Country Presentation Croatia

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Country Presentation Croatia
Updated November 2007
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Contents

• Retailers covered include

• Map
• Demographics
• Political Outlook
• Economic Overview
• The Retail Market
• Europanel Data
• Top 10 Retailers
• Challenges and Opportunities

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Summary

• Area 56,540 sq. km
• Capital City Zagreb
• National Currency Kuna
• Population (2006)4.46 million inhabitants
• Population Density 78.88 people/km
• President Stjepan Mesic
• Ruling Party Croatian Democratic Union (HDZ)
• Prime Minister Ivo Sanader

Source CIA
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Demography 10 most populated regions
Source City Population, 2001
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Demographics
Population Split by Age, 2006 ()
Population Growth Forecast (000s)
www.igd.com/analysis/datacentre
Source IGD Datacentre, 2006, UN
6
Political Outlook

• Croatia adopted its current constitution in 1990
  and declared independence from Yugoslavia in June
  1991. After Slovenia, Croatia has recovered best
  from the break up of the former Yugoslavia.
• During its first 8 years of independence, Croatia
  was ruled by the Croatian Democratic Party (HDZ).
  During this time the government was preoccupied
  with the war and was slow to privatize
  state-owned enterprises and attract foreign
  investment
• After the elections in 2000, a coalition of 2
  parties, the Social Democratic Party (SDP) and
  the Croatian Social Liberal Party (HSLS), came to
  power. Stjepan Mesic was re-elected as President
  in 2005 and will serve a 5-year term.
• As a former socialist country, Croatia is
  battling against the legacy of strong state
  control over the economy. This control had some
  positive results, such as a significant post-war
  reconstruction effort launched by the government
  which, due to the lack of domestic capital,
  relied mainly on foreign borrowing.
• Croatia applied for EU membership in 2003 and
  candidate country status was granted in
  mid-2004.  Entry negotiations began in October
  2005.
• It originally planned to join the EU in 2007,
  however, it is expected to join in 2009 as under
  the current Treaty of Nice, the EU cannot
  function with more than 27 member states and
  additional administrative reforms are required
  before Croatia can join.

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Economy and Consumer Spending

• Croatia generates government revenue through a
  wide range of taxation measures and is one of the
  most highly taxed countries in Central Europe.
• Heavy taxation has slowed the growth of the
  private sector and contributed to the rise of an
  informal economy whose interactions are not
  subject to taxation.
• Personal income tax paid on individual earnings
  ranges from 20-35 and value-added tax (VAT),
  paid on domestic sales and on most imports, is
  fixed at 22.
• An import duty, levied on goods and services, is
  paid by the importer, while there are further
  taxes payable on other goods, including tobacco
  and alcohol.

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Economic Overview
www.igd.com/analysis/datacentre
Source IGD Datacentre estimates, The Economist,
Eurostat
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Grocery Retail Market Sizes 2007e
Top 10 Global Markets
Top 10 Eastern European Markets
www.igd.com/analysis/datacentre
Source IGD Datacentre estimates
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The Retail Market
Source IGD Datacentre estimates
www.igd.com/analysis/datacentre

• IGD Grocery Retail Market corresponds to the
  total annual turnover (excluding VAT) of retail
  outlets predominantly selling food. It includes
  the sales of non-food articles (i.e. health
  beauty, pet care, clothing, DIY etc) sold by
  hypermarkets, supermarkets, discounters,
  neighborhood stores, specialised food stores
  (bakeries, butchers, etc) and open markets. It
  excludes all cash carry, delivered wholesale,
  foodservice and drugstores/chemists.
• IGD Total Grocery Market includes is a wider
  definition of the grocery universe and is the sum
  of the grocery retail market and the cash and
  carry outlets.

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Retail Consumer Spend Per Capita Croatia

• Consumer behaviour in Croatia is similar to that
  in Western Europe, but purchasing power remains
  low.

Source IGD Datacentre
www.igd.com/analysis/datacentre
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The Grocery Retail Market Format Development
Source IGD
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The Grocery Retail Market Structure By Format

• Croatias grocery market is still relatively
  fragmented with a large proportion of small,
  independent stores.
• Supermarkets and local convenience stores are the
  main formats. Cash carry outlets have reached a
  period of stagnation following several years of
  growth.
• Consolidation is taking place as leading
  retailers seek to expand their portfolios through
  acquisitions. International retailers are also
  stepping up their expansion in the region.
• Strict government policy, such as the law
  forbidding Sunday trading for larger retailers,
  is discouraging for some foreign business.
• The Sunday trading ban was introduced in 2004 but
  was 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.

