Voluntary Report - public distribution

**Date:** 3/25/2005

**GAIN Report Number:** EZ5005

EZ5005

**Czech Republic**

**HRI Food Service Sector**

**Annual Report**

**2005**

**Approved by:**

![](media/image1.wmf)Sarah Hanson

U.S. Embassy

**Prepared by:**

Petra Choteborska

**Report Highlights:**

The food service market reached over 3.4 billion USD in 2003 and is
forecast to grow by 4 to 5% in the next five years. Even an increase in
the Value Added Tax (VAT) for the foodservice sector (from lower rate of
5% to the basic level of 19%) as a result of the EU accession in May
2004, has not impacted the sector much. The Czech currency has
appreciated by 8% against the U.S. dollar since 2004, which is helping
U.S. exporters. Consolidation in the HRI sector has not yet happened,
and a major share of sales are generated by independent hotels and
restaurants. Most U.S. export products are shipped through the EU, which
creates opportunities for U.S. exporters servicing warehouses in Europe.
Direct imports are still small with most importers focusing on a
particular commodity (i.e. wine, seafood).

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

Vienna \[AU1\]

\[EZ\]

**Table of Contents**

I. Market
Summary...............................................................................
3

II\. Road Map for Market
Entry...............................................................\...
6

Entry Strategy and Market
Structure.................................................. 6

Sub-sector
Profiles.......................................................................
7

III\.
Competition..................................................................................
11

IV\. Best Product
Prospects.....................................................................
15

V. Post Contact and Further
Information.................................................... 17

***I. MARKET SUMMARY***

-   The Czech Republic has a stable, growing economy (around 3.6%) with
    growing disposable incomes. Inflation in 2003 was around 1.1%.
    However, the current Social Democratic government is unable to
    prevent unemployment growth, and the gap between relative prosperity
    and near poverty is getting bigger.

-   The foodservice market reached over 3.4 billion USD in 2003 and is
    forecast to grow by 4-5 % in the next five years.

-   The foodservice market changed dramatically in the past 15 years --
    after the fall of communism in 1989, state-owned restaurant chains
    disappeared from the market and many new entrepreneurs opened new
    restaurants.

-   As a result of privatization, the sector is extremely fragmented and
    the majority of operators (99.6% of units) are independent. A
    stronger focus on quality is evident as restaurants operate in an
    increasingly competitive market.

-   Three quarters of the restaurants are independent "stand-alone"
    operations; the only restaurant chains are in the fast food sector
    (McDonald's, KFC, Subway).

-   Expenditures in the food service sector reached one third of total
    expenditures on food.

-   The number of foreign tourists doubled since 1992 and has remained
    stable at around 7 million during the last 6 years, which is more
    than half of the total Czech population of 10 million inhabitants.

-   With the EU accession on May 1, 2004, the Czech government met all
    EU requirements and shifted the foodservice VAT from the decreased
    level of 5% to the basic level of 19%. The impact on the foodservice
    has been minor.

-   Imported products in foodservice include wine, fish and seafood,
    beef (from Argentina, however, after EU accession it is possible to
    import US hormone-free beef), rice, cheese, ham (with pizzerias
    importing much Italian crude ham and mozzarella and parmesan
    cheese), vegetables, and special ingredients. There is no official
    data on the value of HRI imported products. However, in the mid and
    upper market segments, the percentage of imported products is
    sizeable and increasing.

**Eating habits:**

-   Eating out is becoming much more popular -- since 1990 expenditures
    on foodservice grew eleven times faster than overall food
    expenditures. In the early 1990s people went to a restaurant usually
    to celebrate something; it was a treat. With growing purchasing
    power Czechs eat out much more often, especially young professionals
    living in Prague (the number of "SINKs" and "DINKs" -- single/double
    income no kids -- is increasing as people wait until their thirties
    to start a family).

-   The capital city Prague differs from the rest of the country --
    Prague has a high number of luxury and various ethnic cuisine
    restaurants (Mexican, Italian, Indian, Chinese, American, French,
    Thai), which are very often frequented by tourists and Prague
    residents.

-   In smaller cities and rural areas, people tend to eat more at home
    as is the case with the older generation in Prague.

-   Typical Czech cuisine (meat, heavy sauces, dumplings) is on the menu
    in lower price restaurants and pubs, while mid- and upper-level
    restaurants offer lighter, healthier alternatives -- e.g. full meal
    size salads are becoming more and more popular.

-   Czechs tend to eat their main meal of the day at noon, in canteens
    or restaurants that offer cheaper lunch menus. In the evening they
    usually eat sandwiches or quick meals from frozen ingredients that
    are becoming more popular (vegetable dishes, fish, fruit dumplings,
    pizza). Family cooking is done mainly on the weekends.

-   Czechs have the highest per capita consumption of beer (160 liters)
    in the world. Wine is becoming increasingly popular both in
    foodservice and at home (consumption grew from 16 to almost 20
    liters per capita in the past years). According to Czech Statistical
    Office data, U.S. wine imports to the Czech Republic reached 1.56
    million USD in 2004 due to growing demand for 'exotic' New World
    wines and promotional activities (including FAS sponsored wine
    promotions).

