Abstract
In BMI’s Q409 Business Environment Ratings (BER) matrix, Croatia is
placed seventh, sandwiched
between the much larger Poland and the Czech
Republic, out of the 14 key regional markets in Central
and Eastern Europe
(CEE). Croatia has continued to improve its position since the start of the
year,
having previously been ninth and second-last. While the
country’s overall score is negatively impacted by
low per capita
food consumption, due to modest income and GDP per capita, it receives maximum
points
for alcohol consumption per head of population. However,
Croatia’s small population remains one of the
major barriers to
investment, as does the price-sensitivity of Croatian consumers. Such factors,
coupled
with the challenging economic conditions and already flagging
retail sales, will translate into a modest
3.27% growth of food values in
the 2008-2013 period, to HRK13.09bn (US$2.26bn) as measured in local
currency terms.
The falling consumer confidence is already resulting in
negative news from the industry. Leading Croatiabased
wine producer
Kutjevo reported a 52.4% year-on-year (y-o-y) fall in net profit for FY08,
exacerbated by the fact that most of its revenues are achieved domestically.
However, the company
should have the long-term strength to benefit from
the Croatian accession into the EU – expected in the
coming couple
of years – and the resulting rise in exports. Still, other food and
drinks majors are looking
to exit the country. To this end, Belgian
brewing behemoth Anheuser-Busch InBev (A-B InBev) is
reportedly selling
its CEE operations, including its prominent Croatian Zagrebacka pivovara
(ZAPI)
arm.
Nevertheless, the economic crisis is providing expansion
opportunities for stronger food and drink – as
well as mass grocery
retail (MGR) – industry players. In terms of acquisitions, Žito
Osijek announced
that it would bid for the purchase of the agricultural
firm PPK Valpovo, which has been facing
bankruptcy. Other companies are
expanding organically; for example, leading domestic meat processors
Koka
(poultry) and Vindom (turkey), both of which are subsidiaries of Vindija, one
of Croatia' s leading
food processing companies, recently inaugurated two
new plants, one in the domestic and one in the
neighbouring Serbian
market.
Consolidation is also taking place in the Croatian MGR market. The
struggling cash-and-carry operator
Getro is up for sale, with interested
parties including Mercator, Metro and Kaufland, now that
Agrokor has
pulled out, due to the high asking price for the retailer. Although Agrokor' s
supermarket
business Konzum continues to expand in neighbouring Bosnia and
Herzegovina, Agrokor itself is
reportedly facing difficulties in the
domestic market. Its drugstore chain Kozmo is rumoured to be likely
prey
for the larger Drogerie Markt (DM), although the recent lifting by the
Constitutional Court of
Croatia of the ban on Sunday trading should
provide a much-needed respite for all Croatian MGR
operators. The freedom
to open their stores on Sunday will, however, be dampened by the news that
the
Croatian economy posted a hefty contraction during the first quarter
of 2009. While some recovery is
expected from late 2010, the Q109 figures
support our forecast for a full-year GDP contraction of 3.21%.
| 
View Cart
