Date:
10.03.2007
Table of contents
1 2 3 Introduction................................................................................................. 3 Croatia an introduction ............................................................................ 4 Retail market overview ................................................................................ 5 3.1 Development of the retail sector ....................................................................... 7 3.2 Retail and wholesale operators ......................................................................... 10 3.2.1 Company profiles.................................................................................. 11 3.3 Buying Groups and Associations..................................................................... 13 3.4 Distributors ......................................................................................................... 14 3.5 Food Fairs ........................................................................................................... 14 4 Food production and imports ....................................................................14 4.1 Pricing .................................................................................................................. 14 4.2 Foreign trade....................................................................................................... 14 4.3 EU membership ................................................................................................. 14 5 Main food groups in Croatia ......................................................................14 5.1 Meat and meat products.................................................................................... 14 5.1.1 Beef and pork producers ..................................................................... 14 5.1.2 Poultry producers ................................................................................. 14 5.1.3 Fish producers....................................................................................... 14 5.1.4 Legal aspects concerning the meat and fish sector.......................... 14 5.1.5 Forecast meat and fish sector ............................................................. 14 5.2 Dairy products .................................................................................................... 14 5.2.1 Dairy producers .................................................................................... 14 5.2.2 Forecast for the dairy sector ............................................................... 14 5.3 Fruit and vegetables ........................................................................................... 14 5.4 Confectionary...................................................................................................... 14 5.5 Beverages ............................................................................................................. 14 5.5.1 Alcoholic beverages.............................................................................. 14 5.5.2 Soft drinks.............................................................................................. 14 5.6 Organic products................................................................................................ 14 5.7 Private label ......................................................................................................... 14 6 Exporting to Croatia...................................................................................14 6.1 Investment........................................................................................................... 14 6.2 Corruption........................................................................................................... 14 7 Retail sector forecast ..................................................................................14 8 HoReCa market in Croatia.........................................................................14 8.1 Sector performance............................................................................................ 14 8.2 Key players .......................................................................................................... 14 8.2.1 Gastro grupa.......................................................................................... 14 8.3 HoReCa sector forecast..................................................................................... 14 9 Method of obtaining information...............................................................14 10 Appendix 1: Store Checks of Selected Retailers ..................................14 11 Appendix 2: Address and contact persons ..........................................14
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1 Introduction
Royal Danish Embassy Zagreb is pleased to present an overview of the Croatian food and retail market, as introduction to the upcoming event 'Taste a bite of Denmark', in association with Landbrugsraadet. The Danish food promotion event, which will take place in May 2007, will be the highlight of the cooperation between the Royal Danish Embassy Zagreb and Landbrugsraadet in 2007. As preparation for the event, we have outlined the most important facts about the Croatian food industry, market and retail segment, in order to show the developments in this sector of the economy, and to confirm the great potential that the Croatian market has for Danish producers. In making of this report we have used our extensive in-house knowledge of the Croatian food and retail sector and experience in making of a similar event, Nordic Days in Croatia 2004 Food & Food Processing (export promotion of Nordic food). We contacted relevant authorities, such as the Croatian Chamber of Economy, Ministry of Agriculture, Customs Directorate, the Ministry of Economy and other market players. We conducted interviews with the biggest players on the retail market Agrokor (Konzum chain), Metro Cash & Carry, CBA, Catering Ivic, People's Restaurant and Stanic. Findings and detailed profiles are presented in the Appendix.
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2 Croatia an introduction
Year Data Population 2001 4.2 million Population of Zagreb (core) 2001 779.000 Percentage of urban population 2001 63.7% GDP per capita 2006 7.613 EUR GDP growth 2006 4.6% GDP growth forecast 2007 4.2% Average annual inflation rate 2001-2006 2.6% Foreign direct investments 2001-2006 7.368 million EUR Unemployment rate (ILO) 2006 11.8% Number of retail outlets 2006 16.000 Retail sales of food 2006 4.3 billion EUR Retail sales of food growth 2006 6% Total agricultural output 2006 0.6% in relation to EU25 Total import from Denmark 2006 134 million EUR Figure 1: Croatia at a glance (RBA quarterly analysis, Ministry of Agriculture)
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Rank/ Region Country Market Market Time Score country risk attractiveness* saturation** pressure*** India Asia 62 34 91 80 100 Russia Eastern Europe 52 58 71 92 99 Ukraine Eastern Europe 46 34 82 90 87 China Asia 68 40 53 90 83 Slovenia Eastern Europe 83 52 43 68 82 Latvia Eastern Europe 67 49 51 79 81 Croatia Eastern Europe 63 48 49 88 80 Vietnam Asia 54 24 88 68 79 Turkey Mediterranean 51 56 66 65 78 Slovakia Eastern Europe 73 52 33 90 77 Figure 2: A.T. Kearney's Global Retail Development Index (AT Kearney analysis, Euromoney database, World Bank report) * 0=low attractiveness, 100=high attractiveness **0=not saturated, 100=highly saturated ***0=no time pressure, 100=high time pressure
Household spending has hovered between 2.4-5.4% since 2003, after the central bank made substantial efforts to temper a strong upsurge in consumer demand in 2002. With the strong kuna against the euro, and growth of domestic credit, this led to strong import growth, despite household spending falling below overall real GDP growth, as Croatian consumers find international goods more competitive.