Market size in million USD:

  ------------------------ ---------- ---------- ---------- ---------- ----------
                           **1999**   **2000**   **2001**   **2002**   **2003**

                                                                       

    Consumer foodservice   2 820,6    2 586,2    2 708,7    3 162,6    3 733,8
  by type                                                              

      Cafés/bars           945,3      861,9      896,5      1 023,2    1 196,7

      Full-service         995        923,3      976        1 162,4    1 382,3
  restaurants                                                          

      Fast food            248,4      221,4      227,3      266,4      317,6

      100% home            \-         \-         \-         \-         \-
  delivery/takeaway                                                    

      Self-service         544,8      496,7      520,2      603,2      708,1
  cafeterias                                                           

      Street stalls/kiosks 87,1       82,9       88,6       107,5      129,1

                                                                       

  Source: Euromonitor 2004                                             
  ------------------------ ---------- ---------- ---------- ---------- ----------

Market size growth prediction in %:

  -------------------------- ------------- ------------- ------------- ------------- -------------
                             **2003-04**   **2004-05**   **2005-06**   **2006-07**   **2007-08**

                                                                                     

    Consumer foodservice by  4,2           4,2           4,7           5             5,4
  type                                                                               

      Cafés/bars             3,6           3,2           3,6           3,9           4,3

      Full-service           4,8           4,9           5,4           5,7           6,2
  restaurants                                                                        

      Fast food              5,7           6,2           6,7           7             7,2

      100% home              \-            \-            \-            \-            \-
  delivery/takeaway                                                                  

      Self-service           3,2           3,5           4             4,4           4,9
  cafeterias                                                                         

      Street stalls/kiosks   6,1           6,2           6,6           5,9           5,5
  -------------------------- ------------- ------------- ------------- ------------- -------------

Source: Euromonitor 2004

Market size -- number of units:

  --------------------------- ---------- ---------- ---------- ---------- ----------
                              **1999**   **2000**   **2001**   **2002**   **2003**

                                                                          

    Consumer foodservice by   26 882,0   27 089,0   27 135,0   26 984,0   26 831,0
  type                                                                    

      Cafés/bars              7 255,0    7 342,0    7 400,0    7 351,0    7 280,0

      Full-service            8 452,0    8 364,0    8 239,0    8 115,0    7 964,0
  restaurants                                                             

      Fast food               2 616,0    2 664,0    2 683,0    2 667,0    2 682,0

      100% home               \-         \-         \-         \-         \-
  delivery/takeaway                                                       

      Self-service cafeterias 1 305,0    1 310,0    1 313,0    1 314,0    1 315,0
  --------------------------- ---------- ---------- ---------- ---------- ----------

Source: Euromonitor 2004

**Market size -- number of units -- outlook:**

  ------------------------- ---------- ---------- ---------- ---------- ---------- ----------
                            **2003**   **2004**   **2005**   **2006**   **2007**   **2008**

                                                                                   

    Consumer foodservice by 26 831,0   26 763,0   26 758,0   26 804,0   26 807,0   26 781,0
  type                                                                             

      Cafés/bars            7 280,0    7 210,0    7 140,0    7 060,0    6 976,0    6 887,0

      Full-service          7 964,0    7 865,0    7 796,0    7 754,0    7 716,0    7 698,0
  restaurants                                                                      

      Fast food             2 682,0    2 707,0    2 751,0    2 807,0    2 859,0    2 910,0

      100% home             \-         \-         \-         \-         \-         \-
  delivery/takeaway                                                                

      Self-service          1 315,0    1 315,0    1 313,0    1 309,0    1 303,0    1 293,0
  cafeterias                                                                       

      Street stalls/kiosks  7 590,0    7 666,0    7 758,0    7 874,0    7 953,0    7 993,0
  ------------------------- ---------- ---------- ---------- ---------- ---------- ----------

Source: Euromonitor 2004

According to a Euromonitor forecast, the number of fast food restaurants
and street kiosks will grow in the next five years, while the number of
cafes/bars and full-service restaurants will decline. This is due to the
fact that people will want to spend less time sitting down in
restaurants and spend more time at work or their hobbies.

  ----------------------------------- -----------------------------------
  **Advantages**                      **Challenges**

  Growing disposable incomes          Falling population numbers

  Low prices of food and labor        Growing unemployment

  Popularity of Czech Republic as a   Still low average disposable
  tourist destination                 incomes

  Stronger currency - \$ depreciated  Increased VAT from 5% to 19%
  by 20% since last year towards CZK  foodservice sector since the EU
  and by 31% since 2003 (current      accession on May 1, 2004
  exchange rate: 1\$ = 23 CZK)        

  Economic and political stability    Low penetration by international
                                      operators (except for fast food)

  Foreign investment in fast food     There is no wholesale chain
                                      supplying HRI sector, to get
                                      products in this sector is more
                                      complicated (C&C Makro, importers,
                                      wholesalers)

  Growing popularity of eating out    Price competition of EU countries
                                      (one market -- duty free)

  There is a 40% growth of the upper  Upper segment market hotels and
  segment market, which has the       restaurants are mainly in Prague
  highest share of imported products  and a couple of other large or
                                      tourist cities (e.g. Brno, Karlovy
                                      Vary); the rest of the country is
                                      relatively 'poor'

  Some products have a lower import   Unawareness of high quality of U.S.
  duty after the EU accession (e.g.   food products (e.g. dried fruit,
  wine, distilled liqueurs)           frozen drinks, snacks, ingredients
                                      and ready frozen meals)
  ----------------------------------- -----------------------------------

***II. ROAD MAP FOR MARKET ENTRY***

***ENTRY STRATEGY AND MARKET STRUCTURE***

-   The best way to establish relations with the Czech HRI sector for
    U.S. exporters is to start business with Czech importers and
    wholesalers

-   More expensive hotels and restaurants buy directly from importers
    and distributors; mid and low segment restaurants purchase food from
    the cash and carry wholesaler Makro

-   Most food products served in hotels and restaurants are of Czech
    origin

-   Imported products include fresh produce, sea fish, alcoholic
    beverages, beef, etc.

