Food Processing Ingredients

An Expert's View about Food Processing in Peru

Posted on: 20 Jan 2012

Favorable market conditions in Peru, could significantly expand U.S. food exports in this sector, especially for food ingredients, food preparations, snacks, confectionary, fruit and vegetable juices,

THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY Required Report - public distribution Date: 12/22/2011 GAIN Report Number: Peru Food Processing Ingredients 2011 Approved By: Emiko Purdy Prepared By: Alvaro Loza Report Highlights: In 2010, total sales of the 90 major food processing companies in Peru reached $8.5 billion. The food industry recovered 7 percent in 2010 from its downturn in 2009. It was mainly triggered by higher income levels, more employment and credit offer. Tariff reductions after the implementation of the U.S. - Peru Trade Promotion Agreement, supported by favorable market conditions in Peru, could significantly expand U.S. food exports in this sector, especially for food ingredients, food preparations, snacks, confectionary, fruit and vegetable juices, dairy products and meat products. Post: Lima Executive Summary: Section I. Market Summary The Peruvian economy is one of the most successful economies in Latin America. Increasing income and expenditure levels are creating opportunities for companies. A growing middle class and changes in consumer attitudes complete an attractive landscape for businesses that are able to capitalize on these trends. Peru has demonstrated to the world its economic stability and continuous growth within the region, even during times of world financial crisis. Peru posted impressive results in 2010, such as 8.8 percent growth of GDP – a proof that Peru’s economy is highly dynamic and driven mostly by private investment, foreign trade, and domestic demand. The food industry recovered 7 percent in 2010 from its downturn in 2009. It was mainly triggered by higher income levels, employment and credit. There were two distinct trends defined by the direction taken by the market for goods. The first one was pushed by prepared and preserved meat production that climbed 4.8 percent -- the rate that has shown a steadily growth for twelve straight years. The leading companies, mainly from poultry and sausage industry, have been able to further diversify their offering of foodstuffs. The second trend relies on the notable expansion of oils and fat industry that grew 17 percent in 2010, mainly boosted by an aggressive competitive behavior between key players, being locals who had best performance at the end. According to food industry perspectives for 2011, there is high growth expectancy for this sector due to expansion of local demand especially at provinces. Despite the rise of ingredients prices in the international market, the industry remains solid and it is gaining more presence abroad. In that sense, major companies such as Alicorp has acquired new plants in Central America and Uruguay. In respect of local market, Alicorp has announced a $25 million investment for enlarging and improving its products lines. The performance of the beverage industry has been positive over the past twelve years, boosted by the domestic market and particularly by the development of soft drinks and mineral waters. In 2010, sector’s growth recovered and expanded 7 percent basically by an increment of domestic demand resulting from country’s economic progress. Distilled beverages and spirits rose barely 0.5 percent as a result of lower production of pisco (4 percent) and other distilled spirits compared to previous year, closing the year with $550 million in sales. Consumption of spirits in Peru can be divided in two groups: low-priced spirits, which have achieved good penetration within the provinces, and high-value products that appeal to upper- and middle-income consumers in urban areas. The first group is constituted by low-priced rum, vodka and economy pisco, whilst the second one is formed by Whisky, tequila, standard pisco and rum. Pisco production expects to grow 15 percent in 2011 as a result of an increment of new pisco producers driven by higher international demand aligned with Peruvian culinary expansion, receiving $50 million new investments. On the other hand, wine production showed a surprising recovery, achieving 21 percent growth in 2010. Peruvian wineries have launched new products resulting in the increased market shares domestically as well as in overseas’ market. As a result, per capita wine consumption has climbed to 1.3 liters from 1 liter in a three year period. The brewing industry also showed an increment of 6.2 percent in 2010 reaching $1.2 billion of the total sales. New products were released for uncovered segments. Peru has the lowest per capita beer consumption in the region with 42 liters. Soft drinks and mineral water have obtained over 7 percent growth in the same period, mainly boosted by vigorous growth of bottled water (22 percent) and energy drinks (14 percent). According to Peru’s customs data, total agricultural imports to Peru from United States grew to $787 million in 2010, up 41 percent from the 2009 level. Moreover, consumer oriented products reached $107 million in 2010 growing 81 percent in respect 2009. The United States became the second largest supplier of consumer oriented products, accounting the 14 percent of the market share which has certainly decreased the reach of Chile and has left Colombia as the third largest supplier of this category. Compan Sales in 2010 ies ($ Million) Beverages (Top 10) 1,940 Foods (Top 30) 3,912 Agribusiness (Top 50) 2,683 Total 8,535 Source: Estimated values based on The Top 10,000 Companies 2011 version, Peru Top Publications The U.S. – Peru Trade Promotion Agreement (TPA) immediately provided duty free access for two- thirds of U.S. food and agricultural products upon entry into force in 2009. The TPA, supported by continued favorable market conditions in Peru, could significantly expand U.S. food exports in the food processing sector for food ingredients, food preparations, confectionary, fruit and vegetable juices and preparations, dairy products (especially cheeses, whey and lactose) and beef, pork and poultry meat products. Advantages and Challenges Facing U.S. Products in Peru Advantages Challenges TPA grants duty free access to most high- 1. Local processed food value foods. consumption is still small, especially frozen food. Appreciation for U.S. food quality and culture. 2. Lack of brand awareness among consumers. Food ingredients will enter duty free upon TPA entry into force. Food ingredients are 3. New local food brands demanded for growing local production appearing in the market at very low and exports. prices. Lower consumption rates in some 4. Lower production costs for categories such as: read meals, frozen Local companies. food, snacks, beer, etc. 5. Local companies have Higher rates of income employment and increased their market share due to credit growth, especially of middle-class. better understanding of local consumer. Consumption of dietetic, light and healthy products is a growing trend. 