Competition in the Czech Republic Food and Drink Market Looks Set to Heat Up

Research and Markets (http://www.researchandmarkets.com/reports/c87072) has announced the addition of Czech Republic Food and Drink Report Q2 2008 to their offering.

BMI’s Czech Republic Food Drink Report provides independent forecasts and competitive intelligence on Czech Republic’s food and drink industry.

The Czech Republic’s mass grocery retail (MGR) industry has come into the spotlight in recent months. As Tengelmann is looking to offload its Plus discount operations outside of its home market Germany, the UK’s Tesco moved in to acquire the chain’s Czech stores. Tesco has reportedly offered EUR200mn (US$293.1mn) for the 144 discount outlets, which would significantly increase its store network from the 93 it currently runs in the country. Tesco has had a major presence in the Central and East European (CEE) region since the mid-1990s, and has rapidly expanded throughout. It has demonstrated its commitment to the Czech market with its recent acquisitions and expansion into the convenience format with its Express banner. If the company is successful in this acquisition it will become the market leader with an estimated CZK48bn (US$2.7bn) in annual sales. However, with other bidders reportedly including the Schwarz Group, Penny Market and Interspar, Tesco is up against some tough competition.

The Czech MGR market has witnessed significant consolidation in recent years, with both Tesco and Julius Meinl pulling out in 2005, and Delvita exiting in 2006 after several years of losses. Due to its proximity to the German market, the country attracted a number of German retailers in the early 1990s, and the MGR market is now one of the most mature in the region. However, despite this level of competition and the slimming profit margins that go with it, the MGR market is still forecast to experience a growth rate of 81.4% between 2007 and 2012, which will be accompanied by further consolidation. Hypermarkets are currently the leading format with the most significant retail sales, which are predicted to reach US$13.6bn by 2012. Discount stores are the third-largest format after supermarkets, with growth of 76.9% forecast between 2007 and 2012, which will result in a value of US$2.79bn. Then in February, in yet another indication that competition is heating up, hypermarket operator Kaufland announced that it is moving into the smaller store format. Currently Kaufland runs a chain of around 80 hypermarkets, which operate in towns with a population of over 20,000. However, the company has decided to start building outlets in smaller towns, placing it in direct competition with those operators that currently dominate these smaller regions, namely Penny Market, Plus Discount and fellow Schwarz-offering Lidl. With rival operators increasingly moving into each others’ territory, competition in the market could get fierce and set off a wave of aggressive cost cutting, ensuring that all eyes will remain on the Czech MGR market for some time.

Companies Mentioned:

Ahold Czech Republic AS

Tesco Stores ÈR

Lidl & Schwarz

NestléÈesko

Plzensky Prazdroj SWOT

For more information visit http://www.researchandmarkets.com/reports/c87072

Source: Business Monitor International