***SUB-SECTOR PROFILES***

*Hotels*

-   Food sales in the hotel sector are less than half that of restaurant
    sales

-   Hotel sales are primarily in the high end market hotels of large
    cities (Prague, Brno, Karlovy Vary) and predominantly by business
    travelers

-   Most Czech hotels are independent, some are franchised in the OREA
    chain

**Top hotels in the Czech Republic**

+------------------+----------------------+----------+---------------+
| **Hotel chain**  | **Hotel name and     | **Lo     | **Turnover in |
|                  | category**           | cation** | 2003 in \$    |
|                  |                      |          | million**     |
+------------------+----------------------+----------+---------------+
| *International*  |                      |          |               |
+------------------+----------------------+----------+---------------+
| InterContinental | InterContinental,    | Prague   | \$52          |
| Hotels Corp.     | 5\*                  |          |               |
+------------------+----------------------+----------+---------------+
| Holiday Inn      | Holiday Inn, 5\*     | Brno     | \$5.2         |
|                  |                      |          |               |
|                  | Holiday Inn Congress | Prague   | \$9.3         |
|                  | Center, 4\*          |          |               |
+------------------+----------------------+----------+---------------+
| Marriott         | Renaissance Hotel,   | Prague   | \$21.6        |
| International    | 5\*                  |          |               |
| Inc.             |                      | Prague   | \$26.5        |
|                  | Marriott Hotel, 5\*  |          |               |
|                  |                      | Prague   | N/A           |
|                  | Marriott Executive   |          |               |
|                  | Apartments, 5\*      |          |               |
+------------------+----------------------+----------+---------------+
| Hilton Hotels    | Hilton, 5\*          | Prague   | \$52          |
| Corp.            |                      |          |               |
+------------------+----------------------+----------+---------------+
| Corinthia Hotels | Corinthia Towers     | Prague   | \$20          |
| International    | Hotel 5\*            |          |               |
|                  |                      | Prague   | \$18          |
|                  | Corinthia Panorama   |          |               |
|                  | Hotel 4\*            |          |               |
+------------------+----------------------+----------+---------------+
| Radisson SAS     | Radisson SAS Alcron  | Prague   | \$18          |
|                  | 5\*                  |          |               |
+------------------+----------------------+----------+---------------+
| Four Seasons     | Four Seasons Hotel   | Prague   | N/A           |
|                  | 5\*                  |          |               |
+------------------+----------------------+----------+---------------+
| Movenpick        | Hotel Movenpick      | Prague   | N/A           |
|                  | Praha 5\*            |          |               |
+------------------+----------------------+----------+---------------+
| Best Western     | 8 hotels in Prague   | Prague   | N/A           |
| International    | 4\*                  |          |               |
|                  |                      | Brno     |               |
|                  | 1 hotel in Brno 4\*  |          |               |
|                  |                      | Brno     |               |
|                  | 1 hotel in Brno 3\*  |          |               |
+------------------+----------------------+----------+---------------+
| Vienna           | Hotel Savoy 5\*      | Prague   | N/A           |
| International    |                      |          |               |
|                  | Hotel Palace 5\*     | Prague   | \$1.6         |
|                  |                      |          |               |
|                  | Andel's Hotel 4\*    | Prague   |               |
|                  |                      |          |               |
|                  | Hotel Diplomat 4\*   | Prague   |               |
|                  |                      |          |               |
|                  | Hotel Le Palais 5\*  | Prague   |               |
|                  |                      |          |               |
|                  | Hotel Dvorak 5\*     | Karlovy  |               |
|                  |                      | Vary     |               |
+------------------+----------------------+----------+---------------+
| Accor Hotels     | 6 hotels in Prague   | Prague   | N/A           |
+------------------+----------------------+----------+---------------+
| *Domestic*       |                      |          |               |
+------------------+----------------------+----------+---------------+
| Orea Hotels      | 25 hotels in the CR  | Whole    | \$54          |
|                  |                      | country  |               |
+------------------+----------------------+----------+---------------+
| Fortuna Hotels   | Quality Hotel Prague | Prague   | N/A           |
| (partner Choice  |                      |          |               |
| Hotels Europe)   | Comfort Hotel Prague | Prague   |               |
|                  | Airport              |          |               |
+------------------+----------------------+----------+---------------+

*Restaurants*

**Full Service Restaurants**

-   Full Service Restaurants account for the largest sector of the
    foodservice market and their sales are growing.

-   Full service restaurant chains are slowly appearing in the market
    (e.g. Coloseum -- pizzeria; Jarmark -- various style dishes, self
    service), but their share is very small.

-   Ethnic (mainly Italian pizzerias, Mexican, and Chinese; also French,
    Indian, Japanese, Middle East, Thai, etc.) and 'experience'
    restaurants (Ambiente, Pravek) are becoming more and more popular.

-   Many restaurants in the city center offer special lunch menus, which
    are usually much cheaper than their standard menu, in order to
    attract people working in the neighborhood.

-   Restaurants purchase ingredients and raw materials from producers,
    importers, and wholesalers.