Average yearly expenditure % of total per household, EUR, 2005 expenditure Personal consumption 9.416 100 Food and beverages 3.127 33.2 Alcohol and tobacco 376 12 Figure 3: Personal expenditure (Croatian Bureau of Statistics) Item % change, 03/05 6.3 8.2 1.3
There are three factors influencing the food retail segment in Croatia, as well as the whole CEE health, convenience and indulgence. Health is the most visible among them on the Croatian market with 18.2% of males and 16.2% of females being obese (BMI over 30). Health will in the future appear in combination with indulgence and convenience, to address new consumer demands.
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Item Measure 2005 % change, 03/05 Rice kg 4.9 2.1 Bread kg 77.5 -2.8 Pasta kg 9.4 9.3 Beef kg 9.4 10.5 Veal kg 2.1 4.7 Pork kg 18.1 0 Poultry kg 19.6 1.5 Salami, ham, etc kg 15.3 11.7 Fish kg 7.8 23.8 Milk l 85.2 9.5 Dairy products l 17.2 9.5 Cheese kg 7.6 10.1 Eggs kg 8.3 2.5 Oils l 14.6 8.1 Tropical fruits kg 11.7 15.8 Bananas kg 10.4 13.0 Apples kg 15.3 14.1 Seedy fruits kg 5.0 42.8 Leafy vegetables kg 11.8 16.8 Root vegetables kg 15.2 11.1 Dried vegetables kg 4.6 58.6 Potatoes kg 44.7 5.4 Sugar kg 12.9 2.4 Coffee kg 3.7 5.7 Mineral water l 32.7 -11.1 Soft carbonated drinks l 12.6 4.1 Fruit juices l 15.6 1.9 Spirits l 0.6 40 Wine l 10.8 -15.6 Beer l 20.8 -6.7 Figure 4: Consumption of food items (Croatian Bureau of Statistics)
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Beginning of the 1990-ties marked a hard period for the country and the economy, with the occurrence of war/post-war period and transition from a centralized to a market economy. First signs of economic recovery and strengthening of the purchasing power appeared in the beginning of 2000-2001. This coincided with the market entry of the first international retailers, after which several new ones continuously entered the market each year. This trend continues today. Domestic retailers have tried to follow suit, however, many of the old retail giants from the pre1990 period have disappeared. Some have simply not survived due to their inability to adapt to new market demands, while other have been lost in the privatization period, which bankrupted a lot of companies and left a large negative impact on the economy as a whole. Despite growing competition from international players, Croatian retailers are holding strong they used their advantage from the 1990-ties, when foreign investors avoided the country due to the complex socio-economic situation. Foreign retail chains brought new ideas and concepts, like distribution alliances and supply chains.
Outlet 2002 2003 2004 Supermarkets 2.45 2.80 3.29 Hypermarkets 0.18 0.18 0.21 Discount 0.04 0.05 0.06 stores Buying group 0.41 0.42 0.45 stores Total mass 3.08 3.45 4.00 grocery retail Figure 5: Total sales by outlet in million USD (BMI) 2005 3.90 0.24 0.07 0.47 4.68 2006 4.60 0.28 0.08 0.50 5.54 2007f 5.38 0.32 0.09 0.52 6.30 2008f 6.28 0.37 0.10 0.54 7.29
Increased competition has encouraged price wars in domestic companies and improvements in shop concepts, such as emergence of hypermarkets. Strict government policy, such as the law forbidding Sunday trading for larger retailers is discouraging for some foreign business. The law on Sunday ban of trading was introduced in 2004 and quickly overruled, following pressure from the retail chains. In 2007, Croatia should get a new Law on Sunday Trading, which will regulate this issue by prescribing strict rules for holiday and overtime payments, as well as more liberal approach during the tourist season.
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Total retail sales reached an estimated 4.68 million USD in 2005, of which supermarket sales accounted for more than 89%. Supermarket sales rose by around 163.9% between 1999 and 2005, while hypermarket sales experienced a 144% increase and continue to provide the highest turnover by retail outlet at an average of 12.5 million USD in 2005.
Outlet 1999 2000 2001 2002 Supermarkets 300 350 404 470 Hypermarkets 3 4 7 9 Discount 60 65 70 82 stores Buying group 700 750 800 820 stores Total mass 1.063 1.169 1.283 1.381 retailers Figure 6: Structure of sector by number of outlets (BMI) 2003 525 11 96 840 1.472 2004 549 14 104 865 1.532 2005 617 20 112 895 1.644
New categories of retail outlets changed consumers' shopping habits. According to Puls market research in 2006, 54% of the population still shops daily, in small quantities. However, this figure marks a decrease since 2003, when 64% reported that they shop daily. When it comes to 'large shopping', 37% of the population makes it once per month, while 17% shop in large quantities 2-3 times per month. The most popular outlets for 'large shopping' are hypermarkets/supermarkets/cash&carry centers (66%) and supermarket chain stores (36%). Approximately 70% of citizens pay in cash, 25% with credit cards.
Outlet Sales in 2005, million USD Supermarket 6.32 Hypermarkets 12.25 Discount stores 0.56 Buying group stores 0.53 Total mass retailers 2.85 Figure 7: Estimated value of sales per type of outlet in 2005 (BMI)
In general, per-capita food consumption expenditure will increase by 16% between 2005-2010. However, despite this overall increase, expenditure on food as percentage of GDP will fall from 14% to around 4%, as consumers become more price conscious and retailers increase competition to keep up with the new demands of high quality and lower prices.
