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Our research indicates that Peru will be the fastest-growing hot drinks market in Latin America increasing by 36% to reach US$ 818 million  by 2018. The Peruvian economy has skyrocketed in recent years, with Peru recording the fastest growth in total GDP in the region between 2008 and 2013, a trend that is expected to continue in the forecast. Rising disposable incomes are not only increasing consumer expenditure on food and non-alcoholic beverages, but are also creating more demanding Peruvian consumers. Hot drinks that are having the most success are those like fruit/herbal teas that have a functional position and other plant based hot drinks that appeal to local Peruvian traditions through the use of local ingredients

Demand for Health and Wellness Benefits

Peru is expected to be the fast growing tea market in Latin America over the forecast, increasing by 59% in retail value to record the second highest absolute value growth after Brazil. In Peru, tea is already nearly as popular as coffee in terms of at-home consumption. In 2013, per capita retail brewed volume was 6 litres, just slightly below coffee which was 6.8 litres. Although black tea (both standard and speciality) is the most traditional type of tea consumed in Peru, health and wellness trends are causing less mature categories like fruit/herbal tea and green tea to attract increasing consumer interest because of their perceived health benefits. These alternative tea types also carry a higher price tag, particularly fruit/herbal which in 2013 retailed at more than five times the unit price of black tea.

Peru Tea Market By Type

Source: Euromonitor International

Some of the most successful tea products in Peru are those that are explicit in their health and wellness function. One example is Sunka, a line of fruit/herbal and green teas from local manufacturer, Dinamika Business that increased by 26% in value in 2013 alone. In addition to being one of the few teas in Peru that has a USDA organic certification, each of Sunka’s teas are positioned to address a specific health concern including weight-management, migraines, stress, colds, indigestion and even prostate health. The variety shown below incorporates yacón, a root indigenous to the Andes, which is also believed to help reduce high blood sugar.

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Source: Euromonitor International

Local Ingredients Boost Other Plant-Based Hot Drinks

The use of indigenous, Peruvian ingredients, like yacón is another increasingly decisive factor in consumer’s hot drinks purchase. More and more consumers in Peru are taking interest in their roots and valuing more traditional products. Over the review period, there was a notable increase the country’s awareness and pride in its heritage in part due to the country’s growing economy. This was especially prevalent in food and drinks, thanks to the publicity and acceptance of Peruvian cuisine in international markets, and promotions by the Peruvian government to promote the country not only abroad, but also domestically. As a result, there has been increasing interest and demand for products that contain ingredients that are indigenous to the country such as Andean cereals like Quinoa, Kiwicha, Kanihua. In addition to their local advantage, these ingredients are also favoured for their nutritional value.

This trend has had a particular impact on Peru’s other plant-based hot drinks market, which often use Andean cereals in their formulations. For example, Kiwigen, the leading brand from Industrias Alimenticias Cusco, incorporates quinoa, and amaranth in its formulation and is positioned as a nutritional beverage that contains vitamins and protein. While Kiwigen is available in kid friendly flavours like chocolate and strawberry, it is positioned as a healthy drink for adults. This renewed interest in local remedies has enabled, other plant-based hot drinks to out-pace the traditionally more dominate flavoured powder drinks, every year since 2011.

The demand for products with indigenous ingredients is expected to continue through the forecast period. Local companies like Industrias Alimenticias will continue to leverage their Peruvian heritage in order to drive sales and compete against international players. In addition to driving the growth of other plant-based hot drinks, this trend will have impact Peru’s overall hot drinks market. Brands and product-types that associate themselves with Peruvian fruit and ingredients will become increasingly prevalent, such as Peruvian coffee, herbal teas made with native herbs like yacón, and fruit teas that explore traditional flavours like passion flower, camu-camu, lacuma, tumbo, and papaya Arequipena.

Lessons for Other Latin American Markets

Functional positioning and the use of traditional ingredients are key strategies to increasing hot drinks sales not only in Peru, but in Latin America as a whole. While the region is the second largest market for hot drinks in terms of retail sales, behind only Asia Pacific, hot drinks’ share of throat in Latin America is the smallest of any other region, accounting for just 16% of overall beverage consumption (inclusive of alcoholic drinks and drinking milk) in 2013. Function can be used to increase hot drinks occasions as it provides an additional incentive to consumers beyond refreshment. Likewise, appealing to local traditions through the use of familiar ingredients is likely to increase consumption, as economic stability in the region is encouraging consumers throughout Latin America to become increasingly aware and interested in their unique cultures.

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