drinking milk products in ecuador

8/19/2019 Drinking Milk Products in Ecuador

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D R I N K I N G M I L K P R O D U C T S I N E C U A D O R P a s s p o r t I

© E u r o m o n i t o r I n t e r n a t i o n a l

LIST OF CONTENTS AND TABLESHeadlines ..................................................................................................................................... 1

Trends ......................................................... ................................................................. ................ 1 Competitive Landscape ........................................................................................................... ..... 2 Prospects ..................................................................................................................................... 2 Category Data .............................................................................................................................. 3

Table 1 Sales of Drinking Milk Products by Category: Volume 2010-2015 ............... 3 Table 2 Sales of Drinking Milk Products by Category: Value 2010-2015 .................. 3 Table 3 Sales of Drinking Milk Products by Category: % Volume Growth 2010-

2015 ............................................................. ................................................ 4 Table 4 Sales of Drinking Milk Products by Category: % Value Growth 2010-

2015 ............................................................. ................................................ 4 Table 5 NBO Company Shares of Drinking Milk Products: % Value 2011-2015 ....... 4 Table 6 LBN Brand Shares of Drinking Milk Products: % Value 2012-2015 ............. 5

Table 7 Distribution of Drinking Milk Products by Format: % Value 2010-2015 ........ 5 Table 8 Forecast Sales of Drinking Milk Products Products by Category:

Volume 2015-2020 ............................................................ ........................... 6 Table 9 Forecast Sales of Drinking Milk Products Products by Category:

Value 2015-2020 ............................................................... ........................... 7 Table 10 Forecast Sales of Drinking Milk Products Products by Category: %

Volume Growth 2015-2020 .................................................................. ........ 7 Table 11 Forecast Sales of Drinking Milk Products Products by Category: %

Value Growth 2015-2020 ........................................................................ ..... 7


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D R I N K I N G M I L K P R O D U C T S I N E C U A D O R P a s s p o r t 1


DRINKING MILK PRODUCTS INECUADOR

HEADLINES

Drinking milk products grows by 2% in current value terms to reach sales of US$685 million in

2015

Retail volume growth stagnates after declining by two percentage points from 2% due to

unhealthy perceptions derived from the labelling law

Fresh milk continues to decline while flavoured milk drinks falls dramatically as perceptions

change among consumers both in volume and value

Unit prices for staple products remain relatively stable, cow’s milk especially rises by 2%

Nestlé Ecuador SA maintains its leading position with a 23% value share in drinking milk

products in 2015

Drinking milk products is set to register a 2% value CAGR at constant 2015 prices over the

forecast period, with sales of US$765 million in 2020

TRENDS

Volume sales were heavily impacted in drinking milk products and grew more slowly than the

review period average. This was caused by several reasons. One is the import barriers that

the government, through the COMEX (External Commerce Committee in Spanish) created

since December 2013, supposedly to improve quality control with the intention of favouring

local manufacturing, is also having as a consequence the increase of different raw material

costs and therefore unit prices to consumers. Another more direct consequence is the traffic

light labels implemented in August 2014 which impacts those products that are high in sugar,like flavoured milk drinks.

Flavoured milk drinks was the most affected category as parents had previously thought these

products were healthy. Following changes to labelling, these products were seen to be less

healthy than previously thought by many, prompting a decline in purchases. Flavoured milk

drinks’ retail value declined by 8% while retail volume decreased by 11%, impacting the

overall growth of drinking milk products as a consequence.

The health and wellness trend triggered growing demand for healthier products, such as

reduced fat products, lactose-free products and dairy alternatives such as soy milk and

various non-dairy drinks, such as rice drinks in higher-income groups. This trend was

underpinned by a multitude of new product launches during the review period.

The average unit price rose moderately below inflation in 2015, explained mostly by thedecrease in the demand for flavoured milk drinks, but also due to higher production costs.

Since unit prices are controlled mainly for cow’s milk by the government in order to e nsure

affordable prices for lower-income groups, prices remained stable in 2014.

