On the back of strong domestic demand, stable credit growth and favourable terms of trade, the Colombian economy continues to grow strongly with real GDP growth of 4.8% forecast for 2011. Private consumption is currently driving Colombian real GDP growth and is expected to continue doing so 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 = +13.2%; forecast to 2016 = +46.3%.
- 2011 alcoholic drink sales = +5.7%; forecast to 2016 = +23.8%.
- 2011 soft drink sales = +8.1%; forecast to 2016 = +33.3%.
- 2011 mass grocery retail sales = +16.0%; forecast to 2016 = +59.3%.
Key Company Trends
J. Martins Launches in Colombia: Portuguese retailer Jerónimo Martins has recently confirmed it is to enter the Colombian market, investing EUR400mn in the country over the next two years with its first Biedronka stores due to open in 2012. The retailer additionally has aspirations of becoming the country's third largest retailer over the next five years. From a competitive standpoint, Jerónimo sees a real opportunity here given the current predominant focus on premium retail in the organised sphere. While making a low-cost critical mass driven model successful will not be easy in Colombia, fundamentally speaking it is a model with a huge amount of promise.
Colombia Ranks Amongst Top Ten Emerging Markets: Colombia now ranks among our top ten emerging consumer markets where food consumption is expected to grow rapidly over the next five years. Per capita consumption on food and drink is expected to reach US$1,407 by 2015, which means that the country is close to hitting the 'sweet spot' within the food industry lifecycle. This means the majority of consumers are no longer exclusively focused on value and mass-market producers can increasingly look to enhance their sales through premiumisation, rather than merely increased volume.
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.
Potential Impact of a US Slowdown: The US remains the single largest destination for Colombia's exports by a substantial margin. In that sense, we believe the potential ramifications of a US slowdown to be the most serious risk to Colombia's growth outlook, given the country's heavy exposure to the country, not just due to the US's position as a dominant export destination, but also as a key investment partner.
Click for Report details:Colombia Food and Drink Report Q1 2012
