Costa Rica Country Profile

Market Overview:

This assessment covers the Central American countries which are part of the U.S. Central American - Dominican Republic Free Trade Agreement, (U.S. - CAFTA-DR) which has been fully entered into force for eight years. The countries are Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua. The Dominican Republic assessment is located in the Caribbean market assessment. There is also an assessment for Panama, which now has its own Trade Promotion Agreement (TPA) with the U.S. that entered into force in 2012. The regional export data is from all of Central America with the exception of Belize which is not part of the assessment.  

U.S. Exports of agricultural products to the Central American Free Trade Agreement countries was nearly US$3.9 billion in 2016, an increase of 4.4% from the prior year. Of that amount nearly 38% or nearly US$1.5 billion were of the consumer oriented variety. Central American FTA/TPA markets also import significant amounts of U.S. processed foods as well. In 2016 the total was nearly US$1.3 billion, up 4% from the prior year.  Top U.S. processed food exports to the region in 2016 included food preparations, processed vegetables and pulses, processed/prepared dairy products, chocolate and confectionery, fats and oils, snack food and prepared/preserved meats. The countries imported nearly 99% of the regions total consumer food products. As the CAFTA-DR continues to develop, and now that the U.S.-Panama TPA has made an impact on trade, the forecast is for a steady increase of U.S. exports over the long-term. 

Most countries within this region share the following characteristics: There is a strong preference for U.S. products. Importers like doing business with U.S. exporters because they are viewed as reliable and trustworthy. The majority of the populations perceive U.S. products as higher quality and safer than local foods and other products from Central America. In most cases, U.S. products have strong name recognition and set the standard for the competition. Supermarket and hypermarket chains are expanding into multiple markets in the region. Local representation is important and personal, direct contact is seen as critical in doing business in this region. 

Importers may also be wholesalers and have national and in many case multinational distribution. Most of the markets are small in size and consolidation of less-than-container-load (LCL) shipments is important, often using freight forwarders or consolidators out of the ports of Miami.  Brand promotion and advertising are widely used to build brand recognition. It is recommended that U.S exporters support their importers/distributors/agents with promotional funds. Since consumers are familiar with U.S. products, it is that much more important for companies to provide samples of unknown products to consumers in order to build brand awareness and preference. Effective market promotion can overcome price sensitivity and retailers are open to this and will readily participate.

Best Prospects:

U.S. processed food products in the region with good sales potential include prepared foods, processed/prepared dairy products, fats and oils, processed vegetables and pulses, chocolate and confectionery, prepared/preserved meats, snack foods, non-alcoholic beverages, condiments and sauces, beer and wine and dog and cat food. There is also forecast of growth in microwavable foods as the countries continue to purchase microwave ovens, as well as other ready to eat meals including soups, noodles, condiments and sauces.

Costa Rica

Euromonitor reports that Costa Rica’s economy strengthened in 2016. Real Gross Domestic Product (GDP) was expected to rise by 4.5% in 2016 after gains of 2.8% in 2015. Costa Rica has solid investment prospects thanks mainly to its high levels of human capital. More than two-thirds of the inflows of Foreign Direct Investment (FDI) come from the U.S. But disappointing labor productivity growth calls for measures to promote innovation, competition and transport infrastructure. Growth of real GDP should improve, exceeding 4% per year throughout the remainder of this decade.  

Tourism is the country’s largest industry, employing more than 13% of the workforce. It is also the country’s largest earner of foreign exchange. Eco-tourism accounts for nearly 40% of the industry’s revenue in a typical year. An estimated 26% of Costa Rica consists of natural reserves and park systems that help to safeguard much of the world’s biodiversity and the burgeoning eco-tourism industry. The real value of tourist receipts rose by 3.6% in 2015 and growth of 2.3% was expected in 2016.

According to Euromonitor, Costa Rica has been experiencing a population boom which will gradually decelerate in the medium term.  Between 2000 and 2030, total population is predicted to increase from 3.9 million to 5.6 million. Costa Rica’s potential workforce (those between 15 and 64 years) will be growing slightly faster than total population as a result of the prolonged population boom. Costa Rica’s fertility rate was well above replacement level for many years. In 2015, the fertility rate was 1.8 children born per female and the indicator will fall to 1.7 by 2030. Women have begun to marry somewhat later in life and therefore are having fewer children. Other reasons for this trend include a longer period of education and a growing number of young women who enter the workforce. As growth of population slows, the percentage of elderly will rise. In 2015, 7.4% of all Costa Ricans were more than 65 years of age and the share will rise to 13% in 2030.

