Long-Term Opportunity In Colombia

Colombia is quickly gaining traction as one of the most exciting economies to be involved in. Multinational firms Starbucks and Krispy Kreme are in the process of opening stores in the country, as incomes rise across all demographics and income equality converges.

The third largest economy in Latin America, Colombia has a young and growing population with, for the first time, large-scale access to credit. According to Bancolombia, consumer loans have risen sixfold over the past decade. Consumption now accounts for two-thirds of the economy, while the middle class has doubled to 30% over the last decade. In our Latin America risk/reward ratings, BMI ranks Colombia fourth in the region, behind the much larger economies of Brazil and Mexico, as well as Chile. Once characterised as a country largely dominated by anarchy, Colombia now ranks on a par with Brazil and Mexico in our risk ratings, above Peru and Argentina.

These factors have proven to be the carrot attracting multinational firms into the country, particularly from the food and drink and mass grocery retail (MGR) sector. Already established in Colombia are fast food chains Burger King and McDonald's, and Chilean retailer Cencosud. Last year, Burger King announced that it was teaming up with Colombian private equity fund Promotora in order to try to increase their store numbers to 100 by 2017. Likewise, last year Cencosud finalised its entry into Colombia's MGR sector by taking over French firm Carrefour's 92 stores in the country.

Exciting Growth
GDP And Food Consumption Per Capita (Local Currency)

Colombia is quickly gaining traction as one of the most exciting economies to be involved in. Multinational firms Starbucks and Krispy Kreme are in the process of opening stores in the country, as incomes rise across all demographics and income equality converges.

The third largest economy in Latin America, Colombia has a young and growing population with, for the first time, large-scale access to credit. According to Bancolombia, consumer loans have risen sixfold over the past decade. Consumption now accounts for two-thirds of the economy, while the middle class has doubled to 30% over the last decade. In our Latin America risk/reward ratings, BMI ranks Colombia fourth in the region, behind the much larger economies of Brazil and Mexico, as well as Chile. Once characterised as a country largely dominated by anarchy, Colombia now ranks on a par with Brazil and Mexico in our risk ratings, above Peru and Argentina.

Exciting Growth
GDP And Food Consumption Per Capita (Local Currency)

These factors have proven to be the carrot attracting multinational firms into the country, particularly from the food and drink and mass grocery retail (MGR) sector. Already established in Colombia are fast food chains Burger King and McDonald's, and Chilean retailer Cencosud. Last year, Burger King announced that it was teaming up with Colombian private equity fund Promotora in order to try to increase their store numbers to 100 by 2017. Likewise, last year Cencosud finalised its entry into Colombia's MGR sector by taking over French firm Carrefour's 92 stores in the country.

Starbucks aims to have five stores open in 2014, with its first coming early next year in the capital, Bogota. Chief Executive Howard Schultz has said that he would be disappointed if the company did not have 50 stores in the country within the next five years. Coffee and donut company Krispy Kreme has also announced that it will enter the country, following its rival Dunkin' Donuts. The firm plans to roll out 25 new stores in Colombia's largest cities over the next five years. The world's largest grocery retailer, Walmart, has also been perpetually linked to a move into the country, but nothing has yet come of this. Such is the interest surrounding Colombia's retail industry, only one of the country's major grocery retailers, Olimpica, is 100% Colombian owned.

Opportunity In Mass Grocery Retail
Total Sales And Growth Rate (Local Currency)

Colombia offers massive potential for companies in the food and drink and MGR sector, though there still remain challenges. The country has one of the largest income disparities in the world, with a substantial portion of the population not being able to afford and/or not having access to packaged consumer goods. While markedly better than a decade ago, political risk still remains something of an issue in the country. This summer saw riots from agricultural workers protesting at the low cost of their produce, particularly coffee, and demanding subsidies from the government. As elections approach in May of next year, there could be a major shift in power.

But as increasing numbers enter into the middle class, many of whom are young and brand-aware, there is real opportunity for food and drink companies and grocery retailers to take advantage. Many are already established in the country, but as economic growth becomes more assured for the long-term future, many more are, and are about to, enter.

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This article is tagged to:
Sector: Food & Drink
Geography: Colombia
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