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Argentina Food and Drink Report 2011
Business Monitor International, Jan 2011, Pages: 66
The Argentina 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 Argentina's food and drink industry.
Argentina’s relatively large population and strong consumption culture bode well for investment across the food and drink sector over the medium term. However, the country continues to lag behind more investor-friendly economies in Latin America in the race to attract foreign capital. Food consumption has increased rapidly in the last few years following the 2001 financial crisis. However, a series of ‘voluntary’ price freezes and reductions on basic foodstuffs implemented as part of the government’s efforts to curb inflation means that a return to pre-crisis year-on-year growth rates is now unlikely in the foreseeable future.
Headline Industry Data:
2011 per capita food consumption = -8.6%; forecast to 2015 = +30.9%
2011 alcoholic drink sales = -1.7%; forecast to 2015 = +37.4%
2011 soft drink sales = +10.1% ; forecast to 2015 = +40.2%
2011 mass grocery retail sales = +8.3%; forecast to 2015 = +41.5%
Key Industry Trends & Developments:
Argentina Loses Top Spot for Beef – Hit by the worst drought in 70 years and a reduction in cattle numbers on the Pampas due to government export limits, Argentina during 2010 lost its place as the world’s largest consumer of beef. Per capita consumption is falling to 57.3 kilos on an annual basis, the lowest since the end of the 1950s. Uruguay has also supplanted Argentina as the world’s largest global supplier of beef. Argentine President Cristina Fernandez's administration has imposed export quotas on beef and some grains in order to guarantee domestic supplies and keep prices in check. Increasing numbers of Argentine ranchers are turning fields over to more lucrative soybeans, pushing up beef prices and triggering state intervention to limit price increases on the product.
Carrefour Strategy Reflects Uncertainty – Carrefour announced plans to invest up to ARS250mn (US$65mn) in Argentina during 2010 to open 23 stores. With around 600 stores, Carrefour is the largest MGR operator in Argentina and is the only global player to have a sizable presence. The move came as the country showed signs of rebounding from an economic downturn caused by the global financial crisis, which temporarily curbed consumption and hit sales at the country's major retailers. However, the investment was less than the average amount invested during 2006 and 2009, when Carrefour directed a total of ARS1.25bn towards the country, suggesting that the company quite rightly may be unsure of the long-term growth trajectory of the country's mass grocery retail (MGR) sector.
Key Risks to Outlook:
Runaway Inflation – Argentina's runaway inflation continues to hurt economic development, weighing on credit growth and hampering much-needed investment. The country's inflationary woes show little sign of diminishing any time soon, raising the prospect that the distortionary impact of uncontrolled consumer price increases will continue to hamper the economic development of South America's second largest economy well into 2011. With annual wage negotiations securing 25%-plus increases, fiscal spending firmly on the up and the central bank continuing to intervene heavily in the foreign exchange market, the key drivers of inflation over recent years remain in place, implying that a return to manageable, single digit price rises is some way off for now.
A Hard Landing Awaits – Despite the upward revision to our growth forecasts for 2010 and 2011, our core macroeconomic conviction about the Argentine economy remains firmly in place: until the current policy mix comes to an end, Argentina will fail to achieve sustainable growth and as a result find itself lagging behind more politically and economically stable regional peers beyond 2012.
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