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Venezuela Food and Drink Report Q1 2011
Business Monitor International, Dec 2010, Pages: 66
TheVenezuela 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.
French dairy producer Leche Pascual has announced plans to build a yoghurt factory in Venezuela through a joint venture with local food producer Empresas Polar. The two firm’s will invest US$104mn in the facility and have set a goal of gaining 50% market share over the next ten years. The factory is to focus on solid and liquid yoghurts and will be distributed by a new joint venture named Pascual Andina. Although BMI is usually in favour of developed market firms expanding their presence in emerging markets, in this instance we would highlight the significant risks that this investment entails, with the economy expected to underperform the wider region and any successful food firm having the potential to be targeted by the country’s government for appropriation
Key Forecasts:
2011 per capita food consumption (US$) = +23%; forecast to 2015 = 15%
2011 alcoholic drink sales (US$) = +20%; forecast to 2015 = -15%
2011 soft drink sales (US$) = +12%; forecast to 2015 = -9%
2011 mass grocery retail sales (US$) = +16%; forecast to 2015 = 2%
Key Company Trends and Developments:
Dairy Sector Attracts Investment – Leche Pascual and Empresas Polar have stated that their yoghurts will attempt to appeal to the country’s middle and lower classes by offering long-life products that do not require refrigeration. This strategy also fits with our economic outlook for the country, but whether consumers with declining purchasing power are likely to spend money on yoghurt, which across Latin America is seen as something of a luxury, is certainly open to question.
Nationalisation Of Bottler Has Implications For Empresas Polar – In October 2010, the Venezuelan government of Hugo Chávez has fired a warning shot at the country’s largest food producer Empresas Polar after accusing it of orchestrating a protest against the nationalisation of a major bottling firm. With the government keen to gain full control of the food industry in what we see as a misdirected effort to stem very high inflation, Empresas Polar has always looked in a vulnerable position. However, with the government now taking control of one of its major suppliers and accusing it of orchestrating protests, its status as an independent entity is looking increasingly perilous.
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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