Proyecto Empresarial

Full-Service Restaurants in Peru

Category Briefing | 08 Oct 2012

HEADLINES

• In 2011, full-service restaurants has value growth of 11% to reach PEN7.4 billion

• The number of outlets grows by 10% to reach 36,028

• The increased recognition of Peruvian food positively affects the growth of full-service restaurants which promote it

• Latin American full-service restaurants has the highest value and outlets growth in 2011 of 13%

• New independent competitors enter the market with premium and innovative offerings

• Delosi SA leads sales in full-service restaurants with a current value share of 1% in 2011

• Full-service restaurants is expected to have a constant value CAGR of 9% over the forecast period

TRENDS

During the review period there was a dramatic increase in the recognition of Peruvian food in the country. This trend positively affected the growth of Peruvian food restaurants, and many international franchises offering international food also decided to include Peruvian food in their menus to satisfy the increased demand for this type of food. For example, in the case of the international brand TGI Friday´s it offers Peruvian dishes as such lomo saltado or lomo with huancaína spaghetti to satisfy consumers looking for Peruvian dishes.

Growth in 2011 was slightly slower than the previous year, but remained aggressive since it almost doubled the growth achieved by the country’s GDP. The growth during review period was dramatic since many entrepreneurs entered the market, encouraged by its interesting growth potential. However, competition became stronger and it was more difficult for companies to stay in business. Out of all outlets opened every month almost 50% closes in a three month period, since they were not prepared to compete adequately and they did not have enough knowledge about full-service restaurants.

Latin American full-service restaurants had the fastest value and outlets growth in 2011 at 13%. This was because of the increased reputation of Peruvian cuisine during the review period which positively affected the growth of all companies promoting this type of cuisine. This trend, together with the improvement of the economy, led to the increase in consumption of Latin American food wherever it was available.

During the review period, full-service restaurants changed dramatically. Full-service restaurants used to be targeted at medium income consumers, but in the review period many premium and also economy restaurants entered the market. Premium restaurants entered offering fine landscaping, elegant and modern décor and premium cuisine, while economy restaurants entered offering family and economy formats.

In 2011, it is possible to find full-service restaurants for every type of consumer, from low to high income consumers, each of them providing prices, menus and landscape for its target consumers.

Casual dining is led by North American restaurants which normally include special menu offerings for children, with casual landscape and an international brand.

Asian full-service restaurants was the second biggest in full-service restaurants in 2011 with 12% value and outlets growth. In 1850 the country had an important immigration of Chinese people, who came to the country to work in agriculture. The Chinese culture blended with the Peruvian culture and as a result Chinese-Peruvian cuisine was created. Since that time Chinese-Peruvian food was widely consumed and liked in the country.

North American and pizza full-service restaurants were the third and fourth biggest with value growth of 11% in 2011. The improvement of the economy led many new franchises and local entrepreneurs to enter the market to benefit from its growth and potential.

Middle Eastern full-service restaurants remained an underdeveloped format in the country in 2011. It grew by less than 1% in outlets and value sales. There remained a lack of recognition of the type of food and outlets available which prevented its development.

Other full-service restaurants were important since it had a 32% value share. However its importance reduced in the review period since it became more specialised and focused on only one type of cuisine to satisfy more demanding consumers. However, there were still several restaurants, especially those directed at low income consumers, which provided every type of food, with no specialisation, which satisfied demand for consumers looking for economy options.

Some full-service restaurants provided breakfast and tea time buffets early in the morning or in the evening to attract consumers who would normally visit coffee shops to look for this type of service.

Most full-service restaurants offer complete lunch meal options during the working day to attract working people, especially executives looking for balanced meals, when they cannot return to their home for lunch. The complete meal normally includes an entrée, a main dish, a dessert and a soft drink, all at a very low price so as to convince consumers to dine out regularly, instead of returning home.

Chain full-service restaurants had less than 1% of total outlets, showing that independent outlets were still dominant in the country. However, in the case of North American full-service restaurants it was possible to see more chained outlets than independents, since the format was more organised than others.

Eat-in represented 94% of total sales and takeaway less than 1%. Consumers were not used to the concept of takeaway and were more used to the concept of delivery. This was due to the low number of cars in the country. According to the 2009 study of APEIM, The Peruvian Association of Market Research Companies, less than 7% of Peruvians own a car, so when a person goes to a restaurant he or she prefers to stay and eat there. In other cases when they do not go to a restaurant, they prefer to ask for delivery rather than spend more money to go to pick up the food.

Full-service restaurants registered a split of 51% food versus 49% drink expenditure. Drinks expenditure showed an increasing trend over the review period. In this case consumers tended to consume drinks almost the same as food, since consumers are semi-captive inside a full-service restaurant. They can only eat and drink the products provided by the outlet, so they consume both almost equally. In addition, prices of drinks inside a full-service restaurant were normally much higher, having an important share of total value sales.

COMPETITIVE LANDSCAPE

Delosi SA led sales in 2011 with a 1% value share, followed by Cinco Millas SA with less than 1%. Both companies manage different brands, many of them with several outlets across the

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