Dominican Republic Country Profile

Market Overview:

Euromonitor reports that the Dominican Republic economy will slow in 2017 but still expand at a healthy pace. Real Gross Domestic Product (GDP) should rise by 4.5% after gains of 6.1% in 2016. The slightly lower rate will be much more sustainable than in recent years; roughly equal to the country’s potential rate of growth. An increase in tourist receipts along with gains in both private final consumption and exports will be the main drivers. Steady inflows of Foreign Direct Investment (FDI) will also benefit the economy. Annual growth of about 4.5% per year is expected in 2018-2020.

The real value of private final consumption rose by 4.1% in 2016 and the same rate is expected in 2017. With close to 2 million Dominicans living abroad, remittances are a key source of income for thousands of families. Remittances rose by 8% in 2015 and they should increase by 2.6% in 2016. Unemployment was 13.5% in 2016 and that will not change in 2017. Underemployment is also a serious problem. Labor productivity has risen significantly in the leading growth industries, improving competitiveness and the investment climate. However, many of the jobs being created are in low-skilled industries. The Dominican Republic’s economy is relatively diversified but closely tied with that of the U.S. The island is a major destination for US foreign direct investment and American tourists.

USDA’s Santo Domingo Office of Agricultural Affairs, OAA, hereinafter referred to as “Post” reports the Dominican Republic or “DR” is now the fifth largest market for U.S. consumer oriented products in the Western Hemisphere, after Canada, Mexico, Colombia and Chile, with exports rising 7% to US$484.3 million in 2016.

The U.S.-Dominican Republic-Central America Free Trade Agreement (CAFTA-DR) has proved to be successful in strengthening the U.S. competitive position, and consumer oriented food product exports have increased by 353% since the implementation of the agreement. There are still many opportunities for growth in sales to the Dominican market. U.S. exports of processed foods to the DR in 2016 totaled US$413.1 million. This represented an increase of 5% from 2015. Top U.S. processed product exports in 2016 included fats and oils, food preparations, processed/prepared dairy products, non-alcoholic beverages, prepared/preserved meats, snack food, beer and wine and chocolate and confectionery.

Post reports that Dominicans have adopted much of the U.S. culture, such as music, sports, and fashion. The food consumption trend in the Dominican is similar to the trend in the U.S., although one can estimate a lag of some time. It is clear that what is demanded in the U.S. will be demanded in the Dominican Republic in the future. Dominican consumers have the idea that products made in more developed countries, such as the U.S., are more reliable in terms of quality and safety. There is also a tendency, mainly among middle and high-income classes, to consume natural and healthy products. These consumers are demanding food with less saturated fat, cholesterol, and sugar.

When it comes to exporting food and agricultural products to the DR the U.S. has some competitive advantages. The implementation of the CAFTA-DR has increased the U.S. market share for food products, lowering or eliminating duties for nearly 80% of products. These duty preferences make U.S. products more competitive in the market. There is also a large and growing tourist sector (5.6 million in 2015 with a goal of 10 million visitors yearly by 2022) who demands high quality food products. In addition a growing number of consumers demanding higher quality and healthier products; generally they perceive U.S. products as meeting their requirements.

There are also efficient food distribution channels with the construction of new highways, modernization of ports and airport infrastructure, which facilitates the flow of imported food products. In general, the Dominican consumer is greatly influenced by the U.S. culture, and has a positive perception of U.S. products. And of course the proximity of DR to the U.S. and strong ties throughout the public and private sectors facilitate trade. Population in urban centers and the rate of employment is growing. There is a Dominican diaspora in the U.S. of approximately one million persons, clustered primarily in the northeastern states and Florida, whose remittance payments help support the home-country economy.

However like all export markets the DR has challenges for U.S. exporters as well. There is competition from other CAFTA-DR signees, which are also increasing their share in the market due to duty preferences. Tariff rate quotas, safeguards and other CAFTA-DR provisions continue to protect local producers of rice, meat (beef, poultry and pork), dairy products, beans, garlic and onion. The Dominican food industry has become more efficient and more competitive, integrating new technologies and production processes.

Also sanitary and phytosanitary issues continue to limit U.S. exports. The Dominican government requires Spanish labeling on al pre-packaged food products. Fiscal reform leading to recent increases in the Value Added Tax (ITBI in Spanish) from 16% to 18%, affects products such as coffee, sugar, chocolate, yogurt, oils, butter, and others; lessening the purchasing power of the Dominican consumer.