**Market size by restaurant type**

**In million USD**

  ---------------------------- ---------- ---------- ---------- ---------- ----------
                               **1999**   **2000**   **2001**   **2002**   **2003**

                                                                           

      Full-service restaurants 995        923,3      976        1  162,4   1 382,3

        Casual dining @        \-         \-         \-         \-         \-
  full-service restaurants                                                 

        Pizza full-service     84,4       82,3       89,1       108,5      130,1
  restaurants                                                              

        Other full-service     910,5      841        886,9      1  053,9   1  1 252,2
  restaurants                                                              
  ---------------------------- ---------- ---------- ---------- ---------- ----------

Source: Euromonitor 2004

**Fast Food**

-   Fast food represents a relatively small part of the consumer
    foodservice market (less than 10% share of total restaurant sales)

-   Sales in fast food are stagnating or slightly declining due to
    healthier eating habits - fast food chains even though they offer
    salads etc. are considered 'unhealthy' eating

-   Over 50% of consumers are school kids and students

+----------------+---+---+---+-------------------------+------+------+--------+
| **Chained      |   |   |   | **Global Brand Owner**  |      |      |        |
| consumer       |   |   |   |                         |      |      |        |
| foodservice:** |   |   |   |                         |      |      |        |
|                |   |   |   |                         |      |      |        |
| **% value**    |   |   |   |                         |      |      |        |
+----------------+---+---+---+-------------------------+------+------+--------+
|                |   |   |   |                         | **20 | **20 | **     |
|                |   |   |   |                         | 01** | 02** | 2003** |
+----------------+---+---+---+-------------------------+------+------+--------+
|                |   |   |   |                         |      |      |        |
+----------------+---+---+---+-------------------------+------+------+--------+
| MdConald's     |   |   |   |     McDonald\'s Corp    | 82,7 | 80,5 | 80,2   |
+----------------+---+---+---+-------------------------+------+------+--------+
| KFC            |   |   |   |     Yum! Brands Inc     | \-   | 16,0 | 16,3   |
+----------------+---+---+---+-------------------------+------+------+--------+
| Pizza Hut      |   |   |   | Yum! Brands Inc         | \-   | 1.9  | 1.8    |
+----------------+---+---+---+-------------------------+------+------+--------+
| Harvey's       |   |   |   |     Cara Operations Ltd | 1,2  | 1,1  | 1      |
+----------------+---+---+---+-------------------------+------+------+--------+
| Little         |   |   |   |     Ilitch Holdings Inc | 0,6  | 0,5  | 0,5    |
| Ceaser's Pizza |   |   |   |                         |      |      |        |
+----------------+---+---+---+-------------------------+------+------+--------+
| Subway         |   |   |   |     Doctor\'s           | \-   | \-   | 0,2    |
|                |   |   |   | Associates Inc          |      |      |        |
+----------------+---+---+---+-------------------------+------+------+--------+
| KFC            |   |   |   |     Tricon Global       | 13,4 | \-   | \-     |
|                |   |   |   | Restaurants Inc         |      |      |        |
+----------------+---+---+---+-------------------------+------+------+--------+
| Pizza Hut      |   |   |   | Tricon Global           | 2.1  | \-   | \-     |
|                |   |   |   | Restaurants Inc         |      |      |        |
+----------------+---+---+---+-------------------------+------+------+--------+
| Total          |   |   |   |     Total               | 100  | 100  | 100    |
+----------------+---+---+---+-------------------------+------+------+--------+

Source: Euromonitor 2004

+----------+-----------------+-----------+------------+---------------+
| # Name   | # Turno         | # No. of  | # No. of R | # No.         |
|          | ver/Sales in 20 | Employees | estaurants |  of Customers |
|          | 03 (\$ million) |           |            |               |
+----------+-----------------+-----------+------------+---------------+
| ## *Mc D | # 83            | # 3 600   | #          | # 38 11       |
| onald's* |                 |           |  70 (Franc | 3 780 in 2003 |
|          |                 |           | hisees 21) |               |
+----------+-----------------+-----------+------------+---------------+
| ##       | 31 (in 2002)    | #         | # KFC 30   | # -           |
|  *Americ |                 | 500 - 999 |            |               |
| an Resta |                 |           |            |               |
| urants*  |                 |           |            |               |
+----------+-----------------+-----------+------------+---------------+

Source: company resources/Albertina

  -------------------------- ---------- ---------- ---------- ---------- ----------
  **Fast food -- market size **1999**   **2000**   **2001**   **2002**   **2003**
  by product in mil. USD**                                               

                                                                         

      Fast food              2 616,0    2 664,0    2 683,0    2 667,0    2 682,0

        Bakery products      750        721        671        614        583

        Burger               831        844        862        883        908

        Chicken              368        367        361        352        347

        Ice cream            278        305        318        325        336

        Fish                 \-         \-         \-         \-         \-

        Latin American       \-         \-         \-         \-         \-

        Middle Eastern       \-         \-         \-         \-         \-

        Asian                \-         \-         \-         \-         \-

        Pizza fast food      216        231        264        282        293

        Convenience stores   \-         \-         \-         \-         \-

        Other fast food      173        196        207        211        215
  restaurants                                                            
  -------------------------- ---------- ---------- ---------- ---------- ----------

Source: Euromonitor 2004

*Institutions*

-   Czechs typically eat a bigger meal at noon and smaller meal/sandwich
    in the evening.

-   During socialism cafeterias were part of a firm, where the majority
    of employees ate at noon. Many companies fell apart after the
    revolution and small businesses have been established. The larger
    companies today have sold their cafeterias (new companies rent their
    space) to private caterers such as Eurest, Sodexho or GTH. Even
    though today employees enjoy a wider range of establishments for
    their mid-day meals, the share of catering companies is growing.
    These caterers also provide meals to many hospitals and retirement
    homes.

-   Catering companies purchase ingredients and raw materials from
    producers, importers, and wholesalers.