6. Stiff competition from other countries within the region. The food processing industry is concentrated, with around 80 percent of Smuggling. the companies accounting for 75 percent of sales. Section II. Road Map for Market Entry A. Entry Strategy To successfully enter the Peruvian food market, U.S. exporters should directly contact the local food processing company or indirectly establish connections through brokers, agents, or representatives. Personal visits are highly recommended. The local partner should be well known by the U.S. Company before any permanent contractual arrangement is made. The local partner should be able to provide updated information on consumer market trends, identify niche markets, and supply information on current market development and business practices. B. Market Structure Local processed food products cover around 85 percent of the market demand. Processed food imports are concentrated in the hands of a handful of distributors, importers, or wholesalers that usually distribute to both retail and food service sectors. Specialized importers usually provide food ingredients to the Peruvian market. Some of them are also producers or wholesalers/distributors. C. Company Profiles Profiles of Major Food Processing Companies 2010 Est. Company d-Use Production Procurement Name, Products Sa Enles Channels Location Channels ($ Million) Alicorp S Retail .A. Cooking ingredients, sauces, dried goods, 1 Lima Direct ,315 HRI Traditional Trujillo Importers canned fruit, prepared meals, ice cream market G Retail loria S.A. Lima Da Direct iry products, canned fish, pork products, fruit 712 HRI Trad Arequipa itional juices M Ca Importers jamarca arket Retail San Fernando S.A. HRI rect Poultry, pork and th 457 eir by- products. Traditiona Lima Di l Traders Market Nestle Peru S.A. Retail Breakfast cereals, confectionary, dairy products, 377 HRI ect smashed potatoes, instant beverages, bakery T Lima Dir raditional Importers goods (pannettonne) Market Retail Molitalia S.A. 196 HRI Direct Lima Flour, pasta, ketchup, semolina Traditional Importers Market Retail Perales Huancaruna S.A. Co 141 HRI Amazonas Direct ffee Processor Traditional Market Retail Redondos S.A. 25 HRI Direct Lima Poultry and by-produ 1cts Traditional Importers Market Retail Laive S.A. HRI ect Dairy products, pork produ 102 cts, fruit juices T Lima Dir raditional Importers Market Retail Molinera Inca S. A. 92 HRI Flour and other grain mill products Tradition T Direct rujillo al Importers Market K Retail raft Foods Peru S.A Cookies, instant desserts and beverag rect es, 90 HRI Lima Di ma Traditional Importers yonnaise and ketchup, coffee Market Industrias del Espino S.A. O 71 Retail Martin Direct ils, fats Wholesal San er Panaderia San Jorge S.A. Ga Retail lletera del Norte S. A. C irect IA Molinera del Centro S.A. 68 HRI Lima D Ba Traditional Trujillo Importers kery goods (cookies and pannettonne) Market Flour and other grain mill products Industrias Teal S.A. Retail Coo Direct kies, candies, pasta, flour, pannettone, 68 Traditional Lima Importers chocolate Market Cogorno S Retail . A. irect Flour, pasta and other grain mi 60 HRI Lima D ll products T Importers raditional Market Retail Ajinomoto del Peru S.A. HRI C 59 ondiments, seasonings T Direct radition Lima al Market Compañía Nacional de Chocolates de Peru Retail S Direct .A. 56 Traditional Lima Confectionary chocolate Ma Importers rket An Retail ita Food S.A. Noodles, pa 5 Traditional Lima Direct sta 5 Market Machu Picchu Trading S.A.C. Co irect ffee, cocoa, cho 55 Lima Wholesaler colate Ica D Retail Sociedad Suizo Peruana de Embutidos S.A. 43 HRI Lima Direct Pork and beef products Traditional Market Retial Panificadora Bimbo del Peru S.A. Direct Ba 39 HRI kery godos Tradition Lima al Importers Market Corporacion ADC S.A.C. Retail Flour, noodles, bakery godos, animal feed, 37 Traditional Tacna Direct pulses, semolina Market Central de Cooperativas Agrarias Retail Cafetaleras C 36 HRI ers offee , Cacao, Honey Bee, Tea, anise, T Cuzco Importraditional camomile, animal feed Markets Molino E Retail l Triunfo S.A. 33 T Direct raditional Lima Flour, semolina, noodles Ma Importers rket Braedt S. A. irect Cheese and 32 Retail Lima D pork products HRI Importers Derivados del Maiz S. A. Retail Corn, potato and sweet potato products as 27 ect Traditional Lima Dir ingredients Ma Importers rket Con Retail fiperu S. A. Direct C Traditional Lima onfection 27 ary Ma Importers rket Retail Industrial Alpamayo S.A. HRI O 23 ils, fats T Lima Direct raditional Market Ame Retail ral S.A.A. O HRI ect ils, chocolate, confectionery, condiments, 19 T Lima Dir raditional Importers seasonings Market Retail Molino Las Mercedes S.A.C. Ba 3 HRI kery god 1os Trad Arequipa Directitional Market Sources: Estimated sales for 2010, based on Peru: The Top 10,000 Companies 2010, Peru Top Publications Profiles of Major Beverage Companies 2010 Company End-Use Production Procurement Name Est. Sales , Products ($ Channels Location Channels Millions) Union de Cervecerias Peruanas Retail Backus & Johnston S.A.A. Lima 870 HRI Direct La Libertad (Corporacion Backus) Traditional Importers Beer and soft drinks ma Lambayeque rket Retail Corporac ion Jose R. Lindley S.A. Beer 494 HRI Ar Direct equipa Traditional Importers market Retail Ajeper S.A. HRI irect Soft drinks, bottled 73 wat 1er T Lima D raditional Importers market Compañ Retail ia Cervecera Ambev Peru S.A.C 154 HRI Beer T Lima Direct raditional and soft drinks Market Ce Retail rveceria San Juan S.A.A. HRI (Corporacion Backus) 100 Lima Direct Beer Traditional Market Embotelladora San Miguel de Retail l Sur S.A.C. 51 HRI So T Arequipa Direct raditional ft Drinks Market Retail Ajeper del Oriente S.A. HRI So 36 ft Drinks T Ucayali Direct raditional Market Retail Embotelladora Don Jorge S.A.C. So 24 HRI ima Direct ft Drinks Traditiona Ll Market Retail Destilerias Unidas S.A. Alcoholic HRI b 19 everages Tradition Lima Direct al Market Retail Santiago Queirolo S.A.C. HRI Aloc oholic B 19 everages T Lima, Ica Directraditional Market Sources: Estimated sales for 2010, based on Peru: The Top 10,000 Companies 2010, Peru Top Publications D. Sector Trends Dairy Products The sales of dairy products grew 13 percent in 2010, mostly driven by the increased consumption of evaporated milk (up 12.6 percent) and yogurt (up 16.7 percent). Condensed/evaporated milk remains by far the most popular dairy products in Peru. In 2011, Peru’s per capita consumption of condensed/evaporated milk is expected to reach 10 litres, the highest anywhere in the world, followed by that of Greece (7 liters). In most other countries, condensed/evaporated milk is only used in the preparation of special dishes and desserts. Grupo Gloria remained the leading player in Peru’s dairy sector in 2010, accounting for 78 percent of the total retail sales (in value). Company’s Gloria brand has a long-standing presence in condensed/evaporated milk and has cultivated a loyal consumer base. In addition, the company periodically introduces innovative new products and offers a well-balanced portfolio across its Gloria, Bella Holandesa and Pura Vida brands. Due mainly to the strong performance on La Lechera brand condensed/evaporated milk and cream, Nestlé ranked second in 2010, with a retail sales share of 17 percent. Cheese is expected to see a 5 percent growth in its retail sales in 2011, compared to the corresponding figure of 3 percent seen in 2010. While an average unit price of cheese is expected to increase by 2 percent in 2011, wider availability within traditional grocers and increased awareness of superior-quality packaged cheese is expected to result in higher sales volume in 2011 compared to 2010. Furthermore, processed cheese spread is expected to achieve the highest retail sales growth rate of 6 percent in 2011. This category will benefit from a vast array of flavors available in small pack sizes, which make products more affordable to middle income consumers. In Peru processed cheese spread is mainly represented by soft spreadable cheese, as the presence of spray/aerosol remained negligible [what does this mean???]