Venezuela Food and Drink Report Q4 2008

Publication Date	October 2008
Publisher	Business Monitor
Product Type	Report
Pages	68
ISBN Number	1749-3064
Product Code	BMI01599

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Summary

Venezuelas dairy sector can be characterised as high risk. The limited number of dairy multinationals operating in the country are living under the cloud of Venezuelas nationalisation policies and price controls threaten margins. However, rising demand means that opportunities exist for firms that can negotiate the tricky political situation.

As discussed in BMIs newly published Q408 Venezuela Food & Drink Report the President of Venezuela, Hugo Chvez, has made it clear that he would like to see large parts of the countrys food industry under state control. However, the food market is still dominated by private firms, and most are managing to turn a profit despite the anti-business policies being pursued by the Venezuelan government.

Italy-based dairy giant Parmalat is one such firm. In 2007 Parmalats revenues from its Venezuelan operations increased by 5.2% to reach VEF602,401mn (US$281mn). However, the firms earnings before interest, taxes, depreciation and amortisation decreased by 6.8% to come in at VEF61,773mn (US$29mn).

This represented a decline of four percentage points in Parmalats profit margin over the year.

Over the year Parmalat sold 22% less pasteurised milk and 52.6% less condensed milk. However, this reduction in sales was not driven by a lack of demand. Demand for dairy products is very highly correlated with consumer affluence and the large amounts of money circulating in the Venezuelan economy, thanks to loose fiscal spending and bumper oil receipts, has sent demand soaring.

Instead, this decline in sales was almost entirely due to the actions of the Venezuelan government. In January 2007 the government introduced price controls to regulate the retail price of pasteurised milk, powdered milk and UHT milk. As Parmalat could not make a profit selling at these prices, the firms production levels were drawn down and sales dropped. With other dairy firms also reducing production there have been serious supply shortages. The Venezuelan government has since responded by nationalising large parts of the domestic dairy industry.

With the government becoming an increasingly dominant player in the production of basic dairy products many dairy firms are now looking to focus on value-added products. These have the added advantage of being less subject to price controls, and offering high growth potential. For example, in 2008 Parmalat recorded revenue growth of 11.3% in the yoghurt sector and 11.7% in the juice sectors. These growth rates reveal that there are still a number of opportunities in the tricky Venezuelan food and drink sector.

Content

Executive Summary
Business Environment
Latin America Food & Drink Business Environment Ratings
- Table: Latin America Food & Drink Business Environment Ratings Q4 2008
Venezuelas Food & Drink Business Environment Rating
Global Food & Drink Business Environment Ratings
SWOT Analysis
Food And Drink
Venezuela Food And Drink Industry SWOT
Mass Grocery Retail
Venezuela Mass Grocery Retail Industry SWOT
Macroeconomic Outlook
- Table: Venezuela Economic Activity
Food
Industry Forecast Scenario
Total Food Consumption
- Table: Venezuela Food Consumption Indicators Historical Data & Forecasts
Confectionery
- Table: Confectionery Value/Volume Sales Historical Data & Forecasts
Industry Developments
Market Overview
Overview Of Sector
Prepared Food / Canned Food
Dairy
Meat
Seafood
Drink
Industry Forecast Scenario
Hot Drinks
- Table: Hot Drink Value Sales Historical Data & Forecasts
Alcoholic Drinks
- Table: Alcoholic Drink Value/Volume Sales Historical Data & Forecasts
Soft Drinks
Soft Drink Value Sales Historical Data & Forecasts
Industry Developments
Market Overview
Alcoholic Drinks
Soft Drinks
Agriculture At A Glance
- Table: Venezuela Dairy Industry Data (000 Tonnes, Unless Stated)
- Table: Venezuela Organic Agricultural Data, 2006
- Table: Venezuela Rural/Urban Population Breakdown
Agricultural Commodity Price
Mass Grocery Retail
Industry Forecast Scenario
- Table: Venezuela Mass Grocery Retail Value Sales By Format (US$bn) Historical Data & Forecasts
- Table: Sales Breakdown By Retail Format Type 2007 & 2017
Industry Developments
Market Overview
- Table: Structure Of Venezuela's Mass Grocery Retail Market By Estimated Numbers Of Outlets
- Table: Structure Of Venezuela's Mass Grocery Retail Market Sales Value By Format (US$bn)
Competitive Landscape
Key Players
Food And Drink
- Table: Key Players in Venezuela's Food & Drink Sector
Mass Grocery Retail
- Table: Key Players In Venezuela's Mass Grocery Retail Sector, 2007
Company Analysis
Food
Alimentos Heinz CA
Cargill de Venezuela
Empresas Polar
Drink
Coca-Cola FEMSA
Pernod Ricard Venezuela
Mass Grocery Retail
Mercal CA
Makro Venezuela
Recession Scenario
Global Scenario
- Table: World GDP Growth
- Table: US GDP Growth, Investment Growth And Private Consumption Growth
- Table: Eurozone GDP Growth
- Table: Asia, Excluding Japan, GDP Growth
- Table: China GDP Growth
- Table: Mexico GDP Growth
- Table: Africa GDP Growth
Latin America Food & Drink Scenario
Deep US Recession: What Would Be The Impact For Latin America's Food And Drink Industries?
- Table: Impact Of Deep US Recession On Total Food Consumption In Latin America - Cumulative Difference (US$bn)
- Table: Impact Of Deep US Recession On Total Food Consumption In Latin America Cumulative Difference (%)
Appendix
Food & Drink Business Environment Ratings
Ratings Methodology
Ratings Overview
Ratings System
Indicators
Limits Of Potential Returns
Risks To Realisation Of Potential Returns
Weighting
Weighting
BMI Food & Drink Industry Glossary
Food & Drink
Mass Grocery Retail
BMI Food & Drink Forecasting & Sourcing
How We Generate Our Industry Forecasts
Sourcing