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Serbia Food and Drink Report Q1 2010
Market |
Food and Drink |
Report Type |
Market Research |
Country |
Serbia and Montenegro |
Published |
5 November 2009 |
Number of Pages |
82 |
Download |
|
Immediate |
|
Publisher |
Business Monitor International |
Groupe Danone was poised to close in on Serbia's leading dairy companies, Mlekara Subotica and Imlek in September 2009
In the Food and Drink Business Environment Ratings (BER) for Q110, Serbia slipped from ninth to 12th position in the emerging Europe matrix. Unlike in the previous quarter, Serbia is now judged to represent a less viable commercial opportunity for food and drinks companies than the Baltic states, as the economic situation there slowly improves. Nevertheless, our assessment of Serbia’s longer-term market potential is relatively optimistic, buoyed by high per capita consumption of food and beverages, as well a positive trade balance figure. Additionally, the country’s food consumption growth score is on a par with some of the more developed regional markets, although factors such as the widespread grey economy, high unemployment and unresolved political issues will remain the main obstacles to foreign investment in the shorter term, as will the downward pressure on food and drinks prices.
Moreover, our outlook on the country’s ability to avoid a deep and potentially protracted recession in 2009 and into 2010 is relatively guarded. In fact, risks related to short-term financing and economic growth are considered particularly problematic, although large players based in other parts of the former Yugoslavia – such as the leading Slovenian mass grocery retail (MGR) operator Mercator – seem to have no qualms about continuing their investment into the country. This should also provide them with a competitive edge over new international players on the scene, with many international conglomerates likely to wait until the country’s economic situation shows stronger signs of recovery. Indeed, having announced its intention to enter the Serbian MGR market in 2009 a while ago, Spar Austria is now choosing to ‘observe’ the situation, with no store openings planned during the current year.
Some European majors are, however, already recognising the longer term potential of the Serbian food and drinks market. To this end, in late September 2009, French dairy behemoth Groupe Danone was poised to close in on two of the country's leading dairy companies owned by UK-based Salford Fund, namely Mlekara Subotica and Imlek, the market leader that also boasts a strong export portfolio.
Danone already boasts a strong emerging Europe portfolio (the region accounted for 15% of group sales in FY08). In addition to topping the much-sought-after Polish market, Danone also leads in the Balkan markets of Bulgaria and Romania, with Serbia to provide a complementary investment.
Around the same time, however, Belgian brewing behemoth Anheuser-Busch InBev (A-B InBev) was reportedly in talks with private equity firm CVC Capital Partners over the sale of its Central and Eastern European (CEE) operations. CVC Capital Partners actually submitted a EUR1.57bn bid, although this falls short of the EUR2bn asking price. The decision was made due to a steady worsening of conditions for brewers across the CEE region since the start of 2009 – severe economic stress has forced a sharp alteration in consumer spending, which continues to profoundly affect the non-essential beverage category. What is more, with populations declining or remaining flat in many of the region's markets, the long-term demographic outlook does not favour brewers, particularly those that are not market leaders.
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