The Dutch economy returned to growth in 2010, with full-year GDP coming in at 1.8% year-on-year (yo- y). However, in the second half of 2011, confidence has been shaken by the ongoing troubles within the eurozone. Private consumption contracted for three consecutive quarters in 2011, declining 1.1% y-o-y in Q311 (following already weak growth of 0.4% y-o-y in 2010). We have therefore been prompted to revise our outlook for Dutch private consumption, forecasting private consumption growth of 0.2% y-o-y in 2012 and 1.5% in 2013. Both producer and consumer confidence are steadily turning lower and, with fiscal austerity set to bite further in the medium term, we expect the job market to remain under pressure. Several factors will act as a drag on household consumption over the coming quarters. In particular, fiscal austerity measures will increasingly bite as Prime Minister Mark Rutte's right-wing coalition pursues its mandate to cut public spending by EUR18bn.
Headline Industry Data
- 2012 per capita food consumption = +3.2%; forecast to 2016 = +21.9%
- 2012 alcoholic drink sales = +2.9%; forecast to 2016 = +20.6%
- 2012 soft drink sales =+4.4%; forecast to 2016 = +31.2%
- 2012 mass grocery retail sales = +5.5%; forecast to 2016 = +38.0%
Key Industry Trends & Developments
Jumbo Emerges As Genuine Ahold Challenger After C1000 Buy: The Dutch supermarket sector looks set to become a two-horse race after local retailer Jumbo announced in November 2011 that it has agreed to buy the C1000 supermarket chain from private equity group CVC Capital Partners. The move follows the acquisition of domestic rival Super De Boer and will cement the firm's position as the country's second largest retailer. Jumbo's increased reach looks set to change the retailing landscape in a country where Ahold has so far dominated with market share of 34%.
Unilever May Eventually Leave Food Sector (But Not Yet): In November 2011, ratings agency Fitch suggested that Anglo-Dutch consumer goods firm Unilever is likely to continue shedding food brands in an attempt to increase its focus on its personal care business. BMI has previously identified that Unilever is currently showing much greater interest in the personal care side of its business, and we have suggested that its valuation could benefit from splitting its food and personal care operations into separate companies. That said, Unilever's strong exposure to emerging markets is partly a result of the wide reach of its food business; we would caution that, while personal care may be a stronger performer in developed markets, the food business is likely to continue playing a key role in building brand awareness and distribution in key emerging markets for some time to come.
Key Risks To Outlook
Export Growth Faltering: It is our core view that export growth, although remaining strong, has probably peaked as the rapid expansion in export orders seen in 2010 is now losing some steam. Export growth has slowed markedly in 2011, and we expect a continuation of this trend to keep wider economic growth in check.
Eurozone Debt Crisis: Meanwhile, the ongoing eurozone crisis poses a threat to investor confidence throughout the entire region. The risk of a major sovereign credit event in Europe would further damage confidence, putting significant pressure on export demand and, therefore, on the Netherlands' economic growth and consumption. While we expect Dutch sovereign bond yields to remain relatively insulated from wider market jitters, a continued deterioration in the regional crisis could drag on economic growth.