Retail Sector

Euromonitor reported that the retail sales value of packaged food was US$3.4 billion in 2020.  That represented a growth rate of 27.1% since 2016 and a dollar amount of US$732 million.  The forecast to 2025 is also promising.  They predict an increase of 23.3% and a value of US$794.8 million for a market size of US$4.2 billion.  High growth products in the forecast include:

• Ready Meals
• Processed Fruit & Vegetables
• Breakfast Cereals
• Savory Snacks
• Ice Cream & Frozen Desserts
• Soup
  

Post reports that the Costa Rican retail sector focused on e-commerce and convenient shopping solutions during 2020.  Grocery retailers, mixed retailers and specialist’s stores across the country invested in e-commerce platforms instead of opening new outlets. These players shifted their attention to improving their ecommerce sites and digital interfaces to support consumer demands for convenient shopping solutions.  Home delivery services were the most significant business model to emerge over the last five years.  These services have enjoyed a rising popularity among local buyers especially due to the COVID-19 crisis.  These services offer consumers multiple payment options.

Convenience stores and “mini-supers” (also known locally as “pulperias”), are small local stores that offer a limited selection of basic goods frequented by local consumers to supplement their weekly purchases.  Traditional outdoor markets, of which there are estimated to be around 13,000 in the country, remain popular for produce purchases.

The supermarket format has been gaining prominence in recent years and there are now more than 350 supermarkets in Costa Rica.  As retail supermarkets expand their reach and consumer base, they present an excellent opportunity for U.S. exporters of food, beverages, and agricultural products.  Market analysts note that 55% of food products sold in supermarkets are imported from abroad with 32% of these imports being from the United States.  There are five major supermarket chains in Costa Rica: Wal-Mart (United States), Gessa (Costa Rica), AutoMercado (Costa Rica), Price Smart (United States), and Megasuper (Colombia).  Wal-Mart (under the names of Pali and Maxi Pali) has 185 stores and owns more than 80% of all the supermarkets.

Due to increased competition among supermarket chains, retailers strive to offer high-quality products, diversify their product range, and offer in-store services.  This has resulted in the growth of prepared foods sold in stores.  This trend has coincided with a rise in demand for convenience foods, including healthy convenient food options, which are now popular with consumers.  High-end and budget supermarkets and mini supers alike are looking to target this niche.  Some food distributors can provide entry into both retail outlets and to the food service sector.  Entry into smaller retailers is best accomplished through working with local distributors.

Best Product Prospects:

Post reports that demand for healthy and/or gourmet snack items are increasing in Costa Rica.  Snacks with natural ingredients, dried fruits, whole wheat, and high-quality ingredients are gaining popularity with health conscious consumers.  This trend is not limited to snack foods; the demand for niche food items, such as organic products or gluten-free goods, is also expanding, which provides opportunities for U.S. exporters.

Food Service Sector

Post reports that according to the Chamber of Restaurants, the Costa Rican food service industry is made up of an estimated 4,325 food service businesses (consisting of hotel restaurants, restaurant chains and franchises). There are many chain restaurants in the San Jose area and many upscale hotels on the Pacific Coast which cater to tourists.

Costa Rica was forced to temporarily close its borders in March of 2020.  The Costa Rica Tourism Board (ICT) report that despite Costa Rica opening to visitors from all U.S. states on November 1 2020, the pandemic and entry requirements will limit passenger volume to 35%-40% of 2019’s volume.  Of the 3,139,000 international visitors to Costa Rica in 2019, more than half (1,666,571) came from North America.  The Costa Rican travel industry has been slowly reopening in November 2020.  Travel representatives report that flights between the United States and Costa Rica are operating at 50% capacity.  Hotels and resorts in Costa Rica offer a wide range of accommodations.  The government is developing a comprehensive travel and tourism plan with a special emphasis on cultural and eco-tourism.  

During COVID-19 the food and beverage sector has been highly impacted by restrictions and social distancing regulations. Restaurants are innovating to gain the trust of consumers by the use of sanitary protocols such as scanning the QR codes to view the menu and reducing physical contact with the waiters.