Retail Legislation
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Breakdown of Shoppers by Housewife Age (Europanel
Data)
of buyers
52 w/e December 06
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Breakdown of Shoppers by Household Size
(Europanel Data)
of buyers
52 w/e December 06
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Breakdown of Shoppers by Presence of Children
(Europanel Data)
of buyers
52 w/e December 06
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Private Label Share (2006)
This chart displays the private label share
against total sales for each retailer. The 2005
figure is given in brackets.
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Market Share
2006
Note Till roll data. Total may not add up to
100 due to rounding. Bracketed figures 2005
data
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Top 10 Retailers 2006
Grocery Retail Market Share exclude cash
carry operations. Estimates.
Source IGD Datacentre, 2006. Data is for grocery
formats only except Total Sales which includes
non-grocery if applicable.
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• Konzum was established in Croatia in 1957 when it
  opened its first self service store in Zagreb.
• In 1970, it became part of the Unikonzum group.
  In 1992, after the end of communist rule,
  Unikonzum converted into a join-stock company
  and, as a result, Agrokor was able to purchase a
  majority stake in the retailer in July 1994. 
• In 1995, the group name was changed to Konzum and
  a period of restructuring and modernisation
  followed.

Key C Convenience, CC Cash Carry, S/S
Superstore/Supermarket
Source IGD, 2006. Total sales are Net.
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Konzum, Croatia

• Konzums current strategy includes
• In Croatia, Konzum aims to consolidate its market
  leading position by pursuing both a strong store
  opening programme and selective acquisitions. 
• The retailer is now seeking cost efficiencies and
  views the modernisation of its business
  operations as a key strategic goal.
• Konzum is planning on expanding its Velpro
  operations into Croatia's regional markets.
• Konzum aims to operate 100 Kozmo pharmaceutical
  stores Croatia by 2010.

Source Retail Analysis photo gallery
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• Ultra Gros is an association of 20 small Croatian
  retailers, founded in 2001.
• Associated retailers include
• They are present in all parts of Croatia and have
  over 430 outlets. The company has its own
  private-label brand, which includes basic grocery
  goods, household and personal hygiene products.

Source IGD, 2006 estimates. Total sales are Net.
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• Getro was founded in 1989 and opened Croatias
  first cash carry store in 1994.

Key S/S Superstore/SupermarketC/C Cash
Carry
Source IGD 2006 estimates. Total sales are Net.
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Getro, Croatia

• Getro is Croatias largest cash carry chain,
  operating 17 stores in over 13 regions.
• It also operates two 1,000sqm supermarkets
  located in Sinj and Bjelovar.
• Getro cooperates with more than 500 regular
  domestic and world suppliers and supplies over
  28,000 registered buyers.
• 70 of its products are sourced locally.
• The retailer operates over 30 food and general
  merchandise private label lines, under labels
  such as Grand, U slast, President's Choice,
  Master, Kristina and Ole!.
• Getro plans to open 6 new cash carry stores in
  the mid-term future.
• It is also considering expansion into Serbia
  Montenegro and Bosnia Herzegovina.

Source Retail Analysis photo gallery
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• Rewe entered the Croatian market in 1999 through
  the organic growth of Billa.
• Rewes private label brand Clever (around 200
  different products of food, cosmetics, beverages,
  household items) is among the most popular on the
  market.
• Rewe aims to increase its 4 Croatia market share
  to 5 in the mid-term future.
• It is planning to continue expansion into Eastern
  Europe and aims to be in the top three leading
  retailers in all the markets it operates in.

www.igd.com/analysis/datacentre
Source IGD Datcentre 2006. Total sales are Net.
Key S/S Superstore/Supermarket
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• Metro opened its first Croatian store in 2001.
• It opened one new store in Croatia in 2006. Its
  2006 annual turnover increased by 21.

Key S/S Superstore/SupermarketC/F-
Convenience/Forecourt
www.igd.com/analysis/datacentre
Source IGD Datacentre 2006. Total Sales are Net.
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• It currently operates 6 stores located in Zagreb,
  Osijek, Rijeka, Zadar and Split.
• Metro views Eastern Europe as a key growth driver
  going forward and is set to continue the
  expansion of its cash carry chain.
• In Croatia, Konzums plans to expand its Velpro
  stores into the regions may prompt Metro to drive
  faster expansion.
• Metro is also pursuing targeted expansion of its
  Real hypermarket and Media Markt consumer
  electronics fascias in Eastern Europe and may
  consider launching the formats in Croatia in the
  future.

Source Retail Analysis photo gallery
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• Lidl entered the Croatian market in 2000
  utilising the Kaufland compact hypermarket
  format. By the of 2006 its portfolio had
  increased to 17 stores.
• Lidl opened its first discount stores in Croatia
  in November 2006. According to Lidl's Croatian
  website, opened 13 stores, including three in the
  capital Zagreb.

