Political upheaval and pisco - The future for beverages in Chile
By Andy Morton
What sort of beverage market is Chile's new President-elect, Gabriel Boric inheriting?
As well as Christmas, the end of December also brought for Chile a new President-elect.
The sweeping victory of 35-year-old libertarian Gabriel Boric has its foundations in pre-pandemic social unrest in the country around inequality. Indeed a 2020 United Nations report found Chile to be one of the world's most unequal countries, with 1% of the population owning around 25% of the wealth.
In the near term, however, the country's socio-economic outlook is looking brighter.
From a GDP perspective, GlobalData estimates that Chile recovered from a 6.8% decline in 2020 when compared to 2019, to a 10.74% growth in 2021. And, as GDP is expected to remain between +1.9% and +2.5% between 2022 and 2030, Chileans are also projected to find more work, with 2020's 10.53% unemployment level forecast to drop year-on-year to 6.82% in 2027.
On the beverages front, and based on GlobalData figures, Chile's soft drinks sector was riding highest as 2021 drew to an end. Figures show that consumption levels in the three months to the end of September were up 11.3% to 28.8m litres compared to the same period last year. High temperatures across the end of the Summer drove 'Iced/RTD drink' consumption up 70%, while the re-opening of gyms and public spaces boosted sports drinks by 184.4% in the quarter and enhanced waters by 50.2%.
GlobalData estimates that sports drinks is set for a significant Chilean boom in the coming years. After enjoying a modest CAGR of 4.8% from 2017 to 2020, the sector is set to really kick on, at an estimated 12% CAGR in the years to 2027.
Carbonated soft drinks retain by far the largest soft drinks market share, accounting for 62% of Chile's 877m litres sold in Q3 of 2021. The rate is projected to marginally shrink, however, at a CAGR of 0.7% between 2021 and 2027.
Sports drinks appears to be something of an outlier in the broader soft drinks market in the country, as GlobalData predicts the sector will shrink, albeit marginally, from 2022 to 2026 at a -0.5% CAGR.
A bird's-eye view of Chile's alcoholic beverage sector, meanwhile, shows growth in all but one of its 14 segments during Q3 2021, with fortified wine volumes falling 5.4%.
Despite being a significant wine producer, Chilean consumers notably prefer beer and GlobalData predicts that trend to continue in the coming years. That said, beer is set to buck its 2017-2021 pace of growth, registered at a CAGR of 3.7%, with a one-year drop of 13% next year. The segment is projected to crawl upwards at a CAGR of 0.4% between 2022 and 2026, marginally ahead of wine's predicted 0.1% growth over the same period.
Perhaps unsurprisingly, Chile's four leading spirits segments, in volume terms, experienced drop-offs during 2020.
GlobalData figures show that the most precipitous of these was experienced by the country's dominant spirits group, so-called 'specialty spirits', which includes the country-specific white spirit, pisco. A healthy two-year CAGR rebound of 8% from 2020 to 2022 for the segment is expected to level out to a near-maintaining rate of +0.1% growth from 2022 to 2027. Whisk(e)y is forecast to display the greatest gain over the same period, at a CAGR of 2.3%, almost double that of the second-fastest, brandy.
Like many other countries, Chile's economy will likely have to deal with increased inflation rates in 2022 as the global business navigates an exit from the coronavirus pandemic. GlobalData expects this to raise the country's consumer price inflation point in 2022 to 4.72%, the third-highest recorded level since 2001.
Although a new leader looks set to install significant political change, Chile's beverage market looks, by and large, to be entering a maintenance period.
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