Caribbean Food and Drink Report Q4 2012

Taken as a whole, the Caribbean consumer sector remains challenging, with the region hit hard by theglobal economic downturn. Markets such as Jamaica, the Bahamas and Puerto Rico were among the firstto enter recession and have been among the slowest to recover. This has put downwards pressure on thepropensity to spend and has led to a drop in demand for discretionary and non-discretionary goodsacross the region. That said, the region is recovering and there are also several markets, including theDominican Republic and Trinidad & Tobago, which were much more resilient during the global crisisand have bounced back much more swiftly. There remain significant pockets of opportunity in the region.

Headline Industry Data

2011 food consumption per capita/forecast 2012 growth/forecast compound annual growth rate (CAGR)to 2016 (all in US dollar terms):

Bahamas: US$1,804/+0.9%/1.0%

Barbados: US$1,165/+4.5%/+4.0%

Dominican Republic: US$231/+3.7%/+2.9%

Jamaica: US$292/+3.7%/+4.7%

Puerto Rico: US$942/+3.1%/+4.0%

Trinidad & Tobago: US$1,091/5.4%/+5.3%

Key Company Trends

Pernod Ricard Moving On From Havana Club Battle After Another Court Defeat: In May 2012, Globalspirits firm Pernod Ricard looked close to giving up its battle to secure rights to the Havana Club brandin the US after the US Supreme Court refused to review a law that prevents the firm from renewing thetrademark in the country. On the same day of this judgement, Pernod Ricard announced the developmentof a new Cuban rum brand for the market, Havanista, which would be launched should the currentembargo on Cuban products be lifted.

Nestlé Invests In Jamaican Milk Energy Brand: In July 2012, Nestlé Jamaica announced a newproduction line for its Supligen milk-based energy drink. The facility, which required an investment ofUS$7.6mn, is located at its Bybrook plant in Linstead. The plant will boost production volumes and allowthe firm to lessen its reliance on imports. Nestlé added that following the upgrade, the Supligen brand willnow be packed in smaller can sizes (from 367mnl to 280ml); this is very likely a response to relativelyhigh levels of inflation and the corresponding weakness in real income growth.

Key Risks To Outlook

Different Prospects for Individual Caribbean Markets: Given that the Caribbean is not a homogenousfood and drinks markets, risks are on both upside and downside in relation to individual countriessurveyed. For example, given that tourism continues to account for a significant proportion of economicactivity in Jamaica, improved international perceptions of the island are likely to bode well for real GDPgrowth and thus also for consumer outlook. Furthermore, on the domestic front, this is likely to encouragegreater investment into both hotel and transport infrastructure from the private sector. On the other hand,in Puerto Rico, one of the largest regional food and drinks markets, while huge structural reforms havedramatically improved the island’s fiscal outlook, growth is set to remain weak, especially as theauthorities aim to rein in public sector spending.