Published: November 2011
Price: $ 6500
Growth, inflation, recession, recovery
During the first half of the review period the Bosnia-Herzegovina Packaged Food Market grew strongly. Main drivers of the market in 2006 and 2007 were expansion of consumers’ disposable income and penetration of large chained retailers, which significantly improved the range of products offered to consumers in Bosnia-Herzegovina. 2008 is the year remembered by volatility of food prices across the world. This was the first in a series of shocks which followed until 2011. During 2009 the global financial crisis spread to Bosnia-Herzegovina and the domestic economy grinded to a halt and began to decline. Recession continued throughout 2010. This negativity in the environment was reflected in a significant decline of Bosnian and Herzegovinian consumers’ disposable income. Like most fast-moving consumer goods, sales of packaged food suffered. However, some categories performed better than others, for example private label brands and basic foodstuffs. In 2011 we begin to see first signs of market recovery in Bosnia-Herzegovina.
Inflation and high unemployment delay serious recovery
The packaged food market as well as the economy in Bosnia-Herzegovina began to recover from the recession during 2011. Still, it is not all blue skies yet. Prices of basic foodstuffs started to grow at the end of 2010 and continued going up in 2011. Categories most affected by price volatility are chocolate confectionery, bakery products and oils and fats, incidentally the same categories which drove price inflation during 2008. Nevertheless, 2011 performance of packaged foods in Bosnia-Herzegovina is expected to be an improvement relative to 2010 and 2009. Manufacturers and retailers have adapted their portfolios, focusing on economy products and private label. Purchasing power of consumers is still negatively affected by a high unemployment rate, but there is work to be found in grey areas of the economy.
Dominance of large regional players
Packaged Food in Bosnia-Herzegovina - Several large regional manufacturing groups have established their dominance over the packaged food market in Bosnia-Herzegovina. Packaged food manufacturing companies run by the Croatian concern Agrokor are heading the market, relying on strong support from its sister company Konzum, which grew into an absolute leader in Bosnian and Herzegovinian grocery retailing during the review period. Danube Foods and Podravka have also managed to leverage their wide production portfolios and financial superiority to claim the remaining spots on top of the packaged foods market in Bosnia-Herzegovina. Bosnian and Herzegovinian consumers are obviously assigning great value to regional brands, perceiving them to offer best value for money. Domestic manufacturers are often perceived to offer inferior quality, which is why they need to price their products below those of regional and international competition.
Polarisation of retailing
Packaged food retailing in Bosnia-Herzegovina continues to be dominated by small grocery retailers, but these outlets are losing ground to large retailers, as supermarkets/ hypermarkets has continued to gain value share over the review period at the expense of independent small grocers. These outlets are able to offer best deals to consumers that are increasingly interested in price. Hence, strong performance of private label. Retailers which have achieved largest penetration of private label in their outlets are: Konzum, Mercator, Tus and DM. Large retail outlets are also able to offer consumers the widest range of brands and products to choose from. Independent small retailers are forced to specialise, increasingly serving as convenience specialists, price specialists or food specialists. Since leading manufacturers shifted their focus towards key accounts (large chained retailers), smaller manufacturers with limited advertising resources are beginning to focus on smaller independents where they can achieve better visibility and better sales. Convenience stores, in keeping with the general trend towards convenience, has increased its share over the review period.