### *General Catering*

+-------+----------+-----------+----------+--------------------------+
| #     | # Tur    | # No. of  | # No     | # Customers              |
|  Name | nover/Sa | Employees | . of Res |                          |
|       | les in 2 |           | taurants |                          |
|       | 002 (\$  |           |          |                          |
|       | million) |           |          |                          |
+-------+----------+-----------+----------+--------------------------+
| # E   | 112      | # 4 600   | # 300    | # daily ca               |
| urest |          |           |          | tering 250,000 people in |
|       |          |           |          |                          |
|       |          |           |          | # Czech go               |
|       |          |           |          | vernment, army, cantinas |
|       |          |           |          |  of private companies, h |
|       |          |           |          | ospitals, jails, schools |
+-------+----------+-----------+----------+--------------------------+
| # So  | # N/A    | # 1,700   | #        | # numb                   |
| dexho |          |           | Over 200 | er of major clients: 140 |
|       |          |           |          |                          |
|       |          |           |          | # cantinas of private co |
|       |          |           |          | mpanies, state offices,  |
|       |          |           |          | schools, hospitals, army |
+-------+----------+-----------+----------+--------------------------+
| # Ar  | 12       | #         | # N/A    | # hospita                |
| amark |          | 500 - 999 |          | ls, cantinas of private  |
|       |          |           |          | companies, state offices |
+-------+----------+-----------+----------+--------------------------+
| # GT  | # 14     | # 700     | # 58     | # monthly catering 400,  |
| H Cat |          |           |          | 000 people in state offi |
| ering |          |           |          | ces, army, schools, hosp |
|       |          |           |          | itals, private companies |
+-------+----------+-----------+----------+--------------------------+

# 

Source: company resources/Albertina

### 

### *Catering for special events*

+------------+--------------------+------------+-----------------------+
| # Name     | # Revenues from    | # No. of   | # No.                 |
|            |  Catering in 2003  |  Employees | of guests at largest  |
|            |                    |            | event catered in 2003 |
|            | # (\$ million)     |            |                       |
+------------+--------------------+------------+-----------------------+
| #          | # N/A              | # 36 - 132 | # 3,700               |
| # *Zátiší* |                    |            |                       |
+------------+--------------------+------------+-----------------------+
| ## *Inte   | # 4                | # 53 - 62  | # 27,500 (in 5 days)  |
| rcatering* |                    |            |                       |
+------------+--------------------+------------+-----------------------+
| ## *Vyše   | # 3                | # 68 - 120 | # 2,200               |
| hrad 2000* |                    |            |                       |
+------------+--------------------+------------+-----------------------+
| ## *Golem* | # 4 (in 2001)      | # over 100 | # 1,600               |
+------------+--------------------+------------+-----------------------+

Source: company resources/Albertina

***III. COMPETITION***

-   Domestic food production supplies the HRI sector with most products
    including meat, vegetables, beverages (beer, wine), and most
    ingredients.

-   Imported products include specialties (e.g. pastas for Italian
    restaurants), fish and seafood (many restaurants now offer at least
    salmon from the sea fish range), vegetables, rice, wine, and
    spirits.

-   Major competitors for U.S. exporters are EU countries (namely the
    neighboring countries like Germany, Slovakia, Poland, Austria, and
    other EU countries like the Netherlands, Italy, Hungary, Spain,
    Belgium, France, and Denmark)

-   U.S. exporters have the biggest advantage with specialty products
    (wine, spirits, ingredients, popcorn, tex-mex, nuts, etc.) or
    products with lower prices than in the EU (e.g. some seafood)

**Major competitors (over 1% market share) -- import of agricultural
products January -- October 2004**

  ---------------- ----------- ----------- ----------- ---------- ---------- ---------- -------------
  **Partner        **1,000                             **%                              **% Change\
  Country**        USD**                               Share**                          2004/2003**

                   **2002**    **2003**    **2004**    **2002**   **2003**   **2004**   

  World            2019701     2590266     3438038     100.00     100.00     100.00     32.73

  Germany          414665      535411      845859      20.53      20.67      24.60      57.98

  Slovakia         224352      276903      369510      11.11      10.69      10.75      33.44

  Poland           168810      220795      335127      8.36       8.52       9.75       51.78

  Netherlands      101058      122252      267936      5.00       4.72       7.79       119.17

  Austria          96783       127534      178179      4.79       4.92       5.18       39.71

  Italy            108869      135268      171005      5.39       5.22       4.97       26.42

  Spain            104354      139648      158802      5.17       5.39       4.62       13.72

  Hungary          81770       105477      130096      4.05       4.07       3.78       23.34

  Belgium          51064       64723       117899      2.53       2.50       3.43       82.16

  France           71947       84736       113539      3.56       3.27       3.30       33.99

  Denmark          36867       45892       65640       1.83       1.77       1.91       43.03

  China            48232       76673       65316       2.39       2.96       1.90       -14.81

  Brazil           48667       70419       58203       2.41       2.72       1.69       -17.35

  **United         **52184**   **56881**   **50641**   **2.58**   **2.20**   **1.47**   **-10.97**
  States**                                                                              

  United Kingdom   21824       24224       43913       1.08       0.94       1.28       81.28
  ---------------- ----------- ----------- ----------- ---------- ---------- ---------- -------------

Source: Global Trade Atlas

The following tables show major competitors in product areas, where the
U.S. has a share over 1%. These areas are:

-   live animals

-   fish

-   dried fruit and nuts

-   miscellaneous food items

-   beverages

-   tobacco

**Commodity: 01, Live Animals**

  ---------------- ---------- ---------- ---------- ---------- ---------- ---------- -------------
  **Partner        **1,000                          **%                              **% Change\
  Country**        USD**                            Share**                          2004/2003**

                   **2002**   **2003**   **2004**   **2002**   **2003**   **2004**   

  World            11951      13630      21304      100.00     100.00     100.00     56.30

  Slovakia         3620       3818       6083       30.29      28.01      28.56      59.34

  Germany          1893       2132       3111       15.84      15.64      14.60      45.89

