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Chile Food and Drink Report Q1 2011
Business Monitor International, Nov 2010, Pages: 72
Chile 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 Chile's food and drink industry.
Domestic food consumption has increased rapidly over the last five years. This growth came to an abrupt halt in 2009, with lower consumer confidence and increased price sensitivity meaning that per capita consumption stagnated. However, growth has returned in 2010 and food consumption is expected to increase steadily over the next five-year period. Consumption is expected to be driven by increased purchasing power, as income levels continue to catch up with those in developed markets. This makes the purchase of processed food products an option for a growing proportion of the population and offers food and drink manufacturers’ opportunities to launch new, innovative value-added products.
Headline Industry Data
- 2011 per capita food consumption = +8%; forecast to 2015 = +36%
- 2011 alcoholic drink sales = +6%; forecast to 2015 = +27%
- 2011 soft drink sales = +9% ; forecast to 2015 = +43%
- 2011 mass grocery retail sales = +5%; forecast to 2015 = +21%
Key Company Trends
Low growth in domestic wine demand requires focus on exports – The reputation of Chilean wine is among the best of all New World producers, with a history of quality that started with wine industry reforms in the 1980s. Paradoxically, despite the growing export demand, consumption of wine on the domestic front has stagnated for several years and is expected to grow only slightly over the five-year forecast period. This has seen major Chilean producers focus on exports and with an emphasis on branding coupled with value Chile has proven to be in a strong position to make progress on the export front during the economic downturn.
International retail expansion – With the local retail market fairly mature, it is logical that major Chilean retailers have started investing heavily outside Chile. This has continued into the latest quarter with Cencosud announcing in October 2010 the acquisition of Brazilian supermarket operator Supermercado Bretas for BRL1.35bn (US$814mn). Bretas operates 62 supermarkets and three distribution centres and the acquisition will significantly expand Cencosud’s Brazilian operations. Bretas represents Cencosud’s largest acquisition since 2005 and will cement the firm’s position as the country’s fourth largest grocery retailer.
Key Risks to Outlook Market maturity – A limiting factor on our growth forecasts is the growing maturity of the food, drink and retail sectors; for example, Chileans are already among the highest consumers of soft drinks in the world. Secondary Chinese slowdown – Along with market maturity the key risk to our consumption forecasts is the prospect of a secondary slowdown in China. Chinese demand for strategic raw materials such as copper helped prop up Chilean growth during 2009 and the country has now overtaken the US as Chile's main export destination. However, overly accommodative fiscal and monetary stimuli in China have led to an overheating that could result in a sharp withdrawal in 2011.
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