Venezuela Food and Drink Report Q3 2011
Business Monitor International, June 2011, Pages: 76
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.
In BMI’s view Venezuela's economic recovery from its two-year recession will be shaky, as they expect positive real GDP growth to be accompanied by chronic inflation, more nationalisations and stagnant oil production. Given that these factors are likely to weigh on private consumption, BMI believes that the majority of economic expansion will be fuelled by higher oil prices and the resulting uptick in petroleumrelated activity. That said, the recent increase in oil prices should have a positive impact on private consumption, particularly as the state will be able to fund an increasing volume of direct transfers.
Private consumption also stands to benefit from a gradual decline in inflation over the coming years. Indeed, even though inflation will remain elevated, given that it is such a politically sensitive issue, we believe that Chávez will be particularly aggressive with his subsidies and price caps in order to rein in the headline figure in the run-up to the presidential election in 2012.
Key Forecasts
- 2011 per capita food consumption (US$) = +7.5%; forecast to 2015 = -36.2%
- 2011 alcoholic drink sales (US$) = +4.4%; forecast to 2015 = -32.4%
- 2011 soft drink sales (US$) = +2%; forecast to 2015 = -42.2%
- 2011 mass grocery retail sales (US$) = +3.9%; forecast to 2015 = -38.7%
Key Company Trends and Developments
Currency Devaluation Increases Risk of Food Appropriations – In line with our expectations, the Venezuelan government devalued the bolívar at the start of 2011 by unifying the 'essential goods' rate of VEF2.6000/US$ with the higher 'non-essential' VEF4.3000/US$ rate. This has implications for the food and drink sector, weaker currency potentially putting more pressure on margins, with producers no longer able to import raw materials at the 'essential goods' rate and the possibility of higher inflation putting further pressure on the government to take control of production through appropriations.
Mercal Expanding – With local production flailing, the government is taking a greater role in food distribution to ensure demand is met. This is being largely orchestrated by state-owned retail chain Mission Mercal. Huge subsidies mean that Mission Mercal is able to offer food to the country’s poorer regions at substantial discounts on the market price. In autumn 2010, Venezuelan President Hugo Chávez announced that the domestic population had saved roughly VEB21bn since 2003 due to the prices provided by Mercal. The number of Mercal outlets nationwide has reached 16,000, with the network distributing 10mn tonnes of food on an annual basis.
Key Risks to Outlook
Shift in oil prices –The risk to our outlook also depends on the trajectory of global oil prices. On the one hand, higher-than-expected prices in 2011 and beyond could provide a significant boost to the state's coffers, increase the supply of dollars in the economy and stimulate private consumption. On the other hand, while not our core scenario, lower-than-expected prices could do the opposite, and could even drag the economy back into recession again. Elsewhere, we see political risks in the run-up to the election as a major risk to our outlook. While it is too early to determine exactly what will unfold in Venezuela over the next couple of years, we caution that the scope for political unrest could still derail this fragile economic recovery.
Inflationary unrest – With one of the highest rates of inflation in the world, we expect worker strikes within the private sector to be a persistent feature of Venezuela's landscape in the medium term. The recent strikes at both Coca-Cola FEMSA and Heinz plants highlight this negative aspect of the country's risk profile. While we are a forecasting improvement in the rate of inflation, we believe the rapid pace of price rises will still be enough to fuel a considerable amount of worker discontent over the coming year.
BMI Industry View
SWOT Analysis
Venezuela Food Industry SWOT
Venezuela Drink Industry SWOT
Venezuela Mass Grocery Retail Industry SWOT
Business Environment Ratings
BMI’s Core Global Industry Views
Table: BMI Food & Drink Core Views
Latin America Risk/Reward Ratings
Table: Latin America Food & Drink Business Environment Ratings, Q311
Venezuela’s Business Environment Rating
Macroeconomic Outlook
Table: Venezuela – Economic Activity
Industry Forecast Scenario
Consumer Outlook
Food
Total Food Consumption
Table: Venezuela Food Consumption Indicators - Historical Data & Forecasts
Canned Food
Table: Canned Food Value/Volume Sales – Historical Data & Forecasts
Confectionery
Table: Confectionery Value/Volume Sales - Historical Data & Forecasts
Drink
Alcoholic Drinks
Table: Alcoholic Drink Value/Volume Sales - Historical Data & Forecasts
Soft Drinks
Table: Soft Drink Value Sales –Historical Data & Forecasts
Hot Drinks
Table: Hot Drink Value Sales - Historical Data & Forecasts
Mass Grocery Retail
Table: Venezuela Mass Grocery Retail - Value Sales by Format - Historical Data & Forecasts
Table: Sales Breakdown by Retail Format Type
Trade
Table: Food & Drink Trade Balance – Historical Data & Forecasts
Food
Key Company Trends And Developments
Currency Devaluation Increases Risk Of Food Appropriations
Dairy Sector Attracts Investment But BMI Cautious
Nationalisation Of Bottler Has Implications For Empresas Polar
Market Overview
Food Production
Confectionery
Agriculture
Dairy
Meat
Seafood
Drink
Key Company Trends And Developments
FEMSA Strike Highlights Burdens Of High Inflation
AmBev Seeks Additional Scale In Difficult Venezuela Market
Attack on Alcohol
Coffee Sector Nationalised
Market Overview
Alcoholic Drinks
Soft Drinks
Hot Drinks
Mass Grocery Retail
Key Company Trends And Developments
Competition From Mercal
Nationalisation Of Exito
Market Overview
Leading Retailers
Table: Structure Of Venezuela's Mass Grocery Retail Market By Estimated Numbers Of Outlets
Table: Structure Of Venezuela's Mass Grocery Retail Market – Sales Value By Format (US$bn)
Table: Average Annual Value Sales By Unit Per Format (2009)
Competitive Landscape
Table: Key Players In Venezuela's Food Sector
Table: Key Players In Venezuela's Drink Sector
Table: Key Players In Venezuela's Mass Grocery Retail Sector
Company Analysis
Food
Alimentos Heinz CA
Cargill de Venezuela
Empresas Polar
Drink
Pernod Ricard Venezuela
Coca-Cola FEMSA
Diageo de Venezuela
Mass Grocery Retail
Mercal CA
Makro Venezuela
BMI Food & Drink Methodology
Food & Drink Business Environment Ratings
Table: Rewards
Table: Risks
Weighting
Table: Weighting
BMI Food & Drink Industry Glossary
Food & Drink
Mass Grocery Retail
BMI Food & Drink Forecasting & Sourcing
How We Generate Our Industry Forecasts
Sourcing
- Alimentos Heinz CA
- Cargill de Venezuela
- Empresas Polar
- Pernod Ricard Venezuela
- Coca-Cola FEMSA
- Diageo de Venezuela
- Mass Grocery Retail
- Mercal CA
- Makro Venezuela
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