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Slovakia Food and Drink Report Q3 2010
Business Monitor International, June 2010, Pages: 76
Slovakia Defence and Security Report provides industry professionals and strategists, corporate analysts, defence and security associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Slovakia's defence and security industry.
In BMI's updated Business Environment Ratings (BER) table for Q310, Slovakia continued to slip down the emerging Europe matrix, falling to sixth from fifth position, out of the 15 major regional markets, as its overall score worsened. While key draws to doing business in Slovakia include its pro-business stance and high per capita food and drinks consumption, its modest population size and the negative trade balance will continue to act as a brake on its progress further up the table. In addition, Slovakia's food consumption is expected to post lower growth over the next five years (at around 15% in local currency terms, but just 3.5% in US dollars) than some of its neighbours. In fact, Slovakia's longer-term BER position will likely suffer from the emergence of better foreign direct investment (FDI) and sales opportunities in nascent regional markets, such as Turkey.
Nevertheless, some foreign companies continue investing in the country, taking advantage of lower labour and manufacturing costs. To this end, in May 2010, British ingredients producer Tate & Lyle completed major expansion of the glucose manufacturing lines at its corn wet mill in Slovakia. The move forms part of the company’s strategy to expand its Trnava plant to meet the higher EU isoglucose quota, as Tate & Lyle is increasingly focusing on value-added ingredients. Similarly, industry press reports that the fast-food industry in Slovakia is likely to expand in 2010, as international chains such as McDonald's, Subway and Paneria look to launch new outlets in the country.
On the other hand, the food and drink industry as well as mass grocery retail (MGR) players are still recovering from a difficult 2009. According to CEE Retail, grocery manufacturers posted sales revenue declines of between 15% and 20% in 2009, with premium products experiencing most difficulties reaching consumers. The figures pertain to the 44 producers under the umbrella Slovak Food Chamber (PKS), which jointly represent over 50% of the Slovakian grocery market in revenue terms. For the current year, the PKS expects the sales of some products, such as dairy, to remain stable, with others, such as beverages, likely to continue struggling.
In the meantime, we expect the same economic trends that played out in 2009 to continue into the remainder of 2010. Indeed, domestic demand will likely remain subdued over the next year. The unemployment rate stood at 12.9% in March 2010, and ? while the labour market appears to be stabilising we expect the official rate of joblessness to remain high over the medium term, as firms wait for signs that an economic recovery is well underway to begin re-hiring workers. Additionally, loan growth is down significantly on the levels witnessed prior to the economic crisis, a further indication that demand for consumer goods will not see a return to previous levels, which will be reflected in a low annual growth rate of food consumption in the country.
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