BMI View: We maintain a positive outlook for Chile's food and drink industry as its food consumption is expected to expand by a compound annual growth rate of 6.6% between 2014 and 2019. More generally, Chile's food and drink sector will look increasingly attractive compared with other Latin American markets, as lower global oil prices provide tailwinds to Chilean consumers. The uptick in private consumption is expected to boost demand for premium and innovative products. We forecast private consumption growth to be 2.7% in 2015, up from 2.2% in 2014, before averaging 4.1% in the remainder of our forecast period to 2019.
Headline Industry Forecasts (local currency)
Total food consumption growth year-on-year (y-o-y) in 2015: +5.9%; compound annual growth rate (CAGR) 2014-2019: +6.6%
Per capita food consumption growth (y-o-y) in 2015: +5.0%; CAGR 2014-2019: +5.7%
Total soft drinks value sales growth (y-o-y) in 2015: +5.8%; CAGR 2014-2019: +4.9%
Alcoholic drinks value sales growth (y-o-y) in 2015: +5.5%; CAGR 2014-2019: +4.8%
Total mass grocery retail value sales growth (y-o-y) in 2015: +5.2%; CAGR 2014-2019: +5.9%
Key Industry Trends
Chile Targets UK For Further Prune Export Growth : Shipments of Chilean prunes into the UK rose 11% in 2014 to 3,340 tonnes. Announcing the figures, Chile Prunes Association Vice President Andres Rodriguez said the industry will continue to consolidate its position in the UK as it is an important market for the sector. He said the association would be pushing the 'Prunes from Chile' brand to maximise the potential for exports to the UK.
Chile Seeks Trade Deal With Eurasian Union : According to reports in April 2015, the Chilean government is working towards enhancing bilateral trade with the Eurasian Economic Union (EEU). As part of the agreement, both parties have agreed to work towards the formation of a joint committee on trade and investment, with a target to establish a Free Trade Agreement in the medium term. The EEU trading bloc comprises of Russia, Belarus, Kazakhstan and Armenia, representing more than 175mn consumers. Chile's trade with Russia increased 18% in 2014 to USD827mn, of which USD768mn were exports and USD60mn imports. Food accounted for most of exports, with fruit accounting for 12% of total shipments.
Drought Damage Reaches Estimated USD1bn : The drought in Chile's Coquimbo region has caused an estimated loss of USD1bn to the local fruit industry, reports Euro Fruit. However, the region's fruit producers are positive that the country's agriculture minister, Carlos Furche, will offer more government support for growers who are affected by the 10-year drought. Fruit producers have urged the government to consider the suspension of taxes, a debt refinancing programme and the creation of a crisis fund in which the government will act as guarantor to the agricultural sector.
Key Risks To Outlook
With considerable exposure to Chinese demand, Chile is particularly vulnerable to a potential hard landing in this major export market, which could trigger a further drop for headline growth figures. With Chinese growth expected to cool over the next three years, reverberations will inevitably be felt in Chile, affecting both disposable incomes and consumer confidence, which are vital ingredients for growth in the country's food and drink sector. With around a third of government revenue coming from copper mining activities, reduced global demand for the commodity (in particular from China) would have a negative effect on government consumption, further dampening economic growth and consumer confidence.