Retail Sector:

Euromonitor has reported that the retail sales value in the packaged food market in the Dominican Republic was over US$2.8 billion in 2016. That represents a 27% period growth rate from 2012, or US$598.4 million. The forecast growth rate is estimated at over US$3.7 billion by 2021, and 26.5% growth or US$785.7 million. Top growth categories in the forecast include ready meals, baked goods, soup, ice cream and frozen desserts, savory snacks, confectionery, baby food and dairy.  

Post reports that since the start of the trade liberalization process in the 90’s and especially since the implementation of CAFTA-DR, retail in Dominican Republic has become bigger, more diversified and more sophisticated. Supermarkets have diversified their stores including specific stores for determined segments of the population, including high-end segments. The most important supermarket chains in DR are controlled by local investment. Even though the existing supermarket chains do not have any formal industry association, they have been effective at defending their dominant position in the local market. U.S. supermarket chains have not entered the market; except PriceSmart which is owned by Dominican and U.S. investors. The main urban cities are well covered by several supermarket chains.

Grupo Ramos (53 stores) and Centro Cuesta Nacional (29 stores) are the biggest supermarket chains in the country. They have diversified their stores in three categories, each one aiming at one specific segment of the population. These major supermarkets have distributed outlets within the provinces with largest per capita income. These supermarket chains import products directly from the U.S. and also buy from other local importers. Supermarkets are increasing their number of product lines. They are also developing the market for their own private brands and are the exclusive representatives of some name brand products. Still, only 20% to 25% of the retail sales are recorded by supermarkets. The rest are posted by informal establishments, such as mom ‘n pop stores (colmados), open public markets and street vendors, which traditionally distribute local, domestic products.

Euromonitor reports that Grupo Ramos continued to lead sales in 2016 with a value share of 10% for the year, which is consistent with the previous year’s performance. Grupo Ramos was followed by Centro Cuesta Nacional (CCN) in terms of grocery retailers, as the latter posted a 9% value share in 2016, which represents an increase of one percentage point year-on-year. The remainder of the category remains quite fragmented, with a number of smaller competitors. While Grupo Ramos focuses on its successful hypermarkets (Multicentro La Sirena) and grocery stores (Supermercados Pola), its discounter channel, Aprezio, has also proven to be successful in recent years with the number of outlets increasing on a consistent basis.

The second leading player, CCN, manages three brands: Jumbo, Jumbo Express and Supermercados Nacional, but is also present outside of grocery retailing, in categories such as home furnishings, books, and toys and games stores. As a global strategy for the holding company, the retailer has focused on clustering all of its formats in the same location around a shared plaza, creating an environment similar to a shopping center. This appeal to those consumers seeking convenience while on the go and has proven to be a successful strategy for the company.

According to Euromonitor one interesting initiative emerged in 2016 in Santo Domingo called Super Fresh Market. This is an upscale modern supermarket that features fresh and organic offerings, and seeks to offer consumers a more sensorial experience for their food shopping. The outlet is located in an exclusive area of the capital and has relatively high prices for the Dominican market. The model seeks to target a very small range of consumers that follow trends that are common in more developed markets, typically the upper-middle-class segment that travels abroad frequently and has exposure to food trends in other markets. While Super Fresh Market is clearly positioned as a modern supermarket, it is not yet clear how successful the venture will be in the medium to long term based on the niche segment it serves.

Euromonitor reports that there were 494 modern grocery retailers in 2016. This included 119 forecourt retailers (many Gas Marts), 57 hypermarkets and 300 supermarkets. The performance of the grocery retailing channel was very strong in 2016, with current value sales increasing by 8.2%. Expansion strategies from the major players as well as a diversification of the offer are some of the factors behind this trend. The fastest-growing channel in sales terms is hypermarkets. These outlets have adapted fast to the change in consumer habits by diversifying and offering a wider range of products. They are also diversifying their locations as they are opened outlets in all the new shopping centers being opened in Santo Domingo starting back in 2012.

