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Czech Republic Food and Drink Report Q3 2010
Business Monitor International, May 2010, Pages: 91
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.
'Having been placed third in the previous quarter, in Q310, the Czech Republic is found in fourth position in the Emerging Europe Business Environment Ratings (BER) matrix, which surveys 15 key countries in the region. While the country’s mature and steady market conditions are providing a safer bet for food and drinks players than those of the emerging markets, such as Turkey, Poland is now placing higher than the Czech Republic, due to the strength of its population numbers and a more attractive longer-term outlook. In addition to a challenging economic environment, including rising unemployment levels (which are exacerbating the pressures of an ageing population), the Czech Republic is now also struggling with corruption. In fact, this has now emerged as a major political issue, adding to the already heated political environment in the run-up to the May 2010 general elections.
In the meantime, the operating environment for food and drink companies – fallen levels of consumer confidence, tensions between retailers and suppliers over prices – remains unsettled. For example, preliminary reports by the Czech Breweries and Malt Houses Association suggests that beer production volumes in the country fell by 5% year-on-year (y-o-y) in 2009, while exports dropped as much as 10%, despite some respite brought in H209 by the improving regional and global economic conditions. The flagship Czech beer company Staropramen posted a 7% y-o-y decline for FY09 headline beer volume sales, while its compatriot Plzensky Prazdroj, a subsidiary of Anglo-South African multinational SABMiller, reported a 1.9% y-o-y fall, a function of both flagging domestic consumption and lower numbers of tourists.
On the food front, Czech Agricultural Association revealed that the country’s agricultural trade deficit worsened by CZK4bn in 2009, despite surpluses made in cereal, oilseed and fruits and animal trade. The chairman of the association confirmed that the country’s trade structure is changing, with more raw materials being exported and more finished food products being imported, which will have a bearing on the trade balance in the coming years. The authors project that the balance will worsen somewhat, despite competitive prices that can be achieved by imports produced in lower-cost manufacturing locations. Pricing pressures will also continue to be exerted by the expansion of the modern retail formats and their economies of scale, with Tesco and Globus – among other retail majors – planning to open a number of new outlets in the Czech Republic in the course of 2010, reversing 2009’s slowdown of store expansion. Similarly, mass grocery retail (MGR) consolidation in the Czech Republic continues apace, as the Penta Investment Group recently received regulatory approval to acquire the 46-store strong Koruna supermarket chain. Penta is believed to be eyeing up other potential takeover targets in both the Czech Republic and Poland, with a focus on the currently independent outlets.
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