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Home > Food and Beverage > Food > Food - General Markets
Serbia Food and Drink Report Q1 2010
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In BMI’s Food and Drink Business Environment Ratings (BER) for Q110, Serbia slipped from ninth to12th position in the emerging Europe matrix. Unlike in the previous quarter, Serbia is now judged torepresent a less viable commercial opportunity for food and drinks companies than the Baltic states, as theeconomic situation there slowly improves. Nevertheless, our assessment of Serbia’s longer-term marketpotential is relatively optimistic, buoyed by high per capita consumption of food and beverages, as well apositive trade balance figure. Additionally, the country’s food consumption growth score is on a par withsome 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 investmentin 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 in2009 and into 2010 is relatively guarded. In fact, risks related to short-term financing and economicgrowth are considered particularly problematic, although large players based in other parts of the formerYugoslavia - such as the leading Slovenian mass grocery retail (MGR) operator Mercator - seem tohave no qualms about continuing their investment into the country. This should also provide them with acompetitive edge over new international players on the scene, with many international conglomerateslikely to wait until the country’s economic situation shows stronger signs of recovery. Indeed, havingannounced its intention to enter the Serbian MGR market in 2009 a while ago, Spar Austria is nowchoosing 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 foodand drinks market. To this end, in late September 2009, French dairy behemoth Groupe Danone waspoised 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 salesin FY08). In addition to topping the much-sought-after Polish market, Danone also leads in the Balkanmarkets 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) wasreportedly in talks with private equity firm CVC Capital Partners over the sale of its Central andEastern European (CEE) operations. CVC Capital Partners actually submitted a EUR1.57bn bid, althoughthis falls short of the EUR2bn asking price. The decision was made due to a steady worsening ofconditions for brewers across the CEE region since the start of 2009 - severe economic stress has forced asharp alteration in consumer spending, which continues to profoundly affect the non-essential beveragecategory. What is more, with populations declining or remaining flat in many of the region's markets, thelong-term demographic outlook does not favour brewers, particularly those that are not market leaders.
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