Peru: An expected return …
The question in the air: If the national economy has grown 19 percent during the past five years, why has consumption not done the same?
To answer this question, we linked each sector of the economy with consumption as tracked by Kantar WorldPanel. We found that growth in construction has a correlation of 0.7 with consumption, but this has contributed marginally to the economic growth in recent years. Mining, meanwhile, has been the engine of economic growth but has no correlation with consumption.
Construction’s poor performance has been the result of corruption scandals. Fortunately, better times are on the horizon: in 2018 and beyond, construction will soon be a growth driver again. With the Pan-American Games around the corner (2019) and big infrastructure projects (airports, roads, highways and metro lines) on the agenda, we can expect a positive impact on consumption.
The return of Peru to the FIFA World Cup finals after a 36-year absence is also expected to energize consumption:
· Even though Peru did not participate in the last World Cup, consumption of beverages grew around 16 percent in the two months that the cup was played, while in Latin American countries that attended, consumption of the same categories grew around 30 percent, boosting other categories, such as home care, due to the rise in gatherings at home to watch games with friends and family.
· The World Cup is an inclusive event; it is common to see women cheering on the team as great fans, and this also opens up opportunities for beauty products. Who doesn’t want to look pretty for the celebrations?
But maybe more importantly, Peru’s long-awaited return to the finals is injecting positivity and a fresh sense of identity into a country where political conflicts and corruption scandals have monopolized the agenda. For that reason, we believe that it is the year to “Peruvianize” efforts to connect with consumers, to lay the foundations for future growth.
In addition, demographics and lifestyle changes are opening up new opportunities:
· Peru’s population will continue growing for the next 50 years, from 32 million in 2018 to 42 million in 2065, growth that is expected to be accompanied by greater spending capacity, building opportunities for growth in penetration and premiumization.
· Young adults (aged 20-39) will number around 11 million for the next 40 years, a generation that is looking for experiences, opening up opportunities for innovation.
· Women’s roles are rapidly evolving: in 2017, seven out of 10 new job positions were for women, and in almost 30 percent of households, the main income earners are women. They will demand practicality and convenience.
We believe that the best is yet to come, so the time to invest and build in the world’s best culinary destination is upon us.
Francisco is Mexican, with more than 20 years of experience in the industry.
He has led analytics, operations and client service teams throughout Latin America.
Francisco has a master’s degree in management, a diploma in marketing and has also been a board member in schools and institutes.