Key H Hypermarket, HD Hard Discount
www.igd.com/analysis/datacentre
Source IGD Datacentre 2006. Total Sales are Net.
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• Mercator has been present in Croatia since 2000
  with the acquisition of domestic retailer
  Sloboda.
• In May 2007, Mercator acquired Croatian chain
  Presoflex d.o.o. Mercator intends to operate the
  40 stores under the 'Presoflex 'fascia and
  continue its expansion across the country.
  Mercator has stated that Presoflex's revenue is
  expected to exceed 80m in 2007, potentially
  increasing Mercator's Croatian market share by up
  to 2.
• By 2010, it aims to increase its market share to
  12 through organic growth and the formation of
  strategic alliances. 

Key H Hypermarket , S/S Superstore/Supermarket
, C/F- Convenience/Forecourt
Source IGD, 2006. Data is for grocery formats
only. Total Sales are Net.
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• CBA is an association of 8 trading companies
  situated all over Croatia.
• Since CBAs establishment in Croatia in 2001, the
  group has worked as a buying association which
  includes the following retailers
• CBA will look to expand its operations by growing
  organically in this market. 
• Store-modernisation is also expected to be a
  priority

Key S/S Superstore/Supermarket,
Source IGD 2006 estimates. Total Sales are Net.
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• KTC started as a small family store in 1992 in
  Northern Croatia and has since expanded to 16
  stores which remain in 100 ownership of the
  Katavic family. 
• KTCs strategy is to focus on rural areas, with
  stores carrying 56,000 food and non-food SKUs. 
• Since they are located in agricultural areas, KTC
  places special emphasis on building strong
  relations with local producers. 
• It works with cooperatives on the production of
  private label preserves and pickles.

Source IGD 2006 estimates. Total Sales are Net.
Key S/S Superstore/Supermarket
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Challenges and Opportunities

• EU accession is likely to increase competition in
  the grocery market as greater numbers of
  suppliers consider trading opportunities within
  the region. This will increase competition for
  retailer listings.
• Croatia is a fragmented market, dominated by
  local players. However, consolidation is
  underway in the market and domestic retailers are
  increasingly putting pressure on suppliers to
  lower their prices.
• As the consumer market matures, consumer
  expectations will evolve from a sole focus on
  prices to a greater demand for high service
  levels, knowledgeable staff, choice of brands and
  own label alternatives.
• Consumer sophistication places additional
  pressures on local retailers and suppliers,
  although it does provide the opportunity for
  margin improvement.

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Market Share Definitions

• IGD defines the grocery retail market as all
  food, drink and non-food products (i.e. health
  beauty, pet care, clothing, DIY, tobacco etc)
  sold through all retail outlets selling
  predominantly food in a given country. This
  definition includes modern retail formats such
  supermarkets and hypermarkets as well as
  traditional retail formats such as open air
  markets and traditional food stores such as
  bakers. However, it excludes cash carry and
  drugstores.
• IGD Market sizes are derived from national
  statistical sites wherever possible. In all other
  cases, the figures published in this report
  represent IGD estimates and are based on a
  consistent methodology and knowledge of local
  markets.
• For each retailer, the turnover used is total
  grocery (rather than total company), and
  therefore excludes non-food formats (such as DIY,
  electrical stores, department stores etc). IGD
  also excludes cash carry formats and retailers
  and drugstores / chemists from this measure to
  ensure a consistent market share figure.
  Therefore these shares are based on IGD Grocery
  Retail Market Sizes.
• 1.Retail turnover is excluding VAT
• 2.Retail turnover is excluding non-food formats
  (e.g. furniture, electrical stores etc)
• 3.Metro cash carry operations are excluded
• 4.Where known, we have subtracted the cash
  carry operations of players such as Carrefour and
  Rewe to use a pure grocery retail estimate of
  turnover.
• IGDs market shares differ from ACNielsen or TNS
  data due to the different methodologies applied
  to calculate the market shares (till roll data
  and customer panel information respectively
  from limited categories).
• Europanel Data
• Europanel market shares are based on purchases
  made by private households, and cover the
  purchasing of fmcg products bought in all outlets
  even if they do not sell primarily food
  (e.g. pharmacies).
• In many countries, the definition excludes large
  items bought in hypermarkets (e.g. television,
  washing machine).
• It does not cover Cash Carry (except where
  private households buy directly from them),
  institutions who may buy some of their products
  from retail outlets (e.g. hospitals, schools etc)
  and purchases made for out of home consumption
  (e.g. caterers, offices etc).

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For More Information

• Visit the Croatia hubpage on Retail Analysis.
• Use the IGD Datacentre for key macroeconomic data
  on Croatia, plus statistics on retailers
  operations by banner and format.
• Visit the photo archive for images of retailers
  operating in Croatia.
• Got an iReports subscription? Try checking our
  International Research reports.
• To find out how an IGD Customised Briefing can
  bring you up to speed on the market and the key
  players, email nick.everitt_at_igd.com
• Still cant find what youre looking for?
  Contact us igd_at_igd.com or 01923 857141.