Government programmes provide free milk. CRECER, for example is a project in the province

of Azuay, which gives free milk to very low-income families, who would not normally have

access to the product. The impact is positive for retailing of milk as it is hoped that families

who benefit from the programme understand the importance of consuming milk for nutrition

and, therefore, will demand the product later on.


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Long-life/UHT holds the largest share of milk as it is generally perceived as being healthier

and better than fresh milk, because it has a longer shelf life. It is also considered to be more

convenient, as it does not need to be refrigerated. Fresh/pasteurised milk suffers a lack of

demand and is less attractive to sell for producers due to the transport logistics, which are

expensive as cold storage is needed. There is a growing offer of non-dairy milk alternatives, mainly witnessed at supermarkets and

hypermarkets that target middle-high and high-income groups. The offer ranges from local to

imported products and includes soy, rice and almond milk. They are mainly purchased due to

health-related needs. However, in the case of soy milk, demand is growing as it is considered

healthy and is becoming more popular.

Drinking milk products are mainly sold through traditional grocery retailers (with a 79% value

share in 2015) and more specifically through independent small grocers, which represented a

61% value share. Consumers frequently purchase this type of product, which is why they

tend to buy it more from a distribution channel that is closer to their homes.

COMPETITIVE LANDSCAPE

Nestlé Ecuador SA remained the leading player in 2015 with a 23% value share. The

company’s brands La Lechera, La Vaquita, Nesquik, Milo and Ricacao are renowned and

highly positioned among consumers. This is due to the company’s efforts to constantly

innovate its products and its marketing campaigns, in which it invests greatly. In addition, the

company was not affected by import barriers, as it produces most of its products locally, but it

also signed a cooperation agreement with the Industry and Productivity Ministry (MIPRO in

Spanish), which cancelled the restrictions for Nestlé’s products.

Local players’ brands lead sales and perform better. The majority of the main brands are local

such as Toni, Reyleche, Nutrileche and Vita. Their strong national distribution network plus its

offer of high-quality affordable prices mean that these brands are quite accepted. Combining

all the local brands together, they reach all income groups. Among foreign companies, theonly large one present is Nestlé, which has a good performance, but only targets middle-high

and high-income groups.

The Ecuadorian government launched a campaign to promote consumption of dairy products.

The campaign, called “three dairy products per day”, aims to inform consumers about the

importance of a daily intake of dairy products. It also strives for consumers to prefer dairy

products over less nutritious options. The campaign runs on the TV, radio and in the press.

Premium products tend to compete for sales by offering highly specific options such as added

vitamin K, organically processed and added collagen. Standard products offer fewer specific

added benefits but high- quality products and various fat content options. Economy products

offer low prices but are usually full fat only. Private label is likely to continue increasing

demand, as players like Corporación Favorita CA already have two – Supermaxi and La

Original.

PROSPECTS

After the decline in 2015, it is expected that volume growth will resume during the next five

years, although not as strong as before, hence a rebound in 2016 is expected after the

stagnation in 2015. It is also expected that families will choose cow’s milk instead of flavoured

alternatives. In order to prevent this, companies are also expected to modify their formulas in

order to make their products healthier, therefore fortification with vitamins, calcium or protein

could be one option.


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Consumers are expected to expect and gravitate towards products that are convenient for

them in terms of distribution, consumption, price and storage. This is why it is likely that

fresh/pasteurised milk will tend to disappear, as it is not convenient in these ways.

Due to the strong marketing campaign to promote consumption of dairy products, drinking

milk products is expected to become better positioned as extremely healthy. As demand for UHT milk increases, traditional grocery retailers are likely to increase

distribution, as they will no longer need to refrigerate the products. Still, retail distribution will

continue to modernise, which is likely to increase the amount of supermarkets and

hypermarkets, which would increase sales of drinking milk products as they have a wider

product offer.

