Our consumer outlook for Croatia takes into account the difficult domestic and external economic situation which will be further compounded by the March 2012 increase in value added tax (VAT) to 25%. Nevertheless, we highlight that the weak state of the domestic economy will see to it that a more pronounced increase in the price level is not felt this year. Similarly, food and drink value is not expected to rise dramatically as consumers increasingly turn to cheaper private label goods and cut down on nonessential spending.

Headline Industry Data (local currency) 2012 per capita food consumption = +0.62%; forecast compound growth rate to 2016 = +1.17%  2012 alcoholic drinks value sales = +1.12%; forecast compound growth rate to 2016 = +2.40%  2012 soft drinks value sales = +2.74%; forecast compound growth rate to 2016 = +4.66% 2012 mass grocery retail = +3.82%; forecast compound growth rate to 2016 = +5.03% Key Company Trends Leading Local Players Investing in Research and Development (R&D) – In March 2012, leading Croatian conglomerate Podravka announced its intention to create a new R&D unit, which will be part of its wider food and beverage business. The unit comprises the following departments: product development, technology development and investment projects, agriculture development, ecology development and quality control and business quality. The move illustrates the company’s strategy to invest in novel products, which are likely to be marketed across the Balkans region and wider, given the sluggish domestic market conditions.

Dairy Industry Interrupted by Farmer Protests – A dispute between dairy farmers and local dairy Dukat, part of French dairy product company Lactalis, intensified with the former taking part in protests over the lowering of the price of milk by the latter. In January 2012, talks between milk producers of the European Milk Board (EMB) member organisation HSUPM and Dukat Dairy and Croatia’s Ministry of Agriculture began, but were halted in mid-February without results. Nevertheless, milk farmers – urged by the Croatian Association of Milk Producers (HSUPM) – who had taken to the streets, blocking roads with their tractors, agreed to end their strike in March 2012.

Consumers Remain Receptive to Private Label Goods – Private label food and drink products have gained considerable ground in Croatia over the past years, on account of difficult economic conditions and downward pressures on consumer confidence levels. According to a recent GfK survey, some 60% of local consumers buy private label goods occasionally, while a further 20% do so regularly.

Key Risks To Outlook Risks Firmly Remain to the Downside – On the home front, a significant portion of spending cuts – necessary to rein in budgetary deficit – will come from cuts in subsidies to state companies and via the public sector wage bill, all of which will further impact the already weak discretionary spending. On the external front, falling tourist arrivals and weaker export prospects on account of the struggling eurozone performance will continue to dampen the country’s chances for economic recovery.

