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The price, greatest enemy of olive oil sales in Panama

The price, greatest enemy of olive oil sales in Panama

2017/20/11 - The Panamanian consumer continues to perceive olive oil as an elitist and expensive product, using it almost exclusively as a dressing for salads. The price and the brand, to a lesser extent, constitute the decisive factors of purchase within this category of product, without quality or the country of origin playing a relevant role, according to a study by ICEX Spain Exports and Investments.
This report highlights that the Panamanian olive oil market is characterized by its small size (it has a population of 3.9 million inhabitants) and geographic concentration in Panama City (1.6 million). Sustained economic growth, the strength of private consumption supported by the increase in wages and the appreciation of the US dollar are the main factors that have led to an increase in the consumption of olive oil between 2012 and 2015.

The main competitor of olive oil are vegetable oils, especially canola, rapeseed and corn, which are frequently used for frying due to its cheaper price, being much more introduced to the Panamanian diet.

On the supply side, given that there is no local production of olive oil, the total consumption is covered by imports, for a value of 5.2 million dollars in 2015. Its evolution has been very positive during the period 2012-2015 (with an increase of 39%), especially since 2013, when the Association Agreement between the European Union-Central America came into force, and in 2014 with the progressive appreciation of the US dollar. The main beneficiaries of these circumstances have been Spain and Italy, with shares of 58% and 36%, respectively in 2015, to the detriment of the United States.

Also, this study indicates that imports of virgin olive oil accounted for 59% of the total in 2015. However, the economic slowdown in Panama, whose GDP grew by only 4.9% in 2016 -the lowest level of the decade- has produced a substitution effect of imports/consumption of virgin olive oil for refined oil. Italy has been increasing its market share significantly since 2012 and is the main competition for Spanish oil.

The distribution channels in Panama are very short and are controlled by a few companies, usually family holdings that import and also carry out the large distribution (Importadora Ricamar- Súper 99; Tagaropulos - Grupo Rey or Riba Smith). They have great market power and work under conditions of exclusivity with foreign producers.

The Panamanian market is currently experiencing an evident saturation of product and brands. The commercial opportunities are scarce, being linked mainly to the development of the Horeca channel (due to the increase in tourism) and the range of Premium oils, with positioning in supermarkets and gourmet stores.

Finally, it should be noted that the short-term outlook for the sector is stable growth, in line with the upturn in economic activity (the IMF forecasts GDP growth of 6.4% in 2017), the strength of the dollar and private consumption.
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