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Company Agrokor REWE Metro Ultra CBA Mercator KTC Kerum Coop Getro
Type and number of outlets Konzum shops Maxi Konzum supermarkets Super Konzum hypermarkets Billa supermarkets 24 Minaco shops: 24 Metro cash & carries: 6 Buying group Buying group Mercator hypermarkets: 8 Mercator supermarkets: 39 Mercator shops: 19 KTC supermarkets: 20 Kerum supermarkets: 30 Ipercoop hypermarkets: 6 Getro cash & carries: 15 Getro family supermarkets: 2 Kaufland supermarkets: 15
Origin Croatian Austrian German Croatian Croatian Slovenian Croatian Croatian Italian Croatian German
Estimated sales, mill USD 1.700 320 277 259 220 223 110 89 40 51
According to market research, Getro has the lowest prices, while the newcomer Lidl is on the second place. Billa is the most expensive retail chain. Mercator is perceived as the 'tidiest' store with the nicest interior decorum, while Lidl is the 'messiest'. In the last 15 years, the number of stores in Croatia has doubled and trading is the main activity of every third company on the market. In 2005, Croatia had 77 hypermarkets and supermarkets per one million inhabitants, similar to Hungary. Czech Republic had 110, Slovenia 181, while Scandinavian countries had 400 per average. In 2006, there were 3297 kiosks, 371 supermarkets (300-2499 m2) and 35 hypermarkets (over 2499 m2). There were also 736 drugstores, 3676 grocery stores (40-100 m2) and 4270 small shops (up to 40 m2).
Getro Getro is a Croatian cash and carry system, largest in the country. It was founded 11 years ago and operates as a retail and wholesale shop dealing with private customers and registered businesses (28.000). Getro developed several private-label brands, such as President's Choice, Grand, Grandi, Cookie, Dominica, etc (food and nonfood items). Their total store sizes range between 5000-19000 m2, of which a minimum of 4000 m2 is used for the cash & carry center, while the rest is leased as outlets to other retailers. It remains to be a family company, with the EBRD holding a minority stake since 2002. The company ranks second in total retail sales. Their expansion plans include Serbia and Montenegro, as well as Bosnia & Herzegovina.
Billa Rewe Group operates in 14 countries worldwide and their first Billa supermarket was opened in Zagreb in 1999. Since then they grew to 48 outlets and they took over a local retailer Minaco. Billa Croatia currently employs 1500 workers. Their privatelabel brand Clever (around 200 different products of food, cosmetics, beverages, household items) is among the most popular on the market. Their supermarkets (24) sizes range from 1200 to 2000 m2. Kaufland Kaufland has been in Croatia since 2002. Their strategy is based on discounted prices and small hypermarkets of 2000 m2. They are constantly expanding and acquiring new premises. Besides food, they offer a range of small household items. They experienced problems with domestic suppliers, which at one point boycotted them due to claims of dumping prices. However, their market share holds strong and is growing. KTC KTC started as a small family store in 1992 in the northern Croatia, and has since expanded to 16 shopping outlets. They remain in 100% ownership of the Katavic family. Their strategy is to focus on rural areas, with shops of 3-4 thousand m2, carrying food and non-food items (56 thousand items). They are present in 17 small towns in the north and northeast of the country. KTC directly imports around 6 thousand items from Italy, Poland, Slovenia, Bosnia and the Ukraine. Since they are situated in agricultural areas, they place special emphasis on building good relations with the farmers they work with cooperatives on production of private-label preserves and pickles.
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Plus market This chain of supermarkets is a recent initiative by the program 'Buy Croatian'. As an attempt to fight of competition from international retail chains entering the market, a retail chain called Plus market was established, whose first shop opened at the end of 2006. This concept is part of the Strategic Partnership and Business Cooperation Agreement between the Croatian Chamber of Crafts (representing 20.000 artisans small shop owners), leading national chain Konzum and leading Croatian food producers (Agrokor, Franck, Koestlin, Kras, Lura, Podravka, Zvecevo). The idea is to connect between 2000-5000 small private shops with Konzum's wholesale store Velpro in a network Plus market. Members will keep their own legal independency, but will profit from reduced prices of goods, joint marketing and standardizing of small retail stores. Due to the fact that domestic food producers are a part of this initiative, Plus market shops will predominantly carry Croatian products.
3.4 Distributors
AWT International The company has been present on the Croatian market for ten years and is one of the largest distributors of food. It is a part of the international AWT group, present in several countries in the south eastern Europe. They are distributors fro Hipp, Barilla, Chipita, Henkel, Kelly's, Master Foods, Pfanner, Schneekoppe, Moelnylcke and Unilever. The company has four distribution centers in major cities with over 21.000 m2 of storage space. Every year they import over 25.000 products.
Item 2005 Change 2004/2005 Turnover 110-120 million EUR +6% Profit 1.4-1.5 million EUR -52% Productivity 27.200 EUR na Figure 9: Economic indicators for AWT, 2005 (Poslovna Hrvatska)
Atlantic Trade Part of the Atlantic Group, Croatian-owned, also includes companies Neva (production of cosmetics), Cedevita (production of teas, medical bonbons, etc) and Multipower (German, former Haleco). Atlantic Trade is a distributor for Duracell, Calvo, Durex, Duyvis, Ferrero, Johnson & Johnson, Katjes, Lorenz, Manner, Nestle Purina, Vivera and Wrigley. 59% of income is generated in Croatia, while around 35% comes from sales in the EU (mostly Germany).
