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Colombia Food and Drink Report Q3 2011
Business Monitor International, May 2011, Pages: 80
The Colombia 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 Colombia's food and drink industry.
The results posted by leading Colombian retailer Almacenes Exito for 2010 point to a sustained growth in domestic demand. This strong bounce supports a positive outlook for the Colombian consumer over a five-year forecast period, with real GDP growth expected to accelerate over the coming quarters. This pace of expansion will see Colombia become one of the fastest growing economies in South America by 2012 and it will be aided by significant volumes of foreign direct investment (FDI) over the medium term in the energy, mining and infrastructure sectors.
This growth is expected to filter through to private consumption and to be boosted by credit growth and a decline in persistently high unemployment levels. BMI expects banking sector stability to promote a large uptick in private sector credit growth over the coming years and this report also forecasts improvement in unemployment over the medium term as the investment boom creates new job opportunities across the country.
Headline Industry Data (in local currency):
?? 2011 per capita food consumption = +6.9%; forecast to 2015 = +44.0%.
?? 2011 alcoholic drink sales = +1.9%; forecast to 2015 = +16.5%.
?? 2011 soft drink sales = +4.3% ; forecast to 2015 = +27.7%.
?? 2011 mass grocery retail sales = +8.5%; forecast to 2015 = +59.2%.
Key Company Trends
SABMiller faces short and long-term challenges in Colombia: The results of brewing giant SABMiller continue to point to particular weakness in the Colombian market. In its quarterly results covering the three months to December 31 2010, SABMiller reported that lager volumes in the country declined by 5%. The result dragged down the performance for the Latin American region, with year-on-year (y-o-y) volumes for the region coming in 1% lower despite a relatively weak comparison period. The declining sales were attributed to significant new taxes and exceptionally bad weather.
Colombian convenience sector to become keenly contested battle ground: In February 2011, Colombia's largest retailer, Almacenes Exito, said it would invest US$160mn this year, primarily to expand its Colombian store network. Exito and its closest rival, Carrefour, are focusing on smaller formats. Exito has announced that its 2011 expansion plans will focus on its urban convenience and discount stores, while Carrefour is trialling its Carrefour Express convenience banner. These outlets are designed to capture market share from the ‘mom and pop' stores that still account for a large proportion of domestic grocery sales. Both retailers have identified small format stores as likely to be a key growth driver in the future and in this respect they have been joined by Mexico's Femsa, which began opening its Oxxo branded convenience outlets in Colombia in 2008.
Key Risks To Outlook Rising food price inflation: Following the floods in late 2010 and early 2011, there is a growing risk that greater than expected food price inflation could push the consumer price index (CPI) to the top end of the central bank's 2.0-4.0% target band over the coming months, or even beyond. According to the government, rains damaged over 680,000 hectares of crops (over 10% of the country's farmed land). As a result, there is significant scope for food price inflation to tick up considerably, which would put downwards pressure on confidence and the propensity to spend.
External risks: A marked deterioration in Colombia's external environment, prompted by a collapse in global oil prices or a political crisis in neighbouring Venezuela, could weigh dramatically on the economy's net exports and the level of FDI.
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