Slovakia Food and Drink Report Q1 2012

We expect 2012 to be a challenging year for Slovak consumers and businesses, with both domestic and external risks becoming increasingly salient as the eurozone sovereign debt crisis continues. Elevated unemployment levels – currently hovering at around 13% – and diminishing consumer confidence will weigh on household demand, while our deteriorating outlook for the eurozone’s and Slovakia’s growth prospects reinforce our vigilant outlook towards discretionary spending. We view Slovakia as a favourable food and drink market from the risks point of view on account of solid operating conditions, but its low longer-term rewards will continue to impact its attractiveness.
Headline Industry Data (local currency)
?? 2011 per capita food consumption = +1.38%; forecast compound annual growth rate (CAGR) to 2016 = +3.47%
?? 2011 alcoholic drinks sales = +1.18%; forecast CAGR to 2016 = +2.20%
?? 2011 soft drinks sales = +1.27%; forecast CAGR to 2016 = +2.95%
?? 2011 mass grocery retail = +1.62%; forecast CAGR to 2016 = +4.82%
Key Company Trends
Consolidation in the Bottled Water Industry: In December 2011, in one of the major deals in this industry to date, two prominent domestic bottled water producers, Budis and Zlatá Studna, merged. A 60% share in the new unit, Slovenské Pramene a Zriedla, will be owned by Budis. The merged company is estimated to account for 20% of the bottled water market in the country.
Tesco Continues to Expand in Slovakia: As part of its strategy to diversify its offerings to distinguish itself from the competition, UK mass grocery retail giant Tesco launched the NCR SelfServ Checkout system in its stores in eight countries across Central and Eastern Europe in Q311. According to the retailer, the move made Tesco the first retailer to offer such a service in the Czech Republic, Slovakia and Hungary. Around the same time, Tesco opened two new outlets in Slovakia, increasing the total number of stores in the country to 106.
Risks To Outlook
Downside Risks Remain in Play: We have recently downgraded Slovakia’s GDP forecasts for 2012 in light of worsening external conditions. We also expect private consumption to remain subdued, with very little scope for single-digit unemployment to return over the medium term. Even among the employed, consumption is likely to remain feeble. Finally, renewed emphasis upon the importance of fiscal austerity in Slovakia, and the eurozone as a whole, means we are unlikely to see much government intervention in the economy over 2012. Rather, with further public sector cuts on the cards, government consumption is likely to drag on growth, which also poses downside risks to our current forecasts.

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BMI Industry View 6
SWOT Analysis 8
Business Environment 12
BMI’s Core Global Industry Views 12
Table: Agricultural Commodity Prices 14
CEE Food & Drink Risk/Reward Ratings 27
Table: Central & Eastern Europe Food & Drink Risk/Reward Ratings – Q112 30
Slovakia’s Food & Drink Business Environment Ratings 31
Macroeconomic Outlook 32
Industry Forecast Scenario 34
Consumer Outlook 34
Food 37
Confectionery 39
Canned And Processed Food 42
Dairy 49
Drink 55
Alcoholic Drinks 55
Soft Drinks 60
Hot Drinks 62
Hot Drinks 62
Table: Hot Drinks Value/Volume Sales – Historical Data & Forecasts 63
Table: Coffee & Tea 63
Trade 65
Mass Grocery Retail 66
Food 69
Key Industry Trends And Developments 69
Companies Looking To Lower Production Costs 69
Consolidation In The Food Production Industry 69
Slovakia Food & Drink Report Q1 2012
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Expansion of Fast-Food Chains Continues 70
Dairy Industry Struggling Due To Low Milk Prices 70
Market Overview 70
Food Consumption 70
Production 71
Main Players 72
Confectionery 73
Canned Food 74
Trade 74
Agriculture 74
Drink 75
Key Industry Trends And Developments 75
Consolidation in Bottled Water Industry 75
Foreign Players Remain Interested In Slovakia’s Soft Drinks Market 75
Slowing Sales Lead To Brewery Closures 76
The Wine Industry Remains Buoyant 77
Market Overview 78
Beer 78
Hot Drinks 83
Mass Grocery Retail 85
Key Industry Trends And Developments 85
Legislation Reversal To Potentially Attract More Foreign Players 85
Expansion Of Convenience-Type Stores As Diversification Strategy 85
New Stores Targeting Low-Income Consumers 86
Expansion Continues Despite Challenging Operating Conditions 86
Slovakian Retailers Looking to Expand in the Czech Republic 87
Market Overview 87
Leading Retailers 89
Competitive Landscape 93
Table: Key Players in Slovakia Mass Grocery Retail Sector* 96
Company Monitor 97
Slovakia Food & Drink Report Q1 2012
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Food 97
Drink 103
Mass Grocery Retail 109
Risk/Reward Ratings Methodology 119
Table: Rewards 119
Table: Risks 121
Weighting 121
Table: Weighting 121
BMI Food & Drink Industry Glossary 123
Food & Drink 123
Mass Grocery Retail 123
BMI Food & Drink Forecasting & Sourcing 125
How We Generate Our Industry Forecasts 125
Sourcing 126
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