Peru Country Profile

Market Overview:

Euromonitor reports that Peru’s economy is building momentum.  Consumer spending continues to increase, along with a healthy labor market and strong credit extension. Exports are also increasing.  The possibility of another flare-up in political instability is a risk.  Growth of real Gross Domestic Product (GDP) will average about 3.7% per year in 2020-2025 and is forecast for 3.8% in 2019.

  • Peru’s economy re-emerged as one of the fastest growing in the region in 2018.
  • Real GDP increased by 3.6% in 2018– up from 2.5% in 2017.
  • The real value of private final consumption rose by 2.5% in 2017 and gains of 3.4% are expected in 2018. Consumer spending benefits from low interest rates and subdued inflation.
  • Unemployment was 12.7% in 2017 and it will edge up to 12.8% in 2018. The government is committed to the creation of more than 150,000 jobs in 2018.

The government’s reform agenda should also gain momentum.  A crucial project will be the construction of a road between Peru’s Pacific coast and Brazil.  Peruvian officials predict that the road will add one percentage point to GDP.  Although many Peruvians are certainly poor, a thriving middle class has also developed.  These consumers are reshaping the country’s national pattern of consumption.  This emerging middle class has been consistently underestimated because the primary sources of income emanate from the informal sector.

Peru’s population was 31.3 million in 2018 (CIA World Factbook Est.).  The country has added 6.3 million people since 2000 but the rate of growth is slowing.  Population is expected to be about 36.8 million in 2030.  More than half of all Peruvians live near the coast – most of them in Lima. 

Peru has signed trade deals with the US, Canada, Singapore, China, Korea, Mexico, Japan, the EU, the European Free Trade Association, Chile, Thailand, Costa Rica, Panama, Venezuela, Honduras, concluded negotiations with Guatemala and begun trade talks with El Salvador, India, and Turkey.

Peru also has signed a trade pact with Chile, Colombia, and Mexico, called the Pacific Alliance, that seeks integration of services, capital, investment and movement of people. Since the U.S.-Peru Trade Promotion Agreement entered into force in February 2009, total trade between Peru and the U.S. has doubled.  Peru is a member of the new 11-member Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) which was formally created in March 2018.  The CPTPP replaces the abandoned Trans-Pacific Partnership (TPP), once the U.S. withdrew from it in 2017.

For over a decade, Peru has been one of the world’s top performing economies, registering sustained high growth accompanied by low inflation.  The PTPA has increased bilateral trade of agricultural products from US$1.4 billion in 2009 to US$3.4 billion in 2017, an increase of 136%.  More than two-thirds of current U.S. agricultural exports enter Peru duty-free.  The U.S. remains the largest agricultural product supplier to Peru, accounting for 30% of market share.

Peru is now the 4th largest export market for agricultural products from the U.S. to Latin America, following Mexico, Colombia and Dominican Republic.  In 2018, U.S. exports of agricultural products to Peru totaled over US$1.2 billion, growth of 6% and a new record high amount.  Of that amount US$266 million or about 21% were of the consumer oriented variety.  The 2018 growth of U.S. processed food exports to Peru have been outstanding.  They showed growth of an impressive 37% at US$264.7 million. Top processed food exports from the U.S. to Peru in 2018 included:

  • Fats And Oils
  • Food Preparations
  • Processed/Prepared Dairy Products
  • Chocolate And Confectionery
  • Non-Alcoholic Beverages
  • Prepared/Preserved Meats
  • Dog And Cat Food
  • Snack Foods

Advantages and Disadvantages of the Peruvian Food Market

U.S. advantages include:

The U.S.-Peru Trade Promotion Agreement (PTPA) grants duty-free access to two-thirds of all U.S.-origin food and agricultural products, including high-value food products.

  • Active supermarket industry that promotes increased demand for high-value food products.
  • Growth of new supermarket outlets in Lima’s suburbs and second tier cities.
  • Appreciation for U.S. food quality and culture.
  • Perception of modern retail outlets as cleaner, convenient, and time saving.
  • Increased health consciousness among the Peruvian population.
  • Middle-class expansion.

Some of the challenges in the market include:

  • Traditional channel remains as the most important for consumers.
  • Preference to buy fresh produce in traditional markets.
  • Modern retail channel (supermarkets and convenience stores) accounts only for 25% of the retail food market share in Lima and 17% in the provinces.
  • New local food brands are appearing in the market at very low prices.
  • Provincial supermarkets are supplied by Lima-based companies.
  • Lack of brand awareness among some consumers.
  • Market access demands higher marketing costs.
  • Domestic producers manufacture more affordable products according to local taste preferences.
  • Cumbersome sanitary registration processes delay the entrance of new food products.