In general, most of the finest restaurants are located in the San Jose metropolitan area.  In recent years, neighborhoods east of San Jose have become attractive places for gourmet cooking establishments such as in old neighborhoods of Amon, Otoya, Aranjuez, Dent, Los Yoses and Escalante.  In the Pacific Northwest tourist hub of Guanacaste, restaurants offer various gastronomic options.  Costa Rican cuisine includes lightly seasoned fresh fish, chicken or beef, grilled plantains and a combination of black beans and rice called Gallo Pinto.  The growth in restaurant operations in Costa Rica has been slow but there are still opportunities for U.S. exporters to supply the many international franchises in the San Jose area.

Competition is intense in the fast-food sector. In the first quarter of 2020, a franchise such as Tony Roma’s, Hard Rock Café, Hooters and Applebee’s closed.  However, the Olive Garden opened its first two restaurants in the country and plans to open several others.

Distribution channels do not vary significantly for food/agricultural products.  Private firms import consumer foods, while several wholesalers are dedicated to the food import business.  The food product distribution chain to supermarkets and to medium and small stores is well developed.  Some of the larger supermarket chains import directly.  Costa Rican law provides for two main forms of representation – a representative and a distributor.  It is possible for one person to be both a representative and a distributor simultaneously.  The larger hotels, resorts and restaurants purchase their food and beverage needs through local importers, directly from U.S. suppliers.  Some hotels have even positioned offices in south Florida to facilitate shipment Costa Rica ports.

Best Product Prospects:

Post advises that the list of popular imports from the HRI sector includes: french fries; snacks, frozen or ready-to eat food, dairy (cheese, yogurt, and butter), vegetable oil, frozen vegetables, dressings and marinades, bakery ingredients, beef, poultry, pork and rice.

Food-Processing Sector

According to Euromonitor, the demand for processed products increased during the first half of 2020 as buyers began to stockpile food with long shelf lives.  As the pandemic lockdown continued, demand for these products began to drop, as buyers started to prioritize the purchase of fresh food.  Overall, in 2020, U.S. agricultural exports remained roughly the same as in 2019.

Local processors are trending more towards natural additives, preservatives, thickeners, and sweeteners.  In addition, consumers are increasingly more health consciousness, influencing the development of healthier choices for packaged/prepared foods.  U.S. producers of herbs, spices, superfoods, condiments, extracts, Omega-3 fatty acids, fibers, and antioxidant compounds can find an opportunity in this market and food processors are looking to add these ingredients to their recipes.

Corn, soybeans, and wheat are also in high demand by Costa Rica’s animal feed manufacturers and integrators.  Some larger food processors already import directly from the United States and many small processors rely on local distributors to import their ingredients. Most imported food ingredients are used for the manufacturing of confectionary and bakery products, sauces, dressings and condiments, sweet and salty premixes, dairy/by-products, and beverages.

The United States remains the main supplier of processing ingredients to Costa Rica.  U.S. products have a good reputation in the Costa Rican market for quality and stable supply.  Ingredients imported from the Central America, Netherlands, and South America is extremely competitive due to free trade agreement between Central America, South America, and Europe.  Large multinational food ingredient companies have representation in Mexico and other CAFTA-DR countries.

Primary imported food ingredients are modified starches, thickeners, stabilizers, sweeteners, cocoa and fibers.  While Costa Rica domestically produces dairy, poultry, table eggs, beef, pork, rice, and beans, it is not self-sufficient in the production of most food products, and thus relies on imports.  Domestically produced products have certain competitive advantages, such as better understanding of the local industry and its needs, but small players face issues with quality consistency.

Best Product Prospects:

The best opportunities for suppliers of food ingredients are among those food and beverage manufacturing companies that offer high-value and new products to the consumer.  Niches and opportunities continue to appear as the processing sector diversifies and consumer demand increases for healthy and high-quality ingredients.  Post reports that the U.S. food ingredient exports with the best potential include:

• Corn
• Sugar, Sweeteners, and Beverage Bases
• Soybean oil
• Tree Nuts
• Distillers Grains
• Chocolate & Cocoa Products
• Condiments & Sauces