October 21, 2008

Independent Forecasts and Market Intelligence for the Colombian Food and Drink Industry for Q4 2008

Research and Markets (http://www.researchandmarkets.com/research/233574/colombia_food_and) has announced the addition of the "Colombia Food and Drink Report Q4 2008" report to their offering.

Consumption of beer in Colombia has been rising steadily in both volume and value terms over the past five years as discussed in our newly published Q408 Chile Food & Drink Report. The market is dominated by one firm - Bavaria, owned by SABMiller - but the high growth rates would suggest that there are opportunities for other firms willing to risk taking on the virtually unopposed incumbent.

SABMiller acquired Bavaria in 2005 and at that time the firm had a virtual monopoly in Colombia, Peru, Ecuador and Panama. This market dominance translated into high profit margins and SABMiller is unlikely to give up its leading position in Colombia without a fight.

In 2007 SABMiller's lager sales increased by 4% and the firm's revenue per hectolitre also improved by 4%. Although reasonably strong these results are not outstanding. However, what may turn the heads of other multinational brewers is that in 2007 SABMiller's premium lager volumes were 60% higher than the year prior, reflecting the tremendous growth rates at the top end of the market.

This is also perhaps the segment where SABMiller is open to attack from exotic foreign brands. While the economics of brewing mean that it will be difficult for any firm to compete with a dominant firm in the mass-market segment, at the top-end, where margins are higher, it will be easier for another firm to make inroads.

One firm already nibbling around the edges is Anheuser-Busch. In 2006 Anheuser-Busch (A-B) launched its Budweiser brand through an arrangement with the country's largest retailer Exito. Budweiser quickly became one of the most popular beers in Colombian supermarkets and the success of this venture encouraged A-B to broaden its distribution channels. In February 2007 the firm entered into a distribution agreement with Heineken which saw Budweiser become available in bars, restaurants and family-owned retail outlets.

In July 2008 A-B was itself acquired by Belgium-based InBev. InBev has already revealed it is keen to expand A-B's operations in emerging markets and Colombia could represent an ideal proving ground given InBev's huge experience in Latin America.

However, SABMiller already looks to be responding to this threat. In March 2008 the company completed work on a new Colombian brewing facility at a cost of US$220mn. This was done to increase capacity and allow the firm to ferment its beers for longer. Beer that is fermented longer is generally more expensive to produce but regarded as higher quality. This clearly highlights that SABMiller is focused on delivering Colombian beers that can compete with high-quality international brands.

Companies Mentioned:

- C.I. Union de Bananeros de Uraba, SA (Uniban)

- Alianza Team (Tecnologia Empresarial de Alimentos SA)

- Nacional de Chocolates

- Drink

- Postobon

- Grupo Empresarial Bavaria

- Mass Grocery Retail

- Almacenes Exito

- Olimpica

For more information visit http://www.researchandmarkets.com/research/233574/colombia_food_and