. Low and middle income consumers have, traditionally, shown a preference for unpackaged cheese, available at independent small grocers and open markets. Consumers appreciate low prices and convenience of unpackaged cheese, as they can purchase the exact quantity they desire and taste products prior to purchase. Grupo Gloria, with its Bonlé brand, remained as the leading player in cheese in Peru in 2010, accounting for 41 percent of the total retail value. Company’s position was based on the good quality of its products, their product availability through both modern and traditional retail channels, highly innovative products and affordable prices. Local players are expected to introduce low-calorie and value-added products, in order to target health-conscious, upper-middle, and high income consumers. In addition, busier lifestyle, especially in urban areas, is likely to result in more middle income consumers relying on supermarkets/hypermarkets to obtain both packaged and unpackaged cheese. Peru is expected to have a $6 per capita consumption of drinking yogurt in 2011, substantially lower than that of other countries in the region, such as Uruguay and Brazil, which are expected to see corresponding figures of $26 and $12, respectively. This shows that potential exists for expansion in Peru. Drinking yoghurt is very popular in Peru and expected to capture 71 percent of market share of total yogurt sales in 2011. Drinking yogurt is consumed both by adults and teenagers. In contrast, yogurt in conventional type of container is less popular and is mainly consumed as a snack by children. Grupo Gloria remained the leading player of yoghurt in Peru in 2010, accounting for 82 percent market share of Peru’s total yoghurt sales. The company benefitted from its longstanding presence in the country, excellent distribution network, good segmentation, frequent product innovation and strong advertising. Health concerns and a desire to keep fit will drive demand for yogurt. It is expected that companies will focus on increasing the availability of pro/pre biotic and low-calorie products, in order to appeal to health conscious consumers. Beer In 2010, beer accounted for 95 percent of the total consumption of alcoholic drinks in Peru, in terms of volume. The popularity of this product is based on its appeal to every socio-economic segment, its wide accessibility, intense competition amongst beer companies – which resulted in prices decreasing from 2001 to 2010 – and frequent product innovation to better meet Peruvian consumers’ tastes. Nevertheless, Peru’s per capita consumption of beer stood at 42 liters in 2010, which was still below the average of the Latin American region, and significantly lower than Brazil and Mexico, which had 65 and 61 liters per capita consumption respectively. In order to increase beer consumption in Peru, beer companies are promoting the idea that beer is suitable to drink with meals, the concept already being practiced in other Latin American countries. Glass bottles is the most popular packaging style used in Peru, due to tradition and preservation of flavor. Beer in aluminum cans is mostly for individual consumption, while bottled beer is shared by several people. Canned beer carries the highest unit price. Imported premium lager was the fastest-growing category, up 6 percent in volume in 2010 compared with a year ago level. Imported premium lager constitutes a niche segment in Peru, accounting for less than 1 percent of beer consumption in 2010, due to the strong tradition of consuming domestic beers, the high price of imported premium lagers and their limited distribution. Nevertheless, as Peru has the second lowest per capita consumption of imported premium lager in Latin America, it has a good potential to grow, as Peruvian consumers’ purchasing power grows and the availability of the products through modern retail channels increases. Product innovation and further segmentation are the trends expected in this category. Local companies will continue to develop new flavors to better meet upper-income consumers’ preferences and as a tool to strengthen current premium brands. Advertising and promotions are used to penetrate the market. Wine Thanks to the consumer education, wine consumption has continued to expand in Peru in 2010. Wine companies have proactively participated in wine promotional activities held in supermarkets/hypermarkets and the trade press, and educated consumers about wine-dish combinations, the wine temperature that guarantees wine’s preservation, and health benefit of wine, etc. During 2010, wine sales achieved a 9 percent growth in terms of volume, after a drop of the same magnitude during the previous year. In 2010, as the Peruvian economy gradually recovered from the slowdown registered in 2009, consumers benefited from higher incomes and therefore increased their purchases of wine. Some consumers traded up to more expensive brands. Red wine is still the leading category accounting for 73 percent of total wine sales in terms of volume, registering the fastest growth of 10 percent in terms of volume in 2010. The performance can be explained by the increased availability of good-quality red wines at affordable prices, through supermarkets/hypermarkets and liquor stores that periodically carry promotions and price discounts to boost sales. Men and women between 25 and 45 years of age are considered to be major wine consumers. There are two different types of consumers in Peru: the first one are low and middle income consumers, who do not have the habit of drinking wine, and prefer the sweetest flavor provided by Burgundy variety of wines. The second type of consumers belongs to middle-high to high socioeconomic segments, have a long wine culture and prefer dry wines and know which type of wine is suitable for different meals as well as the appropriate temperature for drinking it. Demands for wine among women are rising, as more women join the workforce and earn higher income. Baked Goods Baked goods, in particular bread, are a staple in Peruvian diet. Traditionally, most consumers choose artisanal bread (what is artisanal bread?) as they appreciate its freshness. A typical Peruvian buys bread at least once a day for breakfast, children’s lunch, and afternoon tea. Artisanal bread can be found at small grocers, bakeries, andsupermarkets/hypermarkets. It is expected to achieve a growth of 2 percent in retail volume for these products in 2011, which is in line with the performance registered the previous year. This