Across 2013 the Czech Statistical Office recorded continued improvements in consumer confidence levels, which should in turn start to reflect in private consumption and household spending during 2014. Despite modest economic growth in the second quarter, the Czech economy is expected to have contracted again by the end of 2013. Nevertheless, we expect real GDP growth to return to the Czech economy from 2014 onwards. The only potential risks to GDP growth would be as a result of further deteriorating growth within the country's eurozone neighbours, which seems unlikely at this time.
While unemployment remains below the EU average, it continued to rise a little during 2013 and is expected to rise again during 2014. The annual inflation rate stood at just 1% in September 2013, with food and soft drink prices falling another 0.8%. In view of the maturity of the country's consumer base, its increasing confidence should help to secure the premiumisation necessary to sustain momentum in the sector.
Headline Industry Data
- 2013 per capita food consumption (local currency terms) = 0.8%; compound annual growth rate (CAGR) to 2017 = +1.5%
- 2013 beer volume sales = -0.1%; CAGR to 2017 = +0.03%
- 2013 confectionery volume sales = +2.6%; CAGR to 2017 = +3.3%
- 2013 mass grocery retail sales (local currency terms) = 3.1%; CAGR to 2017 = +4.8%
Key Company Trends
Agrofert Acquires Lieken from Barilla: In June 2013, the European Competition Authority approved the acquisition of German bakery group Lieken from the Italian food company Barilla. Agrofert already has a sizeable presence in the bakery business in the Czech Republic, Slovakia and Hungary, and this acquisition will allow Agrofert to enter the German market, where it plans to use Lieken to launch its own product ranges, including ham, milk and butter.
Hame Reports Strong Increase in Sales: In February 2013, Hame, the largest canned food group in the Czech Republic, reported that its 2012 sales increased by 10.5% year-on-year (y-o-y) to CZK5.8bn. While sales in its home market were weak, dropping by 5% y-o-y, sales of its foreign subsidiaries performed well. Hame Group has production facilities in seven factories in the Czech Republic, as well as one factory in Russia and one in Romania. The Czech factories accounted for 48% of group sales in 2012, with the group manufacturing more than 90,000 tonnes of food in 2012. In April 2013, Hame was awarded EUR212,000 compensation following its successful appeal in the Russian courts, in a long-running dispute to stop a Russian competitor company producing counterfeits of Hame pates.
Key Risks To Outlook
Debt Crisis: A more pronounced slowdown in eurozone economic growth - in particular in Germany -would have a negative effect on the Czech Republic's economic growth trajectory. Owing to the high degree of trade integration with Germany, the Czech Republic's economic recovery remains highly dependent on external demand remaining relatively receptive to Czech exports.