  United Kingdom   2046       1982       2371       17.12      14.54      11.13      19.63

  Poland           502        1515       2362       4.20       11.12      11.09      55.85

  Netherlands      755        926        2336       6.31       6.79       10.97      152.40

  France           1162       671        1545       9.73       4.93       7.25       130.06

  Austria          721        666        1320       6.03       4.89       6.19       98.15

  Belgium          83         64         392        0.69       0.47       1.84       510.90

  **United         **374**    **443**    **370**    **3.13**   **3.25**   **1.74**   **-16.37**
  States**                                                                           

  Israel           0          0          266        0.00       0.00       1.25       0.00

  Spain            0          2          211        0.00       0.02       0.99       9677.54

  Ireland          2          54         148        0.02       0.39       0.69       174.68

  Hungary          46         309        126        0.38       2.26       0.59       -59.28
  ---------------- ---------- ---------- ---------- ---------- ---------- ---------- -------------

Source: Global Trade Atlas

**Commodity: 03, Fish And Crustaceans, Molluscs And Other Aquatic
Invertebrates**

  ---------------- ---------- ---------- ---------- ---------- ---------- ---------- -------------
  **Partner        **1,000                          **%                              **% Change\
  Country**        USD**                            Share**                          2004/2003**

                   **2002**   **2003**   **2004**   **2002**   **2003**   **2004**   

  World            38120      42948      45861      100.00     100.00     100.00     6.78

  China            9541       8050       8628       25.03      18.74      18.81      7.19

  Denmark          3976       4327       5764       10.43      10.08      12.57      33.21

  Argentina        1847       6600       3516       4.84       15.37      7.67       -46.72

  Poland           1151       1671       3376       3.02       3.89       7.36       101.99

  Ireland          3508       4013       3205       9.20       9.34       6.99       -20.13

  Netherlands      2709       2111       3172       7.11       4.92       6.92       50.26

  Germany          473        775        2909       1.24       1.80       6.34       275.61

  Norway           3202       3914       2531       8.40       9.11       5.52       -35.33

  **United         **2148**   **1671**   **2022**   **5.63**   **3.89**   **4.41**   **21.02**
  States**                                                                           

  France           938        1634       1393       2.46       3.80       3.04       -14.73

  Slovakia         478        757        1174       1.25       1.76       2.56       55.20

  Turkey           89         478        1057       0.23       1.11       2.31       121.38

  Spain            729        1064       889        1.91       2.48       1.94       -16.52

  Italy            634        565        860        1.66       1.32       1.88       52.09

  Sweden           11         72         594        0.03       0.17       1.30       724.60

  New Zealand      670        279        594        1.76       0.65       1.30       112.76

  Canada           1783       1016       594        4.68       2.37       1.29       -41.60
  ---------------- ---------- ---------- ---------- ---------- ---------- ---------- -------------

Source: Global Trade Atlas

**Commodity: 08, Edible Fruit And Nuts; Peel Of Citrus Fruit Or Melons**

  ---------------- ---------- ---------- ---------- ---------- ---------- ---------- -------------
  **Partner        **1,000                          **%                              **% Change\
  Country**        USD**                            Share**                          2004/2003**

                   **2002**   **2003**   **2004**   **2002**   **2003**   **2004**   

  World            191206     241790     281894     100.00     100.00     100.00     16.59

  Spain            29059      40658      46304      15.20      16.82      16.43      13.89

  Italy            33440      38916      31646      17.49      16.09      11.23      -18.68

  Germany          1768       1944       24860      0.92       0.80       8.82       1178.98

  Netherlands      2217       1486       19105      1.16       0.61       6.78       1185.82

  Belgium          2324       2879       17575      1.22       1.19       6.23       510.41

  Colombia         9170       11602      14703      4.80       4.80       5.22       26.72

  Greece           13439      15325      14145      7.03       6.34       5.02       -7.70

  Poland           5842       6533       11624      3.06       2.70       4.12       77.93

  Panama           13180      8717       10577      6.89       3.61       3.75       21.34

  Costa Rica       8576       8293       9047       4.49       3.43       3.21       9.09

  Ecuador          8792       14674      8036       4.60       6.07       2.85       -45.24

  South Africa     9103       10194      8000       4.76       4.22       2.84       -21.52

  **United         **5141**   **7539**   **7488**   **2.69**   **3.12**   **2.66**   **-0.68**
  States**                                                                           

  Cyprus           3694       5289       7161       1.93       2.19       2.54       35.41

  Turkey           7650       9597       5983       4.00       3.97       2.12       -37.66

  Slovakia         3687       6424       5787       1.93       2.66       2.05       -9.92

  Hungary          5788       7581       5341       3.03       3.14       1.89       -29.55

  France           4537       4091       5246       2.37       1.69       1.86       28.24

  Iran             3906       4844       4348       2.04       2.00       1.54       -10.23
  ---------------- ---------- ---------- ---------- ---------- ---------- ---------- -------------

Source: Global Trade Atlas

**Commodity: 21, Miscellaneous Edible Preparations**

  ---------------- ---------- ----------- ----------- ---------- ---------- ---------- -------------
  **Partner        **1,000                            **%                              **% Change\
  Country**        USD**                              Share**                          2004/2003**

                   **2002**   **2003**    **2004**    **2002**   **2003**   **2004**   

  World            172886     223978      258629      100.00     100.00     100.00     15.47

  Germany          28100      38601       49943       16.25      17.23      19.31      29.38

  Poland           23933      29226       40517       13.84      13.05      15.67      38.63

  Slovakia         12748      15415       22212       7.37       6.88       8.59       44.09

  Hungary          9201       9918        18077       5.32       4.43       6.99       82.27