USDA’s Office of Agricultural Affairs, OAA, in San Jose, hereinafter referred to as “Post” tells us that Costa Rica is an attractive market for U.S. exports. Costa Rican consumers are highly receptive to U.S. food brands, trends and retailers, making the country ripe for export potential. Beer, wine, ingredients, processed meats and pet food are among the fastest growing categories of U.S. exports but great potential exists for other products such as prime beef cuts and consumer-oriented goods. The increased penetration of franchises, international retailing brands and commercial plazas in Costa Rica are making local consumers more open to new food products creating unlimited potential for U.S. exporters.

Post reports that many promising export opportunities exist for high-value consumer products from the U.S. to Costa Rica. The CAFTA-DR entered into force in 2009 and cleared the way for U.S. exports to enter Costa Rica with ease, and since then U.S. exports have grown robustly. The economic outlook in Costa Rica is promising as well; economic growth is steady and a solid base of middle to upper-class consumers is expanding in the country. Additionally, U.S. food products and food companies continue to permeate the market in Costa Rica as the Costa Rican public is both receptive and accustomed to U.S. food products. American food companies, restaurants, and supermarket chains, have been highly successful in Costa Rica and have a strong presence in the country.

With such a high degree of trade, especially with the U.S., Costa Rican importers are well accustomed to working with foreign partners in this market. Many business people in Costa Rica are bilingual, thus, are able to facilitate business negotiations with Americans.  However, the business culture in Costa Rica can be less fast-paced than in the U.S. and those wishing to do business here should be prepared for this cultural difference. U.S. exporters should also note that export procedures and processes in Costa Rica go through many levels of bureaucracy that can, at times, slow the importation process for food products.

In 2016, U.S. total food agricultural exports to the country totaled US$700.6 million, an increase of 8% from 2015 and another new record high. Consumer-oriented products accounted for US$274.4 million, a new record high and an increase of 10% from 2015 when they were US$249.6 million. Costa Rica also imports an abundance of U.S. processed foods, totaling US$236.5 million in 2016, growth of 12% and another new record high. Top U.S. processed food exports to Costa Rica in 2016 included food preparations, processed vegetables and snack foods, chocolate and confectionery, dog and cat food, non-alcoholic beverages and prepared/preserved dairy products.  

Retail Sector:

Euromonitor reported that the retail sales value of packaged food was US$3 billion in 2016. That represented a growth rate of 31.8% since 2012 and a dollar amount of US$726.6 million. The forecast to 2021 is also promising. They predict an increase of 32% and a value of US$1.2 billion for a market size of US$4.2 billion. High growth products in the forecast include ready meals, confectionery, processed fruit and vegetables, breakfast cereals, ice cream, baby food, soup, savory snacks, and baked goods.

Post reports that Costa Rican supermarkets chains had an optimistic outlook for 2016 and are interested in continuing to expand their investments in 2017 and beyond. The Business Group of Supermarkets (Gessa), Walmart, and Automercado, are some of the firms that will increase their coverage in spite of the increasingly competitive nature of the Costa Rican market. Today, approximately 40% of food purchases made within the country take place in modern supermarket formats. Convenience stores and “mini-supers” (also known locally as “pulperias”), which are small local stores offering a limited selection of basic goods, are also commonly frequented by local consumers, especially to supplement weekly purchases. Traditional outdoor markets, of which there are estimated to be around 13,000 in the country, remain popular in Costa Rica as well.

The supermarket format has been gaining prominence in recent years and there are now more than 350 supermarkets in Costa Rica. This figure is growing rapidly as the large supermarket chains routinely open new stores. Urban areas contain the majority of supermarkets but they are gaining ground in rural settings as well. 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 inform that already 55% of all food products sold in supermarkets are imported from abroad with 32% of these imports being from the U.S. There are five major supermarket chains in Costa Rica including Wal-Mart (United States), Gessa (Costa Rica), AutoMercado (Costa Rica), Price Smart (United States), and Megasuper (Colombia). Wal-Mart, according to its own 2016 data, now has 185 stores - owning more than 80% of all the supermarkets in Costa Rica.

Middle to high-income client is the target consumer of many supermarket chains, but price remains an important factor in consumer purchasing decisions. Several budget and discount-oriented retail outlets exist in Costa Rica. Due to increased competition between supermarket chains created from the growing number and format of supermarkets, retailers strive to offer high-quality products, diversify their product range, and offer in-store services. In particular, 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 distribution firms 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.

