BMI's Executive Summary

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The Sector At A Glance

Key Insights On The Food & Drink Sector Of Peru

We expect 2007 to be Peru’s ninth consecutive year of economic expansion, though the GDP growth rate, likely to be around 4%, will be somewhat less than in both 2005 (6.7%) and 2006 (which we forecast will come in at 5.3%). However, the growth will be more evenly spread throughout the year, unlike in 2006, which saw stop-start growth and investment curves, associated with anxieties around the unpredictable presidential election in April.

Over our forecast period as a whole, it remains to be seen how far interest rate developments will lead to declining consumer confidence, as credit becomes more expensive, with interest rates continuing to rise in late 2006 and early 2007. Nonetheless, based on the assumption that the new Alan Garcia government will continue with its market-friendly economic policies, BMI forecasts mass grocery retail (MGR) sales to increase by 59.8% over the full forecast period, reaching US$1.69bn by 2010.

The dominant news in this final quarter of the year is that mass grocery retailers in Peru – especially Wong and Supermercados Peruanos – are finally biting the bullet and making plans to expand out of their comfort zone – the metropolitan area of Lima – into hitherto uncharted parts of the country, beginning with secondary and tertiary cities. Their target is the three-quarters of food and drink sales that occur in ‘traditional’ street markets and small, corner shop outlets.

With their greater buying power, these leading mass grocery retailers should be able to make inroads into Peru’s provinces in a relatively short space of time. Considering the higher prices of products in traditional markets and stores, the benefits to consumers will be considerable. Of course, modern retailers will have to tweak their product portfolios somewhat, and offer many items in smaller packets and portion-sizes, sacrificing a degree of profit, but obtaining the large sales volumes should more than compensate.

In the food and drink sector, the outlook continues to brighten following eight years of economic growth – though the same limitations we initially highlighted in Q306 still apply, with widespread poverty and high unemployment putting a break on domestic growth. However, operators’ optimism appears to on the rise, exemplified by Coca-Cola’s and SABMiller’s plans to build new plants to increase production levels. Overall, we estimate a continued rise in per-capita food consumption for the rest of the decade, rising from its current US$570 to US$630 in 2010.

The export segment is currently the rising star of the food and drink sector. Leading the way is the poultry industry, which has just secured export agreements in a number of new markets, including the EU, Costa Rica, Singapore, Thailand and China. Poultry production in Peru has been increasing rapidly recently in recent years and the country now has a poultry population of around 320mn birds per annum.

Not far behind the poultry industry is the food-processing sector, where we see promising investment opportunities in export-oriented activities. The emerging frozen dinner and entrée category is a case in point: some Peruvian companies are beginning to target them to ethnic groups worldwide. Peruvian cuisine is one of the most diverse in the world; we believe its similarity to Mexican and Thai dishes (with spicy, contrasting tastes) make Peruvian meals a competitive alternative product. Opportunity abounds here for a range of producers, including those in the poultry, meat and vegetable industries, to add value to their staple products and earn valuable foreign currency.

Contents

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Chapter 1 – Business Environment

Retail Business Environment Rankings

Economics - Long-Term Risk

Politics - Long-Term Risk

Mass Grocery Retail Sales Growth

Market Entry Potential

Barriers To Entry

Per Capita Consumption

Table: Latin America Business Environment Rankings

SWOTs

Peru Food & Drink Industry SWOT

Macroeconomic Outlook

Table: Peru – Economic Activity

Chapter 2 – Retail

Regional Overview

Trending Towards Hypermarkets In Latin America

Rise Of Hypermarkets

Table: Number Of Supermarkets/Hypermarkets, 2005

Table: Top Five Mergers & Acquisitions in the Latin American Retail Sector, 2005

Share Of MGR Sales In Total Sales

Industry Forecast Scenario

Table: Peru MGR Value Sales by Format – Historical Data & Forecasts

Industry Developments

Company Developments

Market Overview

Table: Peru MGR Value Sales by Format – Historical Data & Forecasts

Chapter 3 – Food & Drink

Regional Overview

The Growing Market for Wine Sales and Production in Latin America

Table: Per-Capita Consumption Of Wine (litres)

Table: Wine Production Estimates By Country 2005

Industry Forecast Scenario

Table: Peru Beverage Sectors Value/Volume Sales – Historical Data & Forecasts

Table: Peru Food Consumption Indicators – Historical Data & Forecasts

Table: Sectoral Trade Indicators – Historical Data & Forecasts

Industry Developments

Company Developments

Market Overview

Table: Peru Agricultural Sub-Sector Production – Historical Data

Chapter 4 – Tobacco

Industry Forecast Scenario

Table: Cigarette Value/Volume Sales – Historical Data & Forecasts

Industry Developments

Market Overview

Chapter 5 – Competitive Landscape

Table: Key Players in Peru’s MGR Sector

Table: Key Players In Peru’s Food & Drink Sector

Regional Company Case Studies

Company Case Study – Organizacion Soriana

Table: Organizacion Soriana: Stores By Format, June 2006

Table: Organizacion Soriana, SA – Income Statement, January-June 2005 & 2006

Table: Organizacion Soriana: New Store Openings, April-June 2006

Table: Market Shares Of The Four Largest Mass Grocery Retailers In Mexico, 2005

Company Case Study – SABMiller

Table: Top Five M&As In Latin America In 2005

Table: SABMiller In Colombia, As At June 2006

Table: SABMiller In Peru, As At June 2006

Wal-Mart In Latin America

Table: Wal-Mart Latin America Regional Operations

Table: Wal-Mart de Mexico (Walmex)

Table: Wal-Mart Brazil

Nestlé In Latin America

Table: Nestlé Operations In Latin America

Company Analysis

Grupo Gloria

Good Foods SA

Corporacion Jose R Lindley (JR Lindley)

Wong (formerly E Wong)

Union de Cervecerias Peruanas Backus y Johnston (Backus)

Saga Falabella

BMI Forecast Modelling

How We Generate Our Industry Forecasts

Retail Industry

Sources

Competitive Landscape for Latin America Food & Drink Reports: Sample of  
Companies Ranked

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At-a-glance perspective on the strengths, weaknesses, opportunities and threats facing each market’s food & drink industry. BMI also provides similar economic and business environment studies. Company SWOTs (Strengths, Weaknesses, Opportunities, Threats) covering all leading food and drink companies operating in each market, including competitive intelligence on geographic presence and competitive positioning of multinationals against local companies; leading products, services and brands; sales and local market share; foreign direct investment, projects, partners and acquisition strategy. Illustration of the industry via rankings tables comparing revenues, number of outlets, number of employees and registration dates. BMI analyses each company’s performance, market position, strategy and investment potential.

Network of Latin American Food Sources

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BMI's Latin American Food Reports are based on an extensive network of multilateral organisations, government departments, food industry associations, chambers of commerce and company reports. Information sources include: