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Ukraine Food and Drink Report Q4 2010
Business Monitor International, Sep 2010, Pages: 85
Business Monitor International's Ukraine 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 Ukraine's food and drink industry.
Our expectations for the Ukrainian food and drinks market for the current year are fairly subdued. In 2009, real private consumption growth slipped 9.4% on the previous year, with the figure expected to return to the positive territory, but just at 1.5%, in 2010. Our cautious approach is further upheld by the depressed bank lending and rising unemployment rates, which came in at 9.8% at end-Q110, from 9.6% at end-2009, as well as the recent increase in the price of gas, which will further challenge discretionary consumer spending. Mass-market products, including increasingly popular private labels, will stimulate the growth of the discount mass grocery retail (MGR) segment, with price competition also an important part of the less-than-optimal landscape.
Headline Industry Data ! 2010 per capita food consumption = +6.5%; forecast to 2014 = +45.5%
- 2010 alcoholic drinks sales = +4.6%; forecast to 2014 = +36.7%
- 2010 soft drinks sales = +6.4%; forecast to 2014 = +48.9%
- 2010 mass grocery retail = +9.4%; forecast to 2014 = +62.2%
Key Company Trends
Revenue Uptick Due to Base Effects, as Consumer Spending Remains Subdued – In July 2010, Ukraine's leading confectionery company by market share Roshen posted a 35% year-on-year (y-o-y) increase in H110. With output also up, by 12% y-o-y to 184,000 tonnes, the company appears to be rebounding strongly from what was a very challenging 2009, when Ukraine fell into near-depression, as real GDP contracted by 15%. However, BMI notes that base effects are likely to have contributed a large part to Roshen's first-half performance. Broken down sequentially, quarter-on-quarter sales decreased by 6.82% in value terms and increased by 4.44% in output terms. The decrease in value sales suggests that market conditions remain challenging – underlined by the fact our Europe team expects Ukrainian real private consumption to increase by just 1.5% in 2010 after falling by 9.4% in 2009.
Key Risks to Outlook
Economic Uncertainty – While the gas price hike was required to meet IMF conditions, the major spike in fuel costs for households and businesses, as well as the cuts in government spending, will have a negative impact on the wider macroeconomic picture. As a result, we have revised down our growth forecast for Ukraine in 2010 to 3.8%, from 5.0% previously. The effect of the gas price hike could be more severe than expected at present, especially as the country gradually heads into the cold winter months.
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