Dairy is the most important category within packaged food in value terms for Latin America, exceeding USD430 billion in 2017 and showing quite polarised growth between the countries in the region. Despite the fact that dairy consumption in Latin America is not as sophisticated in terms of product scope compared to more developed regions, there are also market opportunities that will be explored throughout this report.
Although in Latin America dairy is considered a widely consumed staple, it is important to understand its consumption formats. While local consumers spend less than half of what their North American and European counterparts in the category spend, much of the consumption still comes from unpackaged artisan-al goods.
While relevant Latin American dairy markets such as Chile, Mexico and Argentina registered positive growth in constant USD terms over 2012-2017, Brazil, which makes up 37% of total dairy revenues in the region, registered currency exchange issues and underperformed on a foreign currency level. Despite the negative performance, Brazil still has potential for growth depending on its economic performance over the next five years.
Despite the fairly high fragmentation, dairy in Latin America has a few large players. The consolidation of Mastellone HnosSA and Grupo Lalain the region, following acquisitions in Brazil and Peru, may continue to shape a more homogeneous demand for milk, cheese, yoghurt and derivatives in the region.
As Latin American consumers seek greater convenience of buying all their groceries in one place, popularity of hypermarkets and large supermarkets continues to grow. As inflationary movements and a lower purchasing power are generating a higher price sensitivity, consumers are tightening their belts and seek out promotions. This movement is likely to attract more foreign investment as dairy producers will ultimately benefit from a more simplified retail network where one listing in a hypermarket reaches more consumers.
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