Item 2005 Change 2004/2005 Turnover 110-120 million EUR +14% Profit 1.5-1.6 million EUR -24% Productivity 19.200 EUR na Figure 10: Economic indicators for Atlantic Trade, 2005 (Poslovna Hrvatska)
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Magma Magma is one of the largest Croatian companies, with several divisions: distribution of clothing (representatives of Miss Selfridge, Topshop, etc), production and retail of sports clothing (Magma Sport), distribution of food (Haribo, Kellog's, Bahlsen). The company is very strong regionally, with representation in Bosnia and Serbia.
Item 2005 Change 2004/2005 Turnover 70-80 million EUR +7% Profit 3.0-3.4 million EUR na Productivity 16.000 EUR na Figure 11: Economic indicators for Magma, 2005 (Poslovna Hrvatska)
Stanic Stanic company's portfolio consists of over 700 products, including poultry, dairy, fish, fruit and vegetables, confectionary, etc. The company's sales are to the retail segment, as well as HoReCa. They have their own warehouses (total 15.000 m2) with cooling facilities on eight locations in Croatia. The company has a packing and cutting plant and currently they are processing around 40 types of products. They are distributors for Zott, President, Sorger, Bayerland, Bonduelle, Heinz, Cirio, Pedro, Grozzete and others.
Item 2005 Change 2004/2005 Turnover 40-50 million EUR +3% Profit 1.8-1.9 million EUR -7% Productivity 19.330 EUR na Figure 12: Economic indicators for Stanic, 2005 (Poslovna Hrvatska)
23.-25.03.2007 07.-09.09.2007 Figure 13: Food fairs in Croatia (Croatian Chamber of Economy)
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Large increases in olive production, sugar beet and oil beet are a result of state subsidized efforts to achieve higher quotas when entering the EU.
4.1 Pricing
Consumer prices grew by 3.2% in 2006, compared with 2005. Increase of food prices, which constitute around one third of the consumer price basket, was 2.5% and was achieved in all categories of food items. Since 2001, food and beverage prices grew by 10%, of which the biggest growth was in fish, alcohol and tobacco prices.
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Item EUR per kg XII/2006 Beef loin 6.00 Pork loin boneless 4.00 Cured ham 10.00 Chicken 3.37 Milk, 2.8% (1 l) 0.57 Cheese 3.40 Plain yoghurt 500 ml 0.76 Fresh eggs (10 pc) 1.20 Butter 250 g 1.00 Margarine 250 g 1.10 Wheat flour kg 0.40 Rice 1.04 White bread 0.94 White sugar 0.94 Table mineral water (1.5l) 1.00 Quality white wine 4.05 Bottled beer, domestic (0.5 l) 0.74 Potatoes 0.26 Table apples 0.7 Tomatoes 1.6 Carrots 0.7 Figure 15: Consumer prices (estimates)
Since there is no official statistics of retail prices in Croatia, we have used the current average prices in retail chains to get a good estimate.
Item EUR per kg XII/2004 1.7 1.8 EUR per kg XII/2006 1.4 1.6 Change 04/06, %
Heifer Simmental for slaughter -18 Young Simmental bull (>450 -11 kg) Cow Simmental for slaughter 0.9 0.8 -11 Pig (80-120 kg) 1.6 1.4 -12.5 Carp 2.1 1.8 -14 Wheat 0.15 0.13 -13 Potatoes 0.17 0.26 53 Figure 16: Average producer prices for agricultural products (wholesale, Ministry of Agriculture)
In the last two years, producer prices of cattle have been steadily decreasing. This is due to the fact that supply of some live animals still exceeds demand. On the other hand, the supply of high quality animals such as young calves is not sufficient. Eurostat shows that Croatia has the highest prices in the region of South Eastern Europe in the following categories: juices, mineral waters, cigarettes, sugar, milk and cheese. Fish is the only category where Croatia achieves lower prices, for example 20% less than in Slovenia.
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Total Food and live animals - live animals 61.95 115.92 - meat and 839.77 175.14 meat products - dairy and eggs 77.05 86.99 - fish 82.73 98.44 - grain and 106.34 133.32 grain products - fruit and 234.34 266.83 vegetables - sugar, sugar 64.79 101.79 products, honey - coffee, tea, 98.56 121.53 cocoa, seasoning - animal feed 81.44 97.04 - other food 109.74 135.72 - beverages 90.26 104.05 Figure 17: Imports (Croatian Bureau of Statistics)
When it comes to imports of food, Croatia's traditional trading partners hold the top positions Italy, Germany and Austria account for 30% of the total food imports. Croatia is currently negotiating accession with the EU, and agriculture is considered to be one of the most difficult chapters that remain to be covered. As a candidate member, Croatia is obliged to incorporate an EU-harmonized system concerning food safety, veterinary and phytosanitary measures. Implementation of such regulated standards, as well as HACCP system in the Croatian food industry, will be the next challenge.
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Danish exports to Croatia amounted to 9.2 million USD in 2005. Food products accounted for 1.9 million USD or 20.65% of the total. In particular, exports of fresh meat are very strong, since Danish meat producers supply large quantities of meat for the Croatian processing industry. The decline in export of meat is caused by Croatia's programs for improvement of domestic production and increased breeding of pigs in Croatia.
