Chile Food and Drink Report Q3 2012

Even though its population falls short of the 18mn mark, Chile leapfrogged Brazil to top our Latin America Risk/Reward Ratings matrix for Q312. Despite some economic growth uncertainties posed by slower growth in its main export partners, Chile’s positive short- to medium-term consumer demand story remains in play. However, the country’s modest youth population component and the maturing food and drink market indicate challenges ahead which are expected to moderate its annual growth rates.

Headline Industry Data (local currency)

2012 per capita food consumption value = +5.6%; forecast compound annual growth rate (CAGR) to 2016 = +5.7%

2012 alcoholic drinks value sales = +7.0%; forecast CAGR to 2016 = +6.2%

2012 soft drinks value sales = +9.6% ; forecast CAGR to 2016 = +7.6%

2012 mass grocery retail value sales = +5.6%; forecast CAGR to 2016 = +5.7% Key Company Trends Nestlé Expanding Chilean Dairy Operations: Despite not being able to merge its operations with New Zealand-based dairy giant Fonterra’s subsidiary in Chile due to local opposition, Swiss food and beverage giant Nestlé remains committed to further investment in the country. The company is reportedly planning to spend CHF127mn (US$138mn) on a dairy facility, which will manufacture a variety of milk products as well as nutritionally fortified ingredients, which will be sold both domestically and exported.

Key Risks To Outlook Global Demand for Copper: Chilean exports of copper – the country’s key export commodity – will be vulnerable to a slowdown in economic growth in China and a recession in the eurozone, the country’s two key export markets. This lower demand, combined with elevated oil prices, is posing downside risks to Chile’s economic development in the course of the current year, and thus to the state of consumer confidence. Additionally, we also note that levies on copper mining account for about 20% of total government revenues, indicating the importance of the commodity to the availability of public sector expenditure and programmes.