FAS San Salvador reports that the COVID-19 pandemic has highlighted the fragile nature of the tourism sector in El Salvador, which in 2020 closed with approximately US$750 million in income, which is at least US$1 million less than projections for foreign
tourism and a 10-year set-back, according to some sector’s analysts. Latest data available shows that about 235 restaurants closed completely in 2020 and hotels estimated their losses at about US$440 million. However, in 2021 the sector’s
slow recovery began. El Salvador hosted the ISA World Surfing Games 2021, which attracted close to 500 athletes, generating significant clientele for the week at beach hotels near the competition area.
Given the large diaspora living
in the United States, El Salvador is highly influenced by the American culture in general, which includes food preferences. In this regards, a good number of U.S. food franchises have presence in El Salvador and despite the pandemic they continue to perform
well. There has been a boom in coffee shops or small bistro-type of restaurants where many solid/large franchises compete with small, gourmet-oriented entrepreneurs that look to sell not only food but a culinary experience. Salvadorans like to get together
at coffee shops or small restaurants for breakfast and a lot more for informal/business meetings. The boom in this sector brings more demand for bakery products, dairy products, cocktails, smoothies, milk shakes, fresh fruits and fruit juices.
Another trend is the opening of different shopping/commercial buildings in different areas of El Salvador. Currently, there are a few office buildings and hotels under construction, among which is Plaza Millennium, a complex of mixed uses: Millennium
Residences (a 10-story building and 8 a Pent House) a hotel with about 180 rooms, convention center and sports court, and finally, Millennium Tower, that according to the contractor will be an office building of 110 meters (or 3601 feet) tall, which will
make it the tallest building in El Salvador so far. All of these projects represent a great venue to promote imported foods/beverages
Hotels, on the other hand, have started to get more room reservations and in-person events have increased
as well. Many hotels re-designed their services offerings, going from delivering to hospitals and other institutions, to offer options for the final consumers, like the “Chef-in-a-Box” concept meals, that were an innovative approach by which
hotels discovered a new business niche.
In 2019, the Salvadoran Restaurant Association launched the very first study on the important role that restaurants play in the Salvadoran economy. They reported a total of 784 formally registered restaurants
that generate $709 million in the local economy, representing 2.9% of El Salvador’s GDP. In addition, there are other dining options for Salvadoran consumers, ranging from small cafeterias to traditional food stands, and more recently, food trucks.
The latter trend started in 2015 with two food trucks, and now consists of over 25 brands that offer high quality and/or gourmet food options at more affordable prices.
FAS San Salvador reports that the hotel, restaurant and institutional (HRI)
sector in El Salvador, as in most places, values fast service and high quality at the lowest price. Local food manufacturers are adapting to package sizes and specific flavor profiles required by the HRI sector, and competing with long-time suppliers
from Mexico and neighboring Central American countries. In addition, the HRI sector is working to increase direct import volume of raw materials to reduce costs
Best Product Prospects:
FAS San Salvador reports
that high value products offer good market opportunities in El Salvador include that since El Salvador is a heavy baked products consumer market, so there is still potential for baking inputs, as well as dairy products, fruit/vegetable juices, premium
beef and lamb cuts, eggs and egg products and deli meats.
FAS San Salvador reports that El Salvador’s global imports of agricultural intermediate products reached US$566 million in 2021, a 29% increase from 2020. Due to the COVID-19 pandemic, the government enacted some measures that stopped operations
of snacks and carbonated beverage factories, but all other food manufacturers continued operations.
El Salvador has maintained its reputation of being the regional leader in the production and export of snacks, juices, and carbonated
beverages, and is in a good position to continue a steady growth in this sector given the ongoing revamping of old highways and the building of new ones to increase connectivity.
The food manufacturing sector has kept a fast pace in terms of
increasing production levels. Food manufacturers took the challenging environment caused by the pandemic as an opportunity to evolve and add new items to their food lines. According to the latest data available for the sector, published by
the Salvadoran Industrialist Association, a total of US$987.4 million value of ingredients was imported in 2020, which is about 12% more than in 2019. Cheese, cottage cheese, bovine meat, and sauce preparations were among the main products
imported by the food industry in the same period. During 2021 global imports of agricultural products accounted for US$2.8 billion, much of which is used by the food industry.
