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Colombia Food and Drink Report Q2 2008
Business Monitor International, April 2008, Pages: 67
The Colombia Food Drink Report provides independent forecasts and competitive intelligence on Colombias food and drink industry.
Executive Summary
In the past 12 months, several food producers have been investing in Colombia to tap the growing demand for ‘indulgence’ products that are not generally regarded as essential, such as chocolate, ice cream, yoghurt and coffee. This demand has been generated by steady economic growth and falling unemployment which has pushed up disposable incomes. This, along with the improving security situation, has made Colombia an increasingly attractive place for international investors such as Danone and Nestlé. Local firms such as Grupo Nacional de Chocolates and Alpina are also keen to capitalise on this rising demand and investing significant funds to increase capacity.
The Colombian economy is growing steadily, thanks to sound fiscal policies that do not pursue short-term growth at the expense of stability. BMI is expecting this growth to continue, albeit at a slightly more modest rate, with GDP growth of 4.78% forecast for 2008 and 4.41% for 2009. Thanks to improvements in the security situation and a drop in guerrilla-related violence, the country is also becoming a less risky place to invest. However, the bombing of a Nestlé owned dairy plant by leftist rebels in January 2007 highlights the fact that significant risks remain when operating in certain parts of the country.
French firm Danone entered Colombia in March 2007, launching a joint venture with local dairy firm Alqueria. The two firms have already invested US$20mn in a yoghurt factory on the outskirts of Bogota and recently announced they will invest EUR100mn in Colombia in the next 10 years. Danone’s branded dairy products, which gnerally sell at a premium price, may have struggled to find a market just a few years ago when consumer confidence was low. With this significant investment, Danone is signalling that it believes many Colombians are now willing to pay for premium branded products and that this demand is only likely to increase in the future.
Another firm benefiting from this trend is Colombia based Grupo Nacional de Chocolates, whose products include confectionery, coffee, biscuits and ice cream. The rise in demand for indulgence products has seen the firm’s profits increase by 150% in the last five years, and the firm estimates that total consumption of its products increased by 13% in the first seven months of 2007. To keep up with this rising demand, the firm has announced plans to invest a further US$250mn by 2009 to raise production capacity with the majority of this investment going towards expanding the firm’s meat, biscuits, chocolate and ice cream plants.
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