While unemployment in the Czech Republic 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
- 2014 per capita food consumption (local currency terms): +1.0%; compound annual growth rate (CAGR) to 2018:+2.6%
- 2014 alcoholic drinks value sales (local currency terms): +2.4%; CAGR to 2018: +4.4%
- 2014 soft drinks value sales (local currency terms): +5.1%; CAGR to 2018: +8.8%
- 2014 mass grocery retail sales (local currency terms): +4.0%; CAGR to 2018: +6.8%
Key Company Trends
Hame Reports Strong Increase In Sales: In March 2014 Hame, the largest canned food group in the Czech Republic, reported that its 2013 sales stood at CZK5.1bn. While sales in its home market remained weak, sales of its foreign subsidiaries performed very well and reached 52% of total sales. Hame's key foreign markets include Russia, Romania, Austria, Hungary, Bulgaria, Slovenia, Kazakhstan and Libya, as well as the US, the UK, Israel and Japan. Of these key markets, 2013 saw significant year-on-year growth in Russia (15%), the Ukraine (29%), Romania (39%) and Slovenia (41%).
Plzensky Prazdroj Sets Personal Best In Export Market: Plzensky Prazdroj and parent company SAB Miller announced in February 2014 that the Czech beer producer had exported 1.114 million hectolitres of beer, making 2013 a record-breaking exporting year. Exports of the company's Pilsner Urquell increased by 4% (y-o-y) while exports of the Velkopopovicky Kozel brand rose by 6%. Plzensky Prazdroj's beers sell in more than 50 countries across the world.
Ahold To Acquire SPAR's Czech Republic Business: Despite denials from the company as recently as August 2013 that it was planning to pull out of the country, SPAR has agreed to sell its Czech operations to Albert supermarket owners, Ahold. Rudolf Staudinger, board director responsible for foreign operations at SPAR, said: 'Our company strategy entails that we manage to establish a satisfying market position in the countries we do business in. Our conclusion was that this could not be realised in the Czech Republic and we will concentrate on other markets such as Italy, Hungary, Slovenia and Croatia.'
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.
During 2013 the Czech Statistical Office recorded continued improvements in consumer confidence levels, which should in turn start to be reflected in private consumption and household spending during 2014. We expect real GDP growth to return to the Czech economy from 2014 onwards, with our country risk team forecasting real GDP growth for the first time in two years. The only foreseeable 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.