BMI View: Household confidence has improved over the last year and will likely keep rising in 2016, as a result of positive developments in the labour market and steadily growing wages. Registered cars also continued to rise 2015, tallying with steady retail sales growth. Taken together, the outlook for households remains one of gradual but robust improvement as the sector draws to the end of its deleveraging cycle and disposable incomes rise. Low inflation is also helping to bolster household purchasing power, although consumer price growth will begin to pick up at the start of 2016 as the base effects from low oil decline. However, we forecast household consumption to stay static relative to total GDP over the next five years, at 61%.
Headline Industry Data (Local C urrency)
2015 per capita food consumption: +3.1%; forecast compound annual growth rate (CAGR) 2014 to 2019: +4.5%
2015 alcoholic drinks sales: 4.2%; forecast CAGR 2014 to 2019: 14.5%
2015 soft drinks sales: +3.1%; forecast CAGR 2014 to 2019: +3.7%
2015 mass grocery retail sales: +8.8%; forecast CAGR 2014 to 2019: +3.5%
Key Company Trends
Food Union Heads For Baltics Dairy Domination: Food Union's financial partner, Meridian Capital, announced in August 2015 that it had acquired Latvia-based dairy company Rigas Piensaimnieks. Food Union already owns Latvia's leading dairy producer, Rigas Piena Kombinats (RPK), which was recently merged with another of its dairy acquisitions Valmieras Piens. In October 2015 Food Union announced that it had also acquired Denmark-based ice cream maker Premier Is. Rigas Piensaimnieks posted 2014 sales of EUR32.9mn and the Danish manufacturer posted 2014-2015 sales of EUR41.8mn.
Cesu Alus Expands Its Functional Drinks Range: Cesu Alus announced in October 2015 the launch of a new range of drinks in the functional soft drinks segment. Having launched 'Vitamin Performance' in spring 2014, the new product 'Protein Performance' is a gluten-free, high-protein drink targeted primarily at the sports and activity lifestyle market. The product is available initially in two flavours and the company has invested more than EUR60,000 in developing its functional drinks ranges. 'since the beginning of 2014, the lifestyle drinks market has tripled in size,' said company Chairman, Eva Sietinsone, 'and I predict that such growth will prevail for the next 3-5 years'.
Cido Grupa Secure s PepsiCo Deal: The Latvian Information Agency reported in October 2015 that Cido Grupa's Denmark-based parent, Royal Unibrew, had reached an agreement with US soft-drinks giant PepsiCo to secure the production and distribution rights for PepsiCo drinks in the Baltics from January 2016. Cido Grupa increased turnover by just 1% y-o-y in 2014 and posted profit down from EUR2.42mn to less than EUR600,000 in the same period. Brands covered by the deal include Pepsi, Mirinda, 7Up and Mountain Dew.
Spilva Has Bumper Harvest: Latvia-based fruit and vegetable processor, Spilva, announced an 18% y-o-y increase in turnover reaching EUR21.6mn in 2014, which produced a 21% y-o-y increase in income from EUR1.15mn in 2013 to EUR1.39mn. The company manufactures a wide range of condiments, preserves, juices and desserts amongst other produce and, according to a report in The Baltic Course, invested EUR829,000 in 2014 into the development of production processes to manufacture preservative-free foods. On the back of the strong 2014 performance, Spilva's Director Lolita Bemhena announced that the investment budget for 2015 would be EUR1.15mn.
Key Risks To Outlook
The prevailing risk to our forecasts for Latvia remains the persistent eurozone sovereign debt crisis. A further deepening of the crisis would pose downside risks to most of our forecasts.
The Latvia 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 Latvia 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 Latvia.
- Benchmark BMI's independent food and drink industry forecasts for Latvia to test other views - a key input for successful budgeting and strategic business planning in the Latvian food and drink market.
- Target business opportunities and risks in Latvia 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.