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Argentina Food and Drink Report 2012
Business Monitor International, Dec 2011, Pages: 80
Argentina has bounced back impressively from recession. However, where we believe consumption could be affected in the medium-term by the unwinding of the imbalances that continue to plague the Argentine economy. Our long-held view is that the government will eventually need to deal with the significant imbalances in the economy. Soaring inflation, fiscal profligacy and growing government intervention mean the economy will struggle to sustain its growth trajectory as investors become increasingly cautious towards it. Our core view is therefore that unless strong reforms are implemented, a hard landing awaits Argentina in the coming years.
Headline Industry Data
- 2012 per capita food consumption (local currency) = +13.1%; forecast to 2016 = +61.7%
- 2012 alcoholic drink sales (litres) = +3.0%; forecast to 2016 = +12.8%
- 2012 carbonated soft drink sales (litres) = +4.7%; forecast to 2016 = +20.4%
- 2012 mass grocery retail sales (local currency) = +11.6%; forecast to 2016 = +64.4%
Key Industry Trends & Developments
Investments Into Food Sector Continue – In September 2011, Mexican bakery giant Grupo Bimbo completed the purchase of Argentina's largest baking company, Fargo. Bimbo previously owned 30% of the firm and has received approval to take full control of the business, which generates revenue of around US$150mn, after selling off two brands to ease competition concerns. This investment came after PepsiCo announced the acquisition of Argentine biscuit and cracker producer Dilexis for an undisclosed price. Dilexis is reported to have revenue of approximately US$100mn, with export activities to the rest of Latin America as well as Africa, and the move represents a significant expansion of PepsiCo's activities in the local snack food market.
Brewers Investing In Argentina – In July 2011, Quilmes, the Argentine subsidiary of Brewing giant Anheuser-Busch InBev (ABI), announced it is to invest ARS3bn (US$730mn) in the country to capitalise on growing demand. As well as responding to growing demand the move can be seen as a response to increasing competition in a market where Quilmes currently has around 75% market share. ABI's plans represent a significant investment in the country and come shortly after SABMiller expanded in the market through the purchase of Argentina's third largest brewer, Casa Isenbeck, from Germany's Warsteiner. The interest of the world's two largest beer firms clearly indicates that the market is widely seen as having great potential.
Key Risks to Outlook
Runaway Inflation – Argentina's runaway inflation continues to hurt economic development, weighing on credit growth and hampering much-needed investment. With annual fiscal spending still high 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 will find itself lagging behind more politically and economically stable regional peers beyond 2012.
Business Monitor International's 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.
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