World Food Retailing Updates

• While the grocery business in the United States and Britain seems recession-proof, the Czech Republic division of Dutch grocery retail giant Ahold is predicting a bad year for 2009 as prognosticators see the country’s GDP declining by 2.1% The company has lost money in six of the last nine years during good times, due mainly to an aggressive acquisition spree buying up other super- and hypermarkets that has piled up a heavy debt burden which the company will be forced to pay down now. While experts think that policy will pay long-term, it will bind the company’s maneuvers this year as consumers shift their buying habits away from these large stores. Still, the prognosis for growth in the supermarket and hypermarket segment through 2013 is for over 90% growth, reaching $15.9bn and capturing over half of the country’s grocery business. The growth is expected outside the Czech Republic’s cities as incomes rise in the suburban and rural sectors. Ahold shares the marketplace with fellow multinationals Tesco, Lidl and Rewe (both headquartered in Germany).

• The Czech Republic is doing well in comparison to Hungary, where the government and banks borrowed heavily in foreign currency-denominated loans, only to have its own currency collapse, making repayment difficult or even impossible in some cases. Estimates show the economy shrinking by as much as 6% this year. The country’s ability to fight the global recession has been compromised by the resignation of its premier, Ferenc Gyurcsany, March 23rd. As recently as last year, pundits were touting the former Soviet Bloc in eastern Europe as the "next hot area for expansion." Ouch!

• Snacks in India continue to grow in importance. Mauritius-based Leila Lands Ltd., a subsidiary of the Wadia Group, whom I got to know on my last trip to Europe, has agreed to acquire Groupe Danone S.A.’s 25.48% stake in Britannia Industries Ltd., raising its share to a controlling 50.96%. Britannia owns the "Britannia" and "Tiger" brands of cookies (biscuits to the British reading this) with a 38% total share of the Indian market. Other Britannia products rusk (a form of hard biscuit dunked in coffee), bread, cakes and dairy.

• While most of the world struggles to cope with the current downturn, Argentina has been recovering from a collapse of its currency from 2000-2002, giving its citizens a leg up in coping (or so they themselves believe). More likely is the current exchange rate; after an arbitrary 1:1 rate maintained for years by Argentina’s government, the peso now floats against other currencies, and its 1:3 rate makes it attractive to tourists and business travelers. The country’s legendary beef supply continues to drive exports, though purists worry about the rise in industrial farming and feedlots used to fatten the cattle for processing. This processing has changed the character of the country's range beef, and has limited expansion of its organic farming success (the country is the world's #2 supplier of organic products after the US). Argentina banned the use of antibiotics and growth hormones in cattle in 2004, but pressure from world demand may alter its practices.

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