According to Euromonitor, retail sales in the packaged food market in Peru are forecast to reach US$9.7 billion in 2022. That represents a growth rate of 7.8% or US$705.4 million since 2018. The forecast for growth in this market is also promising. By the year 2026, the retail sales in the packaged food market in Peru is expected to reach nearly US$11 billion, a growth rate of 15.2%, or nearly US$1.5 billion from 2022.
High growth products in the forecast include:
- Confectionery
- Ice Cream
- Ready Meals
- Sweet Biscuits, Snack Bars & Fruit Snacks
- Baby Food
- Savory Snacks
- Processed Meat, Seafood & Alternatives to Meat
FAS Lima reports that Peru´s food retail sector has shown a growth trend in the last 10 years based on the opening of new stores spurred by a growing middle-class and positive economic indicators. Last year, food retail sales continued to see growth but at a slower pace than 2020, based on staple foods and non-food categories. The retail food sector in Peru is comprised of two segments: modern (supermarkets, convenience stores, discount stores, cash & carry) and traditional (open markets, mom and pop stores, usually called “bodegas”).
There are three main supermarket chains in Peru: Cencosud (Wong and Metro), Saga Fallabella (Tottus) and Supermercados Peruanos (Vivanda and Plaza Vea). The market includes 282 conventional supermarkets and superstores, with 178 in Lima, and close to 790 convenience stores. The sector is comprised of both conventional supermarkets and traditional channels, comprised of wet markets and independent stores. Different types of food appear to perform better in the two formats. Top products include snack foods, dairy, edible oils, confectionaries, bread, and cookies.
The expansion of modern retailers is based on the opening of multiformat outlets, with hard discount and cash & carry formats the better performers during the pandemic. In December 2020, InRetail Peru Corp, which owns the largest food retailer Supermercados Peruanos, announced the acquisition of the entire operation of Makro Supermayorista, a major cash & carry format. The acquisition immediately brought 16 additional stores to InRetail’s portfolio and strengthened its market share in this competitive sector. Supermercados Peruanos holds supermarkets, hypermarkets, hard discounts, and cash & carry formats, covering a wide spectrum of socioeconomic segments. Aligned with these actions, Grupo Falabella opened three more Hiperbodega Precio Uno stores in Lima, Junin, and San Martin.
The food retail industry’s estimated sales reached US$24.7 billion in 2021, up approximately 13% from 2020. The modern channel was able to maintain sales throughout the year since they never closed, despite the pandemic restrictions. The three major supermarket chains in Peru adapted to lower capacity conditions and strengthened their online channels to keep up with sales. The growth was based on basic staple categories and the opening of formats aimed at low-income target audiences.
Supermercados Peranos (SPSA) has developed a discount market format named Mass that currently has 550 stores in the country. Despite the pandemic’s impacts, Tottus Hypermarket, from Fallabella Group, was able to open three more Hiperbodega Precio Uno (HPU) hard-discount format stores, which also cater to the lower income segment. HPU provides a mix of products, similar to a hypermarket, but in a smaller format. Its price competitiveness is due to more private label products. There are 25 HPUs so far and the majority (21) is outside of Lima. The market includes 322 conventional supermarkets and superstores (196 of which are located in Lima).
Peru´s food retail sector is projected to grow 5.3% in 2022, reaching US$26.3 billion. Consumers are expected to revert back to some pre-pandemic purchasing habits, which explain the lower growth projections for this year. Retail sector growth is expected to be driven by better performance of the modern channel due to continued store renovations and an aggressive discounting campaign to encourage sales. In addition, retailers are developing a multichannel concept by enhancing e-commerce services and new store formats.
International externalities are a primary industry concern. Raw material prices and transportation costs continue to rise and will likely impact the retail prices of high-value food products. As such, FAS Lima is conservative about the expected growth of U.S. consumer-oriented exports to Peru in 2022. Last year, this category reached US$343 million, a 17% increase with respect 2020. Some categories benefited from the recovery of the hotel, restaurant, and institutional (HRI) sector and regained market share lost during the pandemic. Despite the rebound of the food retail sector, growth in 2022 will likely stem from basic food categories, with a special emphasis on private labels. FAS Lima expects to see a slight decline in the demand of high-value imported products.
The convenience store channel is the newest format, and it suffered significant setbacks during the height of the pandemic. These formats were gaining market share within the modern channel and posed strong competition for supermarket chains. However, government restrictions during the first months of the pandemic reversed the strong sales growth that had been achieved with new outlets throughout Lima. Towards the end of 2020 and into 2021, the relaxation of restrictions was instrumental to the recovery of sales.
TAMBO is still the most prevalent convenience store, having more outlets than their competitors. Others include OXXO, Repshop, Listo, and other independent stores. Cencosud recently entered into this segment, opening its first convenience store SPID. This is part of an aggressive expansion plan by the Chilean company based on the establishment of express formats. There are around 800 convenience store locations among these brands in Peru. Beverages and ready to eat products are the main categories sold in this channel.
Best Product Prospects:
FAS Lima reports that U.S. products with high sales potential in this sector include cheese, chocolate and confectionery, food preparations, red meats, poultry meats, fruit and vegetable juice, bread, pastry and cookies, soups and broths, sauces and tree nuts.