Mercator Is Aiming To Increase Its Operations In Other Regional Markets

July 30, 2009 - PRLog -- In the Q309 Business Environment Rating (BER) matrix, Slovenia slipped from second to fifth position, due to the pressures exerted by the current economic situation on the already small and saturated market. In fact, due to external factors, in 2009, we expect Slovenia to fall into its first recession in 17 years, with a real GDP contraction of 1.7%. Private consumption overall is expected to contract by 3.0% in 2009, with unemployment likely to rise considerably, weighing down on real wage growth. A modest recovery is forecast for 2010, with international companies likely to increase their involvement in the country, which offers excellent infrastructure, open markets, a skilled workforce and stable political institutions, In terms of individual company developments, the current financial crisis is having an impact. Slovenia's leading brewer Pivovarna Laško posted a 1% year-on-year (y-o-y) volume drop in beverages sales during 2008, although it plans to increase by 0.9% its sales for the current year. While the company recorded a 9% y-o-y increase in its net sales revenue, its net profit was down to EUR9.4mn (US$12.4mn), from EUR61.3mn (US$87mn) in 2007, due to an increase in operating expenses. The future of Pivovarna Laško will also be closely tied to the intention of its majority holder – financial concern Infond Holding – to sell their share in Mercator, the leading Slovenian mass grocery retail (MGR) operator.

In the meantime, other Slovenian companies are finding new ways of responding to the financial crisis.

To this end, leading Slovenian food conglomerate Droga Kolinska recently sold its fruit spreads brand Belsad to major Croatian food processor Podravka. The transaction is one of the latest acquisitions of Droga Kolinska's non-core brands by foreign operators, as the Slovenian concern attempts to focus on key products. The company is majority-owned by food, energy and tourism holding Istrabenz, although the 95% stake is presently up for sale, in the face of falling profits and mounting debts.

The country's MGR operators are also bracing for a challenging year, with unemployment already on the rise. Mercator is aiming to increase its operations in other regional markets, in a bid to reduce its revenue reliance on Slovenia. In the meantime, Austrian Spar has announced plans to invest up to EUR35mn (US$47.5mn) during 2009 in its Slovenian operations, if market conditions do not deteriorate further.

Spar, as well as other MGR players, is likely to increase their private-label offerings, in a bid to respond to the rising price-sensitivity among Slovenian consumers. In fact, the economic situation has been judged so severe that special stores targeting low-income consumers were recently inaugurated in the Slovenian capital of Ljubljana. The stores will be operated by SOS Cooperative organisation, in partnership with Slovenia's Bureau for Employment and Social Protection, and offer groceries at substantially discounted prices.

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