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(Last updated: 26 May 2008)
Trends and opportunities
The market
Argentina is one of the most highly developed countries in Latin America and benefits from having the resources to achieve a high standard of living. It is the second largest country in South America and although it is still under-populated, the population of 39 million is growing at a rate of 1.4 per cent per annum.
In the past few years, the Argentine food and beverage industry has experienced a number of changes. Economic stability, the opening of the economy and the growth of supermarket and hypermarket chains determined an important flow of investments in this area.
After five years of economic recovery and a stable exchange rate, imports of high-value food and beverage products (F&B) in 2008 are projected to increase to about $690 million, according to government figures. As a result of the severe devaluation in 2002, imports of F&B dropped considerably from $1 billion to $350 million that year. Imports began to recover in 2003 and are expected to continue to do so in the future.
Best prospects are in premium products of well-known brands and commodity-type products which are not produced domestically (eg. palm hearts, tuna fish, bananas, coffee, cocoa, pepper, etc.). There are opportunities in the food ingredient sector as most local companies, after the devaluation, have become very competitive in world markets.
Likewise, many lines of products, which had been discontinued in Argentina and whose production had begun in neighbouring countries, have been brought back and are now manufactured locally. This development of new products for the domestic market provides good opportunities for new food ingredients.
Nowadays, most imported F&B products are ultimately sold in large supermarkets and, to some extent, in upscale specialty stores. Retailers source their products from a few local importers/agents and, in many cases, through direct imports. Convenience stores are gradually incorporating imported products.
Almost all F&B are domestically produced. There are some exceptions of specific alcoholic beverages and table-top products, which are generally of very well-known brands. However, with the economic growth that Argentina is experiencing, imported F&B are returning to the market. Argentines had available a wide range of imported F&B for a decade and got used to them, until the economic collapse of 2001-02 made their importation unfeasible. With the slow recovery of the purchasing power, they are gradually incorporating more sophisticated and expensive products into their diets.
Supermarkets are rebuilding their lines of imported F&B products to attract customers with strong purchasing power.
During 2003-2006, food consumption in the interior of the country increased by 45 per cent compared to Buenos Aires city and suburbs, where it increased by 31 per cent. This was due to a reactivation of regional economies, and a tourism boom.
Total F&B sales in superstores and supermarkets in 2007 were at US$5.4 billion. With sustained economic growth projected for 2008, they are expected to total US$5.6 billion.
F&B imports are expected to increase in 2008 as the country continues to grow, and overall economic conditions improve.
The Argentine taste can be characterised as traditional and relatively adventurous. A typical meal would include beef or pasta, served with salad and a potato side-dish. Argentines love sweets, and dulce de leche – a caramel-like spread made from sugar and milk – finds its way into many Argentine desserts.
Although Spain and Italy are the dominant culinary influences, regional differences exist within Argentina that divide the country into four main gastronomic regions: The Pampas (Buenos Aires, Córdoba, and Santa Fe), Northwest (with Cuyo), Northeast or Littoral (with Entre Ríos, Corrientes and Misiones), and Patagonia – a region quite different from the rest both in terms of its tourist appeal, and its British and German influence. In the Patagonia region, for example, berry fruits, smoked salmon, and chocolate are more commonly consumed than in the northwest region, particularly the provinces of Salta and Jujuy (NOA), where dairy products, vegetables, and a variety of meat (including llama) are predominant.
The city of Buenos Aires exerts the most important influence on the culinary culture and gastronomy of the country. It has historically served as the gateway by which different foreign flavours have been introduced to local people.
Buenos Aires city possesses no grand gourmet venues, however, there are major supermarket chains, one of them 'Jumbo' has best developed a gourmet selection of products from different foreign countries such Spain, Italy, USA and Germany.
Any new product must not only taste superb to the Argentine, it must also look superb. Argentines are particularly image conscious and are sensitive to the degree of sophistication professed by a product. To ensure success, a product must also be limited in its availability to the extent that it conveys a sense of brand exclusivity and snobbery.
