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Hungary Food and Drink Report Q1 2012
Business Monitor International, Dec 2011, Pages: 122
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.
In economic terms, Hungary is considered a regional underperformer. This view, in combination with the high level of maturity of its mass grocery retail (MGR) and food and drinks market and the broadly unfavourable demographic profile, will conspire to limit the development of food consumption values through to 2016. Demand for premium and novel foods will continue to suffer under impact of elevated unemployment and raised taxes. In the 2011-2016 period, BMI expects Hungary’s overall food consumption to post a compound annual growth rate (CAGR) of a modest 3.16%.
Headline Industry Data (local currency)
- 2011 per capita food consumption: +3.71%; forecast compound annual growth rate to 2016: +4.26%
- 2011 alcoholic drinks sales: +2.21%; forecast compound annual growth rate to 2016: +2.97%
- 2011 soft drinks sales: +3.10%; forecast compound annual growth rate to 2016: +4.06%
- 2011 mass grocery retail sales: +5.27%; forecast compound annual growth rate to 2016: +5.80%
Key Company Trends
Tax on Unhealthy Foods Comes into Force
At the start of September 2011, the Hungarian government implemented a tax on unhealthy foods, including products with high levels of saturated fat, carbohydrates and high caloric content. The taxation, impacting producers and also first re-sellers, is expected to encourage Hungarians to follow more healthy diets. However, German snack producer Chio subsequently cancelled its plans to relocate its popcorn and hazelnut production line to Hungary.
Beer Consumption in Steady Decline
Beer sales in Hungary fell by 6% y-o-y to 5.69mn hectolitres in 2010, according to the Hungarian Association of Brewers. In the same year, annual beer consumption per capita declined to 57 litres, while a 23% y-o-y fall in beer sales volumes was noticed during the period between 2007 and 2010. A preference for cheaper beer over premium and super-premium products is increasing, with the beer sales trend deviating between the catering sector and the retail sector. Companies Expanding and Upgrading Facilities: In November 2011, Hungary’s largest noodle maker Gyermelyi received a HUF250mn grant, which is to be used for the HUF800mn expansion of its warehouse and distribution centre in the northwest of the country. In the same month, the Dombegyházi Agrár concern opened two renovated hog farms, with the HUF1.3bn investment expected to boost company’s revenues to over HUF3bn in 2012.
Key Risks To Outlook
Downside Risks Remain in Play: Hungary's high level of trade and financial integration with Western Europe leaves the country extremely susceptible to the marked deterioration that has occurred in eurozone macroeconomic and financial market conditions over the past few months. On the domestic front, Hungary also faces major economic risks, such as a severe weakening of credit growth in the banking sector and the prospect of interest rate hikes to help support the currency, which could push Hungary back into recession. Finally, a major risk to BMI's already weak growth forecasts stems from the continued selloff in the forint. Having already returned to its all-time low against the euro (reached at the height of the global financial crisis), the prospect of monetary tightening has risen considerably in recent weeks.
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