April 27, 2011 -
PRLog -- The outlook for consumer spending in Ukraine will remain shaped by the prevailing economic conditions, including the inflation levels that nudged a double-digit mark in 2010 and that is expected to remain elevated throughout the current year. Ukraine's economy is set to enter a period of relatively stagnant growth, on the heels of the global financial crisis. Although we expect Ukraine's macroeconomic convergence with Western developed states to continue through our 10-year forecast period, we caution that this will now take place at a much slower rate than previously expected. Therefore, the potential of the country's food and drinks market will remain subdued in the short to medium term, with growth underpinned by high inflation more than by any real improvements in the product mix. Headline Industry Data (local currency) * 2011 per capita food consumption = +7.9%; forecast to 2015 = +46.9% * 2011 alcoholic drinks sales = +4.7%; forecast to 2015 = +39.9% * 2011 soft drinks sales = +6.9%; forecast to 2015 = +48.1% * 2011 mass grocery retail = +10.0%; forecast to 2015 = +57.2% Key Company Trends Confectionery Industry Seen as Promising Investment Sector - Leading confectionery player in Ukraine, Roshen, broke through the US$1bn sales barrier in FY10, ending December, on the back of strong organic growth and favourable export conditions. Foreign players in the Ukrainian confectionery sector are also stepping up their efforts. To this end, in December 2010, US food group Kraft reported that it was investing US$36mn in the expansion of its facility in Ukraine. The firm expects the expansion to be completed by the end of 2011. The investment will allow the firm to begin biscuit production at the plant. Key Risks to Outlook Inflation to Remain Elevated - In addition to factors such as the unstable domestic political scene and corruption, the National Bank of Ukraine's poor track record in containing inflationary pressures may similarly impede consumer as well as overall risk sentiment. Indeed, average inflation is likely to remain firmly in the double digits until the end of 2011, eroding real wages and making some food and beverages out of reach for some customers. A failure to create a more benign inflationary environment will continue to conspire against financial planning and reduce the certainty of incomes, further compounding effects of the economic downturn on consumer confidence levels.
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