The retail market, as well as the economy in general, has been recuperating strongly. The main impact of the economic crisis in 2002 on the retail sector was higher food prices in peso terms and lower food prices in dollar terms, which encouraged many local processors to export. The new trends of the sector are:
- Continued growth in sales.
- Recovery in sales of brand names and high value products.
- Increased purchases of imported F&B (primarily in large supermarket chains, not in small supermarkets nor grocery stores).
- Improved deli/gourmet sections in upscale stores.
- Continued marketing activities through brochures and in-store promotions.
- Increase of product lines and supply of informal credit by kiosks and grocery stores.
- Strong investment in new openings of supermarkets and wholesalers.
- Expansion primarily in the interior of the country (large and mid-size cities).
The Argentine upper-middle and elite classes were able to recover from the economic crisis at the greatest pace, however, middle- and low-income spending has also strengthened, suggesting that opportunities within the food industry may be two-fold: gourmet, and value-added.
Foreign investment and joint ventures between local and multinational firms resulted in an increase in the diversity and quality of products, without reflecting a change in price. The sectors that have benefited the most include:
- mineral water
- beer
- soft drinks
- concentrated soups
- biscuits
- ice creams
- confectionery
Although Argentina is one of the world’s top food exporters, there are a number of items the country imports to an even greater extent. These include prepacked convenience foods (especially snack foods) and processed fruit and vegetable products. Growth should remain solid, especially in the area of processed foods, and domestic consumption of frozen foods is expanding due to the increasing presence of freezers and microwaves.
Dairy products
Milk production in Argentina during the late '90s reached nine billion litres, and since it has the potential to keep on growing, the country will soon be one of the biggest 10 milk producers in the world. The dairy industry has become one of Argentina’s largest food industries, second only to beef.
Since 1991 the Argentine dairy sector has been totally deregulated and milk prices are determined freely through individual negotiations between farmers and dairy companies. Each company designs a matrix for calculating prices paid to farmers built on factors such as fat and protein contents, milk temperature, sanitary conditions, and volume delivered.
Beverages
The consumption of both alcoholic and non-alcoholic beverages has increased during the last decade, in particular mineral water, diet drinks and fruit juice. Investment in this sector totalled US$3.3 billon – more than seven per cent of the total investment in manufacturing industries.
There is a limited market for imported wines into Argentina due to the extent of local production and high duty rates. However, as wine awareness increases, there is a growing market for boutique wines, which would match the Argentine palate.
Argentina’s wine export sales account for US$380 million and current production is 23 million hectolitres in 2007.
Argentine wine producers are interested in improving their wine quality and are actively looking to incorporate new technology. There are 25,882 (2006) vineyards and 900 producers, most of whom would present projects for Australian companies willing to expand their foreign operations.
Opportunities
Consumers’ tastes and habits are becoming more sophisticated, so there is a niche for speciality and exotic products such as emu and kangaroo meats and exotic fruits.
Argentines in the middle to upper income bracket are increasingly interested in gourmet-type specialty foods and beverages, an area in which Australian exporters should be very successful.
The products and services that present the best opportunities in the Argentine food market are:
- Gourmet food items (eg. spices, nuts, exotic fruit and seafood)
- Organic produce
- Convenience foods
- Snack foods
- Processed fruit and vegetable products
- Culinary skills and training
- Processing equipment and technology for the food manufacturing industry
- Boutique wines
- Sauces
The packaging sector, which includes both materials and equipment, is another export niche:
- Environmentally-friendly packaging
- Bag-in-box and bag-in-drum systems
- Canning for foodstuffs
- Flexible packaging for pastas
- Large containers for bulk shipping
- Freezer and microwave packaging
Despite the high levels of dairy production opportunities exist in the dairy sector:
- Technology
- Dairy cattle breeds
- Low calorie products
- Cheese
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