2014-01-07 22:22:55 - New Food research report from Business Monitor International is now available from Fast Market Research
We expect growth to slow in the Chilean economy over the next year as increases in annual GDP per capita reach their lowest rate for four years at 3.4%. This will have an impact on the spending patterns of consumers, an effect common across much of Latin America. Private consumption is therefore forecast to grow at 4.0% in 2014 compared with 6.1% and 4.7% in 2012 and 2013 respectively. However, we expect to see per capita food consumption increase to US$1,706 in 2014, up 5.6% on 2013. With inflation at around 3.2% for the period, this represents real growth in food consumption as the market continues to develop and offers new products to the consumer class.
Headline Industry Forecasts (local currency
* 2014 per capita food consumption growth = +5.6% year-on-year (y-o-y); compound annual growth rate (CAGR) to 2017 = +5.7%.
* 2014 alcoholic drinks value sales = +5.5%; forecast CAGR to 2017 = +5.7%.
* 2014 soft drinks value sales = +7.1%; forecast CAGR to 2017 = +7.0%.
* 2014 mass grocery retail value sales = +5.6%; forecast CAGR to 2017 = +5.8%.
Full Report Details at
Key Company Trends
Cencosud Sacrificing Short-Term Profitability: Chile-based Latin American food retail giant Cencosud has been working hard to diversify its business over recent years, with the most recent high-profile example coming in October 2012 as the company reached an agreement to acquire Carrefour's assets in Colombia for US$2.6bn. This move was largely debt-financed (JP Morgan loaned the retailer about US$2.5bn) and inevitably had a negative effect on the company's short-term profitability given increased financing costs. Indeed, in the first quarter to March 2013, excluding a one-time provision expense, Cencosud's net income was down 26% y-o-y.
Andina's Net Profits Decline In FY12: In March 2013, Coca-Cola bottler and beverage company Embotelladora Andina posted a 9.7% y-o-y decline in net profits for FY12, reporting them at CPL87.64bn (US$185.4mn). The results released by Andina were consolidated to take into account Q412 figures of Embotelladoras Coca-Cola Polar. The amalgamated company's sales went up by 19.3% y-o-y to CPL1.172trn (US$2.47bn). In April 2013, Andina announced that it plans to invest US$350mn for the year, which will go towards its Brazilian plant and maintenance work Concha y Toro 2013 Profits Hit: In April 2013 local wine major Concha y Toro reported that its full-year net profits for 2012 dropped 40.5% y-o-y to CLP30.02bn (US$63.5mn). Operating profits for the year were down 9.1% y-o-y to CLP53.68bn. That said, net sales increased by 6.6% for the year to CLP450.4bn, making up in part for weak domestic demand. Asian sales were particularly strong, up 21% y-o-y.
CCU Sees Slight Profit Rise For Q113: Compania Cervecerias Unidas (CCU) posted 0.2% y-o-y rise in net profits to CLP40.32bn (US$85.3mn) in Q113 (ended March 31). The company's revenue increased 8% y-o-y to CLP304.1bn (US$646mn) during the period. Quarter 1 earnings before interest, taxes, depreciation and amortisation rose 4.7% y-o-y to CLP3.2bn (US$6mn), with the company attributing the marginal increase in its net profits to increased sales over the period ending March 31.
Key Risks To Outlook
Global Headwinds Pose Concerns: Unlike many Latin American countries, Chile does not suffer from high inflation or long-term depreciation of its currency. In fact, the Chilean peso has appreciated by around 20% against the US Dollar since 2009. However, the most serious risk to our forecasts comes from the potential for Chile's economy to suffer more heavily than we currently expect from a weak external picture. With exports comprising almost 40% of GDP and almost 40% of total exports heading to China and the eurozone, there is clearly potential for Chile's economy to feel the effects from a hard landing in China or a break-up of the eurozone. In particular, considering copper accounts for around 47% of exports, the economy is highly sensitive to the price of the commodity and so we remain somewhat concerned about how the economy would deal with a significant fall in the price of copper.
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