Food& Beverage Sector - EMIS Insight...A total of 4,971 companies are active in the food and beverage sector in Hungary. The majority of the companies (52%) are controlled by domestic

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Food &BeverageSectorHungary

April 2015



Table of Contents

I. Sector Overview

1. Sector Highlights

2. Sector Highlights (cont’d)

3. Economic Importance

4. Sector Forecast

5. Purchasing Power

6. Production

7. Consumption

8. Retail Sales

9. Retail Sales (cont’d)

10.Retail Sales (cont’d)

11.External Trade

12.Foreign Direct Investments

13.Employment and Salaries

14.Government Policy

15.Government Policy (cont’d)

16.Government Policy (cont’d)

17.Hungaricum Club

18.Hungaricum Club - Food and Beverage Products

II. Food Products

1. Fruits and Vegetables

2. Fruits and Vegetables (cont’d)

3. Fruits and Vegetables (cont’d)

4. Oils and Fats

5. Meat Products

6. Meat Products (cont’d)

7. Dairy Products

8. Dairy Products (cont’d)

9. Bakery and Farinaceous Products

10.Bakery and Farinaceous Products (cont’d)

III. Beverages and Tobacco

1. Beverages

2. Beverages (cont’d)

3. Wine

4. Wine (cont’d)

7. Tobacco

8. Tobacco (cont’d)



Table of Contents

IV. Food and Beverage Prices

1. Food and Beverage Prices

2. Food Prices

3. Food Prices (cont’d)

4. Beverage Prices

V. Main Players

1. Top M&A Deals

2. Hungary – Meat Kft.

3. Master Good Kft.

4. Tolnatej Zrt.

5. Ceres Zrt.

6. Torley Kft.



I. Sector Overview



Sector Highlights

A total of 4,971 companies are active in the food and beverage sector in Hungary. The majority of the companies (52%) are controlled by domestic

entrepreneurs, while the share of foreign capital is 48%. The vegetable oil processing, confectionary and snacks segments are dominated by

multinational companies, while the meat and poultry, vegetable and fruit processing as well as the baking industry are largely controlled by domestic

capital. In terms of company size, approximately 70% of the sector's output comes from large enterprises. The remaining production is highly

dispersed, as 96% of the players in the sector are micro-companies with less than 10 employees. In terms of legal form, about half of the food and

beverage companies operate under the legal form of sole proprietorship.

Over the period 2009-2014, the production of food and beverage products expanded at a CAGR of 5.8%, driven by strong demand fundamentals

and increasing export sales combined with the trend of technological modernisation of the sector, supported mainly by foreign direct investments.

Exports have emerged as the main driving force of the industry, expanding at a CAGR of 10.7% in the last five years, while domestic retail sales of

food and beverage products rose at a CAGR of 4.8%. The fruit and vegetables, meat and poultry, and bakery industries outperformed the average

industry growth, boosted by higher foreign demand. On the other hand, the dairy and oils and fats industries registered a below the average

performance due to several long-term structural problems.

The food and beverage industry is traditionally one of the most important sectors of the Hungarian economy, being the second-largest employer and

the third-biggest producer in the manufacturing sector, and accounting for 10.3% of the total industrial output in 2014. Moreover, the export

revenues of the sector are a significant contributor to the overall trade surplus of the country. Hungary has strong fundamentals for food processing,

as agricultural inputs are available in large quantity and high quality. In addition, the country's infrastructure is considered to be one of the best in the

region of central and eastern Europe, considerably facilitating the production and distribution processes.

Overview

Sector Development

Sector Players



Sector Highlights (cont'd)

One of the main challenges before the food and beverage industry is the overall high tax burden that dampens household consumption. Hungary

has the highest VAT rate in the European Union of 27%, as compared to an EU average of 20%. The country applies a reduced VAT rate of 18% on

certain dairy and wheat-based products and a reduced VAT rate of 5% on live pigs and pork products. From January 2015, the Hungarian

government reduced the VAT rate on cattle, sheep and goats, both live and in processed form, from 27% to 5%. In April 2015, Economy Minister,

Mihály Varga, announced that the government may consider decreasing the VAT rate for additional products.

Since its entry into the European Union in 2004, Hungary has been recording increasing imports of food and beverage products, mainly from the

other EU member states. The country imports primarily dairy products, meat and meat preparations, exotic fruits and vegetables, coffee, tea, cocoa

and spices. In 2014, food and beverage products accounted for nearly 5.1% of total imports of the country.

In recent years, the Hungarian overall export in national currency terms has been constantly increasing, with the food and beverage sector being

one of the growth drivers. The main export products of the sector are fruits and vegetables, meat and meat products, poultry, confectionery and

dairy products, with over 90% of the export bound for the countries of the European Union. In 2014, the food and beverage industry accounted for

7.6% of the total export of the country. In addition, the trade surplus with sector's products amounted to HUF 765.2bn, representing 38.7% of the

overall trade balance.

Exports

Imports

Taxation



Source:

Economic Importance

Main Sector Indicators

CEIC, Hungarian Central Statistical Office

2009 2010 2011 2012 2013 2014

GDP, current prices (HUF bn) 26,175 26,946 28,035 28,549 29,846 31,891

GDP (yoy % change) -6.6 0.8 1.8 -1.5 1.5 3.4

GDP per capita (yoy % change) -6.4 1.1 2.1 -0.9 1.8 0.8

Industrial Production (HUF bn) 18,886 21,467 23,788 24,305 24,750 26,788

Food, Beverage and Tobacco Production

(HUF bn)2,070 2,032 2,285 2,527 2,615 2,749

Food, Beverage and Tobacco Production

(% of Industrial Production)11.0% 9.5% 9.6% 10.4% 10.6% 10.3%

Food, Beverage and Tobacco Export

(HUF bn)1,201 1,365 1,683 1,887 1,938 1,997

Food, Beverage and Tobacco Import

(HUF bn)854 901 1,088 1,122 1,124 1,232

Domestic Sales of Food, Beverage and

Tobacco Enterprises (HUF bn)1,463 1,415 1,494 1,592 1,613 1,680

External Sales of Food, Beverage and

Tobacco Enterprises (HUF bn)614 650 770 913 1,012 1,053

Total Sales of Food, Beverage and Tobacco

Enterprises (HUF bn)2,078 2,065 2,263 2,505 2,625 2,733



Source:

Sector Forecast

Food & Beverages, Value-Added Output (% of real GDP)

Food & Beverages, Value-Added Output Index (2010=100)

Food & Beverages, Value-Added Output (% of manufacturing)

Oxford Economics

97.7

99.1 10

2.4

105.

