BMI's Executive Summary

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The Sector At A Glance

Key Insights On The Food & Drink Sector Of Lithuania

Lithuania remains one of Europe’s most dynamic food, beverage and retail markets. During 2006, the country continued to see one of the highest rates of growth in the mass grocery retail (MGR) sector of any Central and Eastern European (CEE) market, with a compound annual growth rate (CAGR) of 21.0% seen in BMI’s forecast, which has been updated this quarter. Still, the market may be slowing somewhat in Q4, in line with the broader economy. Nonetheless, in terms of growth prospects and regulation, Lithuania remains one of the most attractive markets in the CEE – the broader issue is if the market is big enough to attract multinational food retail players.

One key worry is the level of consolidation in Lithuania. The country’s MGR sector and, in fact, retail as a whole, is dominated by VP Market. The main foreign player in the market remains Rimi Baltic. In Q406, joint-venture partner Kesko, the Finnish MGR leader, said it would exit, leaving Sweden’s ICA, owned by Dutch retail giant Ahold with sole control over the venture. Supermarket group Norfos continues to expand in Lithuania, while eyeing Russia, but runs a fairly distant fourth in the market. A major factor dictating concentration in the market, therefore, is the fate of second-largest retailer Iki, a multi-format chain owned by local Paulink but reportedly up for sale. If VP Market or Rimi made a bid, competition authorities could intervene.

The question of concentration is one that worries the country’s many small food processors and farmers, as well as bigger multinational players, who fear the buying power of a few dominant players. A study released in December 2006 by the Baltic International Centre for Policy Studies (Biceps) has fuelled the debate. The survey argued that concentration in the grocery sector in the three Baltic States had reached Western European, mature market standards. Notably, it found that Lithuania had the highest degree of concentration of any of the three Baltic States, reflecting the existence of four strong players operating across all three MGR formats. The authors of the study believe that competition authorities would examine any further mergers and acquisition activity more closely. The report received substantial coverage in the local media and competition authorities will no doubt be looking at it ahead of any future inquiries.

Concentration in the retail market does not mean the market is mature in itself. Overall value growth remains strong in the overall food sector, beverages and the MGR sector, which encompasses a fair amount of non-food sales, primarily through hypermarkets. Lithuanians are becoming wealthier, but remain among the poorest citizens in the EU, providing considerable scope for long-term growth. A strong economy and relatively stable political picture have secured Lithuania’s top spot again in this quarter’s Business Environment Rankings. If entrants can find room, the market still has much to offer.

Contents

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Chapter 1 – Business Environment

Retail Business Environment Rankings

Table: Central And Eastern Europe Business Environment Rankings

SWOT Analysis

Lithuania Food & Drink Industry SWOT

Political SWOT

Economic SWOT

Business Environment SWOT

Macroeconomic Outlook

Table: Indicators Of 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: Retail Indicators

Industry Developments

Company Developments

Market Overview

Table: Sales Value By Format In Lithuania’s MGR Sector – Historical Data & Forecasts (US$mn)

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: Sectoral Trade Indicators

Table: Drinks Indicators

Industry Developments

Company Developments

Market Overview

Table: Lithuania Agricultural Sub-Sector Production (Volume, tonnes)

Chapter 4 – Tobacco

Industry Forecast Scenario

Table: Tobacco Indicators

Industry Developments

Company Developments

Market Overview

Chapter 5 – Competitive Landscape

Table: Key Players In Lithuania’s MGR Sector (2005)

Table: Key Players In Lithuania'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

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

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

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: