Difficult economic conditions are requiring changes in the strategies pursued by domestic companies. Tothis end, in September 2008, leading Croatian food and drink firm Podravka announced that it expects torecord stronger full-year results for 2008, following a cost-cutting campaign. Having been considered anunderperforming company for many years, Podravka is to be transformed under the company's new CEO,who stated that the firm has ‘made serious efforts to cut “nice to have” items and keep only “musthaves”’. Similarly, major players in Croatian mass grocery retail (MGR) sector are joining forces to fightinflation and achieve best purchasing prices. In October 2008, Mercator, Plodine and Rewe-owned Billaannounced that they are forming a joint venture (JV), which will be used to purchase products at cheaperrates, passing on the benefits to consumers. Other companies, such as retail operator Konzum, inpartnership with software specialist Paragon, are working to improve their supply chain management.In the meantime, food and drink companies are also responding to market changes through expansion. InAugust 2008, major Croatian food conglomerate Agrokor was reportedly in takeover negotiations withAlfa Dinamic, the founding member of a cluster of Gastro Grupa. (Gastro Grupa comprises some 30companies, which are the main suppliers of the hotels, restaurants and cafés in Croatia.) The transactionwould follow Agrokor’s July 2008 purchase of Roto Promet, the largest domestic distributor of alcoholicand soft drinks. Shortly afterwards, Agrokor bid to purchase a 48% stake in food retailer and wholesalerZitnjak, with the acquisition potentially reducing Agrokor’s distribution costs. Finally, Agrokor hasrepeatedly been linked with the purchase of a majority stake in Russian retail chain Lenta, although theRussian operator has refused to confirm the rumours.On the other hand, foreign companies are making increasing forays into the Croatian food and drinkindustry. In September 2008, French dairy firm Lactalis increased its stake in Croatia's Kim Dairythrough its local subsidiary Dukat Dairy Industries. Kim processes raw milk and produces ultra-hightemperature (UHT) long-life sterile milk, with the latter segment expected to perform well in the comingyears. Similarly, quoting ‘huge potential’ of the Eastern European probiotics and supplements market,Swedish probiotics specialist Probi cemented two distribution deals in Eastern Europe, including Croatia.Its probiotic supplement based on Probi's Lp299v strain will go on sale as a non-prescription, foodsupplement.On an economic front, Croatia is likely to experience a slowdown, but also a soft landing, unlike its majortrading partners in Western Europe. Real GDP growth over our five-year forecast period will average3.3%, which will underpin long-term convergence with the eurozone. This slower growth climate will beprimarily driven by real consumer spending growth, despite the slowing pace of credit expansion withinthe local economy. Croatia also remains on target for an accession into the European Union (EU), whichis most likely to be finalised in 2011 or 2012.