Poland Food and Drink Report Q1 2013

Weigh down by both internal and external factors, such as elevated unemployment levels and issuesfacing the wider eurozone respectively, Poland's economy has been slowing down of late,and so hasprivate consumption. While discount store operators may benefit from increased volumes of trade,downward pressure on prices will likely intensify. Nevertheless, we remain optimistic about the longertermoutlook for Polish food and drink consumption.

Headline Industry Data (local currency)

2013 per capita food consumption growth = +4.46%; forecast compound annual growth (CAGR)to 2017 = +5.23%.

2013 alcoholic drinks sales value growth = +5.62%; forecast CAGR to 2017 = +6.20%.

2013 soft drinks sales value growth = +7.84%; forecast CAGR to 2017 = +8.78%.

2013 mass grocery retail sales growth = +8.00%; forecast CAGR to 2017 = +8.06%.

Key Industry Trends

Regional Players Seek Acquisitions in Poland: The Office of Competition and Consumer Protection hasgranted approval to Lithuania-based venture capital firmGemini Grupeto acquire Polish foodgroupCenos. The deal was announced by Cenos's parent company Pamapolin a stock exchange filing inthe week ended October 20 2012.Subsequent to theapproval, Pamapol is working to finalise the deal andconclude the share purchase agreement, with financial details of the agreement undisclosed.

Euro 2012 Football Competition Boost Beverage Sales: SABMillerhas reported that the Euro 2012tournament - co-hosted by Poland and Ukraine - helped it return to profit. SABMiller's sales in Polandwere up by 11% year-on-year (y-o-y) in Q112, while its European sales were up by 7% after months ofdecline. Similarly, the Polish subsidiary of US beverage firmThe Coca-Cola Company launched a newslimline can to attract attention and chime with the Euro 2012 competition.

Risks to Outlook

The outlook for the Polish economy in 2013 is contingent on developments in the eurozone. Our corescenario is for a gradual recovery in the bloc. However, this will hinge on policymakers easing austerityand making the required institutional changes for a sustainable currency area. Although the odds of theeurozone surviving have improved slightly as European Central Bank President Mario Draghi appears tobe crossing the rubicon in terms of providing a monetary solution to complement eventual fiscal andeconomic reforms, we caution that the bloc is not out of the woods yet.