Companies are predicted to strengthen their communication campaigns, in order to

encourage greater demand from the expected increase in consumption resulting from the

government’s marketing campaign to eat more dairy products. Players are likely to offer more

promotions and discounts to increase frequency of purchase.

CATEGORY DATA

Table 1 Sales of Drinking Milk Products by Category: Volume 2010-2015

tonnes2010 2011 2012 2013 2014 2015

Flavoured Milk Drinks 24,175.7 24,853.7 25,117.1 26,509.4 26,744.1 23,715.2- Dairy Only Flavoured 24,175.7 24,853.7 25,117.1 26,509.4 26,744.1 23,715.2

Milk Drinks- Flavoured Milk Drinks - - - - - -

with Fruit JuiceMilk 391,496.6 379,724.2 381,988.4 388,131.6 395,816.2 398,912.5

- Cow's Milk 391,496.6 379,724.2 381,988.4 388,131.6 395,816.2 398,912.5- Goat Milk - - - - - -Powder Milk 12,910.0 13,290.0 13,622.3 13,938.2 14,309.1 14,738.0Non-Dairy Milk 453.7 470.0 485.5 506.1 530.6 542.5

Alternatives- Soy Drinks 103.7 110.0 113.2 115.9 119.8 122.2- Soy Milk 350.0 360.0 372.3 390.2 410.8 420.3- Other Non-Dairy Milk - - - - - -

AlternativesDrinking Milk Products 429,036.0 418,337.9 421,213.2 429,085.3 437,400.0 437,908.2

Source: Euromonitor International from official statistics, trade associations, trade press, company research,store checks, trade interviews, trade sources

Table 2 Sales of Drinking Milk Products by Category: Value 2010-2015

USD '0002010 2011 2012 2013 2014 2015



with Fruit JuiceMilk 369,923.8 392,067.7 411,037.1 427,350.5 447,326.9 460,397.0- Cow's Milk 369,923.8 392,067.7 411,037.1 427,350.5 447,326.9 460,397.0


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- Goat Milk - - - - - -Powder Milk 107,464.4 115,224.3 124,151.8 131,583.6 140,986.1 148,115.8Non-Dairy Milk 496.7 554.7 602.8 647.9 704.5 745.1

Alternatives- Soy Drinks 241.2 273.9 297.0 315.9 341.5 361.2

- Soy Milk 255.5 280.8 305.8 332.0 363.0 384.0- Other Non-Dairy Milk - - - - - -



Table 3 Sales of Drinking Milk Products by Category: % Volume Growth 2010-2015

% volume growth2014/15 2010-15 CAGR 2010/15 Total

Flavoured Milk Drinks -11.3 -0.4 -1.9- Dairy Only Flavoured Milk Drinks -11.3 -0.4 -1.9- Flavoured Milk Drinks with Fruit Juice - - -Milk 0.8 0.4 1.9- Cow's Milk 0.8 0.4 1.9- Goat Milk - - -Powder Milk 3.0 2.7 14.2Non-Dairy Milk Alternatives 2.2 3.6 19.6- Soy Drinks 2.0 3.3 17.8- Soy Milk 2.3 3.7 20.1- Other Non-Dairy Milk Alternatives - - -Drinking Milk Products 0.1 0.4 2.1


Table 4 Sales of Drinking Milk Products by Category: % Value Growth 2010-2015

% current value growth2014/15 2010-15 CAGR 2010/15 Total

Flavoured Milk Drinks -7.5 3.3 17.9- Dairy Only Flavoured Milk Drinks -7.5 3.3 17.9- Flavoured Milk Drinks with Fruit Juice - - -Milk 2.9 4.5 24.5- Cow's Milk 2.9 4.5 24.5- Goat Milk - - -Powder Milk 5.1 6.6 37.8Non-Dairy Milk Alternatives 5.8 8.4 50.0- Soy Drinks 5.7 8.4 49.7- Soy Milk 5.8 8.5 50.3- Other Non-Dairy Milk Alternatives - - -Drinking Milk Products 2.1 4.8 26.4


