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Hungary Food and Drink Report Q1 2008Published by: Business Monitor International Published: Feb. 20, 2008 - 70 Pages Table of Contents
AbstractBoth Hungary’s consumers and its food and drink industry are struggling with rising food prices.Rising grain prices are continuing to squeeze Hungarian bakers, and in September the Hungarianbranch of the International Union of Bakers-Confectioners said that consumers have to accept thatbread and milk as well as other food and drink products. Due to a drought across southern Europe andrising demand from Asian markets, prices of basic commodities have been soaring globally. Althougha slowdown in consumer price growth in September to 6.4% year-on-year (y-o-y) from 8.3% inAugust in Hungary was in line with our expectations of a decline in the comsumer price index (CPI)in the latter half of this year, high food prices still remain a key concern. On a monthly basis, foodprices grew by 2.2% in September, up from just 0.1% and a decline of 0.8% in August and Julyrespectively, with these rises having a negative effect on consumer confidence.Poor weather also had an effect on drinks companies’ profits, such as PepsiAmericas. In October thecompany posted a lift in operating income for its third quarter, on the back of rising sales, withoperating income for the three months to the end of September rising by 27% y-o-y to US$140mn.Sales in the quarter were also up by 11% to US$1.2bn. The company said that acquisitions, worldwidenet pricing gains and strong volume growth in Central Europe were to thank for this growth. Volumesin Central Europe were up by 25.2%, with acquisitions driving the majority of the increase. However,poor weather in the company's developing markets, including Poland, Hungary, Czech and Slovakia,led to slower volume growth in the region. Net sales in Central Europe rose 52% to US$238.2mn. Meanwhile, as also discussed in the report, the European Union (EU) looks set to reform its milkquota system in the face of a rapidly changing global milk market. The current quota system, whichhas been in place since 1984, is set to continue until 2014/15. But in the face of soaring dairy pricesworldwide, there is considerable pressure on the European Parliament to abolish the quotas as soon as2008/09. Under the current system, farmers in Europe must comply with milk quotas which limit theamount of production per country. If countries exceed their annual quotas, they must pay a 'superlevy'which is an annual fine calculated by the European Commission (EC). Although this system may havebeen sensible 25 years ago when the EU was dealing with a massive milk surplus, in today'senvironment of rising demand and shrinking supply, we believe maintaining such a system makeslittle sense for farmers or the EU. Given this situation, it looks as though the current quota systemshould soon be gone, which will be welcome news for Hungary’s dairy producers, who have beenfacing far greater competition in their domestics market following EU membership. Get Full Details About This Report >> |
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