Food and Drink Report of Croatia Q3

Published: May 2012       No. of Pages: 110       Price: US $ 1175                               

Table of Contents

BMI Industry View 7
SWOT Analysis 9
Croatia Food Industry SWOT 9
Croatia Drink Industry SWOT . 10
Croatia Mass Grocery Retail Industry SWOT .. 11
Business Environment .. 12
BMI’s Core Global Industry Views … 12
Table: BMI’s Core Views . 22
CEE Food & Drink Risk/Reward Ratings . 23
Table: Food & Drink Risk/Reward Sub-Factor Ratings, Q312 (scores out of 10) … 23
Table: CEE Food & Drink Risk/Reward Ratings, Q312 .. 26
Croatia’s Food And Drink Risk/Reward Ratings . 27
Macroeconomic Outlook … 28
Expenditure Breakdown … 29
Industry Forecast Scenario .. 31
Consumer Outlook 31
Food .. 34
Food Consumption … 34
Table: Croatia Food Consumption Indicators – Historical Data & Forecasts 35
Confectionery … 36
Table: Value/Volume Sales of Croatian Confectionery – Historical Data & Forecasts … 37
Canned And Packaged Food 39
Table: Value/Volume Sales of Croatian Canned Food – Historical Data & Forecasts … 39
Table: Pasta – Production, Consumption and Trade – Historical Data & Forecast … 40
Table: Meat – Production, Consumption & Trade – Historical Data & Forecast … 41
Table: Jellies – Production, Consumption & Trade – Historical Data & Forecast . 43
Dairy 44
Table: Dairy – Production, Consumption & Trade – Historical Data & Forecast .. 44
Trade . 47
Table: Croatia’s Sectoral Trade Indicators – Export, Import and Balance Value – Historical Data and Forecasts 48
Drink . 49
Alcoholic Drinks .. 49
Table: Croatia Beverage Sectors – Value/Volume Sales – Historical Data & Forecasts . 50
Soft Drinks … 51
Table: Croatia Soft Drink Sectors – Value/Volume Sales – Historical Data & Forecasts … 52
Hot Drinks … 55
Table: Croatia Coffee and Tea Sectors – Value/Volume Sales – Historical Data & Forecasts 56
Mass Grocery Retail 57
Table: Croatia Mass Grocery Retail – Value Sales by Format – Historical Data & Forecasts … 58
Table: Sales Breakdown By Retail Format Type (% of total) … 59
Food 60
Key Industry Trends And Developments … 60
Consolidation Continues in Croatian Food Industry … 60
Leading Players Ride Out The Storm … 60
Domestic Agriculture Continues to Suffer 61
Market Overview … 62
Food Production .. 62
Confectionery … 64
Canned Food … 64
Specialist Foods … 64
Trade 65
Agriculture … 66
Organic Farming . 66
Olive Farming .. 67
Drink 68
Key Industry Trends And Developments … 68
Atlantic Grupa Acquisition Spree 68
Larger Brewers Invest In Expansion 68
Croatian Wine Specialists Expand Production 69
Market Overview … 69
Alcoholic Drinks .. 69
Beer . 69
Wine . 71
Spirits … 71
Soft Drinks … 72
Hot Drinks … 73
Mass Grocery Retail .. 75
Key Industry Trends And Developments … 75
Croatia Losing Its Investment Appeal .. 75
Diversification Pursued In View Of Challenging Operating Conditions .. 75
Agrokor Fails to Finalise the Mercator Deal … 76
Market Overview … 76
Leading Players … 78
Table: Structure of Croatia’s Mass Retail Grocery Sector by Number of Outlets 80
Table: Structure of Croatia’s Mass Retail Grocery Market by Value … 80
Table C: Croatia – Estimated Value of Sales per Outlet 2011 (US$mn) .. 81
Competitive Landscape 82
Table: Key Players – Croatia’s Food Sector 82
Table: Key Players – Croatia’s Drink Sector … 83
Table: Key Players: Croatia’s Mass Grocery Retail Sector . 84
Company Monitor .. 86
Food .. 86
Atlantic Grupa . 86
Franck.. 88
Podravka .. 89
Agrokor 91
Dukat … 93
Kraš . 94
Drink . 95
Adriatic Distillers 95
Carlsberg Croatia 96
Badel 1862 … 97
Mass Grocery Retail . 98
Spar Croatia 98
Lidl … 99
Konzum .. 100
Mercator-H 102
Rewe (Billa) … 103
BMI Methodology . 104
Table: Rewards .. 104
Table: Risks … 105
Weighting 105
Table: Weighting 105
BMI Food & Drink Industry Glossary . 106
Food & Drink.. 106
Mass Grocery Retail … 106
BMI Food & Drink Forecasting & Sourcing … 108
How We Generate Our Industry Forecasts . 108
Sourcing . 109Table: BMI’s Core Views . 22
Table: Value/Volume Sales of Croatian Confectionery – Historical Data & Forecasts . 37
Table: Meat – Production, Consumption & Trade – Historical Data & Forecast . 41
Table: Jellies – Production, Consumption & Trade – Historical Data & Forecast . 43
Table: Dairy – Production, Consumption & Trade – Historical Data & Forecast . 44
Table: Croatia’s Sectoral Trade Indicators – Export, Import and Balance Value – Historical Data and Forecasts . 48
Table: Croatia Beverage Sectors – Value/Volume Sales – Historical Data & Forecasts . 50
Table: Croatia Soft Drink Sectors – Value/Volume Sales – Historical Data & Forecasts . 52
Table: Croatia Coffee and Tea Sectors – Value/Volume Sales – Historical Data & Forecasts. 56
Table: Croatia Mass Grocery Retail – Value Sales by Format – Historical Data & Forecasts . 58
Table: Sales Breakdown By Retail Format Type (% of total) . 59
Table: Structure of Croatia’s Mass Retail Grocery Sector by Number of Outlets . 80
Table: Structure of Croatia’s Mass Retail Grocery Market by Value . 80
Table C: Croatia – Estimated Value of Sales per Outlet 2011 (US$mn) . 81
Table: Key Players – Croatia’s Food Sector . 82
Table: Key Players – Croatia’s Drink Sector . 83
Table: Key Players: Croatia’s Mass Grocery Retail Sector . 84
Table: Rewards . 104
Table: Risks . 105
Table: Weighting. 105