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Venezuela Food and Drink Report Q4 2010
Business Monitor International, Sep 2010, Pages: 67
The Venezuela Food and Drink Report provides industry professionals and strategists, corporate analysts, food and drink associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Venezuela's food and drink industry.
Our short-term outlook for food and drink spending in Venezuela is poor. Unlike many of its regional peers Venezuela is struggling to escape from recession and we are forecasting an economic contraction of 3.8% in 2010 on the back of a decline of 3.3% in 2009. One of the most conspicuous symptoms of Venezuela's economic malaise is the persistence of fierce inflationary pressures. This is reflected in our US dollar consumption forecasts, with the value of the Venezuelan bolivar expected to depreciate significantly over the next five years. In an attempt to control the problem the government has nationalised large parts of the domestic food and drink industry.
Key Forecasts
-2011 per capita food consumption (US$) = +22%; forecast to 2014 = -7.4%
-2011 alcoholic drink sales (US$) = +4.6%; forecast to 2014 = -29%
-2011 soft drink sales (US$) = +12%; forecast to 2014 = -17%
-2011 mass grocery retail sales (US$) = +18%; forecast to 2014 = -9%
Key Macroeconomic Data
-2010 Real GDP growth = -3.8%, 2011 Real GDP growth= +3.2%, (2009, -3.3%)
-2010 Consumer Price Index = +40% chg y-o-y (period average) (2009, +26.9%)
-2010 Unemployment Rate = 9.5% (end of period) (2009, 8.8%)
Key Company Trends and Developments
Risk of appropriation – Over the last few months the Venezuelan government of Hugo Chávez has taken further steps towards nationalising the country’s food industry with decrees to seize assets belonging to Mexico-based Gruma and Venezuela-based Empresas Polar. The risk of appropriation remains a major threat for food and drink players operating in Venezuela and partly explains why the country remains in bottom position in our Latin American Food and Drink Business Environment Ratings.
Nationalisation of retail industry – In September 2010, it was reported that Chávez had approved a US$690mn payment plan to acquire the 80% majority stake in Casino-owned Cativen, whose stores were appropriated at the beginning of the year. The Exito and Cada chains will become part of a new state chain called Bicentanario, which Chávez has said will ‘strengthen the transition to the socialist economic model’. This represents the first time the government has turned its attention to the retail sector and other retailers in the country must now be concerned that such moves may represent the start of a trend.
Key Risks to Outlook
Possible upside risk – The dire economic environment could hold positives in the longer term, with a fall in the popularity for Chávez meaning that an alternative candidate could emerge victorious in the 2012 elections. If there is a change of leadership in 2012 and a shift to a more moderate administration, we believe that the Venezuelan economy has the potential to experience solid rates of economic expansion over the long term, with positive implications for our consumption forecasts.
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