Post advises that U.S. exporters may enter this sector through importers or the major chains. Major chains prefer to do business directly with the foreign supplier, but for some products, it is easier to buy them from a specialized importer. Over thirty small and medium-sized supermarkets are members of the Small Supermarket Association (UNASE), which has developed a purchasing structure and has built a warehouse to supply its members. Other independent supermarkets buy from local importers, which are also distributors and wholesalers.

Food Service Sector:

The tourism sector continues to be one of the most important in the Dominican economy. According to the Central Bank, the tourism sector, with an aggregated value of US$1.3 billion, represented 7% of the GDP and grew 6.1% in 2015. The average tourist spends approximately US$130 per day. According to the National Association of Hotels and Restaurants (ASONAHORES), nearly 5.6 million tourists entered the DR in 2015. Of this total, 86% (4.8 million) were foreigners while the remaining 14% (0.8 million) were DR nationals residing outside of the country.

The number of foreign arrivals has increased 7% yearly over the last three years. 64% (3.1 million) of those foreign visitors arrive in the country through the Punta Cana Airport, the most important tourism area of the DR. Around 19% of foreign visitors come through the Santo Domingo airport. U.S. tourists continue to lead arrivals in DR. According to ASONAHORES, approximately 41% (2 million) of foreign visitors in 2015 came from U.S. Europeans, mainly Germans, French, Russian and English, comprise the second biggest tourist group at 23% (1.1 million).

There are approximately 129 outlets of 21 fast food restaurant chains in the DR according to the Exports and Investment Promotion Agency of El Salvador (PROESA). Most of them are U.S. franchises. There are approximately 333 medium and large restaurants in the country; 167 of them located in Santo Domingo (of which 50 are considered high end restaurants), 61 in Santiago, 60 in Bávaro, 23 in La Romana and 22 in Puerto Plata. Supply of the restaurant sector is dominated by a few major distributors like Benigno Zapatero, HORECO, Representaciones Plaza, among others, and by major confectionaries like MercaSid, Kimberly Clark, etc. The most important supermarkets distribute wines and other products to these restaurants.

At last report from Post, accounting for roughly 20% of U.S. imports of high value food products, the Hotel Restaurant Institutional (HRI) sector provides good opportunities for U.S. exporters. The Dominican Republic continues to be one of the major tourist destinations in the Caribbean. The implementation of the U.S. Central America-Dominican Republic (CAFTA-DR) Free Trade Agreement has helped import of some products, such as meat, poultry, and cheese that were facing some restrictions. In addition to lower tariffs, importers are taking advantage of the Tariff Rate Quotas (TRQ’s) under the CAFTA-DR to supply the HRI sector.

All-inclusive resorts, which usually focus on sourcing local products to lower their costs, have good potential for U.S. select beef, which competes in price with the best local beef. U.S. choice grade also have some potential for the most exclusive resorts and high end restaurants. Although major restaurants and all-inclusive resorts import some products directly and have developed a purchasing structure, most of them source their products from local importers. Therefore, Post advises the best way to enter the sector is to work with local importers. Providing training to this sector on food safety and how to use specific imported products, such as beef, poultry meat, and dairy products has been an effective tool used by some suppliers and trade groups.

Food-Processing Sector:

Post reported that in the Dominican Republic, according to the General Directory of Internal Taxes (DGII), there are 1,075 registered companies classified as agro-industrial/processing companies. According to the Central Bank of the Dominican Republic, in 2014 the elaboration of food products represented a US$2.6 billion industry. The industry is classified by the Central Bank as “food products industry.” The rest of the food processors in DR are classified by the Central Bank as Other Manufacturers/Industries, and official data does not provide a clear idea of the business gross of these processors.  

The U.S. has always been one of the most reliable suppliers of food ingredients for the Dominican food processing sector. After the implementation of the CAFTA-DR the potential of the sector has increased, as food processors have focused on increasing their quality to compete in the international market. Although the U.S. faces strong competition from Central and South America, food processors in the Dominican Republic see U.S. suppliers as a reliable source, in terms of volume, standards, and quality.

The pasta, meat and dairy products, edible oil, beer, juice, and soft drink sectors continue to show strong potential. Dominican food processors import food ingredients either individually or through their specialized associations. Post advises the best way to enter the market is to contact the food processor directly, instead of going through a local importer. 

Best Product Prospects:

Best prospects in the Dominican Republic food markets include powdered milk, grape wine, baby food, french fries, apple juice, beer and cheddar cheese. 

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