9

107.

4

108.

4

2015f 2016f 2017f 2018f 2019f 2020f

9.39

9.189.14 9.14

8.98

8.81

2015f 2016f 2017f 2018f 2019f 2020f

1.64

1.62

1.64

1.66

1.65

1.63

2015f 2016f 2017f 2018f 2019f 2020f



Source:

Purchasing Power

Purchasing Power per Capita, 2014

Purchasing Power Per Capita, 2013

GFK

13,110

37,15030,560

21,580

7,540 7,000 4,950 3,750 1,640

100

283233

165

58 53 38 29 13

EU Average Switzerland Norway Germany Slovakia Czech Republic Hungary Romania Ukraine

Purchasing Power per Capita (EUR/year) Relative Purchasing Power (EU average=100)

12,890

36,350 35,180

20,620

11,600 9,5805,000 3,490 2,200

100

282 273

160

90 7439 27 17

EU Average Switzerland Norway Germany Slovakia Czech Republic Hungary Romania Ukraine

Purchasing Power per Capita (EUR/year) Relative Purchasing Power (EU average=100)



Source:

Production

Industrial Production Index of Food, Beverage and Tobacco Products (2010=100)

Industrial Production Value of Food, Beverage and Tobacco Products (HUF bn, current prices)


70

80

90

100

110

120

130

Jan

Mar

May Ju

l

Sep

Nov Jan

Mar

May Ju

l

Sep

Nov Jan

Mar

May Ju

l

Sep

Nov Jan

Mar

May Ju

l

Sep

Nov Jan

Mar

May Ju

l

Sep

Nov Jan

Mar

May Ju

l

Sep

Nov Jan

2009 2010 2011 2012 2013 2014 2015

2,070 2,032

2,285

2,5272,615

2,749

2009 2010 2011 2012 2013 2014



Source:

Consumption

Annual Food & Beverage Consumption per Capita Comments

Hungary has one of the highest levels of food and

beverage consumption per capita in the CEE region.

However, the consumption of main food and beverage

products has followed a downward trend in the 2011-2013

period. The largest decreases were recorded in the

consumption of vegetables, milk, mineral water, fruit

juices and cereals.

On the other hand, sugar was the only main food product

that registered an increase in consumption.

Hungarian Central Statistical Office

2011 2012 2013

Cereals (kg) 81.3 79.3 80.1

Meat and meat products (kg) 52.2 50.8 51.6

Fish and fish products (kg) 1.6 1.4 1.3

Milk (litre) 50.4 50.5 47.0

Yoghurt, sour cream, kefir (litre) 11.6 11.8 11.3

Canned milk, milk powder, cottage

cheese (kg)5.6 5.7 5.6

Fat, bacon (kg) 16.3 15.7 16.0

Vegetables (kg) 78.8 77.0 73.6

Fruits (kg) 38.9 37.5 38.2

Sugar (kg) 12.4 12.0 14.0

Mineral water (litre) 57.7 58.8 56.3

Soft dtrinks (litre) 25.5 24.1 25.0

Fruit juices (litre) 12.1 10.6 10.8

Wine (litre) 5.7 4.9 4.8



Source:

Retail Sales

Retail Sales of Food & Beverage Sector (HUF bn)

Unadjusted Volume Indices of Retail Sales (same period of the previous year = 100)


2009 2010 2011 2012 2013 2014

Food, Beverages and Tobacco 3,294 3,319 3,514 3,742 3,957 4,168

Of which:

Sales in Non-Specialised Stores 3,002 3,007 3,187 3,375 3,354 3,270

Sales in Specialised Stores 292 312 327 366 603 897

2009 2010 2011 2012 2013 2014

Food, Beverages and Tobacco 95.9 98.0 100.3 99.1 102.5 104.5

Of which:

Sales in Non-Specialised Stores 95.7 97.5 100.2 98.8 97.3 98.4

Sales in Specialised Stores 98.3 102.8 1,010.0 102.1 150.9 138.7



Source:

Retail Sales (cont'd)

Retail Sales by Main Commodity Groups (% of total retail trade)

Number of Retail Stores by Type


2006 2007 2008 2009 2010 2011 2012 2013 2014

Food 21.5 22.8 23.2 24.5 24.9 25.0 26.3 27.2 26.3

Alcoholic beverages 3.4 3.2 3.4 3.4 3.5 3.7 3.93.9 3.5

Non-alcoholic beverages 2.5 2.6 2.8 2.8 2.8 3.0 3.2 3.2 3.0

Coffee 0.9 0.8 0.9 0.9 0.8 0.9 0.90.9 0.9

Tobacco 2.5 2.8 3.2 3.6 3.6 3.6 4.1 5.0 6.0

2010 2011 2012 2013 2014

Supermarkets 25,388 25,398 25,320 24,086 23,611

Specialised shops for food, beverage and tobacco 18,129 19,008 19,885 19,561 19,789

Total retail shops and stores with food dominance 43,517 44,406 45,205 43,647 43,400



Source:

Retail Sales (cont'd)

Market Share of Small Retail Stores in Sales of Food & Beverage Products (%)

