BMI's Executive Summary

[TOP]

The Sector At A Glance

Key Insights On The Food & Drink Sector Of Latvia

Rapid growth, political stability and a liberal investment environment are distinguishing features of the three Baltic economies, particularly Latvia and Estonia. In October 2006, Latvia’s overall retail spending grew by an almost improbable 26.4% year-on-year (y-o-y), by far the fastest rate in the European Union (EU) and well ahead of vastly poorer but fast-growing markets in the CIS. On the mass grocery retail (MGR) front, the opening of the first Prisma hypermarket by Finnish group SOK in Riga in Q4 and the rapid rollout of discount formats by Ahold-controlled Rimi Baltic and Lithuania’s VP Market underline the vibrancy of the market, even if larger European retail groups are largely steering clear of the market. In the beer market, players such as Cesu Alus appear to have recovered after the dislocation of accession in 2004 and have posted record sales, despite the market dominance of Baltic Beverages Holding (BBH).

Still, there are reasons for caution. One reason why Germany’s Aldi discount group pulled out of its Baltic expansion programme at such an early stage was, it appears, the perception that these small markets lacked room for new entrants. This is an area of increasing concern, not just for food and beverage producers – who fear too much concentration of buying power among existing retailers, even as they are suspicious of the pricing power of big international chains. A study released in December 2006 by the Baltic International Centre for Policy Studies (Biceps) argued that, overall, concentration in the grocery sector in the three Baltic States had reached Western European, mature market standards. However, it noted that Latvia was least consolidated, a view easily bolstered by the sheer number of players in the Latvian market compared to other Baltic states. The real significance of the findings is its prediction that competition authorities would examine any further mergers and acquisition activity more closely. The positive news from the study is that are still greater opportunities in Latvia than elsewhere in the Baltics.

The surge in consumer spending in Latvia and Estonia, and double-digit GDP growth rates this year, present their own concerns. The capacity of the small economy to continue to absorb the rapid inflow of investment is an issue, as are tightening labour markets, soaring real-estate costs and inflation. Latvia will be a late entrant to the eurozone, although in practice, its currency will be driven by European Central Bank policies designed for lower-growth, more-mature economies. Latvia’s fourth-place rating in this quarter’s updated Business Environment rankings reflects these risks, but also takes note of consistently investor-friendly policies and an economy more open than most Western European states. Inevitably, Latvia may see investment in its food and beverage sector falter in coming years, due to the country’s own success, with export production shifting to cheaper – if wilder – markets and retailers concentrating elsewhere.

Contents

[TOP]

Chapter 1 – Business Environment

Retail Business Environment Rankings

Table: Central And Eastern Europe Business Environment Rankings

SWOT Analysis1

Latvia Food & Drink Industry SWOT

Political SWOT

Economic SWOT

Business Environment SWOT

Macroeconomic Outlook

Table: GDP, Output & Population

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: Latvian Retail indicators

Company Developments

Market Overview

Table: Structure of Latvia's Mass Grocery Retail Market by Volume of Sales (US$bn)

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

Table: Food consumption indicators

Table: Food sub-sector indicators

Table: Drinks indicators

Table: Sectoral trade indicators

Industry Developments

Company Developments

Market Overview

Table: Latvia Agricultural Sub-sector Production (Volume, tonnes)

Chapter 4 –Tobacco

Industry Forecast Scenario

Table: Tobacco indicators

Industry Developments

Market Overview

Chapter 5 – Competitive Landscape

Key Players

Table: Key Players in Latvia’s Mass Grocery Retail Sector (2005)

Table: Key Players in Latvia's Food & Drink Sector (2005)

Regional Company Case Studies

Mercator – CEE Case Study

Financial Highlights

Table: Mercator’s Financial Highlights

The Only Way Is Up…

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

Diageo – CEE Case Study

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

Table: Diageo: Distribution In The CEE

Groupe Danone – CEE Case Study

Groupe Danone – The CEE 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

Paulig Baltic AS

BMI Forecast Modelling

How we generate our industry forecasts

Retail Industry

Sources

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

[TOP]

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

[TOP]

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: