New business opportunities in Latin America

Latin America has often been very much regarded as a faraway place, but in recent times more companies in the pet sector are putting it on their list of priority markets – a region where they want to expand their footprint. It is estimated that there are currently 187 million pets in Latin America, a 17% increase in the last 5 years.

Despite still being underdeveloped, compared to regions like the US or Europe, the market is slowly catching up. Industry insiders believe that in the next 2-3 years, it will be more mature and able to compete at a global level.

Industry in transition

Carlos Posadas, Vice President for Pet Solutions in LATAM at the nutrition company ADM, considers the local industry to be in a process of transition. Consumers are becoming more informed, and the internet is playing a key role as they learn more about products, formulations and the nutrients a pet needs. The pandemic helped to boost the market and, although the economy pet food category still dominates in most countries in the region, there is also consolidation of the premiumization linked to a recent upward trend in pet expenditure.

Business forecasts show 7-8% increases in the market for pet food and treats in Latin America in the next 5 years. Euromonitor International predicts that the cat food category will register the biggest yearly increase, followed by pet products and dog food.

E-commerce catch-up

While pet companies around the world are investing in further developing their online platforms, Latin American markets are still catching up. This is due to network and other technological issues that can make it difficult to connect with people, especially those living in the countryside.

Most of the sales in the region are still done through the traditional channels, but the convenience of buying from home – and in bigger quantities – is increasing the demand for this kind of service. So specialized retailers, including Amazon and big supermarket chains such as Walmart, are now offering consumers pet food and products through their web shops.

Pandemic helped here too

The pandemic has accelerated the growth of online sales in the region, which increased by around 20%. Figures from Statista show that prior to the pandemic less than 10% of Mexican retail sales took place online, but these figures have jumped to 74% since then. Argentinian online marketplace Mercado Libre had already experienced growth before the pandemic, with increased purchases of pet food through their website in 2019. 45% of the customers buying these products were millennials, and this was even higher in Mexico (52%) and Colombia (58%).

 

Global and local interest

The market clearly has room for expansion, and this is seen as a perfect opportunity for companies that want to diversify their business and access new and young markets that are less saturated and still developing.

“There is an opportunity for growth, and a lot of big companies want to enter the market,” says ADM’s Carlos Posadas. ADM recently expanded its production capabilities in the Mexican state of Jalisco with a new line that will triple its pet food manufacturing capacity. This expansion will serve markets in the north of the region as well as Colombia, which is fast becoming a key market for the company.

Global ingredient manufacturer Kemin has now opened a distribution center in Guadalajara after seeing the growth potential of the local market.

German pet manufacturer Josera has entered the Colombian market and plans to market its dry food for dogs and cats there, with plans to expand further in Mexico, Uruguay and Argentina in the near future.
 

In an investor seminar not long ago, Nestlé Purina said that the Latin American region has ‘an excellent future’ and it is currently working toward brand leadership in the premium dog and cat segments. The company expects to open a new facility in Argentina this year.

At the same time, local players are eyeing expansion. Earlier this year online pet store Laika, which claims to serve 300,000 active users, raised $48 million in a funding round and plans to expand to new markets in the region, including Argentina, Peru and Ecuador