moderate performance is explained by the fact that the largest category, artisanal bread, is a mature one, and therefore its growth follows the population growth. Packaged/industrial bread is expected to be the fastest-growing category in 2011, with a value growth of 7 percent. Even if consumers prefer the freshness provided by artisanal bread, some high- and middle-income consumers are gradually turning towards packaged bread, either because they appreciate the value-added features provided such as wheat bread or fortified bread or because hectic lives favor the consumption of such products (as packaged bread has a longer shelf-life than artisanal bread). Although artisanal bread will continue driving sales of the category, as it will continue to represent the main product sold within baked goods, there is a good potential for developing packaged/industrial products, as high- and middle-income consumers become more concerned about health issues and seek for products that can help them keep a healthy diet. Consumers in urban areas living busier lifestyles will also increase their demands for packaged products. Biscuits Biscuit is expected to obtain a 6 percent growth in sales in terms of value during 2011, which is in line with the performance registered the previous year. Savory biscuits and crackers are expected to be the fastest-growing category in 2011, with a 7 percent growth. This performance can be explained by the fact that savory biscuits effectively addressed the trend towards innovation, in an effort to expand its consumer base. In addition, busier lifestyles favored the consumption of crackers as some people turn to them as a substitute of artisanal bread at breakfast and consume it at their workplaces. Alicorp and Kraft Foods led sales in 2010, with a market share of 33 percent each with Alicorp slightly leading. Their privileged position is explained by the longstanding presence of their most representative brands. Private labels offered by supermarkets/hypermarkets such as Wong, Metro, and Plaza Vea focus on offering products within the most affordable categories such as savory biscuits and sandwich biscuits. In addition, since 2009, they have adopted the strategy of favoring the companies thatoffer discounts for bulk sales. In 2010, private label accounted for only 2 percent of the total retail sales. As consumers increasingly become health conscious, product innovation will be focused on value- added products that provide, for example, fewer calories or contain extra fibre. In addition, companies will try to update their portfolios with more premium biscuits that can attract consumers who are not willing to spend more money on expensive chocolate confectionery. Frozen Processed Food Peru is the country with the lowest per capita consumption of frozen processed food in Latin America. Traditionally, Peruvian consumers prefer to consume fresh food which is generally purchased daily at wet markets and independent small grocery stores. Peruvian consumers are not only attracted to the natural flavor of fresh food, but they also believe that fresh ingredients contain higher nutrition value than frozen food. This cultural norm stands against the development of frozen processed food in the country. Despite this, however, the increasingly hectic lifestyles of Peruvians living in urban areas and the increasing numbers of women joining the Peruvian workforce determine that more consumers are now purchasing frozen processed food as it is a category which constitutes practical meal solutions and convenient ingredients. Frozen processed red meat and frozen processed poultry are the most popular categories in frozen processed food in Peru, together accounting for 95 percent of total retail sales. Frozen hamburgers are easy to prepare and cheaper than hamburgers eaten at restaurants. Frozen chicken meat is also popular in Peru as it comes with wide range of product presentations which include burgers, nuggets, fillets and breaded chicken. Frozen processed food is set to increase in value by 9 percent during 2011, commensurate with the value growth registered during 2010. The rising need for convenient packaged food products is combined with the increase in affordable frozen processed food options, especially under private label. Supermarkets/hypermarkets represent the predominant distribution channel for frozen processed food in Peru, accounting for 85 percent of total retail sales in terms of value during 2011, while bodegas (traditional food retail channel) accounted for the remaining 15 percent. This can be explained by the fact that supermarkets/hypermarkets generally have the refrigeration equipment required to adequately preserve frozen processed food, while very few bodegas can afford to invest in this type of equipment. Furthermore, manufacturers of frozen processed food are not interested in providing the refrigeration equipment to small grocers as low demand would hardly justify the expense. Frozen processed food will be a beneficiary of fast changing lifestyle of urban Peruvians, as they increasingly become interested in packaged food products which demand less preparation time. Furthermore, the growing trends towards wellness and health will enhance Peruvians’ demands for value added and low-calorie products. Breakfast cereals Whereas in the past breakfast cereals in Peru were mainly purchased by upper income consumers due to their high prices, in recent times manufacturers have responded to the expansion of the middle income segment and introduced more affordable variants in smaller package sizes. This trend continued during the review period, helping to maintain growth in retail sales, both in volume and in value. Another notable trend in breakfast cereals was the launch of new health and wellness products made from wheat or fortified with ingredients that provide functional health benefits. This trend was especially strong in the hot cereal category, where consumers can now purchase added value products fortified with ingredients that have traditionally had a very healthy image in Peru. Sales of breakfast cereals are expected to register a 7 percent in 2011. As more people live in urban areas and lead busier lifestyles, they try to take a balanced breakfast by increasing their consumption of this types of product. Domestic company Global Alimentos SAC led sales in 2010, with a 28 percent share in value. The privileged position of the company is explained by its wide range of products at affordable prices that successfully attracted middle-income consumers. In addition, the company was the first to offer flexible packages and different package sizes to adjust to Peruvian consumers’ preferences. Canned Preserved Food Canned/preserved fish/seafood is the most popular category in canned/preserved food in Peru, accounting for 76 percent of total canned/preserved food retail sales. Moreover, Peru has the third highest per capita consumption of canned/preserved fish/seafood in Latin America. This can be explained by several reasons. First, Peru is a coastal country on the Pacific Ocean and as most of its population lives in close proximity to the coast, they are used to consuming fish and seafood. Second, canned/preserved fish has a well established