Principal import and food distribution firms that can provide entry into retail outlets and to the food service sector include Ciamesa, Belca, Mayca/Sysco, and Pedro Oller; these firms are the primary source of imports for wholesalers, supermarkets, grocery stores and restaurants. Entry into smaller retailers is best accomplished through working with local distributors. In 2015 four commercial centers were built, City Mall, City Place in Santa Ana, Ocean Mall in Puntarenas, and Beach Walk in in Jaco beach. City Mall in Alajuela is one of the largest openings that have been getting attention as it is one of the largest malls in Central America.

Best Product Prospects:

Post reports that in general, the most favorable prospects continue to be processed products, beef, poultry, wine and beer, but the area of high value products continue to offer good market opportunities as well. In recent years, consuming more convenience and healthy foods has been the trend and has resulted in good prospects for U.S. exports of fresh fruit (mainly apples, grapes, peaches and pears), processed fruits and vegetables (especially canned fruits), and snack foods (including chips, cookies and candies). Processed fruits and vegetables, especially mixed fruits, mixed vegetables, yellow and sweet corn, peas, mushrooms, and garbanzo beans generate strong import demand.  

Food Service Sector:

Post reports that Costa Rica has a well-developed hotel, restaurant and institutional (HRI) sector and tourism is ranked as one of the main economic drivers representing an important source of foreign currency. The HRI sector in Costa Rica is highly dynamic and competitive, with steady growth in all sectors. Projections made by the Central Bank of Costa Rica indicate that 2016 will generate $2.9 billion in revenue from tourism and by 2017 this amount will increase to $3.1 billion. Some of the best prospects in this market include prime beef cuts, wines, beer, and high value products.

The increasing number of tourists also helped the tourism sector grow by 9% in 2015 compared to the previous year. The tourism sector was responsible for more than US$2.8 billion in revenue in 2015 and employs roughly 600,000 people in Costa Rica through direct and indirect employment. The strong tourism sector has provided an opportunity to increase hotel/restaurant/ institutional (HRI) sector sales, including the opening of more high-end grocery stores in tourist areas outside the San Jose metropolitan area.

Hotels and Resorts in Costa Rica offer a wide range of accommodations for the growing business and tourism industries. The government is developing a comprehensive travel and tourism plan with a special emphasis on cultural and eco-tourism. It is also implementing aggressive marketing campaigns in the U.S. and Europe. However facilities and basic infrastructure still need to have significant attention to truly be able to attract large scale tourism. From the 9.6 million tourists who visited Costa Rica over the past five years, almost 700,000 preferred lodging options available through platforms such as Airbnb or HomeAway instead of hotels, especially in the Pacific Northwest (Guanacaste) region.  

The large variety of nationalities that either visit or live in Costa Rica has also created the framework for a wide variety of restaurants that offer many international and ethnic foods. The increase in the expatriate community along with the growth in medical tourism continues to drive demand for high value foods in retail stores and restaurants. Costa Rica´s gastronomy education and training centers are growing to provide interested students better options to learn more about the food industry. Consumers continue to demand new and innovative food service experiences, flavors, and service channels such as delivery and drive-through options. This has led to growth in new cuisines and format types - a trend that will only gain momentum over the long-term as the market continues to develop at record speed.

Costa Rica’s restaurant sector, specifically fast-food establishments, showed improvement in the number of openings in the second half of 2015 and grew by 5% in 2016. 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. More than eighty restaurants are located within the 2 square kilometers represented by the neighborhoods mentioned. 

The non-fast food restaurant subsector is experiencing rapid growth and is primarily frequented by professionals. New, upscale and specialized restaurants serving both local and continental cuisines are springing up in the major urban centers as well. There are no statistics as to the current number of restaurants to date but, due to increased tourism, immigration, and the sophisticated dining tastes of the Costa Rican middle and high income populations, the selection of restaurants is ample with cuisine specialties such as Argentinian, Colombian, Chinese, Spanish, Mediterranean, Italian, Indian, Japanese, and Mexican.

Expanding franchises include the sports bar chain Hooters which has six restaurants with a total investment of US$3.3 million, Hooligan’s which also has six locations, and Chili’s which is expected to invest US$2.4 million in two new locations, bringing the total number to five. The local chain “RostiPollos” is also in the process of expanding its presence throughout the country by investing US$1million to open new restaurants.

