Since the fall of Communism in the early 1990s, central and Eastern European economies have provided attractive investment opportunities for multinational food manufacturers and retailers.
Rising GDP, greater purchasing power and a keen openness towards Western products and retail formats meant entry into countries like Poland and the Czech Republic proved fruitful for companies facing maturing economies in the West.
And with the entry of a clutch of countries in the region into the EU in 2004, such investment proved even more attractive as the former Communist countries became part of the largest trading bloc on the planet.
However, as the global economic downturn bites in 2009, questions are beginning to be asked about the prospects for central and Eastern Europe. Where once industry watchers forecast that continuing economic growth and rising incomes would further fuel a burgeoning retail segment, now forecasters fear that the global downturn could have a real impact on what were only a few years ago thriving economies.
This week, just-food is in Prague, the Czech capital, as some of the leading lights in the region’s food manufacturing and food retail industries discuss the prospects for the sectors in central and Eastern Europe.
Industry analysts BMI have argued that the Czech retail market, for instance, is going through a “difficult” period, with high inflation and high interest rates weighing on retail sales in 2008. Discount retailers, including the likes of Lidl and Rewe’s Penny, continue to thrive, a trend which is likely to continue as the Czech economy navigates the downturn.
The Czech Republic is one of the region’s more mature FMCG markets and, as BMI has argued, some international firms could choose to pull out of the market to focus their resources on faster-growing markets further east, like Romania.
Senior management from the likes of Tesco, the largest retailer in the Czech Republic, and rivals Ahold and Metro Group are in Prague this week at the Retail Summit, a two-day event that will tackle issues from the downturn, to the rise in private-label consumption and growing demand for convenience shopping, to sustainability projects. Executives from multinationals including Unilever and Procter & Gamble, as well as local majors including Váhala, will also be in attendance.
just-food will bring you dedicated coverage from Prague as the great and good form our sector discusses what the future holds for a key region for multinational investment.