widespread distribution channel both within traditional and modern grocery retail stores. Third, canned/preserved fish/seafood benefits from intense competition which determines that unit prices remain fairly stable and the leading companies generally launch new products quite regularly. The most common types of canned fish in Peru include tuna, mackerel, sardines and anchovies, all of which can easily be preserved either in oil or in water. Canned/preserved food is set to increase by 7 percent in value during 2011. This growth will be higher than the 5 percent value growth recorded during 2010. Products in canned/preserved food are gradually increasing in popularity as more consumers value the convenience it offers. Higher incomes allow consumers to purchase more canned/preserved food. GW Yichang & Cia SA led sales of canned/preserved food in Peru during 2010 with a market share of 30 percent, thanks to the popularity and high quality of its Florida brand within canned/preserved fish/seafood and the high level of distribution the brand has achieved within the country’s main distribution channels. Domestic companies have a strong hold on canned/preserved food, since fishing and agriculture are main economic activities in Peru, which gives them a significant advantage over the multinationals. In addition, domestic companies are first to introduce product innovations, such as canned fish in tomato sauce, or a spicy sauce of tomatoes, ají and onions. Furthermore, the prices of the domestic brands are considerably more affordable than the international ones, thus attracting low- and middle-income consumers. Dried Processed Food Dried processed food accounted for 11 percent of total retail value sales in packaged food in Peru during 2011. This performance can be explained by the fact that rice is a staple in the Peruvian diet and is an essential item for lunch and dinner across every socioeconomic segment in the country. It is also worth noting that middle income and low income consumers in Peru still prefer unpackaged rice as it carries substantially lower unit prices than packaged options and it can be purchased the exact weight desired such as 200g, 500g or any weight which suits the individual customer. Rice companies offer several different package sizes and types of rice with a variety of prices that include economy, standard, and premium, in order to cater to the widely varying preferences and budgets of Peruvian consumers. Dessert mixes accounts for less than 1 percent of retail sales of dried processed food in Peru. There are two main underlying reasons for this situation. First, the most popular dessert mix is jelly, which carries very low unit prices. Jelly benefits from its widespread availability and appeals mainly to low income and middle income consumers. Second, busier lifestyles coupled with higher disposable incomes determine that middle income consumers generally purchase ready-to-eat desserts, many of which are artisanal products prepared at bakeries and independent small grocers, rather than taking the time to prepare a dessert at home. Alicorp led in 2010 with a 32 percent market share in overall dried food thanks to its strong presence in pasta. In rice and dessert mixes Corporación Transcontinental del Perú SAC led in Peru during 2010 with a 42 percent share thanks to the popularity of its Costeño brand in rice. This brand is appreciated for its high quality and also benefits from an excellent distribution network within both traditional and modern retail channels. Furthermore, the company has a well-balanced product portfolio with premium, standard and economy varieties which allows the company’s products to appeal to different socioeconomic segments. Oils and Fats Vegetable oil and oil (do you mean rape oil?), which remained the most popular oils and fats category in Peru is expected to account for an 85 percent share of retail sales in volume in 2011. Vegetable and rape oil is a staple in most households in Peru and is traditionally used on a daily basis in the preparation of meals. There is a wide array of brands and packaging sizes available targeting low, middle and upper income consumers. Moreover, vegetable and rape oil is widely available both within traditional and modern grocery retail outlets. Despite this, more niche categories offered the best opportunity for higher growth. Producers focused on developing healthier options, such as low-calorie products and fortified products, in order to retain the interest of health-conscious consumers. This category is expected to register retail sales growth of 9 percent in value in 2011, compared to the decline of 1 percent seen in 2010. In terms of retail sales in volume, oils and fats are expected to see growth of 3 percent in 2011, similar to that seen in 2010. As such, the strong retail sales growth in terms of volume is expected in 2011 which will be largely driven by price increases. The largest category, vegetable and rape oil is only expected to see modest retail sales growth of 3 percent in 2011, as a result of upper income consumers migrating to healthier alternatives, such as olive oil. The local company Alicorp remained the leading player in oils and fats in 2010, accounting for 56 percent of market share in value . Alicorp continued to enjoy a very strong position in vegetable and seed oil, the largest category. The company offered a well balanced portfolio of brands, including Primor, Cocinero, Capri, Cil and Friol, which targeted different segments. In addition, the company’s excellent distribution network ensured its presence through every grocery retail channel. Peru was expected to have the third lowest per capita consumption of olive oil within Latin America in 2011, at 0.3kg. This represents an attractive opportunity for companies to increase penetration by offering more affordable options to middle income consumers, whose interest in consuming olive oil increased over the review period, due to the health benefits it offers. Ready Meals Peru is the country with the lowest per capita consumption of ready meals in Latin America, mainly due to two reasons. Firstly, traditionally, Peruvians prefer consuming fresh food, as they perceive it to be more nutritious than frozen products or ready meals. Secondly, the high prices of these products represent a big obstacle to their development: there are many affordable options at foodservice establishments, which can be cheaper than a ready meal or include several courses like an appetizer, main meal and soft drink. Despite this, time constraints of Peruvians living in urban areas; cause some of them to turn to ready meals. Due to the small size of the ready meals market, there are plenty of opportunities for other brands to enter the market and rapidly gain considerable share. It is expected to increase ready meals value by 5 percent during 2011, which will be a slightly better performance than the 4 percent value growth registered during 2010. However, the 2 percent volume growth expected in 2011 is set to be in line with the 2 percent volume growth recorded in 2010. This suggests that increasing unit prices is the main factor behind the higher value growth expected in 2011. There was no significant investment by any of the major