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LatAm Peru Local Market Overview

For the last couple of years, Peru has shown not-so-encouraging results in comparison with those that characterized the first decade of this new millennium. After ten years of economic brilliance it seemed Peru had resisted the 2008–2009 crisis, but now it appears it was just late in arriving. The country stopped growing at around 7% and, for this year, we expect an estimated growth of merely 4%.

China's slowdown and the subsequent fall in mining exports, among others, appear to be the original source of a downturn that seems to be strengthening and consolidating during 2014. This is followed by a negative trend in the expectations and a halt in the domestic consumption, which can be clearly seen in the provinces.

Bad years? It depends, I guess, on the benchmark. If, for instance, we compare our current situation against 2008, when this country had a growth of almost 10%, the diagnosis is negative; if we compare ourselves with our neighbors, the assessment will depend on the country we choose. It's the same if we compare Peru with the rest of the world. The truth is that the vertiginous growth period seems to have passed, although Peru is still growing faster than the global average.

However, if we look at the process in a bit more depth we'll see that what has stopped growing –or has rather decreased – are those products we call commodities. Yes, precisely those that don't have a brand.

So what is happening with the brands?

Apparently, they continue to be healthy. The IPhone 5 was followed by the IPhone 5C and 5S, but now there is the problem of having to compare them with the Samsung S4 and the S5, and with Sony, Motorola, LG and so on... And it appears that the telephone companies don't have enough stock to meet demand. As for cars, well, there seem to be more luxury cars around now and we are already seeing dealers of luxury brands in the provinces.

Low-cost sodas and powder juices seem to have contracted, probably because of the bottled waters and juices of supported brands. Malls keep opening and expanding, and the global fever for bicycles – with their eco-friendly and luxurious side – seems to be reaching Peru.

You can keep counting and it seems that there is no slowdown for those brands that knew how to build equity. Even the Brand Equity market surveys increase!

Perhaps the macroeconomic indicators depict a less than encouraging scenario, but this is clearly not correlated to people's desires. It's true that those who work in some of the affected industries could find their purchasing power impacted, but it is also true that some brands are still building value and strengthening in the global market. The local brands that are growing are those that are trying to carve out a niche for themselves abroad.

The secret to growth seems to be the work put into building the brand since the best brands seem to be ever healthy and with a potential to keep on growing. Is it – perhaps – that only some companies are realizing that, more than products, people are asking for brands?

Claudio Ortiz

Managing Director, MB Perú