Nielson, Brand Trend Hungary

Geographic Distribution of Retail Sales of 90 Main Food & Beverage Products in Small Retail Stores, Nielson 2014

Centre (Budapest and its surroundings)

33%

Northeast 20%

Northwest 19%

Southeast 16%

Southwest 12%

29

36

8

18

9

29

36

8

18

9

Over 2,500 m²

401-2,500 m²

201-400 m²

51-200 m²

0-50 m²

Feb 2013 - Jan 2014

Feb 2012 - Jan 2013



Comments

Source:

External Trade

In line with the overall growth of the external trade, Hungary witnessed a significant increase in the export and import of food, beverage and

tobacco products in recent years. Export emerged as the main driving force, expanding at a CAGR of 10.7% over the period 2009-2014, while

the import of food, beverages and tobacco grew at a more modest pace of 7.6% CAGR. As a result, the county strengthened its positions as

a net exporter of food, beverages and tobacco. Notably, the trade surplus with those products stood at HUF 765.2bn in 2014, accounting for

38.7% of the overall trade balance of the country.

Total External Trade (HUF bn) Food, Beverage & Tobacco External Trade (HUF bn)


16,5

74 19,6

90 22,3

43

23,1

43

24,1

18

26,1

20

15,5

18 18,1

74 20,3

64

21,2

21

22,1

63

24,1

44

1,05

6

1,51

6

1,97

9

1,92

2

1,95

5

1,97

7

2009 2010 2011 2012 2013 2014

Total Export Total Import Trade Balance

1,20

1

1,36

5 1,68

3 1,88

7

1,93

8

1,99

7

854

901 1,08

8

1,12

2

1,12

4

1,23

2

348

464 59

5 765

815

765

2009 2010 2011 2012 2013 2014

Export Import Trade Balance



Comments

Source:

Foreign Direct Investments

In the period 2009-2014, the food, beverage and tobacco sector registered a total net outflow of foreign direct investments (FDI) of HUF 19bn, which was in

contrast to the overall investment position of the country that recorded a total FDI inflow of HUF 6,995bn. The foreign investment inflow in the sector

reached a peak of HUF 71.7bn in 2011, when it accounted for 5.7% of the total FDI. However, since 2012 the attractiveness of the industry for foreign

investors has been decreasing, resulting in a steady trend of withdrawal of investments. Notably, the food, beverage and tobacco sector recorded a net

outflow of FDI of HUF 62.8bn in 2014.

Total Foreign Direct Investment (FDI) Flow (HUF bn) FDI Flow in Food, Beverage and Tobacco Sector (HUF bn)

CEIC, National Bank of Hungary

404 456

1,267

3,236

693940

2009 2010 2011 2012 2013 2014

-10.1-21.7

71.7

-10.6

14.5

-62.8

2009 2010 2011 2012 2013 2014



Source:

Employment and Salaries

Number of Employees in Food, Beverage and Tobacco Sector (year-end)

Average Monthly Earnings in Food, Beverage and Tobacco Sector (HUF)


95,1

07

94,8

04

93,8

50

92,9

92 95,8

32

96,8

79

97,7

72

16.1%

15.5%15.2%

15.4%15.6%

15.3% 15.2%

2009 2010 2011 2012 2013 2014 Feb-15

Number of Employees in Food, Beverage and Tobacco Sector Share in Total Employed in Manufacturing Sector (%)

166,333 166,052179,899

198,491208,727

227,438

201,700

108,776 112,458121,762

128,430136,716

148,973

132,114

Dec, 2009 Dec, 2010 Dec, 2011 Dec, 2012 Dec, 2013 Dec, 2014 Feb, 2015

Average Gross Monthly Earnings Average Net Monthly Earnings



Source:

Government Policy

Regulatory

Bodies

Ministry of Rural Development

The Ministry of Rural Development has regulatory functions over rural development, food chain supervision and development of

agricultural economy.

State Secretariat for Food Chain Control

The Secretariat has regulatory functions over plant and soil protection and is responsible for the elaboration and implementation of the

National Plant Protection Action Plan and the Food Chain Safety Strategy.

National Food Chain Safety Office (NFCSO)

The former Hungarian Food Safety Office and the Central Agriculture Office were integrated into a new office: the National Food Chain

Safety Office (NFCSO) in March 2012 under government decree 22/2012. The NFCSO incorporated all features of food chain safety

supervision within ten functional departments: animal health and animal welfare; food and feed safety; plant protection, soil

conservation and agri-environment protection; animal breeding; veterinary diagnostics; veterinary medicinal products; winery and

alcoholic drinks; forestry; farming; plant production and horticulture.

National Institute for Food and Nutrition Science (NIFNS)

NIFNS has regulatory functions in the areas of human nutrition, food technology, nutritional environment and hygiene. The Institute is

responsible for the notification of food supplements, foods for particular nutritional uses (infant formulae, complementary foods, gluten

free foods, etc.), cosmetics and biocides used in food industry and mass catering, as well as for providing education, research and

advisory services to Hungarian and international authorities and industries.

European Commission, Ministry of Rural Development



Source:

Government Policy (cont'd)

Sunday Ban

In November 2014, the Hungarian Minister of Economy, Mihály Varga, submitted a draft bill that envisages the forced shutdown of

large supermarkets with an annual turnover of above EUR 163mn from 2018 in case they do not generate profit for two consecutive

years (with the exception of the recently established companies). The measure will affect mainly foreign-owned retailers, such as Aldi,

Auchan, Metro, Spar, Tesco and Lidl. The aim of the proposal is to protect Hungarian food producers and retailers from being forced

out of the market by foreign companies, which rely on their higher bargaining power to sell food at a loss and grab market share.

