HOT DRINKS IN LATIN AMERICA: NEW OCCASIONS, NEW FUNCTIONALITIES

© Euromonitor International PASSPORT 2HOT DRINKS IN LATIN AMERICA: NEW OCCASIONS, NEW FUNCTIONALITIES

Disclaimer

Much of the information in this briefing is of a statistical nature and, while every attempt has been made to ensure accuracy and reliability, Euromonitor International cannot be held responsible for omissions or errors.

Figures in tables and analyses are calculated from unrounded data and may not sum. Analyses found in the briefings may not totally reflect the companies’ opinions, reader discretion is advised.

Latin America was the fastest growing hot drinks market in the review period and will remain so over the forecast period, exceeding all other regions except for Asia Pacific in absolute value growth. Increasing consumption rates will be one factor in future growth as hot drinks’ overall share of throat in Latin America remains low. Demand for premium products that offer innovative formats, specific functions, or appeal to local tastes will also be key to the region’s value growth.

ScopeINTRODUCTION

This is a report on the market for hot drinks in Latin America. All values expressed in this report are in US dollar terms, using a fixed exchange rate (2013). 2013 figures are based on part-year estimates.

All forecast data are expressed in constant price terms; inflationary effects are discounted. Conversely, when historical data is expressed in current terms inflationary effects are taken into account.

Hot Drinks

US$ 39.7 billion

Coffee

US$ 12.5 billion

Tea

US$ 19.3 billion

Other Hot Drinks

US$ 8.0 billion

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Key findingsINTRODUCTION

World’s fasting growing hot drinks market

Latin America was the fastest growing region for hot drinks retail over the review period (2008-2013) and is expected to remain so over the forecast period, increasing by 26% or US$4.8 billion between 2013 and 2018. Still, low per capita figures across most Latin American markets demonstrate the potential for even further growth.

Varied preferences spells opportunities for all hot drinks categories

Latin America boasts the most diverse hot drinks preferences of any region in the world. In addition to a robust coffee culture, there a strong tradition of other hot drinks consumption both in other-plant based and powdered-based. Such diversity offers growth opportunity for manufacturers across hot drinks categories.

Coffee dominates, but tea is the fastest-growing category

Although coffee accounts for nearly two-thirds of hot drinks consumption in the region, tea is forecasted be the fastest growing hot drinks category. Fruit/herbal teas will make up the bulk of tea sales in the region driven by increased health and wellness concerns and interest in traditional fruits and herbs.

Brazil, Brazil, Brazil

Over the forecast period Brazil is expected to record the largest absolute value growth in coffee in the world. Likewise, Brazil is expected to account for more than half of the region’s tea growth, while it is also the world’s second largest consumer of other hot drinks after China. Although hot drinks consumption is already well-ingrained in Brazil, there remains plenty of opportunity for manufacturers to increase retail occasions and drive value through more premium products.

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Consistent growth in Latin American hot drinksREGIONAL OVERVIEW

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Latin America GDP grew by just under 3% in 2012/13 in constant (real) fixed US dollars. Total Latin America GDP reached US$6.1 trillion in 2013, while total aggregated consumer expenditure on coffee, tea and cocoa reached US$14.9 billion. Although hot drinks (excluding yerba mate) accounts for just 20% of what the region spends on overall non-alcoholic drinks, expenditure on hot drinks has increased at a consistently faster rate every year since 2009. As hot drinks are often viewed as a staple, everyday beverage, they are more likely to be resilient to challenging economic conditions than soft drinks.

Overview of regional economic growthREGIONAL OVERVIEW

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Hot drinks has the smallest share of all beverage consumption (including alcoholic drinks, soft drinks and drinking milk products) in Latin America compared with any other region. Latin America has the lowest per capita tea consumption of any region in the world, and ranks third to last in terms of coffee consumption despite being the world’s largest coffee-producing region.

Hot drinks consumption compared to the rest of the worldREGIONAL OVERVIEW

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Compared to the rest of the global market, Latin America maintains the most diverse hot drinks preferences. In many Latin American markets, hot drinks are associated with specific uses and occasions during the day: coffee or plant-based hot drinks such as yerba mate are used as a source of energy; tea is used for relaxation or medicinal purposes; and flavoured powder drinks are used as a breakfast option (primarily as a complement to milk)

Latin America has the most varied hot drinks preferencesREGIONAL OVERVIEW

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Coffee is clearly the most popular hot drink in Latin America, accounting for two thirds of all hot drinks consumed in 2013. Latin America is also the leading region for coffee production as it is home to two of the three top coffee producers in the world: Brazil and Colombia. Vietnam is the second largest producer.

Despite increased interest in tea, coffee is king in Latin America REGIONAL OVERVIEW

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In 2012, Latin America surpassed Western Europe to become the largest region for on-trade coffee consumption in foodservice volume terms. The region is also expected to record the largest growth in coffee foodservice volume over 2013-2018, nearly four times that of Asia Pacific which is expected to see the second biggest increase. Brazil is responsible for the majority of Latin America’s strong on-trade coffee market, accounting for 74% of the region’s coffee foodservice volume in 2013. This is largely due to the ubiquity of cafezinhos - small cups of strong, sweet coffee - which are widely available at even the most informal foodservice establishments, including bakeries and lanchonetes (snack bars).

Latin America leads world in foodservice coffee consumptionREGIONAL OVERVIEW

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To succeed in Latin America, manufacturers must continue to look to Brazil which accounts for the bulk of the region’s hot drinks sales. Although the market is known for coffee, in terms of both production and consumption, interest in tea is expected to continue to increase over the forecast period, while the country is also the world’s second largest consumer of other hot drinks.

Latin America has the most fragmented hot drinks market of any region in the world, thanks to consumers’ preference for different types of drinks. The region’s diverse preferences offer opportunity for manufacturers across the hot drinks industry. Although coffee dominates, Euromonitor International forecasts that Latin America will be the fastest growing market for tea over 2013-2018.

Although Latin America accounts for the second highest hot drinks sales in the world, hot drinks accounts for the smallest share of throat in the region compared with anywhere else in the world. The occasions for hot drinks consumption in the region remain overshadowed by soft drinks, despite the fact that coffee and other hot drinks such as yerba mate and hot chocolate are traditionally consumed in many markets.

While Latin America accounts for the most coffee sold through foodservice outlets, the majority of sales are commoditised, thanks to the omnipresence of on-trade coffee in Brazil. However, the increasing popularity of specialist coffee shops in many of the region’s top coffee markets indicates potential for a shift towards more premium foodservice coffee options, which in turn, will drive value in retail coffee as consumers look to replicate the coffee shop experience at home.

Relatively low consumption = room for growth Potential for value-added foodservice

Varied preferences Brazil is a giant in all categories

Opportunities in summaryREGIONAL OVERVIEW

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