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Greece Food and Drink Report Q1 2011
Business Monitor International, Nov 2010, Pages: 76
The Greece 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 Greece's food and drink industry.
In September 2010, Anglo-Dutch consumer goods giant Unilever revealed it is to buy the Greek ice cream business belonging to local dairy firm EVGA. The announcement is interesting as to what it says about the Greek food and drink market and the long-term potential that we believe remains in what at the moment is a very tricky market. Given Greece’s economic turmoil, this investment is clearly futurefocused and can be taken as a sign that Unilever believes the market has long-term potential. This is in line with BMI’s view. Despite the country’s position at the bottom of our regional risk/reward rankings – with its economic and political strife weighing heavily on both components – we see the potential for long-term outperformance.
In the years leading up to the global financial crisis Greece was a consistent outperformer, as the economy began to harmonise with its more prosperous European neighbours and we believe this trend will eventually return, particularly if the current administration successfully cracks down on bureaucracy and corruption and the country becomes a more competitive place to do business.
Headline Industry Data:
- 2010 per capita food consumption = -1.1%; forecast to 2015 = 0.9%
- 2010 alcoholic drink sales = -1.1%; forecast to 2015 = 0.7%
- 2010 soft drink sales = -1.1% ; forecast to 2015 = 4.1%
- 2010 mass grocery retail sales = -0.1%; forecast to 2015 = 5.8%
Key Company Trends:
Vivartia Merges With Mevgal, Consolidation Seen As Key Strategy To Combat Recession – In September 2010, Greece’s largest dairy and food group, Vivartia, which was bought by local investment fund Marfin Investment Group (MIG) in summer 2007, said it is to acquire a 58% stake in Greek dairy firm Mevgal. The short-term motivation for the move can be seen as defensive, with both firms searching for cost saving measures as consumer spending retrenches and margins get squeezed. However, over the longer term, the enlarged firm should be in a stronger position to expand internationally, with Greek dairy products having delivered strong export growth in recent years.
Aldi to Exit Greece But BMI Still Sees Potential In Sector – Discount giant Aldi has announced it is to exit the Greek market after struggling to build up sufficient scale to operate a viable business. The firm entered the market in 2008 and had a goal of opening 100 stores by 2009. However, difficult local conditions, including high land prices, slowed the pace of expansion and by the end of 2009 it operated just 38 stores in the country. The firm’s withdrawal raises question marks over the discount sector, which might have been expected to be a major beneficiary from the downturn. However, rival discount operator Lidl has so far not shown any signs of giving up on the market and BMI believes the sector still offers significant potential.
Key Risks To Outlook:
Government default – The risks to our outlook are weighted to the downside as we still believe a default is the likely conclusion to Greece’s fiscal problems. Greece’s liabilities are far in excess of its ability to pay and we believe the latest financial support pledges will only push back the recognition of liabilities to a future date. Ultimately, we believe the only options available to Greece are outright default, debt restructuring or a direct transfer of liabilities to eurozone states. The latter two options would still represent a technical default since the government would renege on the original terms of its bond contracts. However, either would clearly be preferable to a full-scale default, which could have very severe consequences for every part of the Greek economy and the EU.
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