Peru Food and Drink Report 2012

Chile-based retailer Cencosud has revealed that it remains committed to Peru following the election of left-leaning President Ollanta Humala. The firm had planned to invest US$220mn in Peru during 2011, and the firm’s president, Horst Paulmann, stated that it will follow through with this because it was ‘betting on Peru’. This sentiment is in line with our view that the risks associated with a Humala victory have to some extent been overblown. It looks increasingly likely that the new government will pursue a much more moderate economic policy path than had originally been expected.

Peru’s consumer sector has consistently been labelled by BMI as one of the region’s most attractive, and the election of Humala could have an impact on this analysis. There are a number of different directions the country could take, ranging from the popular form of capitalism pursued by President Luiz Inácio Lula da Silva in Brazil (which successfully took millions out of poverty and created a larger consumer base for retailers to market to) to the extreme socialism pursued by President Hugo Chávez in Brazil (which has culminated in the assets of the country’s largest grocery retailer Exito being nationalised). We currently think that the most likely scenario is that Humala will successfully rule as a moderate, which is positive for our food and drink outlook.

Headline Industry Data (local currency) ?? 2012 per capita food consumption = +10.7%; forecast to 2016 = +55.2% ?? 2012 mass grocery retail sales = +11.9%; forecast to 2016 = +64.8%

Key Industry Trends & Developments Chilean Retailers Investing In Peru To Take Advantage Of Burgeoning Consumer Demand: Chilean

retailers Cencosud and Falabella have detailed their investment plans for Peru as they look to take advantage of the country’s growing consumer affluence. Cencosud, which is already the country’s leading supermarket operator, plans to enter the department store sector by investing US$70mn to establish 10 of its Paris branded department stores in Peru by 2014. Falabella has said it will also invest US$70mn to expand its range of supermarkets, department stores and hardware outlets. Chilean department store operator Ripley is also investing, having announced plans in December 2010 to spend US$56mn to open eight new outlets in Peru by 2013. These investments are in line with a long-term trend of Chilean firms aggressively expanding their Peruvian operations and are a sign of confidence in the Peruvian consumer story.

Aje Group Could Grow To Be Global Soft Drinks Challenger: In a March 2011 interview with The Wall Street Journal, an executive for Peruvian soft drinks company Aje Group announced that the firm plans to issue its first bond, worth US$200mn, to help fund expansion. The vice president for finance and administration, Carlos Ananos, said the group was exploring options for an initial public offering (IPO) as it looks to expand its reach further into Asia and Latin America. The prospect of more rapid growth for the Peruvian firm, which was founded in 1988, is not likely to be well received in the offices of The Coca-Cola Company and PepsiCo, with the firm currently eating up market share across Latin American and Asia thanks to a well-received strategy of undercutting the prices offered by the two soft drinks giants.

Key Risks to Outlook Export Demand Hit: We caution that there remains the risk of a further global slowdown, which would hit demand for Peruvian exports and reduce investment inflows, posing a downside risk to our otherwise bullish outlook for the economy.

Social Unrest: A second risk is related to the election of Humala. Although an increase in social unrest and political violence is seen as an unlikely scenario, a descent into regular serious violence, most likely over foreign-owned mining concessions, cannot be completely discounted given relatively high income inequality and simmering tensions among Peru’s ethnically diverse population. This scenario would likely see the intensification of existing income and ethnic disputes and could necessitate a much-increased military presence across the country as the government seeks to regain public order.

Table of contents

Chapter 1 - BMI Industry View

Chapter 2 - SWOT Analysis

Peru Food Industry SWOT

Peru Drink Industry SWOT

Peru Mass Grocery Retail Industry SWOT

Chapter 3 - Business Environment

BMI’s Core Global Industry Views

Table: Food Prices And

Table: BMI’s Core Views For The Food & Drink Industry

Latin America Sector Focus

Brewing Will Continue To Consolidate Around Heineken SABMiller and ABI

Latin America Risk/Reward Ratings

Table: Brazil Food & Drink Risk/Reward Ratings – Q

Table: Latin America Food & Drink Risk/Reward Ratings – Q

Peru Food and Drink Risk/Reward Rating

Macroeconomic Outlook

Table: Economic Activity

Chapter 4 - Industry Forecast Scenario

Consumer Outlook

Food

Food Consumption

Table: Food Consumption Indicators – Historical Data & Forecasts

Confectionery

Table: Confectionery Value/Volume Sales – Historical Data & Forecasts

Table: Confectionery

Table: Meat

Table: Fish

Table: Oils & Fats

Table: Dairy

Table: Pasta

Drink

Hot Drinks

Table: Hot Drinks Value Sales – Historical Data & Forecasts

Table: Tea

Soft Drinks

Table: Soft Drinks

Alcoholic Drinks

Table: Alcoholic Drinks

Mass Grocery Retail

Table: Mass Grocery Retail Sales By Format – Historical Data & Forecasts

Trade

Chapter 5 - Food

Key Industry Trends And Developments

Multinationals Invest in Peru

Organic Farming Takes Off

Market Overview

Drink

Key Industry Trends And Developments

Aje Group Issues Bond Exploring IPO

Beer Sales Flat But Poised For Growth

Focus on PremiumSegment Beers

Coffee Exports Keep Rising

Market Overview

Soft Drinks

Alcoholic Drinks

Chapter 6 - Mass Grocery Retail

Key Industry Trends And Developments

Censosud Turns A Corner In Peru?

Chilean Retailers Investing In Peru To Take Advantage Of Burgeoning Consumer Demand

Walmart Looks to Expand Peruvian Base?

Market Overview

Chapter 7 - Competitive Landscape

Key Players

Table: Key Players in Peru’s Food and Drink Sector

Table: Key Players in Peru’s Mass Grocery Retail Sector

Chapter 8 - Company Monitor

Food

Grupo Gloria

Good Foods

Drink

Union de Cervecerias Peruanas Backus y Johnston (Backus)

Corporacion Jose R Lindley (JR Lindley)

Mass Grocery Retail

Wong (Cencosud)

Saga Falabella

Chapter 9 - Risk/Reward Ratings Methodology

Table: Rewards

Table: Risks

Weighting

Table: Weighting

BMI Food & Drink Industry Glossary

Food & Drink

Mass Grocery Retail

BMI Food & Drink Forecasting And Sources

How We Generate Our Industry Forecasts

Sources

Related research categories

By sector: General drinks

By market: Peru (in South America)