  Netherlands      7180       7676        14315       4.15       3.43       5.53       86.49

  **United         **9885**   **11916**   **14074**   **5.72**   **5.32**   **5.44**   **18.11**
  States**                                                                             

  Austria          7962       10469       13210       4.61       4.67       5.11       26.18

  Italy            6837       11120       9816        3.95       4.96       3.80       -11.72

  Denmark          5367       7591        9788        3.10       3.39       3.78       28.95

  France           6751       9989        8859        3.91       4.46       3.43       -11.32

  Spain            6913       8229        8098        4.00       3.67       3.13       -1.59

  Switzerland      5263       12818       7904        3.04       5.72       3.06       -38.33

  Colombia         10579      14585       7117        6.12       6.51       2.75       -51.20

  Brazil           9084       11776       6859        5.25       5.26       2.65       -41.75

  United Kingdom   2314       2964        4014        1.34       1.32       1.55       35.45
  ---------------- ---------- ----------- ----------- ---------- ---------- ---------- -------------

Source: Global Trade Atlas

**Commodity: 22, Beverages, Spirits And Vinegar**

  ---------------- ---------- ---------- ---------- ---------- ---------- ---------- -------------
  **Partner        **1,000                          **%                              **% Change\
  Country**        USD**                            Share**                          2004/2003**

                   **2002**   **2003**   **2004**   **2002**   **2003**   **2004**   

  World            99564      133055     194948     100.00     100.00     100.00     46.52

  Slovakia         16813      27344      26785      16.89      20.55      13.74      -2.04

  Germany          5372       10822      24906      5.40       8.13       12.78      130.15

  Austria          11315      16643      21338      11.36      12.51      10.95      28.20

  Italy            12871      16420      19922      12.93      12.34      10.22      21.32

  France           9069       12822      19530      9.11       9.64       10.02      52.31

  Spain            5658       6304       14410      5.68       4.74       7.39       128.59

  Hungary          6548       8349       10089      6.58       6.27       5.17       20.84

  Netherlands      2621       2807       9465       2.63       2.11       4.86       237.18

  United Kingdom   3790       4082       6692       3.81       3.07       3.43       63.97

  Poland           4049       2518       6671       4.07       1.89       3.42       164.91

  Ireland          1593       2016       5475       1.60       1.52       2.81       171.52

  Belgium          1304       1724       4384       1.31       1.30       2.25       154.27

  **United         **4181**   **3799**   **3978**   **4.20**   **2.86**   **2.04**   **4.71**
  States**                                                                           

  Chile            969        1636       3351       0.97       1.23       1.72       104.87
  ---------------- ---------- ---------- ---------- ---------- ---------- ---------- -------------

Source: Global Trade Atlas

**Commodity: 24, Tobacco And Manufactured Tobacco Substitutes**

  ---------------- ----------- ----------- ----------- ----------- ----------- ---------- -------------
  **Partner        **1,000                             **% Share**                        **% Change\
  Country**        USD**                                                                  2004/2003**

                   **2002**    **2003**    **2004**    **2002**    **2003**    **2004**   

  World            63041       82486       131827      100.00      100.00      100.00     59.82

  Germany          7745        9840        35607       12.29       11.93       27.01      261.86

  Slovakia         10283       17115       12051       16.31       20.75       9.14       -29.59

  **United         **16592**   **13135**   **11777**   **26.32**   **15.92**   **8.93**   **-10.34**
  States**                                                                                

  Poland           2837        5275        8531        4.50        6.39        6.47       61.72

  Brazil           4965        7966        7601        7.88        9.66        5.77       -4.58

  Malawi           1594        3518        6448        2.53        4.26        4.89       83.30

  Netherlands      1164        2142        6322        1.85        2.60        4.80       195.06

  Greece           1973        3090        6261        3.13        3.75        4.75       102.63

  Austria          166         379         5310        0.26        0.46        4.03       1299.82

  India            223         750         4999        0.35        0.91        3.79       566.38

  France           1411        2042        4389        2.24        2.48        3.33       114.93
  ---------------- ----------- ----------- ----------- ----------- ----------- ---------- -------------

Source: Global Trade Atlas

***IV. BEST PRODUCT PROSPECTS***

-   All U.S. products need good promotions -- for the HRI sector on
    effective approach includes menu promotions (e.g. U.S. chefs
    demonstrate recipes for U.S. ingredients to chefs of top hotel and
    restaurants), wine tastings (for hotel and restaurant owners and
    sommeliers and for special wine stores), seafood promotions (for
    importers and chefs of hotels and restaurants). FAS organizes such
    promotions, and U.S. Exporters interested in this market should
    contact our office for additional details (see end of report for
    contact information).

**Category A: Products Present in the Market That Have Good Sales
Potential**

**Product Comments**

-   [**WINE**:]{.underline} U.S. wine exports are still relatively small
    (around 1% of Czech total imports) but have grown significantly to
    \$1.56 million in 2004 (Czech Statistical Office);
    [advantage]{.underline}: the reason for this growth is a growing
    popularity of the New World wines; [challenge:]{.underline} to sell
    high quality wines at higher prices while retailers look to the very
    low price category (e.g. one U.S. wine imported by Tesco is sold for
    \$3.8 at the retail lever, which is considered good price); more
    expensive U.S. wines are positioned as luxury items and cost more
    than they do in the U.S.