Item TOTAL Live animals Meat and meat products Dairy products and eggs Fish and fish products Cereals and cereal products Fruit and vegetables Sugar, sugar products and honey Coffee, tea, cocoa, spices Animal feed Other food products 2005, million DKK 772.7 1.2 76.5 4.1 30.3 3.8 2.2 0.3 6.6 8.3 17.5 % change, 03/05 9 100 -33.3 -47.4 -33.2 -39.2 -45 50 175 -21.6 47 % of total exports, 2005 0.15 0.05 0.27 0.03 0.18 0.09 0.1 0.01 0.54 0.18 0.21 0.04
Beverages 1.8 -40 Figure 18: Danish exports to Croatia (StatBank Denmark)
4.3 EU membership
Croatia started negotiations with the EU in October 2005. Negotiations should end in full membership in 2010/2011. During the negotiations process, Croatia will aim to secure most favorable position within the EU common market as possible. In agriculture, this means raising the current level of production of many crops, in order to obtain higher quotas once the membership is accepted. The government is therefore creating and implementing programs to stimulate production of such agricultural products (olives, grapes, cattle). In the period to come, Croatia will also have to work on implementing EUprescribed sanitary standards, regulation of market of agricultural products, veterinary and animal health regulations, etc. The pre-accession fund SAPARD is currently in place and Croatia will draw 25 million EUR from the fund for various capacity-building projects in agriculture.
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Croatia is a member of the Central European Free Trade Agreement, which is a freetrade pact that can act as a stepping-stone for SEE countries moving towards EU membership. With Bulgaria and Romania joining the EU in January 2007 and leaving the agreement, CEFTA's only members remain Croatia and Macedonia, although smaller markets of Albania, Kosovo and Moldova will likely sign on soon. Serbia and Bosnia Herzegovina are expected to join as well, after resolving objections over competitive conditions. With these 2 countries in as well, CEFTA will cover 28.5 million people. Croatia, as the most developed country in the pact, carries the weight of 42% of the total.
9% 10% 30%
6% 42% 3%
Serbia
Macedonia
Moldova
Croatia
Bosnia-Herzegovina
Albania
Figure 19: Economic weight of existing and potential CEFTA members (% of combined GDP, 2006 forecasts, excluding Kosovo, Montenegro data combined with Serbia, BMI)
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Croatians consume most poultry, with pork being the close second. Despite the trend of healthy eating, as well as recent outbreaks of avian flu and swine fever, there have been no major changes in the quantities of consumed meat.
CROATIA
39% 24% 37%
DENMARK
22%
37%
cattle
pork
41%
poultry
Figure 21: Distribution of meat consumption in Croatia and Denmark, 2005 (Croatian Bureau of Statistics, Eurostat)
Per capita consumption figures stand at 19.6 kg of poultry, 11.6 kg of cattle and 18.1 kg of pork per year.
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There are 196 slaughterhouses in Croatia. A number of slaughterhouses are of international standard and 12 have exporting licenses for the EU and US markets. However, many municipal slaughterhouses will have to upgrade their standards or be closed, for not complying with EU regulations.
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PIK Vrbovec PIK Vrbovec is one of the oldest Croatian meat industries, formerly an agrocombinate. They have been on the market for over 70 years and were bought in 2005 by the Agrokor concern (biggest Croatian food industry). The company produces fresh meat and durable products, including beef and pork, all sorts of sausages, dried meat and bacon, canned meat, and other processed beef and pork. The company is licensed for exports to the EU and is one of the largest suppliers of McDonalds in Croatia. More information can be found on www.agrokor.hr.
Item 2005 Change 2004/2005 Turnover 160 million EUR +300% Profit 60 million EUR +400% Productivity 52.000 EUR na Figure 23: Economic indicators for PIK Vrbovec, 2005 (Poslovna Hrvatska)
Belje Belje has a long tradition in the meat production since it was once the biggest meat company in Croatia. It is now part of Agrokor concern. The company is set up in several profit centers: manufacture of sausages and salami, production of flour, production of wine, dairy production, crop production, animal feed production, pig production, production of fattening calves and milk production. Until 2010, Agrokor intends to invest 400 million HRK in Belje and make it one of the forerunners of the Croatian food exporting industry. More information is on www.agrokor.hr.
Item 2005 Change 2004/2005 Turnover 110 million EUR +93% Profit 20 million EUR +145% Productivity 16.530 EUR na Figure 24: Economic indicators for Belje, 2005 (Poslovna Hrvatska)
Danica Danica is part of Podravka concern, one of the leading food producers in Central and Eastern Europe. Podravka has companies in 17 countries and a strong distribution network from the Adriatic to the Baltic Sea. Podravka's brands are widely recognizable, and include the roof brand Podravka and Vegeta, the universal food seasoning sold in over 40 countries worldwide. Danica meat industry has licenses to export to the EU and the US. The company is currently undergoing internal restructuring. They have over 700 employees. More on www.podravka.hr.
Item 2005 Change 2004/2005 Turnover 50 million EUR +13% Profit 230 thousand EUR -19% Productivity 13.330 EUR na Figure 25: Economic indicators for Danica, 2005 (Poslovna Hrvatska)
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Koka Koka is a part of the Vindija food industry concern, one of the top three Croatian food industries, consisting of meat, dairy and bakery companies. Their products are fresh and frozen chicken meat, chicken salami, pates, light products and ready-tobake chicken meals. The company holds 80% market share in the poultry segment. Koka exports 85% of the total production, mostly to the markets of the UK, Austria, Sweden and Slovenia.