In an effort to restore the allegedly distorted competition in the food and beverage retail market, the government introduced a partial

ban on Sunday shopping in Hungary as of March 15, 2015. Under the new system, large stores with an area of over 200 m2 are

obliged to remain closed on Sundays. Family-owned stores were not affected by the new regulation. The measure put pressure on

large supermarket chains most of which are foreign-owned.

BMI, HVG, Euronews



Source:

Government Policy (cont'd)

Products of

Animal Origin

Milk (maximum 3% fat)

Semi-hard cheese

Eggs

Cottage cheese

Carp

Chicken

Turkey

Until 2010, for all

products from vegetal

and animal origin was

applied a reduced VAT

rate of 18%. However,

the newly elected

Government in May

2010 has eliminated the

VAT reduction on these

products (with the

exception of wheat-

based and milk

products). At present,

the standard VAT rate of

27% is applied to all of

the above listed food and

beverage products.

Products of

Vegetal

Origin

Potatoes

Tomatoes

Cauliflower

All cole crops

Carrots and all edible vegetal roots

Cucumber

Legumes

Edible mushrooms

Celery

Pumpkins

Capsicum plants and products

Corn

Stone fruits, nuts

Apple

Pear

Grapes

Berries

Melon and watermelon

Peach and apricot

Plum

Medical herbs

Hungarian Government



Source:

Hungaricum Club

Hungaricum

Club

The Hungaricum Club initiative was launched in 1999 by four local companies: Herend Porcelain Manufactory, Pick

Szeged Co., Tokaj Trading House and Zwack Unicum, with the purpose to promote the production and consumption of

Hungarian products in the internal market. The Hungaricum brand is awarded to handicraft, industrial, food and beverage

products that are part of the material cultural heritage of Hungary. At present, there are 115 products included in the

Hungaricum Club. Among these, 71 belong to the agricultural and the food and beverage sectors.

The selection of products to be included in the Hungaricum Club is realised by the Hungaricum Committee, which is

headed by the Minister of Agriculture and Rural Development.

Ministry of Foreign Affairs, Hungarian Government's Collection of Hungaricums



Hungaricum Club - Food and Beverage Products

All fruit brandies produced in Hungary are Hungaricums. The best sold brands are: Agárdi, Gyulai, Zwack, Brill, Márton és lányai, Panyolai, Tarpai

and Bestillo.

Fruit Brandies

Aszu wine produced in the Tokaj wine region.

Wattle, Kalocsai paprika spice.

Csabai sausage, HERZ Classic salami, Goose products, goose liver, Pick salami and Gyulai sausage.

Onion from Makó, wattle honey, soda-water, Karcagi bull stew, Gastronomic heritage of the Gundel family, Hungarian Christmas candy and

Szamos Marzipan.

Wine

Spices and Herbs

Meat Products

Others



II. Food Products



Source:

Fruits and Vegetables

Agricultural Harvested Area (ha)

Total Harvest of Main Fruit Species (tonnes)


21,2

60

20,4

20

25,8

60

20,5

40

21,6

90 26,2

70

12,1

15

19,9

82

14,4

60

20,7

92

21,8

64

13,6

21

6,39

0

6,47

0

6,50

0

4,00

0

5,44

0

7,74

0

3,85

0

3,71

0

4,20

0

3,75

0

4,64

0

4,71

0

2,35

0

1,93

0

2,37

0

2,14

0

2,49

0

2,64

0

2009 2010 2011 2012 2013 2014

Potatoes Hungarian red paprika Maize Wheat Sunflower seed

2009 2010 2011 2012 2013

Apples 575,368 496,916 292,810 650,595 591,866

Grapes 550,000 294,771 449,870 356,363 451,115

Sour cherries 78,752 51,870 61,735 53,425 70,414

Plums and greengages 51,487 70,854 37,338 43,268 47,998

Peaches 60,618 52,912 41,735 16,263 43,918

Pears 32,256 24,176 17,327 14,622 27,688

Apricots 33,457 27,059 24,766 10,779 21,488

Cherries 8,126 5,758 7,722 4,832 10,088

Strawberries 6,597 3,844 3,595 4,629 6,357

Currants 7,267 3,853 2,987 3,327 3,377

Raspberries 4,967 3,184 2,267 2,000 1,450



Comments

Source:

Fruits and Vegetables (cont'd)

Since 2010, the number of production enterprises in the fruit and vegetable processing industry has been constantly growing driven by increasing domestic

and foreign demand. In 2013, the total sales of Hungarian companies operating in the segment amounted to HUF 241.8bn, up by 11.5% y/y. In recent

years, exports have emerged as the driving force for the companies in the sector, as foreign sales expanded at a CAGR of 17% over 2010-2013. Notably,

export saccounted for 69.1% of the segment's turnover in 2013.

Number of Enterprises (units) Number of Enterprises by Segment (units)

Hungarian Central StatisticalOffice

7 8 5 4

16 18 17 15

88 93

100 102

2010 2011 2012 2013

Processing and preserving of potatoes

Manufacture of fruit and vegetable juice

Processing and preserving of other fruits and vegetables

99

106

114115

2010 2011 2012 2013

Processing and preserving of fruits and vegetables



Source:

Fruits and Vegetables (cont'd)

Total Sales Value (HUF bn)

Total Sales Value by Market (HUF bn)

Segment-wise Sales Value, 2013 (%)

Total Sales Value by Market, 2013 (%)


177.5

188.1

216.8

241.8

2010 2011 2012 2013

Processing and preserving of fruits and vegetables

104.5

121.3

143.9

167.1

73.1

66.9

72.9

74.7

2010

2011

2012

2013

Export Sales Domestic Sales

Processing and preserving of other fruits

and vegetables

80.2% Manufacture of fruit and vegetable

juice 19.6%

Processing and preserving of potatoes 0.2%

Export Sales69.1% Domestic

Sales 30.9%



Source:

Oils and Fats

Number of Enterprises (units)





16 15

1211

2010 2011 2012 2013

Manufacture of vegetable and animal oils and fats

110.2

145.4

168.2

152.4

2010 2011 2012 2013

Manufacture of vegetable and animal oils and fats

55.1

74.8

100.2

106.4

55.1

70.5

67.9

45.9

2010

2011

2012

2013


External sales69.9% Domestic

sales 30.1%



Source:

Meat Products



Number of Enterprises by Segment (units)

Comments


In 2013, the number of meat processing enterprises dropped sharply, as

a result of the adoption of higher animal welfare standards that increased

significantly the production costs of domestic companies. However, the

products of the segment remained competitive on the international

markets, given the global trend of increase in meat consumption, mainly

in the emerging markets.

