Make investors in the Retail and Consumer goods sector aware of business development opportunities within Eastern Europe, and more generally, to a 343 million consumer market extending from Russia to Albania, from Estonia to the Czech Republic.

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Lucy Hewitt        Page         01/11/2004

   

The objective of the following Business Report is to make investors in the Retail and Consumer goods sector aware of business development opportunities within Eastern Europe, and more generally, to a 343 million consumer market extending from Russia to Albania, from Estonia to the Czech Republic.

Lucy Hewitt

EASTERN EUROPE: A region defined geographically as that part of Europe covering the eastern part of the continent. Generally, this means that it lies between the Ural and Caucasus Mountains and the western border of Russia.

For the purpose of this report Eastern Europe will include:

  • Belarus
  • Estonia
  • Latvia
  • Lithuania
  • Russia
  • Ukraine
  • Moldova
  • Bosnia – Herzegovina
  • Bulgaria
  • Croatia
  • Macedonia
  • Romania
  • Czech Republic
  • Hungary
  • Poland
  • Slovakia
  • Slovenia

A Brief History

In late 1989 the countries of Eastern Europe broke loose from the Soviet Union, threw off communism, and began to construct democratic institutions and market-oriented economies. This great transformation is founded on the idea that adopting the institutions and practices, that have proven successful in Western Europe since World War II, can best advance freedom and prosperity. The people of the region want "to return to Europe." To do so, they plan to dismantle the remnants of the communist economic system and build market-oriented economies based on private ownership: the transformation is well under way. (, 2004)

The Economics of Eastern Europe

Eastern Europe’s regions are highly contrasting: their populations vary from a high of 144 million people in Russia, to a low of 1.5 million people in Estonia. This report covers a market having a population of 324 million people, which compares in size to the current European Union (EU) market region. These two areas combined represent 10% of the world’s population.

Table 1: The population of Eastern Europe 2003 (000's)

GDP growth (US $ millions) has remained nigh on static year on year (2002 – 2003), Lithuania, Macedonia and Russia are the exceptions: they have grown. The birth rate in Eastern Europe has declined and as a result there is a general ageing of populations. A widespread rise in the unemployment figures from these countries is largely due to the restructuring of the industrial sector and privatisation of public enterprise. It can also be argued that cheap imports are essentially impacting upon employment rates. Despite a low average income (excluding Hungary and the Czech Republic) purchasing power is improving – primarily driven by successful macroeconomic stabilisation programmes - particularly in Russia.

However, credit is also becoming more readily available.

* As of October 2004

Sources: GMID, Europa Statistics and World census.

The past year proved challenging for global retailers. Carrefour, Leclerc, Reitan. Metcash, Edeka and Makro withdrew from existing markets as domestic retailers acquired more expertise, consolidated and developed more sophisticated supply chains. The growth of discounters within emerging markets is also encroaching on domestic and importing retailers: there is an ever-growing threat from Eastern Europe’s peers in the United States. Office Depot is acquiring its way into Hungary, and the Wal-Mart juggernaut continues to gain strength.

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Eastern Europe Breakdown

There is a wealth of information on all of the countries within Eastern Europe. To help prioritise which countries to focus on, A.T Kearney developed the Global Retail Development Index (GRDI). This annual survey ranks emerging countries based on four key variables: country risk, market attractiveness, market saturation and time pressure.  Eastern Europe benefits from high annual growth rates, 4 to 5 percent for real GDP growth in the past three years. These countries represent fertile ground for retail expansion as they gain financial and political stability, and consumer demand increases for high quality goods at ...

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