companies in ready meals during 2010 or the first half of 2011. Dried ready meals are expected to be the fastest growing category in ready meals in Peru during 2011, increasing by 5 percent in value. Dried ready meals continue to benefit from the fact that there are several traditional Peruvian dishes available in dried ready meals. Therefore, many consumers in search of practical options for a quick meal which offers a familiar taste, are attracted by dried ready meals. Local company Redondos leads ready meals in Peru thanks to its wide range of ready meals based on traditional Peruvian dishes. Moreover, these products are offered in canned/preserved format and are therefore ready to be consumed after heating, a factor which appeals to the convenience that many upper income Peruvian are in search of. It is worth noting that, given the small size of ready meals in Peru, there remain ample possibilities for other brands to enter the category and quickly gain a significant value share. Sauces, dressings and condiments Peruvian consumers are very fond of spicy sauces to complement their meals. However, traditionally Peruvian consumers rely on home-made sauces which use Peruvian ingredients, such as different types of ají (a spicy ingredient which can be yellow, red or orange), or rocoto (another spicy Peruvian ingredient, which is red). However, packaged sauces, dressings and condiments registered healthy rates of growth in recent years, based on several factors. Firstly, local company Alicorp SAA has been at the forefront of the development of sauces which look to capture the flavour of home-made sauce, but offer the practicality of a ready-to-use sauce. Its most successful launches have been a Peruvian-style mayonnaise, a rocoto sauce and ají sauce. Secondly, busier lifestyles, especially in urban households, meant that a growing number of Peruvian consumers relied on sauces, dressing and condiments to save time when cooking. Thirdly, companies have eagerly launched a good variety of packaging formats and sizes, targeting every socio-economic segment. It is expected to growth 7 percent in 2011, which will be slightly above of 2010 results. Peruvian consumers are increasingly relying on products in sauces, dressings and condiments as opposed to those that are artisanally produced, owing to concern about the sanitary conditions in which artisanal products are made. Moreover, leading companies in sauces, dressings and condiments offer periodic discounts on bulk sales and products in a variety of packaging size formats in order to meet the budgetary requirements of different consumers. Soy based sauces is expected to register the strongest current retail value growth, of 8 percent, in sauces, dressings and condiments in 2011. However, in terms of retail volume growth, this category is expected to register growth of only 4 percent. Like in other categories, Alicorp was the leading player in sauces, dressings and condiments in 2010 with a retail value share of 41 percent. The company has cultivated loyalty among many consumers due to its offer of good quality products that are carefully developed according to traditional homemade recipes. In addition, the company benefits from a widespread distribution network, its affordable product pricing and its wide array of packaging formats and packaging sizes, as a result of which its products meet the needs of a wide base of Peruvian consumers. Consumer migration from artisanal to branded packaged products, the continued search for increasingly convenient products, increased availability of products and new product development in line with the tastes of Peruvian consumers are all factors that are expected to help to boost demand for sauces, dressings and condiments in the future. Spreads Jams and preserves remained the dominant category within spreads in terms of retail volume sales. Jams and preserves are a traditional part of the Peruvian diet, usually consumed at breakfast and teatime. Rising health awareness and public concern over diet-related conditions like obesity and diabetes led to increased demand for jams and preserves products with reduced sugar content. Another notable trend in the category was the introduction of new flavour variants based on traditional Peruvian plants and fruits like coca and aguaymanto by smaller local companies. In 2011, spreads is expected to achieve an 8 percent value growth, which is above the 6 percent growth achieved the previous year. Upper-income consumers continue to increase their demand for categories that constitute niches such as chocolate and nut-based spreads. In addition, higher incomes have resulted in some middle-income consumers opting to buy larger packaging formats or beginning to demand low-calorie versions of their preferred jams and preserves. Grupo Gloria continued to lead sales in 2010 with a value share of 33 percent, due to its longstanding presence in the market and the availability of different packaging formats and sizes within traditional and modern retail grocers to appeal to a large consumer base. Ranking in second position was GW Yichang & Cia with a 25 percent value share. This company frequently introduces new flavors and has developed an interesting line of light brands to meet preferences of health- conscious consumers. Sweet and Savory Snacks Per capita volume consumption of sweet and savory snacks in Peru is relatively low compared to in other countries in Latin America thus there are plenty of possibilities for further development of the category through the launch of products that better meet the preferences of Peruvian consumers. Peru has the third lowest per capita consumption of sweet and savory snacks in the region, standing at 0.5kg, while the average for the region is nearly 1.5kg. This determines that there are plenty of opportunities for the category to develop. The latest focus of the main companies in the category was the launch of products which better met Peruvians’ tastes and preferences. This trend began in 2008 with the launch of chips based on native Peruvian potatoes by Snacks America Latina SRL, a move which was later replicated by local companies such as Deprodeca SAC. Snacks America Latina SRL remained the undisputed leading player in sweet and savory snacks in 2010, with a retail value share of 59 percent. Its leading position is due to its strong distribution network, the offer of products in various packaging sizes and frequent product innovation in order to better satisfy the preferences of Peruvian consumers Product innovation is expected to continue to boost demand for products in sweet and savory snacks over the forecast period. It is expected that multinational player Snacks America Latina SRL will continue to update its product portfolio with brand extensions and new product launches that develop niche categories Section III. Competition Source: World Trade Atlas (2010) Peru grants tariff preferences to the Andean Community of Nations (CAN - Bolivia, Colombia and Ecuador), and to Mexico, Paraguay, Argentina, Brazil, Uruguay and Cuba. Peru’s trade policy is oriented towards open markets. Peru has signed different commercial and trade agreements, while others have not entered into force yet and just a few still in negotiations: