BMI View: We maintain a positive longer-term view of Peru's food and drink sector, which will see strong expansion rates and present a number of interesting investment opportunities over the forecast period. Growth will be driven by a strong consumer outlook, supported by improving labour market situation and favourable crediting conditions. More generally, Peru's food and drink sector will continue to benefit from country's largely youthful population and ongoing formalisation of the mass grocery retail (MGR) segment .
Headline Industry Data (local currency)
Food consumption growth year-on-year (y-o-y) in 2014: +9.5%; compound annual growth rate (CAGR) 2013-2018: +9.4%;
Per capita food consumption growth (y-o-y) in 2014: +8.1%; CAGR 2013-2018: +8.1%;
Soft drinks value sales growth (y-o-y) in 2014: +6.7%; CAGR 2013-2018: +7.0%;
Alcoholic drinks value sales growth (y-o-y) in 2014: +5.9%; CAGR 2013-2018: +6.2%;
Total mass grocery retail (MGR) value sales growth (y-o-y) in 2014: +9.6%; CAGR 2013-2018: +9.5%.
Key Industry Trends And Developments
Coc oa Production To Grow 5% In 2014: Cocoa production in Peru is expected to increase 5% in 2014 on the back of expansion of area planted, according to the US Department of Agriculture. This could place the country among the top 10 exporters in the coming years. Peru is predicted to produce 70,000 metric tonnes of cocoa in 2014, with high prices on the international market making it a lucrative crop for farmers. The domestic government is also pushing to establish cocoa as an alternative crop to coca. Exports of cocoa bean for 2014 are also expected to increase by 18% to reach 37,000 metric tonnes, with the Netherlands, Germany and Belgium among the biggest importers.
Peruvian Produce Provides Potential For Growth: Peruvian fresh produce exports are estimated to record huge growth in volumes and sales in the coming years, as demand increases for the country's vast range of fruit and vegetables. The country produced 1.22mn tonnes of fresh fruit and vegetables in 2014, but this figure is expected to almost treble to 3.5mn tonnes by 2020, according to Carlos Enrique Camet, president of fresh produce export association AGAP. The categories showing most growth will be table grapes, increasing from 250,000 tonnes to 1.2mn tonnes, avocados (from 177,000 tonnes to 793,000 tonnes) and pomegranates (from 9,800 tonnes to 23,000 tonnes).
Frutarom Buys Montana Food For USD28.5mn: According to announcements in October 2014, Israel-based flavours and ingredients producer Frutarom has acquired Peru-based Montana 's flavours and natural food colours division Montana Food for USD28.5mn. The move is part of the company's strategy to expand its growing operations in Central and South America through organic growth and acquisitions. The transaction includes the acquisition of Montana Food operations in Chile and Peru. The acquisition will enable Frutarom to have a sizable production site in Peru and have one of the top research and development, sales and marketing, and distribution infrastructure in the region.
T&G, Unifrutti Collaborate On Table Grape Plantation : In autumn 2014, New Zealand-based fresh produce company Turners & Growers (T&G) has entered an agreement with Chile-based Unifrutti to establish a joint venture (JV) to develop a large-scale table grape plantation in Peru. The JV has acquired 340 hectares of agricultural land in Piura and will be planting grapes by end-2014, with the first commercial harvest expected in 2015.
Exports Of Fresh Fruit Rise 34% In H114: Peru registered a 34% year-on-year (y-o-y) rise in exports of fresh fruit to 543,000 tonnes in H114, according to the Association of Peruvian Agricultural Producers Unions (AGAP). The figures indicate an increase in agricultural production, resulting in a rise in trade in high-added value products. Moreover, it shows that the sector has generated several jobs via rural development initiatives that aim to sustain production competitiveness. According to the AGAP, Peru exported 250,000 tonnes of fresh fruit to Europe, while it exported 171,000 tonnes and 47,000 tonnes to the US and Asia respectively (Andina).
Senasa Frames New Rules For Kiwi Plant Imports : In June 2014, Peru's national agriculture health service Senasa has set up new phytosanitary rules for imports of kiwifruit plants from the US, reports Andina.com.pe. The move supports growers' interests and will boost expanding the fresh produce export offer by enabling commercial production of kiwifruit in the country. The rules state that imported plants must be accompanied by an import licence issued by Senasa, ensuring official inspection and clearance for shipment.
Key Risks to Outlook
There are significant downside risks to our growth outlook. Slower-than-expected growth in China, especially stemming from the dynamics of a rapidly cooling property market and high domestic debt (see 'Positive GDP Print Masks Lurking Weaknesses', July 16 2014), could weigh further on investment and metals exports in Peru.
The risks to our copper price forecasts, and, by extension, our fiscal revenue growth forecasts for Peru, are weighted to the downside. The main risks emanate from Chinese authorities' increasing scrutiny of firms using metal as collateral for financing. Should China crack down on this practice, firms may liquidate their holdings, flooding the market with metal and sending copper prices lower, with negative implications for government revenue growth in Peru.