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Colombia Food and Drink Report Q4 2011
Business Monitor International, Sep 2011, Pages: 97
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.
A positive outlook for the Colombian consumer over the forecast period remains in place, with real GDP growth expected to maintain momentum 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.
In Colombia private consumption is expected to drive real GDP growth over the next few years, driven by historically low interest rates, strong credit expansion and rising house prices. In addition, Colombia’s large proportion of low-income consumers means the country has one of the lowest per capita food consumption rates within the region.
Headline Industry Data (in local currency):
- 2011 per capita food consumption = +11.6%; forecast to 2015 = +35.7%.
- 2011 alcoholic drink sales = +5.6%; forecast to 2015 = +17.9%.
- 2011 soft drink sales = +8.9%; forecast to 2015 = +24.6%.
- 2011 mass grocery retail sales = +13.3%; forecast to 2015 = +47.4%.
Key Company Trends
FEMSA Invests in Colombia: Soft drink giant Coca-Cola FEMSA has recently unveiled plans to invest significantly in its capacity in Colombia. The firm has said it will spend US$160mn on a new plant that is expected to begin operations in three to five years. Colombia is seen as a dynamic market and the firm's plans for an increase in capacity follows significant investment in 2010. The firm's vice president of corporate affairs has previously described the market as one with 'enormous growth potential' and BMI agrees that the immaturity of the market makes it a good long-term prospect.
Exito Regional Profile Boosted: French group Casino has recently sold its majority stake in two Uruguayan retailers to Almacenes Exito as part of the plans for the ‘internationalisation’ of the Colombian retailer. Exito has acquired Casino’s stakes in Devoto and Disco in Uruguay for US$746mn.
The two chains operate 53 stores in the country and are expected to generate sales of approximately US$770mn in 2011. This acquisition is seen as an important step for Exito’s international expansion in Latin America, enabling the retailer to attain a strong leadership position in the Uruguayan market with a share that nearly doubles that of its closer competitor.
Key Risks To Outlook
Rising food price inflation: If inflation begins to tick rapidly upwards, forcing the Central Bank to tighten monetary policy even more aggressively, we could potentially see a substantial slowdown in consumer demand in Colombia. The rate has edged higher, but at 3.23% is still well within the central bank's target range of 2-4%.
Potential Impact of a US Slowdown: The US remains the single largest destination for Colombia's exports by a substantial margin, accounting for 42% of exports in January to May 2011, and we outline the potential risks to growth if a slowdown in the US economy were to materialise. While regional neighbours such as Brazil have made significant headway in developing south-south trade routes with economic powerhouses such as China, Colombia has a relatively undiversified export base, with the bulk of its goods trade taking place within the Americas.
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