Exports are the driving force for the production of Hungarian meat

processing companies, as it has expanded at a CAGR of 12.8% over

2010-2013. In comparison, the domestic sales grew at a 4% CAGR in

the period.

127 124132

122

94 86

95 92

53 56 60 59

2010 2011 2012 2013Processing and preserving of meatProduction of meat and poultry meat productsProcessing and preserving of poultry meat

195 194

215

206

2010 2011 2012 2013

Processing and preserving of meat and production of meat products

533.9

576.6

614.3

655.3

2010 2011 2012 2013

Processing and preserving of meat and production of meat products



Source:

Meat Products (cont'd)

Total Sales Value by Product (HUF bn)


Total Sales Value by Product, 2013 (%)



157.5

188.3

211.9

226.1

186.7

203.0

205.6

225.1

189.7

185.3

196.8

204.1

2010

2011

2012

2013

Processing and preserving of poultry meat

Processing and preserving of meat

Production of meat and poultry meat products

Processing and preserving of poultry meat

34.5%

Processing and preserving of meat

34.4%

Production of meat and poultry meat products 31.1%

Domestic Sales 61.3%

Export Sales38.7%

176.6

207.2

224.8

253.7

357.3

369.4

389.5

401.6

2010

2011

2012

2013




Comments

Source:

Dairy Products

Since the country's accession into the European Union, the Hungarian dairy industry has faced higher quality production standards and

strong competition amid gradual decrease in the consumption of milk and milk products. As a result, the number of enterprises and the

domestic output have been shrinking. In 2013, the Hungarian dairy product companies reported total sales of HUF 220.8bn, up by 1.8% y/y,

driven by an increase in the domestic sales by 21.4%, while export revenues dropped by 1.5%. Additional insecurity for the sector is forecast

after the end of the milk quota regime in the European Union on 30 March 2015.

Number of Enterprises (units) Total Sales Value (HUF bn)


54 58

62

50

2010 2011 2012 2013

Manufacture of dairy products

204.6

207.0

217.0

220.8

2010 2011 2012 2013

Total sales value of dairy products (HUF bn)



Source:

Dairy Products (cont'd)






201.1

203.0

212.8

211.1

3.5

4.0

4.2

9.7

2010

2011

2012

2013

Operation of dairies and cheese making Manufacture of ice cream

Operation of dairies and

cheese making95.6%

Manufacture of ice cream

4.4%

31.6

32.0

31.1

37.7

173.0

175.0

185.9

183.0

2010

2011

2012

2013


Export Sales17.1%

Domestic Sales82.9%



Comments

Source:

Bakery and Farinaceous Products

The bakery industry has registered a moderate growth of 6% in sales revenue over the 2010-2013 period. The main driving forces of the segment were the

reduction of production costs, mainly due to the lower prices of wheat and flour, combined with the gradual increase in demand. The production is primarily

sold on the domestic market, which accounted for 86.3% of the sector's turnover in 2013. However, in recent years, exports have been gaining momentum.

Notably, snacks maker Mondelez International Inc invested HUF 11bn in its biscuit plant in the city of Székesfehérvár over the 2011-2014 period,

consolidating the global production of Milka and Cadbury choco-bakery sandwiches exclusively in this plant.

Number of Enterprises (units) Total Sales Value (HUF bn)

Hungarian Central Statistical Office, Agrárszektor, Hungarian Baker Association

560589

632

541

90 79 94 8042 47 52 47

2010 2011 2012 2013

Manufacture of bread, fresh pastry goods and cakes

Manufacture of rusks and biscuits, preserved pastry goods and cakes

Manufacture of macaroni, noodles, couscous and others

197.7

217.4

235.2 235.7

2010 2011 2012 2013

Manufacture of bakery and farinaceous products



Source:

Bakery and Farinaceous Products (cont'd)


Total Sales Value by Market, 2013 (HUF bn)




120.8

135.8

145.0

144.3

57.4

61.8

65.7

65.6

19.5

19.8

24.5

25.8

2010

2011

2012

2013

Manufacture of bread, fresh pastry goods and cakes


Manufacture of macaroni, noodles, couscous and others

Manufacture of bread, fresh pastry goods

and cakes61.2%


27.8%

Manufacture of macaroni, noodles,

couscous and others11.0%

135.0

45.5

22.9

9.3

20.1

2.9

Manufacture of bread, fresh pastrygoods and cakes

Manufacture of rusks and biscuits,preserved pastry goods and cakes

Manufacture of macaroni, noodles,couscous and others

Domestic Sales Export Sales

Export Sales13.7%

Domestic Sales86.3%



III. Beverages and Tobacco



Source:

Beverages


Number of Enterprises by Product Type, 2013 (units)

Comments


2010 2011 2012 2013

Manufacture of wine from grape 121 113 136 119

Manufacture of soft drinks, mineral water and other bottled waters 52 49 51 51

Distilling, rectifying and blending of spirits 27 31 38 38

Manufacture of beer 4 4 4 4

Manufacture of other non-distilled fermented beverages 3 3 3 3

296.9304.0

333.1337.0

2010 2011 2012 2013

Manufacture of beverage products

• The beverage industry registered a moderate performance over

2010-2013, recording an increase in total sales revenues at a CAGR

of 4.3%. A total of 204 companies operated in the sector at the end of

2013, with the majority of them active in the manufacture of wine, soft

drinks and mineral water, and alcoholic beverages.

