BMI view: After two consecutive years of contraction, the Slovenian food and drink market recorded modest growth in 2014. While we expect the positive trends in the Slovenian economy to persist in the near term , the recovery is anticipated to be slow and modest. As a result, we forecast weak growth in the Slovenian food and drink market with sales figures accelerating towards the second half of our forecast period.
Headline Industry Data
Food consumption (local currency) growth (y-o-y) in 2015: +0.4%; compound annual growth rate (CAGR) 2014-2019: +1.0%.
Per capita food consumption (local currency) growth (y-o-y) in 2015: +0.2%; CAGR 2014-2019: +0.9%.
Alcoholic drinks value (local currency) sales growth (y-o-y) in 2015: 0.0%; CAGR 2014-2019: +1.9%.
Soft drinks value (local currency) sales growth (y-o-y) in 2015: +0.9%; CAGR 2014-2019: +2.5%.
Total mass grocery retail value (local currency) sales growth (y-o-y) in 2015: +4.0%; CAGR 2014-2019: +4.8%.
Key Company Trends
Podravka Acquires Majority Stake In Zito: In May 2015, Croatia-based Podravka has reached an agreement to acquire a 51.55% stake in Slovenia-based food producer Zito for EUR33.03mn (USD36.91mn). As part of the agreement, Podravka will buy 183,386 shares of Zito at EUR180.1 (USD201.24) each. Podravka must offer to buy the rest of Zito's shares in due course, in line with Slovenian legislation. The deal values the entire company at EUR64mn (USD71.5mn). However, the actual price will be lower as Zito has treasury shares worth around a tenth of the entire issue. The deal still requires approval from competition authorities.
Heineken Confirms Majority Stake In Pivovarna Lasko : In March 2015, Netherlands-based brewer Heineken has agreed to acquire a 51.11% stake in Slovenian drinks group Pivovarna Lasko in a transaction worth around USD237mn. Bank Asset Management Company (DUTB), the largest shareholder in both Heineken and Lasko, announced the deal, reported Reuters. DUTB holds 23.5% of Lasko. Heineken is purchasing its stake in Lasko for USD27.05 a share and will later bid for the whole company, in line with Slovenia's legislation. Investment funds , such as KKR, CVC and Mid Europa Partners , were also among the interested bidders for Pivovarna Lasko.
Rastoder & Agrokor Enter Cooperation Deal: In June 2014, Slovenia-based fruit and vegetable processor Rastoder entered a cooperation deal worth between EUR70mn (USD95mn) and EUR100mn (USD135mn) with Croatian retailer Agrokor. Under the terms of the agreement, Rastoder's high-quality products will be made available for the same or lesser price to Agrokor customers.
Agrokor Completes Purchase Of Mercator : Agrokor confirmed on its website in June 2014 that it had completed the majority purchase of Slovenia's largest retailer, Mercator. The purchase was valued at a total of EUR 544m; Agrokor purchased around 53% of shares in the company for EUR324mn, while an extra EUR220mn was set aside for other investments associated with the purchase. Prior to the takeover, Agrokor reached an arrangement with banks to refinance up to EUR1bn of debt and achieved regulatory approval. Agrokor stated that the two companies would generate EUR7bn of annual revenues and employ more than 64,000 people.
Key Risks To Outlook
At present, we see government spending the biggest risk to Slovenia's recovery. There is a material risk that the government may decide to pursue tighter fiscal policy before the economy has gained enough momentum to escape recession, driving a reduction in domestic demand that is too large to be offset by improving external demand dynamics. In this scenario we could see economic activity remain flat or in recession until 2015. Externally, downside risks are present too. Slovenia's primary trading partners are Germany, Italy and France, which are facing their own growth challenges at present. Hence there is a strong risk that the recent jump in external demand may prove unsustainable.