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Serbia Food and Drink Report Q2 2009
Market |
Food and Drink |
Report Type |
Market Research |
Country |
|
Published |
22 May 2009 |
Number of Pages |
74 |
Download |
|
Immediate |
|
Publisher |
Business Monitor International |
In the revised Food and Drink Business Environment Ratings for Q209, Serbia remains firmly at the bottom of the table profiling 14 main markets within Central and Eastern Europe (CEE). Investors continue to be wary of unresolved political and economic issues, which notably include widespread corruption and large-scale ‘grey economy’ activities. In terms of the wider economic environment, we now anticipate lower rates of growth than previously projected for both 2008 and 2009. We estimate that the Serbian economy grew by 5.7% in 2008, down 1.3 percentage points (pp) from our previous projection of 6.5%, and forecast an outturn of 3.4% in 2009, down from our previous forecast of 6.3%.
The slowdown in economic growth is attributable to a combination of both external and domestic factors, which cannot be completely counterbalanced by the recent government’s decision to lower the planned budget deficit to 1.5% of GDP in 2009 by reducing social spending. Concern remains that Serbia's plans to cover a portion of the deficit through revenues from privatisations is overambitious in the face of the current financial crisis.
Nevertheless, the market continues to offer some positives, such as the already high per-capita consumption of beverages. This has been recognised by a number of foreign players in the beer market, for example, the Dutch companies Heineken and Efes Breweries International (EBI), which recently formed a joint venture – United Serbian Breweries (USB). However, the past three months have witnessed no major food and beverage deals involving foreign companies, indicating a wider slowdown in industrial activities owing to the adverse economic conditions, although mass grocery retail (MGR) operators Intermarché (France) and Metro Group (Germany) announced modernisation and expansion of their outlets in Serbia.
On the other hand, leading domestic players are continuing to consolidate their position in the market. In December 2008, Serbian juice maker Nectar announced the acquisition of compatriot mineral water manufacturer Heba, in a US$3.22mn transaction. Around the same time, Nectar revealed its intention to expand further across the CEE region, backed by the European Bank for Reconstruction and Development (EBRD), which is to provide financing. The EBRD had already lent Nectar US$13mn, indicating its confidence in the company’s performance. On the back of rising disposable incomes, we believe that Nectar's product range, experience of operating in CEE countries and strong distribution network should allow it to enlarge its market share at a reasonable pace once it enters Romania.
The above decision is supported by the figures published recently by beverage researcher Canadean. The data show that, while the growth of the European soft drinks market is experiencing a significant slowdown, primarily owing to the minimal development of Western Europe, soft drinks values in Romania as well as Poland have grown strongly, while Serbia also posted mild improvements. Overall, Eastern Europe recorded a 2% value increase in Q308, will full-year growth expected to come in at 3%, which bodes well for Nectar’s strategy.
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