Colombia Retail Sales Grew By Just 0.5% In 2008, Down From Growth Of 11% In 2007

July 2, 2009 - PRLog -- Colombia’s two largest retailers, Almacenes Exito & Carrefour, have both announced plans to rein in expansion due to falling consumer confidence and global downturn. There is little chance of Colombia avoiding a recession in 2009 as the twin engines of growth in recent years - private consumption and fixed investment - feel the brunt of collapsing consumer confidence, the global downturn and ongoing risk aversion. We are, therefore, forecasting that Colombia will experience an economic contraction of 1.5% this year, the country’s first contraction since 1999, which compares to growth of 3.4% in 2008 and 7.6% in 2007.

Colombia Food and Drink Report Q3 2009: http://www.companiesandmarkets.com/r.ashx?id=9V9517CEF144679

According to the country’s national statistics office, retail sales grew by just 0.5% in 2008, down from growth of 11% in 2007, with growth well into negative territory in the latter stages of the year. This is clearly an ominous signal for the country’s retailers, and the report is expecting total mass grocery retail sales to stagnate in 2009. Any increase in sales is likely to be driven by new store openings, rather than by a significant increase in like-for-like sales.

Indeed, in the last quarter, the country’s two largest retailers have both announced plans to rein in expansion over the course of this year. Almacenes Exito, which is a subsidiary of France-based Casino, has stated it will invest COP190bn (US$81.5mn) in 2009, down from COP500bn (US$214.7mn) in 2008.

Meanwhile, the Colombian unit of Carrefour has revealed it will invest EUR100mn (US$129.3mn) in 2009, compared with EUR200mn (US$248.7mn) in 2008. However, strong growth is still expected in food consumption in Colombia over the next five years. By 2013, total food consumption is expected to rise by 47.8% (nominal growth rate in local currency terms), stemming from a projected 36.5% increase in per-capita spending and an 8.3% increase in the size of the population. Using forecasts for the COP/US$ exchange rate, this translates into total food consumption growth of 107.9% in US dollar terms as the Colombian peso is forecast to strengthen considerably against the US dollar over the next five years. This growth will be driven by increased demand for value-added and premium products for the most part.

Colombia is the world’s third-largest coffee producer. At the end of March, the National Federation of Coffee Growers reported that Colombian coffee shortages will start to ease by August, with volumes normalising by September as the mid-year crop from southern and northern regions is delivered.

Production was down 9% y-o-y in 2008, as a result of poor weather and high input prices associated with the global commodities bubble. The federation said its 2009 first half crop would be around 4.5mn bags, down 1.5mn bags from a year earlier, but said strong recent flowering indicated a normal second half of the year. Production for 2009 is seen at more than 11mn 60-kilogram bags. Colombia is a major supplier of some of the best Arabica coffee in the world and hopes to increase production to 17mn bags by 2014, which, given the current economic climate, seems an overly ambitious target, particularly as the highdemand speciality coffee sector, which is hoped will drive growth, is likely to be the worst affected in terms of consumer demand.

Colombia Food and Drink Report Q3 2009: http://www.companiesandmarkets.com/r.ashx?id=9V9517CEF144679

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