• In 2013, the beverage sector reported total sales revenues of HUF

337bn, up by 1.2% y/y. About 84% of the sectors output was bound

for the domestic market. However, in recent years, the sector has

witnessed an increase in foreign demand, mainly for wine, soft drinks

and beer.



Source:

Beverages (cont'd)

Total Sales Value by Type, 2013 (HUF bn)

Total Sales Value by Market, 2013 (HUF bn)

Total Sales Value by Type, 2013 (%)



Export Sales16.0%

Domestic Sales84.0%

8.1

20.2

67.7

84.0

157.1

Other non-distilled fermentedbeverages

Distilling, rectifying and blending ofspirits

Wine from grape

Beer

Soft drinks, mineral water

Soft drinks, mineral water

46.6%

Beer 24.9%

Wine from grape 20.1% Distilling, rectifying and blending of spirits 6.0%

Other non-distilled fermented beverages2.4%

18.0

49.9

79.2

134.4

2.2

17.8

4.8

22.7

Distilling, rectifying and blending ofspirits

Wine from grape

Beer

Soft drinks, mineral waters

Domestic Sales Export Sales



Source:

Wine

Area with Vineyards (ha)

Average yield (kg/hectar)

Grape Harvested (tonnes)

Comments

Hungarian Central Statistical Office, Ministry of Foreign Affairs and Foreign Trade and Payments

82,38382,638

82,479

80,345

81,001

82,274

80,193

2007 2008 2009 2010 2011 2012 2013

In recent years, the Hungarian wine industry has witnessed a decrease

in the area with vineyards and the production volumes amid weak

domestic demand and strong competition from imported products.

Although a net exporter of wine, Hungary remains dependent on the

import of grape to satisfy the needs of its wine industry.

In an effort to boost the competitiveness and the export of domestic food

and beverage products, including wine, the government opened 14

trading houses in 2014, mainly in the countries from Southeast Asia,

North Africa and CIS. The Hungarian Investment and Trade Agency was

tasked to adopt measures for promotion of the sales of Hungarian wine

in foreign retail chains operating in the country.

540,072570,502 550,000

294,771

449,870

356,363

451,115

2007 2008 2009 2010 2011 2012 2013

7180

7530

7240

3990

5554

4930

6510

2007

2008

2009

2010

2011

2012

2013



Source:

Wine (cont'd)

Grape External Trade in Volume (tonnes)

Wine External Trade in Volume (tonnes)

Grape External Trade in Value (HUF mn)

Wine External Trade in Value (HUF mn)


1,65

5

1,23

6

1,27

8

40 50 90

-1,615-1,186 -1,188

2011 2012 2013

Import Export Trade Balance

4,94

5

4,08

6

4,17

0

206

214 45

1

-4,739

-3,872 -3,719

2011 2012 2013


11,0

27

11,2

74

12,6

6321,8

69

21,4

82

21,5

62

10,84210,208

8,899

2011 2012 2013


540,

503

411,

002

461,

136

626,

592

532,

148

544,

194

86,089

121,146

83,058

2011 2012 2013




Source:

Tobacco






5 5

4

5

2010 2011 2012 2013

Manufacture of tobacco products

16.4

18.2

14.1

22.2

2010 2011 2012 2013

Manufacture of tobacco products

10.9

11.9

10.6

15.3

5.5

6.4

3.5

6.9

2010

2011

2012

2013

Export sales value Domestic sales value

Export Sales69.0%

Domestic Sales31.0%



Comments

Source:

Tobacco (cont'd)

In July 2013, the Hungarian government introduced a state monopoly on the retail sales of tobacco products under the Law on Curbing Under-Age

Smoking and on the Trade of Tobacco Products. The new regulation created the state-owned company Nemzeti Dohánykereskedelmi Nonprofit Zrt,

responsible for overseeing the retail trade of tobacco and granting concessions via public tenders to so-called National Tobacco Shops, at which tobacco

products can be sold. The new system reduced the number of tobacco retailers in Hungary from around 40,000 to less than 5,500 stores. In addition, the

government adopted a 10% increase in the taxes on all tobacco products in 2013, thus, increasing the retail price. The government's measures led to a

significant decrease in the sales of tobacco on the domestic market.

Tobacco Sold in Hungary (bn pieces of cigarettes) Tobacco Prices (HUF/pack)

Hungarian Central Statistical Office, NAV (National Tax and Customs Administration Directorate)

17,430

11,858

13,010

12,534

9,321

2009

2010

2011

2012

2013

491 53

8

550

663

787

547 60

2

557

690

835

569 61

9

591

712

835

2010 2011 2012 2013 2014

Symphonia Sopianae Multifilter



IV. Food and Beverage Prices



Highlights

Source:

Food and Beverage Prices

Prices of Selected Food & Beverage Products, March 2015

In March 2015, the Hungarian Central Statistical

Office conducted a survey on the price dynamics of

the main food and beverage products in selected retail

stores over the past year.

Between March 2014 and March 2015, the average

price of the main food and beverage products dropped

by 0.6%.

The largest decreases were recorded in the prices of

sugar, milk and milk products, poultry and pork meat,

and wine. On the other hand, fruits and vegetables,

oils and fats, eggs, fish products and liquors showed

an increase in the average retail price.