Country Type Status Andean Community (Bolivia, Ecuador force and Free Trade Agreement In Colombia) MERCOSUR (Argentina, Brasil, Uruguay, Economic Complementation Paraguay) Ag n force reement I Cub Economic Complementation a Ag ce reement In for Chile Free Trade Agreement In force Mexico Trade Integration Agreement In force United States Free Trade Agreement In force Canada Free Trade Agreement In force Singapore Free Trade Agreement In force China Free Trade Agreement In force South Korea Free Trade Agreement In force European Free Trade Association (EFTA) Free Trade Agreement In force Thailand Th To come into ird Protocol force o come into Japan Economic Partnership Agreement T force Eu To come into ropean Union Free Trade Agreement force Co To come into sta Rica Free Trade Agreement force come into Panama Free Trade Agreement To force Guatemala Free Trade Agreemnent Negotiating El Salvador Free Trade Agreemnent Negotiating Honduras Free Trade Agreemnent Negotiating The PTPA reinforces U.S. competitiveness within the Peruvian market. The quality of U.S. products is already appreciated among the high-end consumers. For a complete list of products that have benefited from PTPA, please check Competitive Situation facing U.S. Suppliers in the Food Processing Market in 2010 Product Advantages and Ca jor Supply tegory/ Ma Ne Sou ey Supply Countries Disadvantages of Local rces Strengths of K t Imports Suppliers New Zealand: 31 percent U.S.: 21 Dairy Products percent re (Excl. Cheese) Chi i - Only two companies a s a major supplier of dairy le: 12 - New Zealand major producers of ingredients, especially HS 040210 milk ($127.85 percent evaporated milk and mi accounting 36 percent of total imports. llion) Bolivia: 12 yogurt. percent Argentina: 6 percent U.S: 38 percent Argentina: 15 Che percent Local homemade cheeses ese 2,431 tons Uruguay: 15 Argentina and Uruguay are part of are commonly sold. percent MERCOSUR and have tariff preferences Gourmet cheeses are not ($11.59 million) Netherlands: 7 made locally. percent New Zealand: 7 percent Colombia: 52 percent Ecuador: 10 Sna - Local producers are major ck Foods percent 19 food processors. They ,505 tons Chi - Tariff preferences are applied to le: 7 ountries. import food ingredients for ($54.1 million) p neighboring cercent U.S snacks and snacks in bulk. .: 7 percent Argentina: 6 percent Chile: 60 percent U.S.: 12 Chile sells at cheaper Processed Fruits percent prices due to proximity - Local processors are and Vegetables Argentina: 6 and tariff preferences. major exporters, but their 47,885 tons percent - EU products are viewed as good quality. local supply is limited. ($65.93million) Netherlands: 4 - Argentina has increased its potatoe perce exports and fruit jellies Italy: 3 percent China: 3 percent Chi - There is an open window le: 93 - Chile is the main supplier because of from November to Fresh Fruits percent 69 proximity, price and duty free entrance. February for that will ,174 tons Argentina: 5 - Argentina has a window for pears and benefit the United Stated ($49.83 million) percent U.S apples. - Local fruit sold in retail .: 2 percent markets is of lower quality. U.S.: 31 percent Fruit and Brazil: 23 - Chile has tariff and proximity - Local brands are well vegetable juices percent advantages. 1,422,272 L Chile: 13 - Brazil has increased its expor positioned in the market at ts of ($ 2.5 million) percent p competitive prices. ineapple juice Argentina: 11 percent Argentina: 41percent Chile: 22 - Major local breweries are percent S well positioned, price pain: 11 competitive, and belong to W percent - Proximity and recognized quality of ine and Beer 17 Brazil: 8 C international companies, hilean and Argentinean wines. .42 Million representing 95 percent of percent - Brazil is the major supplier of imported liters the market. beer. ($29.5 million) Italy: 7percent - Local wine is well France: 3 positioned and price percent competitive, but does not Ecuador: 3 satisfy demand. percent U.S.: 2 percent Brazil: 29 percent U.S - Peru’s market for U.S. .: 22 meats reopened in October R percent ed Meats Chi - Major imports come from nearby 2006. le: 14 (fresh, chilled or p - U.S. meats are of e countries. rcent frozen) pidly due to superior quality. 22 Colomb Colombia has grown very ra ia: 11 ,995 tons pe low prices. - Peru imports three times rcent ($45.67 million) A more offals than meats. rgentina: 11 p - Local meat does not ercent satisfy the demand. Paraguay: 8 percent Chile: 29 percent Bolivia: 15 percent Red Meats A - The pork products rgentina: 11 (prepared, p industry also imports ercent - Chile has tariff and proximity preserved) Sp prepared meats. ain: 11 advantages. 1,238 tons p - U.S. product tariffs will ercent decrease throughout 5 to 7 ($5.00 million) Italia: 10p years. ercent U.S.: 8 percent Denmark: 8 percent Brazil: 32 - TRQ for U.S. chicken leg Poultry Meat p of U.S. poultry products ercent - Imports quarters 24,410 tons Chi reopened in October 2006. le: 25 - Local poultry producers ($29.32 million) p - Brazil and Chile are major suppliers of ercent U.S poul are major suppliers with try cuts. .: 20 good distribution channels. percent - Imports are mainly Argentina: 16 chicken and turkey parts. percent Bolivia: 8 percent Note: Net imports correspond to the three food sectors: Food Service, Retail and Food Processing. Source: World Trade Atlas Section IV. Best Product Prospects Source: World Trade Atlas (2010) A. Products Present in the Market Which Have Good Sales Potential: Average Produ Market Annua l ct/ Import Key Constraints Market Produ Size Imports Import ct Attractiveness for Ca 2010 2010 G Tariff Over Market rowth tegory es Rate Development the U.S. t. (2005- 10) 14 .4 Cheese 18,480 2,341 percent 040610, - U.S. competitors - U.S. cheeses are (HS 0406) MT tons 20 and are: Uruguay mainly used in the 40 (16percent) and food processing ($11.59 0 Netherlands sector, but have million) percent (16percent). potential in the HRI 040630 - Strong and Retail Food 040690 preference for EU Sectors. 0 cheese at high- - In 2010, the United percent end HRI and States was the first Retail Sectors. supplier with a market share of 38 percent. - TPA*: 17 years linear, 2,500 MT quota with 12 percent increase per year. - Major suppliers are - United States Colombia($26 represents 2 percent 14,492 Confectionary 0 million) and of total imports, tons – non 16.1 p however, U.S. ercent Ecuador ($4 million). imports grew 14% in chocol N/A a te percent ($37.4 - Local industry is 2010. (HS 1704) mi llion) strong. Major . owners are foreign companies. - The U.S. is the - Chile is the second major 3,663 0 major supplier supplier with 17 Confectionary tons 12.2 pe (24 percent of rcent percent. The U.S. – chocolate N/A percent MS). strength is in (HS 1806) ($13.6 - Local industry is chocolate for the mi llion) competitive. retail sector. Imports grew 46 percent in 2010. - United States is the 14,229 - Local Production second largest Food tons 16.4 0 is strong supplier and holds Preparations N/A percent p - Chile is the 17 percent of market ercent (HS 210690) ($120 major importer share. million) (33 percent). - In 2010 imports grew 28 percent. - Due to an increment of income levels, local consumers are demanding high Total - Competes wi quality products, th beef and 1,435 0 qua such as beef. lity meats Prime and offa - U.S. imports have ls tons 7.9 percent from Colombia, choice beef market: ($5.73 percent A grown 75 percent rgentina, (HS 020230) 274,425 million) Uruguay, respect 2009 in this Brazil MT category and Bolivia. - United States became the second largest beef supplier in 2010 and holds 25 percent of import market share Edible Beef 10,000 3,911 16.4 0 Local production - The United States Offals (liver) MT tons percent percent covers most of holds 95 percent of (HS, ($5.4 the market size. import market. 