Chile's consumer sector is more developed than many in Latin America leaving less room for growth. A population of only 17mn also places downwards pressure on our forecasts. On the plus side, the food and drink market is still seen as relatively fragmented, leaving opportunities for companies to come in and be successful. The penetration of organised retailing is also high, smoothing the way for producers to get their products into the hands of consumers. Chile's regulatory environment is viewed favourably, with the country committed to free trade and investment while we also have a generally positive outlook for the country's economy, with the country well placed to weather the global economic headwinds.
Industry Data
- 2012 per capita food consumption (local currency) = +8.5 %; forecast to 2016 = +34.9%
- 2012 alcoholic drink sales (litres) = +4.8%; forecast to 2016 = +19.2%
- 2012 soft drink sales (litres) = +4.8% ; forecast to 2015 = +19.7%
- 2012 mass grocery retail sales (local currency) = +8.0%; forecast to 2015 = +34.3%
Key Company Trends
Rising Exports And Domestic Demand Prompt Chilean Confectionery Investment – In October 2011, Argentine food producer Arcor announced plans to invest US$40mn in Chile to build a new confectionery factory. The investment will be made through its Chilean confectionery subsidiary Dos en Uno. Arcor revealed the facility is intended to eventually replace its plant in Santiago city centre, in an effort to increase profit margins. The facility will produce confectionery for both the domestic market and for export, underlining Chile's strong position as a hub for producing food for the wider region.
Walmart's Entry Leads To Rapid Consolidation In Chilean Retail – In September 2011, Chile's third largest supermarket operator Grupo SMU has announced it is to acquire smaller rival Supermercados del Sur. Full terms of the deal have not been disclosed, although SMU did reveal it included a capital injection of US$215mn. The move comes three years after Walmart entered the market and can be seen as a sign of the competitive pressure that the firm, with its low-priced business model, has brought to bear on the market. We expect further consolidation within the sector as local operators look to build the economies of scale needed to compete with the world's largest retailer.
Key Risks To Outlook
Market maturity – A limiting factor on our growth forecasts is the growing maturity of the food, drink and retail sectors; for example, Chileans are already among the highest consumers of soft drinks in the world. In addition, the organised retail sector already accounts for around 62% of all grocery sales (compared to 27% in neighbouring Peru) and, with expansion opportunities limited, supermarket sales in real terms have advanced by only around 30% since 2005. This figure compares unfavourably to other countries in the region.
Growth remains tied to Chinese prospects – With the Chilean economy still highly dependent on the export of minerals to China, any slowdown in this market would have significant negative implications for Chilean economic growth and consumption.
Click for Report details:Chile Food and Drink Report Q1 2012