ProductAverage Retail Price

(HUF)

Pork (kg) 1,310

Carp (kg) 1,080

Chicken (kg) 804

Tomatoes (kg) 717

Grinded coffee (250g, pack) 642

Eggs (10 pcs) 391

Mineral water (1.5 l) 371

Bread (kg) 306

Milk (1.0 l) 243

Flour (kg) 135

Potatoes (kg) 126



Source:

Food Prices

Consumer Price Indices of Fruit and Vegetables, March 2015* Consumer Price Indices of Cereals and Sweets, March 2015*

Hungarian Central Statistical Office, - * 100 = the same month from the previous year

99.4

100.4

100.8

101.1

104

110

110.6

129.7

Fruit and vegetable juices

Dry legumes

Canned fruits

Canned vegetables

Walnut, poppy seed, nut

Potatoe

Fresh domestic andexotic fruits

Fresh vegetables

97.7

100

100.1

100.1

100.2

100.9

101.2

101.6

101.8

Sugar

Sweet puffed pastryproducts

Bread

Sweet pastries

Sweet cereals

Dry pasta

Chocolate, cacao

Confectionery productsand ice cream

Hard candies and honey



Source:

Food Prices (cont'd)

Consumer Price Indices of Meat Products, March 2015* Consumer Price Indices of Fatty Products, March 2015*


99.4

99.6

99.7

100.2

100.9

101.8

102.2

103.1

Pork

Canned meat

Poultry

Beef

Sausage, salami

Other meat

Canned fish

Fish

96.8

98.7

98.8

98.9

99.1

99.7

100.5

101.4

102.1

104.2

Bacon

Milk

Pork fat

Cheese

Butter

Milk products(without cheese)

Margarin

Fats

Eggs

Oil



Source:

Beverage Prices

Alcoholic Beverage Consumer Price Indices, March 2015* Non-Alcoholic Beverage Consumer Price Indices, March 2015*


97.9

99.1

101.2

108.3

Wine

Beer

Alcoholic beverages

Liquors

101.1

101.8

102

102.2

Soft drinks

Espresso

Tea

Coffee



V. Main Players



Source:

Top M&A Deals

Top 15 M&A Deals in Hungary’s Food and Beverage Sector (2013–2015 YTD)

EMIS DealWatch

Date Target Company Deal Type BuyerCountry of

Buyer

Deal Value

EUR (mn)

Stake

(%)

Apr-15 Partner in Pet Food (PPF) Kft Acquisition Pamplona Capital ManagementUnited

Kingdom

315.0

(Official data)100.0

Apr-15Corn wet milling assets of Eaststarch in Bulgaria,

Turkey and HungaryAcquisition Archer Daniels Midland Co (ADM) United States

240.0

(DW estimate)100.0

Feb-13 Naszalytej Zrt. Acquisition Jasztej Zrt. Hungary9.8

(DW estimate)100.0

Jan-13 Kometa 99 Zrt.Minority stake

purchaseMunicipality of Kaposvar Hungary

7.0

(Official data)n.a.

Mar-13 Ovarterj Zrt. Acquisition Belcolatte Italy3.0

(Market estimate)100.0

Sep-13 Gyulai Huskombinat Acquisition Gyula Municipality Hungary2.8


Sep-13 Assets of Zalai Baromfifeldolgozo Acquisition Puten Invest Hungary2.0


May-14 Kapuvar meat plant assets Acquisition Saudi investors Saudi Arabia1.8

(Market estimate)100.0

Apr-15 Kuntej Zrt Acquisition Lactalis Group France n.a. 100.0

Mar-15 FrieslandCampina Hungaria Zrt. Acquisition Alfoldi Tej Kft Hungary n.a. 100.0

Mar-15 Kekkuti Asvanyviz Zrt Acquisition Karlovarske Mineralni Vody (KMV)Czech

Republicn.a. 100.0

Jan-15 MCS Vágóhíd ZrtMinority stake

purchaseHo-Me Vagyonkezelő 2000 Zrt Hungary n.a. 24.9

Jan-15 OT IndustriesMinority stake

purchaseBonitas 2002 Hungary n.a. 47.0

Apr-14 NT Kft Acquisition Agrofert Holding asCzech

Republicn.a. n.a.

Mar-14 Montiviz Vizpalackozo Es -Forgalmazo Zrt. Acquisition Company managers Hungary n.a. n.a.



Highlights

Source:

Hungary – Meat Kft.

Income Statement (HUF mn)

Balance Sheet (HUF mn)

Founded in 1997, Hungary – Meat is one of the largest pig

slaughterhouses in Central Europe, with a slaughter

capacity of 1mn heads per year.

The company produces fresh and frozen pork products

(loin, ham, pork collar, belly, shoulder, chitterlings and

bones) under the SEUROP certification system.

The company operates a processing unit in the city of

Kiskunfélegyháza, covering an area of 100,000 m2,

including 13,000 m2 of built area, and employs some 500

people.

Export accounts for over 85% of the company's revenues,

with Japan, Korea, Italy, Spain, Russia, Taiwan, China,

Slovakia, Czech Republic, Romania and Poland being the

main export destinations.

Hungary – Meat is a subsidiary of Italian meat processing

company Grupo Pini.

Company data

74,2

08 92,7

51

86,3

63

2,09

9

2,83

9

1,98

7

1,33

5

1,39

7

553

2.8%3.1%

2.3%

2011 2012 2013

Net Revenues EBITDA Net Profit EBITDA margin

17,8

40 21,3

70

19,4

80

4,70

3

6,00

9

2,06

8

7,85

4

7,93

2

9,69

6

3.74

2.79

4.88

2011 2012 2013

Total Assets Shareholders' Equity Net Debt Net Debt/EBITDA



Highlights

Source:

Master Good Kft.



Founded in 1994, Master Good is a family-owned

integrated poultry producer with operations across the

entire value chain, from feed production and hatching to

breeding farms, slaughterhouses and meat processing.

The company operates 28 production units in Northeastern

Hungary, including feed mixing plants, incubators,

hatcheries, meat processing plants and storage facilities,

and employs some 1,200 people.