Item 2005 Change 2004/2005 Turnover 130 million EUR 32% Profit 770 thousand EUR -59% Productivity 7.600 EUR -10% Figure 27: Economic indicators for Koka, 2005 (Poslovna Hrvatska)
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Item Total Fish - blue fish - sardines - anchovies - tuna - other Other fish - hake - goatfish - mullet - eel - sea bass - Pickerel - bouge - sole - other Shellfish - lobster - scampi and other Oysters and other - oysters, mussels - squid - cuttlefish - octopi Caught 34.636 33.194 28.621 16.521 9.504 1.021 1.575 4.573 870 911 30 25 28 145 125 210 2.229 258 7 251 1.184 90 243 80 771
Production 2005 Bred 9.475 6.475 3.425 3.425 3.050 3.000 50 3.000 3.000 -
Index 04/05 110 111 107 101 127 97 104 130 128 102 125 227 101 125 151 137 250 94 223 93 109 99 352 205 124
Figure 28: Production of fish and shellfish in Croatia, 2005 (Croatian Bureau of Statistics)
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The biggest growth of production and market share is recorded for salted anchovies, frozen fish, smoked fish, fish pates and marinades, as well as various fish produces. Since 2002, production of these products has increased 5 times. Still, the production is minimal compared with Croatia's potential. Fisheries are one of the rare branches of production with a positive foreign trade balance and it is expected to improve further once the fishing fleet is in place. This should decrease Croatia's current vast imports of blue fish needed for tuna breeding (Croatia imports 30.000 tons of herring and sardines from Sweden, Denmark, Spain). Fish is exported to Italy and Spain, while entire production of tuna is exported to Japan. Exports of salted anchovies are increasing, especially to Italy and Spain. Canned fish is exported to the region, Czech Republic, Austria, USA, Canada, Australia and Poland. There are only three companies in Croatia dealing with canned fish and fish processing. The largest company, Adria, is the market leader, with 70% of the total quantity of canned fish produced. The rest is shared between Sardina and Mirna (around 20 million cans per year each).
Adria Adria produces around 25 million cans of fish per year. The company is over 100 years old and is situated in the coastal city of Zadar. Adria has adopted HACCP and ISO standards and its main products are canned Adriatic sardines of high quality. Other products include fishmeal, salted anchovies and other processed blue fish. Adria's strategic partner is Podravka, which enables them access to international markets, such as Poland, Sweden, Hungary, Greece, USA and others. The company has 350 employees.
Item 2005 Change 2004/2005 Turnover 20 million EUR +26% Profit -700 thousand EUR +71% Productivity 5.470 EUR na Figure 29: Economic indicators for Adria, 2005 (Poslovna Hrvatska)
Mirna Mirna invested around 1 million EUR in 2005 with the purpose of acquiring technologically advanced equipment for production and construction of a new fishing ship. Due to mismanagement in the past, Mirna is still in financial difficulties. Sales are generated mostly through exports, which grew with a rate of 25% in 2005. However, profitability is low due to high input costs. In European terms, this company produces 5% of the total European production of canned fish.
Item 2005 Change 2004/2005 Turnover 2.9 million EUR -20% Profit -430 thousand EUR na Productivity 6.670 EUR na Figure 30: Economic indicators for Mirna, 2005 (Poslovna Hrvatska)
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Sardina The company is situated on the island of Brac and is 100 years old. However, it is fully modernized and production follows ISO and HACCP standards. Most of the income is generated on tuna and high quality white fish. Around 1/3 of income comes from fish cans. Their majority owner is the Swiss company Ameco. Sardina is the smallest of the three remaining fish processing companies, but it is recording high growth rates. Besides Eastern Europe, USA and Canada, the company's large export market is Israel, since they also produce kosher fish.
Item 2005 Change 2004/2005 Turnover 20 million EUR +9% Profit 30 thousand EUR -25% Productivity 11.070 EUR na Figure 31: Economic indicators for Sardina, 2005 (Poslovna Hrvatska)
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Vindija Vindija concern consists of the dairy industry (Vindija), bakery (Latica) poultry producer (Koka and Vindon), as well as a newly established animal feed producer (Biodar). The brand Vindija has a long tradition and is perceived as 'healthy and fresh'. The company is an innovator when it comes to introduction of bottled fresh milk and isotonic drinks and is still the only regional producer of special cheeses (with mould). However, in the segment of yoghurts and other dairy products, Vindija lags behind competition. One of the reasons is outdated technology, which should be solved with the planned construction of new plant in Varazdin. In a typical retail store, Vindija is represented with 27% of all milk and dairy products, and 50% of all chicken meat. The company is also looking for expansion opportunities, and is currently the owner of one dairy in Serbia.
Item 2005 Change 2004/2005 Turnover 300 million EUR 2% Profit 8 million EUR 16% Productivity 23.200 EUR na Figure 33: Economic indicators for Vindija, 2005 (Poslovna Hrvatska)
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It is expected that the Croatian fruit and vegetable market will remain stable in the next 2-4 years. It is hard to expect major increases in consumption, but there will be decreases in prices. Traditionally, fruit and vegetables are bought in open markets and every larger settlement has at least one such place. Although this tradition is still alive and some of the largest open markets in Croatia (Zagreb, Split, etc) are also big tourist attractions, they are faced with a growing competition from supermarkets.
5.4 Confectionary
The market of confectionary in Croatia grew at the rate of 5% in the period from 2000-2005. Total imports of confectionary in 2005 stood at 42.300 tons, showing a growth of 4.300 tons, or 11.4 % as compared to 2004. At the same time an amount of 12.300 tons of products were placed on foreign markets, representing an increase of 7.8%. There is a rising demand for healthy low-calorie products, as well as different varieties of salted snacks and dips. However, Croatians have a taste for sweets, especially chocolate and soft lines, which have shown growth the last 3 years.
