Boston, MA -- (SBWIRE) -- 01/06/2014 -- Lithuania has finally escaped the most severe economic crisis over the past decade. The post-downturn period will be marked by modest economic expansion, with forecast real GDP growth of 3.4% in 2013 and 3.6% in 2014. Recovering consumer optimism will be mitigated by persisting high unemployment levels and continued government austerity measures. High emigration levels and negative natural population growth will set the country's 3m population on the decline, which will become a fundamental obstacle for food and drink industry expansion over the longer term.

Headline Industry Data (local currency)

- Per capita food consumption growth in 2013: +2.68%; compound annual growth rate (CAGR) to 2017: +4.00%
- Alcoholic drinks sales value growth in 2013: -0.55%; CAGR to 2017: +4.14%
- Total mass grocery retail sales growth in 2013: +1.89%; CAGR to 2017: +6.29%

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Key Company Trends

Zemaitijos Pienas To Establish UK Cheese Brand: Lithuanian cheesemaker Zemaitijos Pienas is to open a chain of cheese cafes in and around London, according to The Grocer. The cafes will operate under its Dziugashouse brand, and sell a range of cheeses, in addition to other consumables including ice cream and chocolate. The launch follows the company's decision to establish a sales office in the UK earlier in 2013. Polish Frozen And Chilled Ready Meals Company Targeting Lithuania: In November 2012, local press reported that Polish company U Jedrusia, which deals in the manufacturing and distribution of frozen and chilled ready meals, is planning to expand to the Baltic region. The company reportedly is targeting Lithuania first, focusing on the less developed sector of chilled ready meals. U Jedrusia will reportedly partner with retailer Maxima in order to gain maximum exposure to consumers.

Vilniaus Degtine Posts Strong H112 Performance: One of the most prominent alcoholic drinks manufactures in Lithuania, Vilniaus Degtine, posted a 38.9% year-on-year (y-o-y) increase in sales in H112. In volume terms, sales were 24.2% higher, with the positive performance attributed to the 'renewal of the product range and active marketing activities'. Its exports grew 37.3% in the same period.

Key Risks To Outlook

We believe that the immediate risks to our outlook on Lithuania's economy lie to the upside, given that a robust performance in gross fixed capital formation in H113 could extend into the second half of the year, which would see stronger fixed investment growth in 2013 than we are currently forecasting. The positive effects on growth, however, would be somewhat muted by stronger than expected imports of goods and services growth, as higher fixed investment would require higher imports of capital and intermediary goods.

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