Abstract
In the BMI’s Q309 Business Environment Ratings (BER) matrix, Croatia is
placed ninth out of the 14
major food and drinks markets in Central and
Eastern Europe (CEE), having previously been second-last.
The improvement
is in part explained by the considerable worsening of the scores awarded to
some other
CEE countries, such as Latvia and Estonia, which are facing
major problems brought about by the current
global economic crisis.
Nevertheless, Croatia itself is limited by its small population size,
price-sensitivity
of Croatian consumers and the modest per capita spend on
food, given the limitations of its per capita
incomes – although the
country’s total food consumption is expected to grow by 8.93% through to
2013,
reaching US$2.39bn. However, in the short-term, rising unemployment
and falling numbers of tourists
will be just some of the factors holding
back the development of food and drinks values in Croatia.
The longer-term
forecasts are, nevertheless, upheld by the fact that a number of Crotian
companies
reported solid financial performance for 2008, despite wider
economic woes. For example, Croatian food
and drink giant Podravka posted
a 144% and 9% year-on-year (y-o-y) growth of its net income and
turnover,
respectively. However, BMI believes that the severe fallout in consumer
confidence enforced
by the shuddering impact the global financial crisis
is having on CEE is likely to weigh down on
Podravka' s performance in
2009. In fact, given that leading Croatian confectionery producer
Kraš
reported lower net profits in 2008, illustrating difficulties
facing producers of non-essential foodstuffs.
Nevertheless, in February
2009, Podravka, Kraš, and Croatian coffee and snacks maker Franck –
in
partnership with a number of major banks – were reportedly
planning to create a consortium, which
would target suitable foreign
companies through acquisition. According to local newspaper Poslovnki
dnevnik, the consortium is also interested in the purchasing of brands owned
by Droga Kolinska, such as
Barcaffe (the leading coffee brand in Slovenia)
and Grandcaffe, which would complement Franck’s
portfolio. Podravka
is reportedly targeting Argeta pates and Cocta soda, having already acquired
the fruit
spread brand Belsad, while Kraš is looking to take over
Soko Štark, the Serbian confectionery arm of the
Slovenian company,
which indicates that Croatian players are continuing to plan long-term.
In
the meantime, while we expect GDP per capita to rise by an impressive 90.41%
through to 2018, we
caution that the Croatian mass grocery retail (MGR)
market will remain relatively small. This will have
an impact on the
country’s food and drinks values, especially as its population is not
expected to get much
beyond the 4.4mn mark. Still, Croatia’s
progress towards the membership of the European Union (EU),
which could be
finalised within the next three years, should improve the position of foreign
players in the
local market, given that the government exhibits a
considerable degree of protectionism towards the
domestic industry.
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