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The market leader in confectionary is the domestic producer Kras, with 22.7% market share (retail value). They are under huge pressure from the competition, and they have been declining since 2000 (drop from 30.9% market share is 2001). The company's strengths are their brands, which have been on the market for decades and are recognized in the entire region. Mars and Ferrero are contributing with around 15% market share each. Besides Kras, there are two more companies on the top ten list (Cedevita and Zvecevo).
Brand name NBO/licensee Dorina Kras Milka Kraft Orbit Wrigley Twix Mars Bounty Mars Kinder Surprise Ferrero Lindt Lindt & Sprngli AG Bajadera Kras Mars Mars Winterfresh Wrigley Figure 34: Brand shares, confectionary (Euromonitor) Origin Croatia Austria USA USA USA Italy Switzerland Croatia USA USA
5.5 Beverages
5.5.1 Alcoholic beverages
Alcohol consumption and production took a severe knock with the introduction of the new law on road safety in August 2004. Following a series of tragic road accidents, the government established a complete ban on drinking and driving no alcohol is allowed in the driver's blood. This greatly contributed to the decrease of total volume sales of alcoholic drinks by almost 6% in the period from 2004-2006. Only wine recorded marginal growth of 1%. The most popular alcoholic drink in Croatia is beer, which also suffered the greatest negative effect of the 0-promille law. In 2005, total beer volume sales decreased by almost 5% y-o-y. Beer producers tried to cushion the blow by introducing innovative packaging, new lines of alcohol-free or reduced alcohol beer and new sizes, but without major success. Domestic lager brands are the most popular (Ozujsko and Karlovacko). Lager imports grew each year until 2005, however. Wine seems to be relatively steady in production and consumption. The most popular spirits are bitters, whose total volume sales grew by 21% from 2004-2006. Again, domestic producers are the most popular (Vigor is the absolute leader with volume share over 9%). Traditional spirits like rakija (slivovica, destilled from plums, for example) are produced at home and in hand-made distilleries, which limits their sales performance. There is a longstanding tradition of brandy production, however the consumption is decreasing consistently with 2005 volume sales almost half the level seen in 2000 (2.5 million liters compared with 4.2 million liters). On the other hand, whiskey has increased by almost 17% from 2004-2006. FABs (flavored alcoholic beverages) were introduced in late 2003 and have gained instant market appreciation.
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Forecast for the performance of alcoholic drinks largely depends on the situation with the law on road safety. Since its introduction, there have been talks that the law will be abolished (returned to the previous 0.5 promille limit). It can be expected that the government will consider it, in light of the upcoming election later in the year.
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Traditionally, coffee is the most popular hot drink in Croatia. Value sales outpaced volume between 2000 and 2005. This was due to the fact that instant coffee, cappuccino and decaffeinated coffee, which are more expensive than fresh ground coffee, increased greatly in terms of total coffee over the review period. Tea volume sales increased on a more moderate pace. Although there are no obstacles for multinational players to enter Croatia, hot drinks sales are dominated by local companies. In both coffee and tea, foreign brands account for only about a quarter of value sales. 'Other hot drinks' is the only category where their share is slightly higher. Coffee and tea (albeit predominantly fruit tea) have a long tradition in the country and consumers predominantly choose familiar domestic brands. Domestic company Franck remained the leader in both coffee and tea sales. Multinational players however are winning over consumers with new product formats. This was demonstrated by the introduction and immediate acceptance of 3-in-1 instant coffee products. Nestl Adriatic, which was the first to launch the 3-in-1 Nescaf brand, is the leader in instant coffee. As the health trend grows stronger, consumers will demand more innovative soft drinks, with lower calorie and sugar content. Vindija is at the moment leading the way with their brand new line of functional juices. At the same time, the water segment is expected to continue growing.
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Besides Konzum, all leading retailers have private labels, while Getro and Konzum cover the widest assortment of goods by private labels. It is expected that discounters like Lidl (who entered the market in late 2006) and possibly Aldi (rumored to be entering Croatia) will influence the Croatian private label market to a large extent.
6 Exporting to Croatia
The most common way to enter the Croatian market, being a Danish producer, is through a distributor. In the general food segment, the common procedure is to make an agreement with an experienced company, who is familiar with Croatian retail practices and has a strong foothold in retail chains. Croatia is a EU-member candidate, which means that the Stabilization and Association Agreement (free-trade) is in place. Around 80% of the foreign trade in Croatia is handled under free-trade conditions, since Croatia has free-trade agreements with over 30 countries. Croatia is also a member of CEFTA.
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6.1 Investment
The tax and customs incentives are achievable for those investors investing at least 4 million HRK (approx. 540,000 ) in the newly founded companies. The tax and customs incentives are achievable under the condition of holding the same number of employees; otherwise these incentives can no longer be used. Tax benefits include reduced profit tax rates (10%-0%; standard rate is 20%), financial aid for the opening of new jobs or for the retraining of employees that can be granted on a one-off basis up to 15,000 HRK (approx. 2000 ) per employee and aid for the education or retraining which can be granted in the amount reaching 50% of the education or retraining cost.
6.2 Corruption
According to Transparency International's Corruption Perception Index, Croatia rates 3.4, which is equal to Poland, Egypt, Saudi Arabia and Syria (10= no corruption, 1=worst corruption). On the worldwide scale, Croatia ranks 69 out of 163 countries. Perceived corruption is worst in politics, legal system and health care. Efforts are made to fight corruption and in 2006, there were several highly publicized cases of corruption in the health system. However, this was only the tip of the iceberg. Corruption and measures of its reduction will be the key factor in the negotiations between Croatia and the EU, and the result will be the introduction of stricter rules and procedures in the near future. In the business sector, corruption widely pronounced in the system of public procurement (tenders).