Table 5 NBO Company Shares of Drinking Milk Products: % Value 2011-2015

% retail value rsp


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Company 2011 2012 2013 2014 2015

Nestlé Ecuador SA 23.3 23.3 22.5 22.3 23.0Industrias Lácteas Toni 12.0 11.4 11.0 10.8 10.0

SA

Reybanpac CA 8.0 8.2 7.7 7.3 7.0Pasteurizadora Quito SA 7.8 7.5 6.9 6.7 6.2Industrias Lácteas, SA 6.6 6.6 6.1 5.8 5.9Lácteos San Antonio CA 5.8 6.1 5.9 5.9 5.9Lechera Andina SA Leansa 3.9 3.7 3.4 2.9 2.8

Alpina Productos 0.4 0.4 0.5 0.5 0.5 Alimenticios Alpiecuador SA

Parmalat Group - - - - - Agrícola Ganadera - - - - -

Reysahiwal SAPrivate Label 2.0 2.1 2.0 1.9 1.8Others 30.2 30.8 33.9 35.8 36.9Total 100.0 100.0 100.0 100.0 100.0


Table 6 LBN Brand Shares of Drinking Milk Products: % Value 2012-2015

% retail value rspBrand (GBO) Company (NBO) 2012 2013 2014 2015

La Lechera (Nestlé Nestlé Ecuador SA 13.6 12.7 12.1 12.2SA)

Toni Industrias Lácteas Toni SA 11.4 11.0 10.8 10.0La Vaquita (Nestlé Nestlé Ecuador SA 6.4 6.5 7.0 7.4

SA)

Reyleche Reybanpac CA 8.2 7.7 7.3 7.0Vita Pasteurizadora Quito SA 7.5 6.9 6.7 6.2Indulac Industrias Lácteas, SA 6.6 6.1 5.8 5.9Nutrileche Lácteos San Antonio CA 6.1 5.9 5.9 5.9Svelty (Nestlé SA) Nestlé Ecuador SA 2.7 2.7 2.7 2.9

Andina (Grupo Gloria) Lechera Andina SA Leansa 3.0 2.7 2.3 2.3 Alpina (Alpina Alpina Productos 0.4 0.5 0.5 0.5

Productos Alimenticios Alimenticios SA) Alpiecuador SA

Leche Andina Lechera Andina SA Leansa 0.7 0.7 0.6 0.5Pasteurizada (GrupoGloria)

Nesquik (Nestlé SA) Nestlé Ecuador SA 0.5 0.5 0.5 0.4Huesitos (Nestlé SA) Nestlé Ecuador SA 0.1 0.1 0.1 0.1

Reyleche Agrícola Ganadera - - - -Reysahiwal SAParmalat Parmalat Group - - - -Private label Private Label 2.1 2.0 1.9 1.8Others Others 30.8 33.9 35.8 36.9Total Total 100.0 100.0 100.0 100.0


Table 7 Distribution of Drinking Milk Products by Format: % Value 2010-2015


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% retail value rsp2010 2011 2012 2013 2014 2015

Store-Based Retailing 100.0 100.0 100.0 100.0 100.0 100.0- Grocery Retailers 98.8 98.5 98.0 98.0 98.0 98.0

-- Modern Grocery 19.3 19.0 18.9 18.8 18.7 18.6Retailers

--- Convenience Stores - - - - - ---- Discounters - - - - - ---- Forecourt Retailers 1.0 1.0 1.0 1.0 1.0 1.0--- Hypermarkets 4.0 3.8 3.8 3.7 3.7 3.6--- Supermarkets 14.3 14.2 14.1 14.1 14.0 14.0-- Traditional Grocery 79.5 79.5 79.1 79.2 79.3 79.4

