September 15, 2005

Central and eastern Europe's rising feed additives market

Following their accession to the EU in 2004, the new member states of central and eastern Europe (CEE)-the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia-are experiencing improved economic conditions.

Growth in the CEE feed additives markets-for which the key sectors are swine and poultry-is spurred mainly by expectations for rising exports and increased investments into CEE's agricultural infrastructure, according to a recent research done by consulting company Frost & Sullivan.

Increasing price stability of feed ingredients and additives, and lower production costs are also boosting the local use of functional feed additives and other ingredients.
  

Currently, many local companies supplying animal feed additives are primarily distributors or pre-mixers. However, manufacturers-usually European or global players-and many large compound feed and livestock production organisations have entered the CEE.

Frost & Sullivan's programme manager Kathy Brownlie said, "Despite the inadequate nature of much of the agricultural industry infrastructure, many companies active in this industry sector believe that the CEE feed additives market will grow by over 50 percent over the next five years.

"They also believe that the market is yet to reach its full revenue potential."

Although several local feed additive sectors are well established, many others are still at developmental stage. As such, with the relatively few suppliers active in these sectors, growth potential is immense.

Besides, there are also higher sophistication in production methods and improved farmer education. As CEE farmers become more knowledgeable on animal husbandry and animal nutrition and hygiene, the feed additive use in livestock diets is set to surge.

However, the EU accession is also likely to generate challenges for CEE feed additive manufacturers. EU regulations on environmental issues, consumer protection and animal welfare in CEE countries will temporarily restrict market development.

Smaller, domestic suppliers will too be bound by the introduction of lengthy and expensive registration procedures for feed additives.

Brownlie said that as such, local suppliers might merge, face takeovers from foreign competitors or simply exit the market.

Another area of concern for local CEE feed additives suppliers is competition from highly sophisticated, market-oriented international suppliers.

Attracted by its growth potential, large feed additive suppliers have already established manufacturing plants in the CEE region, expanded manufacturing plants' capacity, or started working with local businesses.

Currently, the amino acids sector dominates the CEE feed additives market both in terms of volume and value. However, the impending 2006 ban on antibiotic growth promoters is likely to provide impetus for feed acidifier use.

As such, alternative growth enhancing products such as feed acids will experience considerable growth-a trend that Frost & Sullivan expects to continue till 2011.