile fundamentals continue to offer a safer bet for food and drink players. Food consumption was valued at an estimated CZK214bn (US$11.4bn) in 2009, representing a single-digit year-on-year (y-o-y) growth, as the discount players within the mass grocery retail (MGR) sector benefitted from trading down to cheaper and private label goods. The forecast food consumption growth – of just over 23% in local currency terms between 2009 and 2014 – is comparably modest, as consumers remain more interested in the purchasing of value-priced products. Still, key drivers of growth in the latter stages of the forecast period especially will be renewed consumer confidence and rising demand for innovative products, as well as modernisation of the country’s retail industry.
Some industry segments are expected to perform better than others. Beer, for example, has been struggling in the face of rising domestic prices, in place over the past few years to address increased production and raw material costs. Most recently, in January 2010, Czech businesses started reimporting Pilsner Urquell from Germany due to lower wholesale prices in the neighbouring nation. The ironic buyback of the Czech product will not only have a negative impact on value sales of beer, but could be potentially damaging to the general image of the industry. In the meantime, alcoholic drinks sales are expected to increase in (local currency) value terms by 13.06% from 2009, below the expected food consumption growth, reaching CZK103.76bn (US$5.94bn) by the end of 2014.
In order to address flagging beer sales, a number of breweries have over the past months resorted to opening restaurants under their patronage. According to the August 2009 report by online magazine Moderni Obchod, the Czech Republic currently has around 50 such restaurants, with the three of the four leading breweries – Plzensky Prazdroj, Pivovary Staropramen and Budejovicky Budvar, but not Heinkenen – already present in this franchised marketplace. Budvar operates seven Original Pivnice Budvarka restaurants, while Staropramen leads with 30 Potrefena Husa, which are located both in the Czech Republic and Slovakia. The 17 Pilsner Urquell Original restaurants are run under the patronage of Plzensky Prazdroj.
On the purely economic front, we expect private and government consumption to stay in positive territory in 2010 (as in 2009, when GDP was estimated to have grown, despite the economic slowdown). For the current year, we forecast real GDP growth of 1.5%, positively influenced by social spending commitments and household consumption, but counterbalanced by still-below-optimum unemployment figures. Looking ahead, we expect Czech real GDP growth to average 3.2% over the 2010-2014 period, significantly below the 5.4% average posted during 2004-2008. Nevertheless, much of this uptick will be driven by steadily improving private consumption, which bodes well for the stronger players within the food and drink industry.
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