BMI View : The Estonian retail sector remains positive and is planning further expansion of both ranges and premises during 2016, with mass grocery retail players being no exception. Domestic demand will remain the largest contributor of growth in 2016, as strong real wages and unemployment dynamics bolster consumer spending. However, as inflation returns to higher levels, we expect household purchasing power to reduce in comparison to 2015.
Headline Industry Data
2015 per capita food consumption (local currency): +1.4%; forecast compound annual growth rate (CAGR) to 2019: +1.8%.
2015 alcoholic drinks sales (volume): 0.2%; forecast CAGR to 2019: +1.0%.
2015 soft drinks sales (volume): +3.4%; forecast CAGR to 2019: +0.3%.
2015 mass grocery retail sales (local currency): +4.8%; forecast CAGR to 2019: +3.7%.
Key Company Trends
HKScan Drops Major Production Investment Plans For Rakvere: Rakvere brand owner HKScan announced on 5 August 2015 that it was dropping its planned investment of EUR20mn into a new production facility in Rakvere, Estonia. The plans were to involve building a new 10,000 square metre production facility alongside its existing plant in Rakvere. The new plant was to be equipped with advanced technology designed to deliver value-added products for growing product segments. However, a strategic review led the company to conclude that it should instead focus efforts on improving operational efficiency and increasing production capacity across of its existing units.
Saku Brewery Announces New Products And Export Markets: Saku Brewery reported in August 2015 that it had added South Korea, China and Italy to its list of export markets. The company claims that half of its production is now destined for export markets, the largest of which are Finland, the other Baltic states, Denmark and Iceland. Saku is keen to continue developing its export market to ensure growth against a contracting Estonian market. 2015 also saw the brewery introduce a new alcohol-free light beer called Saku Alkoholivaba, new varieties to its Humal & Oder series of dark beers and a preservative-free soft drink, Lotte Lemonade.
Government Excise Tax Hikes Hit Liviko: The Estonian government's planned 15% increase in alcohol excise duty has driven Liviko to look to Latvia to preserve its future competitiveness. The Estonian increases will see the tax gap between duty in the two countries widen to 37.2%, forcing Liviko to look towards production in Latvia. Liviko's Chairman, Janek Kalvi, told Public Broadcasting that 'We're not doing this to undermine the Estonian state but to save our company'. Production in Latvia, the company estimates, could save EUR10-15mn in excise duty, which totalled EUR49mn in 2014.
Paulig Sells Its Food Ingredients Business To Solina Group: France based Solina Group announced in April 2015 that it had acquired Paulig Group's food ingredients division for an undisclosed sum. Although the food ingredients division is headquartered in Helsinki and has sales/R&D offices in Sweden and Norway, its production centre is based in Estonia. The product range extends to 2,000 different items that are distributed throughout the Baltic States, Nordic countries and eastern Russia.
Maxima Sees Highest Growth In Estonia: Maxima Group reported in February 2015 that of its Baltic state operations, the highest growth in turnover was reported by Maxima Eesti. Estonian activity saw turnover increase by 5.2% year-on-year to reach EUR401mn. The company has continued expanding its large XX format stores and expects to open its second Maxima XXX in Tallinn during 2016. At the time of writing, its new EUR30mn logistics centre was on target for completion by the end of 2015.
Key Risks T o Outlook
External Environment Continuing To Pose Downside Risks: As a member of the eurozone, Estonia remains continually exposed to economic downturns in the overall euro area and political tensions in periphery countries pose a threat to eurozone stability over the forecast period. In particular, political tensions with Russia threaten economic stability in the Baltic area. As a large trade partner to Estonia, continued weakness in the Russian economy remains a downside risk to growth prospects during 2016.
The Estonia Food & Drink Report features BMI Research's market assessment and independent forecasts for food and drink expenditure, consumption, sales, and imports/exports and forecasts for the mass grocery retail sector. The report also includes analyses of major regulatory developments, the background macroeconomic outlook and competitive landscape comparing national and multinational companies by leading products and services, sales, investments, partners and expansion strategies.
BMI's Estonia Food & Drink Report provides industry professionals and strategists, sector analysts, business investors, trade associations and regulatory bodies with independent forecasts and competitive intelligence on the food and drink industry and the mass grocery retail market in Estonia.
- Benchmark BMI's independent food and drink industry forecasts for Estonia to test other views - a key input for successful budgeting and strategic business planning in the Estonian food and drink market.
- Target business opportunities and risks in Estonia through our reviews of latest industry trends, regulatory changes and major deals, projects and investments.
- Exploit latest competitive intelligence on your competitors, partners and clients via our Company Profiles (inc. SWOTs, KPIs and latest activity) and Competitive Landscape Tables.
BMI Industry View
Summary of BMI’s key industry forecasts and views, covering food and drink manufacturing and consumption and the mass grocery retail market.
Industry SWOT Analysis
Analysis of the major strengths, weaknesses, opportunities and threats within the food, drink and mass grocery retail sectors and within the broader political, economic and business environment.
BMI’s Food and Drink Risk Reward Index
BMI’s Risk Reward Index provides investors (food and drink manufacturers and mass grocery retailers) looking for opportunities in the region with a clear country-comparative assessment of a market’s risks and potential rewards. Each of the country markets are scored using a sophisticated model that includes more than 40 industry, economic and demographic points. These provide indices of highest to lowest appeal to investors, with each position explained.
BMI’s food chapter is divided into sections such as meat, fish, confectionary, dairy and canned foods, and provides insight into each market’s food industry, centred on a forecast to end-2019 for the sector. The chapter includes the following elements:
- Industry Forecast Scenario: Historical data series and a forecast to end-2019 for growth of key indicators within a market’s food industry. Indicators include food consumption, food consumption as % of GDP, canned food sales, confectionery sales and food and drink imports and exports, among others.
- Industry Developments: A summary of corporate developments, including news on M&As, FDI, expansions, closures and financial results, in addition to analysis and explanation of the latest industry events and how these could influence further investment.
- Market Overview: An overview of the structure of the market, introducing the key players and discussing underlying trends.
Segmented the same way as BMI’s food chapter, the drink section provides insight into each market’s drink industry, centred on a forecast to end-2019 for the sector. Forecast indicators include alcoholic and soft drink sales by value, volume and sub-sector and tea and coffee sales, among others.
Mass Grocery Retail Forecasts
Segmented the same way as BMI’s food and drink chapters, the mass grocery retail section provides insight into each market’s grocery retail industry, centred on a forecast to end-2019 for the sector. Forecast indicators include mass grocery retail sales by format (including supermarkets, hypermarkets, convenience and discount stores) and a breakdown of the organised retail sector versus the traditional sector, among others.
Illustration of the mass grocery retail and food and drink industries via rankings tables comparing revenues, number of outlets and number of employees. This chapter also includes data-rich, in-depth regional analysis of the market position, business strategies and investment potential of the region’s leading mass grocery retail and food and drink operators.
Examines the competitive positioning and short- to medium-term business strategies of key industry players. Strategy is examined within the context of BMI’s industry forecasts, our macroeconomic views and our understanding of the wider competitive landscape to generate company SWOT analyses. The latest financial and operating statistics and key company developments are also incorporated within the company profiles, enabling a full evaluation of recent company performance and future growth prospects.
The Food & Drink reports draw on an extensive network primary sources, such as multilateral organisations, government departments, industry associations, chambers and company reports.
*Company profiles are not available for every country. Those reports instead contain information on the current activities of prominent companies operating in the market.