Master Good produces around 100,000 tonnes of feed and

processes some 37mn chickens per year, offering fresh

poultry products and ready-made meals for the domestic

and international markets. Its distribution network includes

over 300 brand shops in the Eastern Hungarian region

where fodder in bags, chicklings and pre-raised poultry are

sold.

The company exports its products mainly to the Czech

Republic, Slovakia, the United Kingdom, Korea, China and

South Africa.

In March 2015, Master Good unveiled its plans to invest

HUF 60bn by 2020 in organic growth and potential

acquisitions of peers in the region. The company also aims

to further boost its presence in Slovakia, where it has an

ongoing greenfield investment. Master Good estimates a

turnover of HUF 100bn by 2018.

Company data

19,4

59 27,2

32

31,0

87

894

1,20

0

1,27

4

76 556

617

4.6%

4.4%

4.1%

2011 2012 2013


9,33

7 11,3

90 13,5

44

1,81

6

2,37

3

3,01

0

4,10

7

3,65

7

4,47

0

4.59

3.053.51

2011 2012 2013




Highlights

Source:

Tolnatej Zrt.



Founded in 1995, Tolnatej is the largest semi-hard cheese

manufacturer in Hungary, with a market share of about

30%.

The company produces fresh products (milk, cacao milk,

cottage cheese, kefir, sour cream), butter, semi-hard

cheese (Trappista, Trappista light, smoked Trappista,

Edam, Óvari, Gouda, Tolnai, Csemege, Parenica),

processed products (triangle-shaped products in round

boxes, cheese spreads) and powdered products (powdered

milk, whey powder) under the Tolle brand.

Tolnatej processes 150mn litres of milk per year in a

cheese processing plant with a capacity of 11,000 tonnes, a

drier with a capacity of 500,000 litres and a unit of fresh

dairy products.

The firm exports whey powder, light milk-powder, cheese

(Trappista, Gouda and Edam), butter and butter spread.

Tolnatej is controlled by a group of Hungarian private

investors under the holding company TEJINVEST

Nagykereskedelmi és Szolgáltató Korlátolt Felelősségű

Társaság.

Company data

21,0

69

23,4

43

26,7

69

1,31

3

1,24

7

2,05

7

840

245

712

6.2%

5.3%

7.7%

2011 2012 2013


12,2

62

13,1

35

14,2

91

9,15

9

9,44

4

10,5

44

-4,2

98

-3,9

43

-3,4

48

-3.27 -3.16

-1.68

2011 2012 2013




Highlights

Source:

Ceres Zrt.



Founded in 1951, Ceres is one of the most traditional

bakery companies in Hungary.

The company produces a wide range of fresh and pre-

packed goods, including bread, toast, pre-backed, specialty

and bio products under the Ceres brand.

Ceres operates bakeries in the cities of Győr and Miskolc,

with an annual production capacity of 24,000 tonnes of

bakery products, and has some 500 employees.

The company also manufactures gluten-free and diet

products through its subsidiary Multi Pékség.

In July 2010, Penam, a Czech bakery group controlled by

Czech agribusiness group Agrofert Holding, acquired full

control of Ceres for an undisclosed sum.

Company data

8,46

1

8,72

7

9,80

5

763

594

705

159

168

245

9.0%

6.8%7.2%

2011 2012 2013


5,84

8

5,78

9 7,05

8

2,54

6

2,71

2

2,95

7

1,94

9

1,96

1

2,71

4

2.55

3.30

3.85

2011 2012 2013




Highlights

Source:

Torley Kft.



Torley, founded in 1995, following the guidelines laid down

by József Törley in 1882, is the largest sparkling wine

producer in Hungary.

The company has own vineyards in the tradition-rich

Hungarian wine region of Etyek and operates two facilities

in the cities of Balatonboglár and Budafok, with a

production capacity of 24mn litres per year, employing

some 280 people.

Torley produces sparkling wine, based on three production

technologies Méthode Traditionnelle, Méthode Transvasée

and Méthode Charmat, non-alcoholic drinks, wine-based

cocktails and wines under the Torley brand.

In 2013, the company sold 18.5mn bottles of sparkling

wine, 12.2mn bottles of wine and 900,000 bottles of liquor,

with about a third of the sales coming from export. Torley

reached a share of 70% of domestic sales of sparkling wine

and of 8% of the sales of bottled wine in value terms.

The company's controlling shareholder is German producer

of sparkling wine, wine and spirits Henkell & Söhnlein.

Company data

16,1

99

16,1

88

16,4

04

1,98

3

1,40

4

1,63

7

1,61

4

570

212

12.2%

8.7%

10.0%

2011 2012 2013


18,3

88

19,2

03

19,9

21

13,9

52

14,6

13

14,8

81

-366

-183

-597

-0.18 -0.13 -0.36

2011 2012 2013




Contact:

Corporate Headquarters

6-8 Bouverie Street

London EC4Y 8DD

UK

Voice: +44 20 7779 8100

Fax: +44 20 7779 8224

Americas Headquarters

225 Park Avenue South

New York, New York 10003

US

Voice: +1 212 610 2900

Fax: +1 212 610 2950

Asia Headquarters

Eucharistic Congress Bldg. No.

III

4th Floor, 5 Convent Street

Mumbai 400 001

India

Voice: +91 22 22881123

Fax: +91 22 22881137

Disclaimer:

The material is based on sources which we believe are reliable, but no warranty, either expressed or implied, is provided in relation to the accuracy or completeness

of the information. The views expressed are our best judgment as of the date of issue and are subject to change without notice. EMIS and Euromoney Institutional

Investor PLC take no responsibility for decisions made on the basis of these opinions.

Any redistribution of this information is strictly prohibited. Copyright © 2015 EMIS, all rights reserved. A Euromoney Institutional Investor company.

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Documents

Food& Beverage Sector - EMIS Insight...A total of 4,971 companies are active in the food and beverage sector in Hungary. The majority of the companies (52%) are controlled by domestic