With over 10,800 processing facilities, the food and beverage
industries play a key role in the Salvadoran economy, representing 30% of the manufacturing sector. El Salvador is a major importer of agricultural products, including food ingredients and a wide variety of consumer-oriented products.
According
to the same report, the top products used by the food and beverage manufacturing industry were meats, dairy, bakery inputs, sauces/condiments, and other food preparations, which were collectively valued at US$987 million. During 2020, Nicaragua
was the main supplier for food ingredients (dairy) to the food manufacturing sector, followed by Guatemala and the United States.
Grupo Calvo, a Spanish tuna processing company maintained its position as the #1 regional exporter and the second
place was for snack manufacturer Diana. For beverages, Livsmart Americas was the top exporter.
Most food processors are small-to-medium sized, serving the domestic market only. However, some large food and beverage multinationals also have
manufacturing operations for export in El Salvador. Some examples are Calvo, McCormick, Livsmart, Bimbo and Coca Cola. Other large food processing companies in El Salvador include Diana, Harisa, and Lactolac, Molinos de El Salvador (MOLSA),
Sabores Cosco de Centroamerica, and Eco Foods.
Snack manufacturing is a large segment of the foodprocessing sector. Diana is the leader in this industry, supplying not only the domestic market but also exporting to Central America and the United
States. Meat processors are using more U.S. pork to produce deli meats and sausages. They are also offering seasoned and plain pork cuts at many supermarkets and independent grocers. Imports of U.S. pork and pork products reached a record high of $45
million in 2021, which is 76% more than in 2020.
El Salvador tends to follow rather than generate new consumption patterns due to its size and the relatively low purchasing power of its residents. One clear side-effect of the pandemic
in El Salvador is a growing preference for healthy foods, especially those that are low in sugar and fat; Salvadorans are now looking for products with natural ingredients, fortified with vitamins and without artificial ingredients. Non-allergen
foods (gluten-free, egg-free, dairy-free, lactose-free, etc) are increasingly demanded.
Another manufacturing sector that is registering increases despite the pandemic is beer manufacturing, not only in the craft beer segment but also the commercial
lines. There are three major craft breweries leading this trend: Cadejo Brewery, Premio, and Santo Coraje. For the commercial lines, La Constancia ranked second in the beverage sector exporters list for the RANKING® 2021. The United States is
steadily increasing its exports to supply Salvadoran beer breweries. During 2021, total exports of hops cones registered an increase of 36%, reaching a total of USS$300,745.
In 2021, the manufacturing industry maintained a similar
to 2020 trend in imports of ingredients, where dairy products accounted for 21% of global food imports, followed by soups/food preparations and beef/beef products. These are key products used as ingredients by the food manufacturing sector, not
only to meet local demand but also to export products to the region. New product development/research departments within manufacturing companies have become more proactive in attending international trade shows to learn about consumer trends, new
food ingredients or additives, and bring new ideas to develop products mainly in the specialty/gourmet category. Some of the added-value products being produced are pesto, special cream cheeses or dips, and other tropical fruit jams/jellies and
beverages.
Best Prospect Products:
There is still potential for many U.S. ingredients to increase market share in El Salvador, specifically dairy, beef, bakery ingredients/goods, fresh fruits and vegetables. There
are great opportunities to introduce U.S. seafood to the Salvadoran market. In addition, the baking industry has a growing demand for preserved fruits, large fresh strawberries, almonds, and other nuts for healthy snacks or baked goods. Another
trend is for healthy, reduced sugar foods and beverages, creating a potential market for natural sweeteners, assorted flavor juices, and fruit extracts.
Categories with potential growth for the manufacturing industry in El Salvador are flours,
baked products and prepared foods targeted to the Salvadoran diaspora, and confectionery products. Salvadoran food manufacturers rely on imports of intermediate products because of a lack of availability or local production. The United States
was the number one supplier in this category in 2021 with a market share of 31%.
