2012-02-03 15:32:59 - Latvia Food and Drink Report 2012 - a new market research report on companiesandmarkets.com

On the back of economic recovery, Latvia significantly improved its position in our latest version of the Business Environment Ranking (BER) matrix for the Emerging Europe region. The country ranks seventh out of the 15 markets surveyed regionally, ahead of both its Baltic neighbours. Nevertheless, its long-term attractiveness to food and drinks manufacturers will continue to suffer from small population numbers, the market´s relative maturity (including the well-developed mass grocery retail (MGR) sector) and the expected slowdown in its economic growth. Indeed, these factors are illustrated by Latvia´s low reward score (of just 37 out of the maximum 100 points), as its composite score remains propped up by one of best regional risk profile.

Headline Industry Data (local currency)

- 2011 per

 

 

capita food consumption: +3.05%; forecast compound annual growth rate to 2016:+2.84%
- 2011 alcoholic drinks sales: +4.07%; forecast compound annual growth rate to 2016: +4.10%
- 2011 soft drinks sales: +6.22%; forecast compound annual growth rate to 2016: +5.93%
- 2011 mass grocery retail sales: +7.02%; forecast compound annual growth rate to 2016: +5.71%

Key Company Trends

Fazer Exists Restaurant Business in Latvia and Estonia: The catering and restaurant unit of Finnish bakery specialist Fazer (Fazer Amica) has sold its Baltic catering and restaurant business to Fazer Food Services Latvia, as part of its strategy to realign its focus on larger markets of the Nordic countries and Russia. The move also indicates that the company´s long-term view of the Estonian and Latvian markets´ potential was unfavourable. Previously, CEO Karsten Slotte stated that the company was to strengthen its newly created business structure and market position during 2010, as part of the company´s ambition to become the leading food company in the region.

McDonald´s Expanding in Latvia: In October 2011, McDonald´s reported that its first Latvian outlet outside the capital was to open in mid-November in the second-largest city in the country, Daugavpils. The new outlet will be the company´s first two-story restaurant in the country. The fast-food restaurant chain manages eight restaurants in the Baltic region, with a limited number expected to be launched during the coming years, given constraints posed by small population numbers across the three states.

Key Risks to Outlook

Economic and Political Risks: With ructions in the eurozone likely to continue and global macroeconomic headwinds prevalent, consumer confidence could take a hit in the coming months, further weighing on consumer spending in Latvia. Investments could also fall precipitously in the event of shaken investor confidence in the country´s investment environment and/or macroeconomic outlook. On the political front, while we expect the Latvian government to remain stable in 2012 following September 2011´s snap election which saw a three party centre-right coalition come to power, we see potential challenges in the coming year. In particular, we highlight the ongoing austerity push amid a deteriorating macroeconomic backdrop, shoring up support for the eurozone and corruption as potential sources of friction. With the government is committed to tackling endemic graft, the task is not an easy one and may also cause political friction going forward.

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