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There are over 3000 restaurants in Croatia, not including self-service and cantinas, which is 97 less than was recorded in the same period a year before (as well as 30 companies less). Bars show a similar decrease of 5% y-o-y in the number of units. The booming tourism sector is having a positive influence on the hotel industry, which recorded 27 hotel companies more in 2006 compared with the previous year.
Type Turnover (I-IX 06), 000 HRK Turnover index (I-IX 05/I-IX 06) Hotels 6.518.780 106.5 Camps 427.429 129.0 Restaurants 705.401 107.6 Bars 584.901 103.3 Cantinas 264.502 94.0 TOTAL 8.552.696 106.9 Figure 38: Turnover of the HoReCa sector in Croatia in Q3, 2006 (Bureau of Statistics)
In total, the sector recorded an increase of turnover y-o-y in 2006 (index 106.5), with the biggest increase recorded in camps, while cantinas made a somewhat smaller turnover (index 94). Cafes/Bars Cafes and bars are the most common form of hospitality venues in Croatia. Croatians have a so-called 'caf culture', which means that the cafes are usually filled with people during all hours of the day. Cafes usually serve hot beverages (coffee, tea) during the day and alcoholic drinks during the evening (beer and liquor being the most popular). Usually, cafes and bars stop serving hot drinks after 7 PM. Vast majority of them do not offer any food, snacks included.
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Type
Units
Coffee bars 642 Beer halls 17 Buffets 153 Figure 39: Cafes and bars
Restaurants Croatia has a long tradition of restaurants and eating out. Due to tourism, being the main economic activity, restaurant industry is concentrated at the coast and in the capital of Zagreb. Out of the tourist season, however, many coastal restaurants are closed. Restaurants are experiencing a slow rise of turnover and more units are opened every month. There is a rising popularity of ethnic and gourmet restaurants, as well as restaurant-night clubs/lounge bars. Chain restaurants (except fast food) are not yet present in Croatia. The predominant establishments are small family units.
Type Units Employees 3.855 443 496 153 581 Turnover (I-IX 06), 000 HRK 595.386 50.217 59.305 12.500 148.184 Turnover index (I-IX 05/I-IX 06) 103.6 97.4 92.4 94.7 106.4
FSRs 340 Pizzerias 60 Bistros 109 Patisseries 30 Fast food 55 Figure 40: Restaurants
US-style fast food outlets are present on the Croatian market since 1980-ties, when the first chain Ham-ham was opened. Traditional Croatian fast food (such as cevapi, burek, etc) was available in restaurants and kiosks all over the country, as well. The first international fast food chain to enter the market was McDonalds, in 1994. Since then, McDonalds opened 16 restaurants in Croatia. Subway is the second international operator, with 6 restaurants. Other foreign operators are not present. However, the fast food market is growing main consumers are school children. However, the presence of international operators is still below that in the other transition countries.
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Company cafeterias were an integrated part of the corporate culture and often a part of an employee's benefits package before the 1990-ties. Today, they have either been completely abandoned, or are operated by private entrepreneurs. In hospitals, schools, nursing homes etc, the meals are in most cases cooked internally. Suppliers are selected through the public tendering procedure each year.
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When it comes to distributors for the HoReCa sector, more companies will probably join the market in the years to come. Although local players are well positioned on the market, there will be room for companies that are able to provide a full service approach including both food and non-food supplies.
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Meat Contact person Do they directly import these products? How big is the share of imported products in each category? Which companies are their main suppliers? Whom should suppliers approach with an offer? Which fairs and exhibitions do they visit? Who visits the fairs?
Dairy
Fruit/veg
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Contact person Do they directly import these products? How big is the share of imported products in each category? Which companies are their main suppliers? Whom should suppliers approach with an offer? Which fairs and exhibitions do they visit? Who visits the fairs?
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CBA
Company name Name of CEO Address City Telephone Fax Web address Predominant store format CBA Internacional d.o.o. Mr Zeljko Vugric Koturaska 69 Zagreb +385 1 632-3400 +385 1 632-3401 www.cba-zg.hr Stores of all sizes organized under the umbrella of one buying group CBA Internacional 2004 Number of outlets Turnover Number of employees Meat Contact person Do they directly import these products? How big is the share of imported products in each category? Which companies are their main suppliers? Whom should suppliers approach with an offer? Which fairs and exhibitions do they visit? Who visits the fairs? Dairy Fruit/veg 2005 2006 N/A 10 M EUR N/A Confectionary Beverages
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Royal Danish Embassy Trg Nikole Subica Zrinskog 10 HR-10000 Zagreb Croatia Tel +385 1 4924 540 Fax +385 1 4924 554 E-mail office@dtczagreb.hr www.dtczagreb.um.dk
Royal Danish Embassy Zagreb is part of the Danish Trade Council, Royal Danish Ministry of Foreign Affairs, which is the official export and investment promotion agency of Denmark. The Danish Trade Council has approx. 350 employees, of whom approx. 280 are based abroad at embassies, consulates general and trade commissions on approx. 100 markets. The Danish Trade Council advises and assists Danish companies in their export activities and internationalisation process according to the vision: We must be the partner preferred by enterprises in international trade and investment activities. The Work in the Danish Trade Council follows specific procedures and quality guidelines that are described in our internal quality manual. In this way our customers are secured the best possible quality under the varying working and market conditions that at any given point of time are in force for the respective embassies, consulates general and trade commissions.