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Hungary Food and Drink Report Q4 2010
Business Monitor International, Sep 2010, Pages: 87
Business Monitor International's Hungary 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 Hungary's food and drink industry.
Since establishing itself as a fairly high-spending and business-friendly market for Western food, drink and retail companies up until 2006-2007, Hungary has lost major ground to the Czech Republic, Poland and Slovakia in the food and drink sector. With the Hungarian food and drink industry already fairly well developed, and lacking scope for major long-term growth – especially given the modest population of about 10mn - established multinational companies are likely to continue cutting spending in Hungary in favour of markets with stronger medium- and long-term growth visibility.
Headline Industry Data
- 2010 per capita food consumption: +2.18%; forecast to 2014: +20.97%
- 2010 alcoholic drinks sales: +0.86%; forecast to 2014: +24.42%
- 2010 soft drinks sales: +2.47%; forecast to 2014: +21.07%
- 2010 mass grocery retail sales: +3.15%; forecast to 2014: +26.49%
Key Company Trends
Looking Abroad for Growth – Although it posted a 14% year-on-year (y-o-y) decline in its sales revenues for FY09/10 (ending March), dropping to HUF24bn, leading Hungarian spirits producer and distributor Zwack Unicum took some comfort from the fact that exports outperformed its domestic markets. To this extent sales were down by a lower margin of 8% y-o-y in this subsector. Exports are likely to continue taking greater strategic importance to the company, bearing in mind that Zwack is already strongly placed domestically, and that the Hungarian alcoholic drinks market is among Central Europe's most mature. Long-term growth is, therefore, likely to be increasingly driven by foreign markets, where Zwack can leverage off its strong brand portfolio. Key regional frontier markets like Romania should provide promising long-term upsides.
Key Risks to Outlook
Economic Weakness – Restocking of inventories, positive base effects, and a poor showing for imports relative to exports delivered most of the improvement on the 4.0% y-o-y contraction witnessed in the last quarter of 2009. Going forward, while we believe that Hungary's economy is on the road to recovery, with real GDP forecast to expand by 1.1%, Hungary's short-to-medium term macroeconomic outlook remains far from sanguine. Beyond this year, we reiterate that Hungary will underperform both its historical trend average through to 2014, as well as its peers in Central Europe, due to cuts in government consumption, weak consumer demand and limited credit availability. Such factors, in addition to the falling population numbers (as well as population ageing), will hamper the development of the premium foods and drinks segments, along with higher volume uptakes. If the performance of the Hungarian economy is worse than currently expected, our forecasts will have to be adjusted accordingly.
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The Food & Drink Market in Hungary
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