Retail Sector:

According to Euromonitor, retail sales in the packaged food market in Peru had been estimated to reach US$8.9 billion in 2018.  That represents a growth rate of 15.1% or US$1.2 billion since 2014.  The forecast for growth in this market is also promising.  By the year 2023, the retail sales in the packaged food market in Peru is expected to reach US$11 billion, a growth rate of nearly 18.3%, or US$1.7 billion.  High growth products in the forecast include:

  • Breakfast cereals
  • Ready meals
  • Processed fruit and vegetables
  • Processed meat and seafood
  • Dairy products
  • Edible Oils
  • Rice, pasta and noodles
  • Sweet spreads
  • Savory snacks
  • Ice cream and frozen desserts

The retail food sector in Peru is comprised of two segments: modern (supermarket stores, convenience stores and discount stores) and traditional (open markets and mom and pop stores).  While the traditional channel holds over 80% of market share, the modern channel experienced a high rate of growth over the last 10 years.  In 2018, growth in retail food sales is projected at 4.3%, reaching US$23.8 billion by the end of the year.

Supermarkets have reported more sales because of the maturity of some of their outlets that opened in 2017, the development of convenience store formats and an aggressive discounting campaign to encourage sales.  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 250 conventional supermarkets and superstores (171 of which are located in Lima), and 450 convenience stores two of which are located outside of Lima and 172 discount stores, only 6 outside of Lima .

A limiting factor for supermarket expansion, especially within Lima, is the lack of affordably priced land available for new, large store construction.  As a result, food retailers have developed other formats, such as convenience and discount stores, to increase penetration and ensure competitive pricing.  Last year, out of 70 new retail food outlets, only four were large store formats, the rest were convenience and discount stores.

The sector’s expansion strategy aims to expand into Lima’s lower-middle income districts.  Convenience stores are the format of choice to achieve this objective.  Tambo+ (Lindley Corporation) is the fastest growing chain and holds about 90% of market share or 200 stores.  The second largest chain is Listo (Grupo Romero), with 110 locations.  Listo stores are primarily attached to gas stations in Lima.  Mass (Supermercados Peruanos) and Repshop (Repsol) currently have 105 and 100 locations, respectively. Convenience store sales are currently at about US$244 million per year, and are projected to double over the next five years.

The quantity of imported products is higher in supermarkets, with the assortment originating from different parts of the world.  The migration of people from other countries, especially Europe and the U.S., is rising; hence, the necessity to offer food from different countries is increasing because those consumers are used to other flavors and products.  In addition, there are an increasing number of people who are also lactose intolerant or celiac and require specific products that are not common in Peruvian retailing.  For this reason, imported products are more demanded and offered.

Best Product Prospects:

U.S. products with high sales potential in this sector include cheese, chocolate and confectionery, food preparations, prime and choice beef, offals, vegetable juice and pet food.

Food Service Sector:

Peru is an internationally recognized gastronomic hub with opportunities for imported complementary food products.  Three Peruvian restaurants, Maido, Central and Astrid & Gaston are in the top 10 list of the Latin America’s 50 Best Restaurants in 2017 occupying the first, second, and seventh position.  Recognized as the World’s Leading Culinary Destination five times in a row (2012-2016), Peru is a perfect option for foodie tourism in the region.

The forecast for Peru’s hotel, restaurant and institutional (HRI) sector to grow 2.1% in 2018 based on new restaurant openings, the consolidation of the fast food chains, and the expansion of commercial shopping malls.  Instrumental to its reputation as a “foodie destination” in the region is Peru´s recognition as “World´s Leading Culinary Destination” by the World Travel Awards five years in a row and the presence of three Peruvian restaurants on the list of “Latin America’s 50 Best Restaurants in 2017.”

The best prospects for U.S.-origin food products reside in supplying high-end hotels and restaurants.  Casual dining and family-style restaurants, along with coffee shops and fast food chains (averaging 8% growth over the past five years), also offer opportunities.

Best Product Prospects:

U.S. products with good sales potential in this sector include cheese, beef and offals, poultry meat, nuts and almonds, wine and pork meat. 

Food-Processing Sector:

Peru’s food processing industry is a dynamic sector of the national economy.  The food industry in Peru accounts for almost 27% of the industrial GDP and sales were forecasted to reach US$14.3 billion by the end of 2017.   Its growth is directly linked to the development of the food retail and food service sectors.   Food product manufacturers source both domestic and imported product ingredients.  Local processed food products cover 70% of the market demand.  As supermarket and hypermarket operators continue to expand their networks throughout the country, they will likely also expand their private label brands into new product categories.  

Local food manufacturers have tapped into consumer demand for quality food at affordable prices.  They are also successfully tailoring products to meet increasing consumer demand for healthier food products.  Food product manufacturers source both domestic and imported product ingredients.  Some manufacturers are now producing food products for distribution through vending machines to meet time-starved consumers’ demand.  Several larger processors import directly from the United States.  Small processors rely on local distributors to import their ingredients

The two criteria retailers use when looking to launch new products are quick rotation and profit per unit.  Food product manufacturers in Peru source both domestic and imported product ingredients to meet consumer demand for quality food at affordable prices.  These manufacturers are successfully tailoring products to meet different segments of consumer demand.  For instance, the health food and vending machine segments are growing to meet the respective demands of health conscious and time starved consumers

Best Product Prospects;

Products with high potential in this sector include wheat, concentrated milk, enzymes and preparations, mixtures of edible oils and fats, almonds, boneless frozen pork, mixtures of odiferous substances, vegetable saps and extracts, whey and modified whey, preparations of semola, starch flour or malt extract, hop cones and roasted malt.

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