020622) million) U.S. imports grew 15 Frui - Brazil is the t and 14,222 percent in 2010 and Vegetable hl 30 0 second largest United States juices N/A percent supplier and holds percent 23 remains as the percent of (HS 2009) ($2.5 ma largest importer rket share in million) 2010. holding 31 percent of market share. - Growing local pet industry. - There is an 12,250 informal industry - The United States MT holds 22 percent of Pet foods 45,000 17 arising. .6 0 the market, with an (HS 230910) MT p - Colombia 42 ercent percent ($13.84 percent), and 21 percent increase million) Argentina (31 from 2009. percent) are major competitors. - Peruvians are major consumers of - Major exporters turkey during are Brazil (52 Christmas and New 4,598 percent) and Chile Year’s. tons Tur (34 percent) - The food retail key 13,000 27.2 6 followed by the sector is becoming (HS 020727) MT percent percent (7.6 United States with more popular not million) 14 percent. only in Lima, but also - Local poultry in the province. industry is strong. - USAPEEC has initiated a market penetration plan. 10 - Peruvians are ,050 TRQ: - Strong local major consumers of Poultry meat tons 56.2 $23,000 13,997 industry. poultry. cuts mi percent tons - Frozen llion - TRQ: 6 percent (HS 020714) ($8.53 0 presentation is mi ease per year. llion) percent not comm incron - Colombia is the major import B 4,449 read, pastry, 21 supplier and holds United States holds .1 0 cookies N/A tons 22 percent of 14 percent of import ($10.2 percent percent (HS 1905) mi market share. market share. llion) Local companies are very strong. - United States grew 1,152 38 percent in 2010 Soups & tons - Local companies and is the major B 20.6 0 roths N/A p import supplier in ercent p are very ercent (HS 2104) ($2.63 competitive this category.holding million) 33 percent of import market share - United States grew 5,557 16 percent in 2010 tons Sauces A 15 0 - Local companies and is the major (HS 2103 N/) p are very import supplier in ercent, percent ($9.87 competitive. this category. million) Holding 32 percent of import market share Nuts and N/A 452 tons 40 0 - Chile (37 - U.S. imports have almonds percent percent percent of the grown 161 percent in (HS 0802) ($2.7 market) is the respect to 2009. The million) second largest United States is the supplier. major supplier with 61 percent of the import market. - Importers recognize that U.S. quality of nuts and almonds is better than competitors. - Argentina (53 - There is a niche percent), Chile market for quality (32 percent), and wines for which the 8.1 Spain (7 percent) United States can be 15.7 0 W 21 million are major appreciated and price ine percent percent liters exporters. competitive. (HS 2204 million ) liters ($24.87 - Only regular - Peru’s wine mi llion) wine consumers consumption is recognize U.S. growing. Right now is wine quality. above 1.3 liters. Note: TRQ = Tariff Rate Quota, on a first-come first-serve basis. Sources: World Trade Atlas, USTR, Ministry of Agriculture (Minag), Gestion and El Comercio Newspapers B. Products not Present in Significant Quantities, but which have good sales Potential: Average Product/ Annual Product Imports Impor Import Key Constraints Over t C ve Market Attractiveness for lopment ategory 2010 Growth Tariff Market DeR the U.S. ate (2005-10) - Importers are interested Peaches, 2,968 e is major supplier in U.S. peaches and cherries and tons 13.6 0 - Chil Ne with 99 percent of the nectarines. ctarines ($2.3 percent percent market. - Duty free access for this (HS 0809) million) category. - Chile is the major - There is a window of 61,859 0 supplier with 92 percent opportunity for the United Apples and Tons 20 States between November .2 percent of the market. Pears p - The United States is and February. ercent (HS 0808) $44 the third largest supplier Local consumers recognize mi llion with 2 percent of the U.S. apples and pears market. quality. 6,633 - U.S. window: September 0 Gr to December. apes, tons percent raisins 22 percent - Chile holds almost 88 In 2010 U.S. imports percent of the market. reached $1.1 million due (HS 080620) ($14.3 mi to a less Chilean llion) production. - United States holds 60 2.4 35 percent of import market tons Citrus percent - Chile is the second - Recognized quality of -23 percent major supplier with 40 (HS 0805) U.S. oranges and $30,546 percent of the market. tangerines. - Export window for the United States is from January to March. - Peruvians are not used to eating pork. - Local industry produces more than 3,005 - Pork imports are 100,000 MT growing. tons - The industry is the Pork Meat - U.S. pork benefit from 63 percent 2.4 same as the poultry (HS 0203) percent TPA implementation. ($6.9 industry. mi - llion) - Chile is the major supplier with 79 percent of the market and second is Canada with 15 percent - There is a high-end segment for gourmet sausages, in which the United States can S 547 tons ausages compete. - Major exporter is Chile (HS 1601) 28 percent 2.4 the United States holds 19 ($1.6 p with 44 percent of ercent mi ma percent of import market. rket llion) Imports has grown 142 percent in 2010. Fast food restaurants are main channel for this category. - The United States has H 74 quality products to tons - Major suppliers are am, introduce to the gourmet p rocessed 32 Italy (43 percent of the percent 3.42 market HS 160241 ($0.84 percent market) and Spain (39 mi - TPA: 7 years llion) percent). U.S. imports grew 95 percent in 2010. - Local breweries are very strong and owned - Niche market for 8.9 by international premium beers. mi companies. llion - Growing consumption of B - Local breweries eer liters beer (over 40 lts per (HS 5.6 p ercent 0 produce and import new 2203) percent b capita) rands for introduction ($4.5 - Duty free entrance. mi in the market. llion) B Lack of U.S. brands within razil is the major the market. supplier (53 percent of the market). Note: TRQ = Tariff Rate Quota, on a first-come first-serve basis. Sources: World Trade Atlas, USTR, Ministry of Agriculture (Minag), Gestion and El Comercio Newspapers C. Products Not Present Because They Face Significant Barriers None. Section V. Post Contact and Further Information If you have any question or comments regarding this report or need assistance exporting to Peru, please contact the Foreign Agricultural Service in Lima at the following address: U.S. Embassy Lima, Foreign Agricultural Service (FAS) Mailing Address: Office of Agricultural Affairs, Unit 3785, APO AA 34031 Address: Av. La Encalada cdra. 17, Monterrico, Lima 33 Phone: (511) 434-3042 Fax: (511) 434-3043 E-mail:
Posted: 20 January 2012

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