Retailers--- Food/drink/tobacco - - - - - -

specialists--- Independent Small 61.0 61.0 61.1 61.2 61.3 61.4

Grocers--- Other Grocery 18.5 18.5 18.0 18.0 18.0 18.0

Retailers- Non-Grocery Specialists - - - - - --- Health and Beauty - - - - - -

Specialist Retailers-- Other Foods Non- - - - - - -

Grocery Specialists- Mixed Retailers 1.3 1.5 2.0 2.0 2.0 2.0Non-Store Retailing - - - - - -- Vending - - - - - -- Homeshopping - - - - - -- Internet Retailing - - - - - -- Direct Selling - - - - - -Total 100.0 100.0 100.0 100.0 100.0 100.0


Table 8 Forecast Sales of Drinking Milk Products Products by Category: Volume2015-2020

tonnes2015 2016 2017 2018 2019 2020



with Fruit Juice

Milk 398,912.5 408,318.7 417,013.7 425,394.3 433,761.6 442,454.4- Cow's Milk 398,912.5 408,318.7 417,013.7 425,394.3 433,761.6 442,454.4- Goat Milk - - - - - -Powder Milk 14,738.0 15,103.2 15,436.4 15,742.1 16,020.7 16,214.7Non-Dairy Milk 542.5 566.0 590.5 614.4 637.8 659.8

Alternatives- Soy Drinks 122.2 127.1 132.0 136.7 141.1 145.1- Soy Milk 420.3 438.9 458.6 477.8 496.7 514.7- Other Non-Dairy Milk - - - - - -


Source: Euromonitor International from trade associations, trade press, company research, trade interviews,trade sources


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Table 9 Forecast Sales of Drinking Milk Products Products by Category: Value 2015-2020

USD '0002015 2016 2017 2018 2019 2020



with Fruit JuiceMilk 460,397.0 471,817.0 482,300.6 492,373.6 502,389.1 512,362.6- Cow's Milk 460,397.0 471,817.0 482,300.6 492,373.6 502,389.1 512,362.6- Goat Milk - - - - - -Powder Milk 148,115.8 154,670.3 161,242.2 167,928.4 174,682.0 181,067.0Non-Dairy Milk 745.1 781.1 819.0 857.1 894.6 930.8

Alternatives

- Soy Drinks 361.2 378.4 396.2 414.1 431.8 448.6- Soy Milk 384.0 402.6 422.7 442.9 462.8 482.2- Other Non-Dairy Milk - - - - - -



Table 10 Forecast Sales of Drinking Milk Products Products by Category: % VolumeGrowth 2015-2020

% volume growth

2015/16 2015-20 CAGR 2015/20 Total

Flavoured Milk Drinks -7.3 -1.7 -8.3- Dairy Only Flavoured Milk Drinks -7.3 -1.7 -8.3- Flavoured Milk Drinks with Fruit Juice - - -Milk 2.4 2.1 10.9- Cow's Milk 2.4 2.1 10.9- Goat Milk - - -Powder Milk 2.5 1.9 10.0Non-Dairy Milk Alternatives 4.3 4.0 21.6- Soy Drinks 4.0 3.5 18.7- Soy Milk 4.4 4.1 22.5- Other Non-Dairy Milk Alternatives - - -Drinking Milk Products 1.8 1.9 9.9


Table 11 Forecast Sales of Drinking Milk Products Products by Category: % ValueGrowth 2015-2020

% constant value growth2015/2016 2015-20 CAGR 2015/20 TOTAL

Flavoured Milk Drinks -6.7 -1.2 -6.0- Dairy Only Flavoured Milk Drinks -6.7 -1.2 -6.0


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- Flavoured Milk Drinks with Fruit Juice - - -Milk 2.5 2.2 11.3- Cow's Milk 2.5 2.2 11.3- Goat Milk - - -Powder Milk 4.4 4.1 22.2

Non-Dairy Milk Alternatives 4.8 4.6 24.9- Soy Drinks 4.8 4.4 24.2- Soy Milk 4.9 4.7 25.6- Other Non-Dairy Milk Alternatives - - -Drinking Milk Products 1.9 2.3 11.8


drinking milk products in ecuador

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