"Italy Food & Drink Report Q4 2013" Published

Despite signals that the worst is over in Italy, we nonetheless expect the economy to remain in recession throughout 2013, forecasting real GDP to contract by 1.5%. With poor employment prospects and a prolonged recession weighing on consumer confidence, an ongoing decline in property values will further damage Italian perceptions of wealth and willingness to spend. Our forecast for GDP growth in 2014 and 2015 is 0.1% and 0.7% respectively, which reflects our view that a lack of structural reforms will limit the country's competitiveness and productivity gains, with spillover effects on the food and drink industry.

Headline Industry Data (local currency)

* 2013 per capita food consumption = +0.09% year-on-year (y-o-y); compound annual growth rate (CAGR) to 2017 = +1.02%
* 2013 alcoholic drink value sales = +2.28%; CAGR to 2017 = +2.45%
* 2013 soft drink value sales = -1.12% ; CAGR to 2017 = +1.48%
* 2013 mass grocery retail sales = +0.15%; CAGR to 2017 = +1.22%

Key Industry Trends And Developments

Full Report Details at
- http://www.fastmr.com/prod/712788_italy_food_drink_report_q4_2013.aspx?afid=301

Swiss Emmi Acquires Rachelli: In summer 2013 Swiss dairy group Emmi acquired premium Italian specialist dessert manufacturer Rachelli. The financial details of the transaction were not disclosed. Rachelli operates in more than a dozen countries and produces ice cream, frozen desserts and chilled desserts such as tiramisu. The deal will allow Emmi to reinforce its position in the European market for Italian speciality desserts, strengthening its expertise in a niche sector.

Conad Outperforms The Market: In summer 2013 Italian retailer Conad reported positive results for 2012 despite a difficult year for household budgets and consumption in Italy. Turnover for the full year climbed by 7.3% to reach EUR10.9bn. The store network stood at 3,067 outlets with floor space of more than 1.7mn square metres. Conad attributed a 0.7% growth in market share to new openings, with the retailer's share of the Italian grocery market now standing at 11.3%.

Key Risks To Outlook

The outlook for the Italian economy depends on developments in the eurozone and Italian politics given that Italy's large public debt leaves it particularly vulnerable to crises of confidence. The ongoing risk of government instability or the potential for the government to overreach in its attempts at stimulating the economy could lead to further problems. If cooperation between the centre-left and centre-right coalition were to break down and fresh elections called, this would increase uncertainty and weigh on the consumption and investment outlook. A loss of bond market confidence would risk sparking a public debt crisis, with the only option for the government being an immediate sharp reduction in expenditure, which would be negative for growth.

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