Fast-Food Companies Find a Market for Growth in Peru

KFC, McDonald’s and others are looking to Latin America for future expansion.

There are more U.S. fast-food restaurants in China than in any other emerging market, which isn’t much of a shocker. The surprise is the country with the greatest concentration of the eateries: Peru.

Hungry residents of Peru’s populated areas have to travel, on average, just two-thirds of a mile to find a U.S. fast-food joint, according to data compiled by Bloomberg. This is all good news for fast food companies, which are increasingly counting on Latin America for growth after thriving in China.

“We’re starting to see the emergence of Brazil and South America being a hotbed for American restaurant franchises to go and open up,” said Darren Tristano, executive vice president at food industry consultant Technomic Inc. “South America is kind of becoming the next window. Now that Asia has already started, I think South America is really going to be where the growth is.”

The first U.S. chain opened in Peru in 1981, and the result is evident. Eight fast food counters line the walls of the Jockey Plaza mall in Lima — half of them Peruvian brands and the other half U.S.

Yum! Brands Inc.’s Kentucky Fried Chicken, the largest U.S. fast-food chain in Peru, and Burger King are doing a brisk trade, as is Bembos, Peru’s biggest burger chain.

After three decades blighted by dictatorships, terrorism and hyperinflation, Peru is reaping gains from free-market policies adopted in the 1990s that fueled the fastest economic growth in Latin America in the past decade. Economic stability is spurring a consumer boom that has gathered steam during the past decade.

Peruvians now spend more time shopping and eating at a growing number of malls and new shopping districts, increasing demand for fast food. That market grew 15 percent last year, according to data from the Peruvian Chamber of Franchises.

U.S. chains such as KFC, McDonald’s Corp. and Burger King Worldwide Inc. moved into Peru in the 1980s and 1990s and have since branched out beyond its capital, Lima.

U.S. chains have cemented their domination in the past decade and today have 60 percent of the market. McDonald’s and Burger King led the expansion in sales last year, followed by Bembos. In more developed markets such as Brazil and Mexico, local brands account for 92 percent and 70 percent of sales, respectively, according to the chamber.

“Foreign brands have much more experience, and they have a structure and operating capacity that brands in Peru haven’t been able to develop,” said Diego Herrera, president of the Lima-based chamber. “They’re brands that have studied their marketing, their customers, their processes almost to perfection. They come here and advance very quickly, filling gaps at a sort of pace that Peruvian businesses can’t match.”

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