BMI's Executive Summary

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The past quarter has seen some major developments in the Czech Republic's drinks industry. The Czech government continues to mull over the possibility of selling the brewer Budejovicky Budvar, with rumours circulating that Belgian drinks giant InBev is considering acquiring the company. As the Czech government has been moving forward with the privatisation of many assets under its economic reform process, the highly profitable Budvar brewery looks likely to be sold off, despite opposition from some politicians. Although many have speculated that InBev is the most likely bidder for Budvar, the company itself has remained silent on these acquisition rumours. Given the strength of the Czech beer market in general and Budvar in particular, it is easy to see why InBev may be interested in purchasing the company, which would also serve to reinforce its already strong foothold in Central and Eastern Europe (CEE). In other acquisition news, Heineken Krusvovice was given the green light to go ahead with its acquisition of the Krusovice Brewery from Germany's Radeberger Gruppe for an undisclosed amount, with both of these acquisitions reflecting the growing consolidation in the industry.

The Czech Republic is almost synonymous with beer, with Czechs consuming the highest quantity of beer per capita in the world, and the country's exports proving popular around the globe. Czech beer is exported to more than 50 countries around the world, with Germany, Slovakia, the UK and the US topping the list. In fact, 722,000 hectolitres (hl) of beer were exported in Q107, representing a growth of 4.2% year-on-year (y-o-y). Export growth has been facilitated by EU accession, which has lifted trade barriers between the newly acceded countries. While exports continue to be popular with consumers around the world, imported beers are proving popular with Czech consumers as young adults in particular are attracted to innovative new products. For this reason exports are now viewed as the primary growth strategy for domestic players.

In other drinks new, in September Plzensky Prazdroj, the leading brewer in the Czech Republic, said that it would be forced to increase its beer prices in coming months in response to sharp rises in raw material costs. In a press release the company announced that it plans to increase the prices of its beers by 6-8% starting in November, as the current price per ton of malting barley was approaching double the price from the year before. The company has called this an 'extraordinary situation' saying that they have considered all options and if they were to not increase their prices, they would then be forced to compromise on quality. There has been rising competition in the Czech market for barley and hops, pushing prices up. Brewers using imported materials are facing similar pressures as prices have been rising throughout Europe. Plzensky Prazdroj is not alone in having to deal with rising commodity prices, which are putting a squeeze on companies' profit margins throughout the food and drink industry.

Contents

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Chapter 1 – Business Environment

Business Environment Rankings

Table: Central And Eastern Europe Business Environment Rankings

SWOT Analysis

Czech Republic Food & Drink Industry SWOT

Czech Republic Political SWOT

Czech Republic Economic SWOT

Czech Republic Business Environment SWOT

Macroeconomic Outlook

Table: Czech Republic - Economic Activity

Chapter 2 – Retail

Plenty of Potential for Private Labels in CEE

Table: PL Market Share Within Overall Food And Drink Retail Sales, 2006, Selected CEE Countries

Table: Leading CEE retailers by PL market share

Industry Forecast Scenario

Table: Czech MGR Value Sales By Format – Historical Data & Forecasts

Industry Developments

Company Developments

Market Overview – Czech Republic

Table: Structure Of The MGR Market By Number Of Outlets

Table: Structure Of The MGR Market By Value (US$bn)

Table: Value Sales Per Outlet, 2005

Chapter 3 – Food & Drink

CEE Food Focus: Fittest Fight for Future of CEE Dairy Market

Table: EU Allocation Of Milk Quotas To 2004 Accession Countries In The CEE (1,000 Tonnes)

Industry Forecast Scenario

Food

Table: Czech Food Consumption Indicators – Historical Data & Forecasts

Table: Value/Volume Sales Of Canned Food & Confectionery – Historical Data & Forecasts

Drinks

Table: Czech Beverage Sectors Value/Volume Sales – Historical Data & Forecasts

Industry Developments

Company Developments

Market Overview – Czech Republic

Table: Czech Republic Agricultural Sub-Sector Production – Historical Data

Chapter 4 – Tobacco

Industry Forecast Scenario

Table: Cigarette Value/Volume Sales – Historical Data & Forecasts

Industry Developments

Company Developments

Market Overview

Chapter 5 – Competitive Landscape

Table: Key Players - Mass Grocery Retail Sector (2005)

Table: Key Players – Food, Drink & Tobacco Sector

Regional Company Case Studies

Mercator – CEE Case Study

Financial Highlights

Table: Mercator’s Financial Highlights

Current Position

Table: Mercator’s Market Share Growth To 2005

Covering All The Bases

The Importance Of Private Label

Future Position And Growth Strategies

Table: Projected Growth In Market Share, According To Company Strategy, 2005-2010

Group Diageo – CEE Case Study

Table: Brand Performance – Europe, Year Ending June 30 2006

Table: Diageo: Distribution In The CEE

Groupe Danone – CEE Case Study

Table: Groupe Danone – The Figures

Table: Key Figures By Business Line

Table: Key Figures Over Five Years, Fresh Dairy Products (EURmn)

Metro – CEE Case Study

Table: Metro’s Presence In CEE

Table: Development Of Group Sales And Divisional Sales As Well As Regional Sales

Company Analysis

Ahold Czech Republic A.S.

Tesco Stores CR

Plzensky Prazdroj

Nestlé Cesko

Lidl & Schwarz

Metro (Makro)

BMI Forecast Modelling

How we generate our industry forecasts

Retail Industry

Sources

Competitive Landscape for Europe Food & Drink Reports: Sample of  
Companies Ranked

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At-a-glance perspective on the strengths, weaknesses, opportunities and threats facing each market’s food & drink industry. BMI also provides similar economic and business environment studies. Company SWOTs (Strengths, Weaknesses, Opportunities, Threats) covering all leading food and drink companies operating in each market, including competitive intelligence on geographic presence and competitive positioning of multinationals against local companies; leading products, services and brands; sales and local market share; foreign direct investment, projects, partners and acquisition strategy. Illustration of the industry via rankings tables comparing revenues, number of outlets, number of employees and registration dates. BMI analyses each company’s performance, market position, strategy and investment potential.

Network of European Food Sources

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BMI's European Food Reports are based on an extensive network of multilateral organisations, government departments, food industry associations, chambers of commerce and company reports. Information sources include: