Latin America’s appeal for food companies

By Caroline Scott-Thomas

- Last updated on GMT

Related tags: Latin america, United states

Latin America presents growing opportunities for investment for food manufacturers, even as the economic crisis takes its toll on American and European markets, according to a new market report.

Specialist research organization Leatherhead Food International released the report, entitled ‘Emerging Food Markets in Latin America’, in which it analyzes opportunities for food manufacturers on the continent. Many larger food and beverage companies are already looking to expand operations in less developed countries, including Latin America, it said.

“This is especially significant in the present climate, since many economies in Europe and North America are in recession,”​ Leatherhead said. “Faced with static or declining consumption in mature markets in these parts of the world, leading food groups have been turning to the countries in regions such as Latin America in order to maintain profitability, and have appeared keen to access new customer bases whilst also taking advantage of lower labour costs.”

Brazil’s expanding potential

In terms of current growth, Brazil is one of the most attractive markets in the world, not only for internal sales as the country’s large urban population becomes more affluent, but also for its export potential. Brazil already has strong trade relations with the US, “on account of its geographical proximity”,​ but Leatherhead predicts that markets have been opening up in other parts of the world, such as the EU and the Asia-Pacific region.

To give a better idea of local consumers’ purchasing power, Leatherhead also ranked Latin American countries in terms of per capita gross national income (GNI), where Argentina, Chile and Mexico come out on top, at $13,000, $12,590 and $12,580 respectively. When ranked in this way, Brazil comes much further down the list, with an average GNI of $5,910.

Most promising sectors

The report predicts that the sectors most likely to see future growth in Latin America include value-added dairy products such as ice cream and yogurts, ready meals, pizza, beer and soft drinks.

“This is mainly due to factors such as increasing interest in non-traditional foodstuffs, rising levels of disposable income and the emergence of a more sophisticated, predominantly younger urban consumer base, many of whom are less traditional in their tastes,”​ it said.

Bakery products are seen as a staple food item for the majority of Latin American consumers, so sales in this sector are also expected to remain high.

Venezuelan difficulties

Although Venezuela has a relatively high per capita GNI at $11,920, Leatherhead said that it is “perhaps the only unattractive market within the region”​ due to continuing government conflict with business, and evidence of large-scale nationalization. This was seen recently when the government seized control of food production plants, including a Cargill rice processing plant, in a bid to protect Venezuelans from price inflation of staple foods.

Related topics: Market Trends

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