-   **[NUTS AND DRIED FRUIT:]{.underline}** In 2004, the Czech Republic
    imported nuts (0802 HTS -- other nuts incl. *almonds and
    pistachios*) worth of \$25 million, out of which \$11 million was
    sourced from the U.S.. The Czech Republic imported \$6 million worth
    of raisins (080620) out of which slightly less than \$1 million was
    from the U.S. These products compete with lower quality, lower
    priced products from countries such as Iran and Pakistan;
    [advantage:]{.underline} growing demand for better quality products;
    [challenge:]{.underline} to persuade Czech retailers to carry both
    kinds of nuts (more expensive/better quality/less expensive/lower
    quality) and not push importers only on price.

-   **[SPIRITS:]{.underline}** Bourbons and other types of U.S. spirits
    are well established in the Czech market; [advantage:]{.underline}
    these products have been heavily supported by TV commercials and
    have a stable market share; [challenge:]{.underline} the whole
    spirit segment is stagnating while Czech are slowly switching to
    wine consumption.

-   **[FISH AND SEAFOOD:]{.underline} T**otal import of live, fresh and
    frozen fish, fish fillets, and seafood (03 HTS) to the Czech
    Republic in 2004 was \$58 million, out of which \$3 million was from
    the U.S. (the actual number may be higher as a result of
    transshipments); [advantage]{.underline}: lower cost products,
    availability; [challenge]{.underline}: higher transportation costs
    than from Europe.

-   **[RICE:]{.underline}** In 2004, total rice imports accounted for
    \$22 million, out of which \$600,000 was from the U.S.;
    [advantage]{.underline}: high quality product, which needs
    promotion; [disadvantage]{.underline}: higher cost.

-   **[POPCORN, PEANUT BUTTER:]{.underline}** Products associated with
    the U.S.; [advantage:]{.underline} little or no competition;
    [challenge:]{.underline} increasing Czech consumers' preferences for
    these products

**Category B: Products Not Present in Significant Quantities but Which
Have Good Sales Potential**

**Product Comments**

-   **[BEEF:]{.underline}** U.S. hormone free beef is exported to the EU
    and after the Czech Republic's accession to the EU may be exported
    on the Czech market; [advantage:]{.underline} Prague has several
    specialized beef steak houses and many expensive restaurants;
    [challenge:]{.underline} U.S. beef would have to be promoted as a
    product of high quality and special taste to compensate higher price
    (compared to Czech beef).

-   **[HEALTHY/ORGANIC:]{.underline}** Demand for organic and healthy
    products is growing and is higher than supply.

-   **[CONVENIENCE/POWDERS:]{.underline}** People work longer hours and
    have less time for cooking, which increases demand for convenience
    foods; frozen meals of good value have a good market potential; high
    quality powder mixes for various beverages are not available on the
    Czech market and have a good market prospect.

-   **[ETHNIC/SPECIALTY/GOURMET:]{.underline}** Some ethnic food, e.g.
    koscher food, has a good potential since the Czech Republic and
    especially Prague is visited by many ethnic groups who oftentimes
    cannot find their special products on the Czech market.

-   **[FRESH FRUIT:]{.underline}** Red grapefruit and other fresh fruit
    from the U.S. have good sales potential, since consumption of fresh
    fruit is rising and consumers are seeking new and more exotic
    products.

Category C: Products Not Present Because They Face Significant Barriers

-   **[PRODUCTS CONTAINING GMO:]{.underline}** Even though Round-up
    Ready soybean is approved for use in food, Czech retailers request a
    certification from importers that states their products are GMO
    free; in the HRI sector this may not be so strict, so some products
    made from GM crops are imported (e.g. soybean oil); however, items
    like tacos and other corn chips would face difficulties in the Czech
    market

***V. POST CONTACT AND FURTHER INFORMATION***

**American Embassy Prague**

Office of Agricultural Affairs

Petra Choteborska

Agricultural Specialist

Trziste 15

118 01 Praha 1

Tel: +420-257-531-170

Fax: +420-257-531-173

E-mail: <petra.choteborska@usda.gov>

[www.usembassy.cz](http://www.usembassy.cz/)

[www.fas.usda.gov](http://www.fas.usda.gov/)

[www.usembassy-vienna.at/usda](http://www.usembassy-vienna.at/usda)

**National Federation of Hotels and Restaurants of the Czech Republic**

Mr. Pavel Hlinka

President

Senovazne namesti 23

110 00 Praha 1

Tel: +420-224-14-2684

Fax: +420-224-142-681

E-mail: <nfhr@nfhr.cz>

[www.nfhr.cz](http://www.nfhr.cz/)

**HOREKA CR**

Ms. Miroslava Luprichova

President

Vinohradska 46

120 41 Praha 2

Tel: +420-224-912-225

Fax: +420-224-912-225

E-mail: <president@horeka.cz>

[www.horeka.cz](http://www.horeka.cz/)

**Mag Consulting**

Mr. Jaroslav Beranek

Director

Taboritska 23

130 87 Praha 3

Tel: +420-267-092-284

Fax: +420-267-092-285

E-mail: <magcon@magconsulting.cz>

[www.magconsulting.cz](http://www.magconsulting.cz/)

**Incoma Consult**

Ms. Martina Heindl

Project Manager

Barrandov Businness Centre

Geologicka 2

150 00 Praha 5

Tel: +420-251-117-525

Fax: +420-251-117-512

E-mail: [heindl@incoma.cz](mailto:bartosova@incoma.cz)

[www.incoma.cz](http://www.incoma.cz/)

**Ministry of Agriculture**

Dr. Milena Vicenova

Head of Food Safety Department

Tesnov 17

117 05 Praha 1

Tel: +420-221-812-937

Fax: +420-221-812-965

E-mail: <milena.vicenova@mze.cz>

[www.mze.cz](http://www.mze.cz/)

(Exchange rate: average 2004: 1\$ = 25 CZK, January 2004 1\$ = 23 CZK)