Ukraine Food and Drink Report Q3 2011

For the Q311 update of our proprietary Business Environment Ratings (BER) matrix for the 15 key Central and Eastern Europe (CEE) markets, Ukraine ranks last, having slipped from the second-last position occupied in the previous quarter. Ukraine’s position is largely the consequence of its economic situation, which has inspired relatively little investor confidence, while also not allowing for strong per capita value growth of food and drinks sales values. While the lack of saturation in the country’s mass grocery retail (MGR) and food and drinks marketplaces remain an attractive position, high inflation and constraints on government and also on individual consumer spending will continue to shape the development of consumption values.
Headline Industry Data (local currency)
?? 2011 per capita food consumption = +7.9%; forecast to 2015 = +46.9%
?? 2011 alcoholic drinks sales = +4.7%; forecast to 2015 = +39.9%
?? 2011 soft drinks sales = +6.9%; forecast to 2015 = +48.1%
?? 2011 mass grocery retail = +10.0%; forecast to 2015 = +57.2%
Key Company Trends
Ukrainian Agriculture and Dairy Industries Remains of Interest – Ukrainian agriculture, which has received a significant cash boost of nearly US$400mn, will also benefit from lower corporate taxes. In fact, eyeing larger shares of the regional dairy market, French dairy major Danone – which recently finalised its merger in Russia and across the Commonwealth of Independent States (CIS) with its Russian peer Unimilk – in March 2011 started a joint milk production and processing project with Ukrainian company Astarta.
Key Risks to Outlook
Commitment Meeting International Loan Conditions – Risks to our forecasts stem from a relatively unstable political and economic situation, including high inflationary pressures. Overall, we also caution that our core view is contingent on the government's successful adherence to its International Monetary Fund (IMF)’s Stand-By Arrangement (SBA). Indeed, should the international lender find Ukraine in contravention of its commitments and suspend the SBA, Ukraine would find its access to international capital markets significantly curtailed, in our view, posing risks to the country's macroeconomic stability and performance. This scenario would clearly have a bearing on consumer confidence and purchasing patterns, especially given that per capita annual spending on food and non-alcoholic drinks – which is already modest by international standards – has been disadvantaged by local currency weakness.

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BMI Industry View 5
SWOT Analysis 6
Ukraine Food Industry SWOT 6
Ukraine Drink Industry SWOT 7
Ukraine Mass Grocery Retail Industry SWOT 8
Business Environment 9
BMI’s Core Global Industry Views 9
Table: BMI Food & Drink Core Views 14
Central And Eastern Europe Food And Drink Business Environment Ratings 15
Table: Central And Eastern Europe Food & Drink Risk/Reward Ratings Q311 18
Ukraine’s Food & Drink Business Environment Ratings 19
Macroeconomic Outlook 20
Table: Ukraine – GDP By Expenditure 22
Industry Forecast Scenario 23
Ukraine’s Consumer Outlook 23
Food Consumption 26
Table: Food Consumption Indicators – Historical Data & Forecasts 27
Confectionery 27
Table: Confectionery Value/Volume Sales – Historical Data & Forecasts 29
Trade 30
Table: Ukraine Food, Drink & Tobacco Trade Indicators (US$mn) – Historical Data & Forecasts 31
Drink 31
Alcoholic Drinks 31
Table: Alcoholic Drinks Value/Volume Sales – Historical Data & Forecasts 33
Soft Drinks 34
Table: Soft Drink Value/Volume Sales – Historical Data & Forecasts 35
Hot Drinks 35
Table: Hot Drinks Value Sales – Historical Data & Forecasts 37
Mass Grocery Retail 37
Table: Mass Grocery Retail Value Sales By Format – Historical Data & Forecasts 39
Table: Grocery Retail Sales By Format (%) – Historical Data & Forecasts 39
Food 40
Key Industry Trends And Developments 40
Market Overview 43
Food Processing 43
Key Players 45
Confectionery 45
Canned Food 47
Trade 47
Agriculture 47
Dairy 48
Drink 50
Key Industry Trends And Developments 50
Market Overview 52
Alcoholic Drinks 52
Beer 52
Wine 54
Spirits 55
Soft Drinks 57
Hot Drinks 59
Mass Grocery Retail 61
Key Industry Trends And Developments 61
Market Overview 64
Leading Retailers 65
Table: Structure Of The Ukrainian Mass Grocery Retail Market By Estimated Number Of Outlets 69
Table: Sales By Format In The Ukrainian Mass Grocery Retail Market (US$mn) 70
Table: Average Annual Sales By Outlet Type (2010) 70
Competitive Landscape 71
Table: Key Players In Ukraine's Food Sector (2010) 71
Table: Key Players In Ukraine's Drink Sector (2010) 72
Table: Key Players In Ukraine's Mass Grocery Retail Industry (2010) 73
Company Analysis 75
Food 75
Ukrproduct 75
Myronivsky Hliboproduct (MHP) 77
Danone-Unimilk (Halakton) 78
Roshen 79
Konti 81
Drink 82
Sun InBev Ukraine 82
Slavutich Carslberg (Baltic Beverages Holding Ukraine) 83
Obolon 84
Odessa Champagne Factory 85
Nemiroff 86
Mass Grocery Retail 87
Fozzy Group 87
Billa 88
ATB Market 89
Auchan 90
BMI Food & Drink Methodology 91
Food & Drink Business Environment Ratings 91
Table: Rewards 92
Table: Risks 93
Weighting 93
Table: Weighting 94
BMI Food & Drink Industry Glossary 95
Food & Drink 95
Mass Grocery Retail 95
BMI Food & Drink Forecasting & Sourcing 97
How We Generate Our Industry Forecasts 97
Sourcing 98
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