Peru FoodNews 2010 - GBR

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A Global Business Reports publication
A Global Business Reports publication
17
THE EXCELLENCE OF PERUVIAN COFFEE AND COCOA
Coffee is by far Peru’s most
important agro-export product, with a
total FOB value of USD 584 million
in 2009. Peruvian coffee is also one of
the world’s finest, as is demonstrated
by the fact that the 2010 People’s
Choice Award of the Specialty Coffee
Association of America (SCAA) went
to a Peruvian coffee from the area of
Puno. With regard to Peruvian cocoa, it
also enjoys an excellent reputation for
its quality among chocolate producers
in Europe and elsewhere. The altitude and the richness of the
Peruvian soil are defining factors.
The main recipient markets of Peruvian coffee are Europe,
buyer of 62.5% of the volumes exported, and North America
(24.5% 2009 data). Interestingly enough, Peru is also exporting
sizable amounts to Colombian buyers, who then re-export the
product as Colombian coffee. In 2009, Peru sold 55 000 tonnes
to Colombia for a value of USD 39 million.
The increasing demand for Peruvian coffee in Colombia
stems from a decrease in production in this country, as a result
of a Colombian government-promoted program to renew
the plantations. While some exporters have made money out
of this situation, Peru needs to look at the longer term and
modernising the sector is of great importance, otherwise the
very low productivity rates of about 500 kg per hectare will cast
a shadow over Peru’s distinctive advantages of low costs and
supermarkets rather than small shops. It was an
elitist product with a high price. What we have
done is to popularise the consumption of readyto-eat
cereals, increasing market penetration
with very high quality, a complete product mix,
accessible prices and nationwide distribution.
We calculate that we have 80% of the marketshare”.
Building upon its strength at a national
level, Global Alimentos is now exporting to
six Latin American countries. Last year the
company completed a USD 5 million expansion
investment to reach its current 13 000 tons per
year production capacity.
The democratisation of consumption is a
phenomenon also seen in the beverage market.
Peruvian multinational Ajegroup has managed
to take a substantial market share in the cola
drinks business in several countries (which
includes Mexico, the world’s second largest
carbonated drinks market) through its Big Cola
brand (known as Kola Real in Peru). Managers
at the company, which is also active in bottled
water, cold tea, beer and isotonic drinks, believe
that the company has expanded the customer
pie rather than fought for the existing one:
“Multinationals normally have a price strategy,
which, in certain countries, limits consumption
to the higher levels of society”, explains Jorge
López-Dóriga, Global Marketing Director
of Ajegroup. “What our company did was to
expand the market, offering quality products at
high quality.
According to Ricardo Huancaruna,
President of the Peruvian Chamber
of Coffee and Cocoa, and Managing
Director of Perales Huancaruna,
Peru’s largest coffee exporter: “For
the last 30 years, Peru has grown
thanks to the producers’ efforts. Even
if our productivity per hectare is low if
compared to Colombia, Guatemala or
Costa Rica, Peruvian producers have
managed to keep their costs down and
offer the highest value”.
According to Lorenzo Castillo, Manager of the Coffee National
Committee (JNC), a producers association: “We currently have
production in 480 000 hectares but we have a potential of 1
million hectares. Yet, the key issue is improving productivity:
70% of our fields have gone beyond their ideal production
period. We need financing to renew our plantations”.
Besides low productivity, the sector faces the challenge of
coping with the distortion and insecurity created by illegal coca
plantations in the area where coffee and cocoa are produced (and
where state authorities are frequently absent). Some industry
leaders complain that although coffee is the country’s largest
export, the government dedicates more attention and resources
to the coast’s agribusiness and to products like pisco. “We do
not want subsidies, we just need access to capital at fair rates”
affirms Castillo.
fair prices. People that had never consumed
carbonated drinks started doing so”.
López-Dóriga emphasises the importance
that innovation has had in Ajegroup’s
spectacular growth since the 1990s: “In
today’s post-modern world where the
choice of products is so large, the quality is
taken for granted. To say that your product
has good quality is equivalent to saying
that a plane can fly. So the critical point is
differentiation, to add value to it”.
López-Dóriga mentions Ajegroup’s
Cifrut brand (a light juice) as an example
of innovation, and reckons that in the future
the company will need to constantly create
new products.
Space for premium
products
The market is expanding at all levels: while
poorer people are starting to consume
products that they could not afford before,
Peru’s middle classes have some extra cash
that they are willing to spend on items with
higher quality and value. As sales of these
types of products increase, the companies
commercialising them are analysing new
opportunities in the exports markets.
Laive, Peru’s second largest dairy player
by volumes, is capitalising on this trend. Luis
Ferrand, Laive’s General Manager explains:
“Peru has very low dairy consumption
per capita, of about 60 litres, due to the
traditional scarcity of milk in the country.
However, there is a growing consumption
trend and there is lots of space for growth:
Ecuadoreans consume 120 litres per year,
Colombians and Chileans 150 litres and
Argentineans 200 litres”. Besides dairy
products, Laive also manufactures cold
meat products and juices. Ferrand believes
that there is a window for growth in all of
these business lines, and that the mindset of
Mexico is one of the main markets for Peruvian drinks
producer Ajegroup.
consumers in Peru is definitely changing:
“Ten years ago, everyone prepared juices at
home and no one wanted to buy processed
juices. Now, it is a very significant business
segment that continues to grow. In the same
manner, the resistance to buy processed
desserts will change”. Although Laive is
not a small player (it had sales of USD 100
million last year), Ferrand insists that the
company is focused more on innovation and
value rather than on offering cheap products
through economies of scale. The company
is celebrating its 100th anniversary and
planning to concentrate in the future on
exports: “We are making our first steps
in the international markets, with sales of
juices, cheeses and evaporated milk in the
Americas. We also see good opportunities
in Europe, especially in juices that are
highly valued there, like passion fruit” says
Ferrand, who expects export revenues to
reach 15% of the company’s total sales in
the short term.
Another company that is exploring
opportunities abroad after consolidating at
home is Producciones and Distribuciones
Andina, a player in dairy, sweets, juices
and the seasonal Christmas-cake panettone.
Similarly to Laive, the company wants to
Luis Ferrand,
General Manager of Laive
position itself as a producer of high quality
products rather than as a massive industrial
provider. In the words of Jorge García
Seminario, its General Manager: “Our
yoghurts are made with 100% fresh milk, and
we have the advantage that we are vertically
integrated with our own milk production. In
Selva, a brand we bought two years ago, the
products are made following the traditional
methods and with the highest quality
standards. Our sweets have been around
for 40 years and are trusted by the mothers.
All these factors help position ourselves
in different market niches that offer more
interesting margins than the mass products”.
With regard to panettone, a seasonal
business, P&D Andina manufactures the
product under several brands (including
the gourmet Kusi Raymi, positioned as an
ethnic Peruvian panettone) but also engages
in contract manufacturing relationships with
third parties. But it is in the Selva juices that
García Seminario sees the best opportunities
for growth overseas: “The Selva juices are
already reaching foreign markets, like the
U.S. and Spain, and we are in conversations
to export them to many other countries. It
is a very high quality brand that has grown
very significantly in Peru”, he concludes.