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BMI View: the consumer picture in Colombia looks relatively positive over our five year forecast period. A reduction in credit, higher unemployment and high personal debt levels mean that the pace of growth is likely to be lower than that witnessed in the boom years leading up to the global financial crisis. However, with strong fundamentals and re-emerging indications of growth, Colombian consumers look set to continue steadily increasing the amount they spend, with positive implications for the food and drink industry. This will continue to encourage investment in the region, with important players such as Carrefour and Grupo Nacional de Chocolates both announcing new development plans in recent months.


Headline Industry Data

2011 per capita food consumption = +4%; forecast to 2014 = +18%
2011 alcoholic drink sales = +2%; forecast to 2014 = +8%
2011 soft drink sales = +3% ; forecast to 2014 = +12%
2011 mass grocery retail sales = +5%; forecast to 2014 = +23%


Key Macroeconomic Data

2010 Real GDP growth = +3.9%, 2011 Real GDP growth = +3.2% (2009, +0.4%)
2010 Consumer Price = +3.5% chg y-o-y (period average) (2009, +2%)
2010 Unemployment Rate = 10% (period average) (2009, 11.9%)


Key Company Trends

Opportunities for Coffee – The market for Colombian coffee is dominated by instant (soluble) coffee and
the sector has delivered only moderate growth in recent years. Traditionally the best Colombia coffee beans had been reserved for export markets where more discerning consumers were prepared to pay a premium for higher-grade coffee. This is gradually changing, with both Grupo Nacional de Chocolates and local industry association National Federation of Colombian Coffee Growers (Fedecafe) running campaigns to encourage Colombian consumers to consume higher quality coffee. In line with this, Nacional de Chocolates is investing US$75mn in its domestic coffee processing plants, launching a new premium coffee brand and has recently taken majority control of local coffee producer Industrias Aliadas.
New Beer Taxes – Value-added tax (VAT) on beer has recently increased from 3% to 14%, a move that raised average beer prices by at least 8%. In response to the tax increase, SABMiller warned that the rise could lead to a one-off fall in its volumes of up to 4.5%. The firm also cut its medium-term volume growth target for Latin America as a whole from 5-7%, to 4-6% a year. The company’s weak first quarter results, for the three months to June 30 2010, saw a volume decline of 6% in Colombia, suggesting that the impact of the tax rise could be even more severe than first envisaged.


Key Risks to Outlook

Faster Credit Expansion – With consumer spending in Colombia tied closely to credit expansion, a key risk to our outlook is any change in this indicator, in turn a factor that is dependent on consumer propensity to borrow, bank's willingness to lend and on interest rates. Slower credit going forward is likely to cap private consumption growth, and this reinforces our view that Colombia's inflationary outlook is set to remain benign, as price pressures are held back over the medium term. Faster Growth In GDP – A second risk to our forecast is that Colombia will experience more rapid economic growth than we are currently predicting. Either a swift increase in foreign direct investment (FDI) or global oil prices could have a positive impact on the broader economy, with positive implications for our consumption forecasts. This represents an upside risk.


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