Costa Rica experienced several closures in recent years, such as Burger King and Wendy’s, but the industry seems to be stable as new franchises have opened within past two years. The U.S. burger chain Johnny Rockets confirmed the opening of three new locations for a total investment of US$2 million. KFC will open a new restaurant in the area of Desamparados, south of the capital. This will be the chain’s 33rd location in the country. Taco Bell opened two new restaurants and is expected to open two more in the near future.

Best Product Prospects:

Post advises that the list of popular imports from the HRI sector include: 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:

Post reports that Costa Rican food processors and consumers trust and value food products that include U.S. raw materials and ingredients. Demand for quality ingredients has been steadily increasing since implementation of the CAFTA-DR.  Bakery ingredients, jellies, dried fruits, snacks, beverages, concentrates and essences among other ingredients for the food processing industry are just some of the items with great growth potential in this market. Additional market prospects for high value U.S. products continue to increase, with impressive growth in products such as beef, poultry, wine and beer, and pet food to name a few. The proximity between the countries facilitates close contacts and strong relationships with clients, both before and after the sale.  

Costa Rica produces the following processed food products: Beverages including juice concentrates, powdered drinks, alcoholic and non-alcoholic beverages drink bases and syrups, soy powder, fruit flavors, and coffee. Preserved foods include canned vegetables, jams, jellies, etc. Confectionary items are candies, chocolates; other processed foods; condiments, baked goods, sauces, dairy, cookies, crackers, snacks, cereals; deli meats: sausages, ham, mechanically deboned meat (MDM); pork bellies, trimmings and offal; flours (fillers); animal fats; baking: pancake mixes, pre-mixes, bulk cake flours, vegetable whipped cream, cookie dough; snacks which require soy flakes, nuts, fresh potatoes; fruit fillings; corn, rice, dry fruits, and oils and dressings: palm oil and shortenings.

There is a wide variability in the kinds of ingredients of animal and vegetable origin used in food and beverage products in Costa Rica. The simplest ingredients used are egg albumin, cocoa, milk powder, natural sweeteners substituting sucrose (such as fructose), soy protein, corn, corn starches and corn flour, MDM’s, whey protein, among others. Costa Rican consumption of herbs, herb extracts and fruit pulps has increased significantly as a result of expansion in the beverage  and the confectionary industries in teas, jellies and juices. The use of spices has increased following a gourmet trend in the preparation of home-made meals and desserts, as well as in restaurant menus and industry formulations. 

Local industry follows international trends in food and beverages, so it is constantly searching for new ingredients which provide additional benefits in health and nutrition, such as phytosterols, Omega-3 fatty acids, fibers, and antioxidant compounds. Some larger processors already import directly from the U.S. and many of the small processors still rely on local distributors to import their ingredients. The largest volume of food ingredients of natural origin is used for the manufacture of confectionary and bakery products, sauces, dressings and condiments, sweet and salty premixes, dairy by-products, and beverages. 

The Center for Food Technology (CITA) of the University of Costa Rica is part of a cooperation agreement with the Ministry of Science and Technology and the Ministry of Agriculture. It was founded in 1974 as part of the University’s program to work on food science and technology in direct collaboration with the government. CITA has licensed its technology to domestic processors, which will let the companies develop new products with CITA’s scientific and technological support.

Most of the food processors in Costa Rica import all of their ingredients directly. A few, however, rely on importers and distributors to handle the importation process. They also have their own distribution channels to wholesalers, distributors and retailers, as well as to hotel, restaurant and institutional industries nationwide. Distribution channels can be different between local and imported products and are constantly changing. The purchase of raw materials for food processing represents a significant portion of the cost of the final price of products. In Costa Rica, there are many small companies with low sales volume and if they try to import directly would face high costs as the conditions and procedures for importing can be difficult. Therefore, it is better for them to use a local wholesaler who can take care of necessary import procedures. For large food processing companies, they usually have their own distribution chain.

Some major processors in the Costa Rican food industry include Cargill, Del Monte, Bimbo, Nestle, Demasa, Sigma Alimentos, Chiquita, Dole, Unilever, and Riviana, among others. Local companies are growing larger as a result of the free trade agreements, which stimulate production for exports. At present, Costa Rica’s population follows the trend towards more ready-to-eat foods, so demand for this type of product has increased domestically. The local processing industry is taking advantage of this niche market and products like refrigerated tacos, tortillas, instant soups and noodles, and desserts, among others, have good market potential in Costa Rica.

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