Colombia – The Future of Foodservice to 2021

24/08/2017 - 13:41

Macroeconomic summary

The Colombian economy is the fourth largest in Latin America, and has been steadily recovering from a banking and currency crisis that launched the country into turmoil in 1999. The poverty rate is decreasing, the middle class growing, and with GDP per capita consistently rising year on year, disposable income among consumers is increasing.

The Colombian economy is highly dependent on commodity exports, particularly fossil fuels and coffee. Low commodity prices over the last few years have caused the Colombian Peso to crash.

The country suffers from heavy congestion, and is long overdue an infrastructure revamp. Over fifty years of conflict with the insurgent FARC group stifled infrastructure improvements, but as this draws to a close, investors are showing great interest in Colombia.

Profit sector summary

In 2016, the Colombian foodservice profit sector was one of the largest in Latin America, generating a value of over COP 36.5 trillion (USD$12 billion). Sales value in the sector rose at a CAGR of 3.4% from 2014-2016, and is forecast to grow at a CAGR of 3.6% from 2016-2021.

Forecasted value growth will predominantly be driven by an increase in the number of transactions, expected to grow at a CAGR of 1.4% to 2021, while outlet number growth is set to remain at a CAGR of 0.8%. Convenience driven purchases are increasing in popularity, reflected in the takeaway growth exceeding that of dine-in, across all foodservice channels.

The pub, club and bar channel is the largest foodservice channel in all respects by a substantial margin. Accounting for over 14.0% of revenue in the profit sector foodservice market, Colombia’s retail channel has an abnormally large presence relative to other countries, which is primarily due to the popularity of bakeries.

Quick service restaurants summary

Valued at COP 3.9 trillion in 2016, and accounting for 10.7% of the foodservice profit sector, QSR was the fourth largest foodservice channel in Colombia.

The value of the channel is forecast to increase at a CAGR of 4.0% from 2016-2021. This will primarily be driven by transaction number growth, which is forecast to have a CAGR of 1.9% from 2014-2016, up from a CAGR of 1.5% over 2014-2016. The future growth in the number of outlets is forecast to remain at a CAGR of 0.7%.

Competition between QSR and other channels is fierce, as the lines between FSR and QSR are becoming increasingly blurred, and the retail channel continues to out- compete on price.

QSR has a considerably smaller market presence than is seen in most other countries. This is mainly due to the abnormally large market share of the retail channel (14.9%), which out-competes QSR outlets on price. Retail is dominated by bakeries, which accounted for 86.9% of channel value in 2016, and the average QSR transaction value is nearly twice that of bakeries. This attracts consumers on a tight budget who, in most other countries, would be drawn to QSR outlets.

The QSR market is heavily fragmented with respect to outlets, with over 26,000 independent operators and just over 3,300 chain outlets. However, customers are considerably more loyal to chain operators, which account for 43.9% of the QSR market, despite only representing 11.3% of outlets.

Although international competition has been making gains in the QSR market in recent years, the top three chain operators in the channel are still domestic brands.

Full service restaurants summary

In 2016, FSR was valued at COP 6.6 trillion, accounting for 18.0% of the foodservice profit sector, making it Colombia’s second largest channel.

The value of the channel is forecast to increase at a 4.4% CAGR from 2016-2021. This will primarily be driven by transaction number growth, which is forecast to rise at a CAGR of 2.3% from 2014-2016, up from 1.9% CAGR over 2014-2016. The future growth in the number of outlets is forecast to increase to a CAGR of 1.2%, up from 1.1% over 2014-2016.

The FSR channel is heavily fragmented, with chain operators accounting for just 12.0% of the total channel sales value. As with QSR, although to a lesser extent, chain operators over-trade relative to their number of outlets, representing just over 6.0% of outlets in the channel. This suggests that chain operators have a greater ‘pull- factor’, resulting in consumers more likely to make a return visit.

The FSR takeaway sector is predicted to be the fastest growing out of all restaurant channels, at a 7.9% CAGR from 2016-2021, which is more than twice the growth rate of FSR dine-in. An increasingly busy population, whose choices are becoming more convenience oriented, and the advent of takeaway services, such as UberEats, are the main drivers of this trend.

Colombian consumers are diversifying their tastes. 60% of those surveyed stated that they ‘feel more adventurous and willing to try new things’ when eating out in an FSR, and there is a growing interest in international cuisine.

Pubs, clubs, and bars summary

The pub, club and bar channel has the largest value by a sizeable margin. At just under COP 15 trillion, its market share exceeds that of the second and third largest channels – FSR and retail – combined.

The value of the channel is forecast to increase at a 3.4% CAGR from 2016-2021. This will primarily be driven by transaction number growth, which is forecast to have a CAGR of 1.3% from 2014-2016, up from a 1.1% CAGR over 2014-2016. The future growth in the number of outlets is forecast to remain steady, at a CAGR of 0.6%.

As GDP per capita continues to steadily rise, consumers will gain more financial confidence, and pub, club and bar operators will continue to dominate the foodservice profit sector.

The pub, club and bar channel is heavily fragmented, with chain operators representing just 4.4% of the number of outlets. However, as with FSR and QSR, chains over-trade relative to their number of outlets, accounting for 8.2% of the pub, club and bar sales value.

The most successful pub, club and bar operators will be those that are able to provide consumers with a unique experience, which can be achieved by offering premium and craft beverages, or unusual and themed concepts (see Bogotá Beer Company case study, pages 93-95).

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