Nicaragua Country Profile

Market Overview:

Euromonitor reports that the Nicaraguan economy will continue to grow at a moderate but still healthy pace in 2016. Nicaragua’s economy has outperformed that of other countries in the region though gains have coincided with the emergence of new vulnerabilities. Real Gross Domestic Product (real GDP) grew by 4.5% in 2016, the same pace as in 2015. Public sector debt is expected to fall in 2016 and to be contained throughout the remainder of the decade. The authorities plan to stabilize the debt-to-GDP ratio by 2020. The real value of private final consumption rose by 4.6% in 2015 and growth of 4.3% is expected in 2016.

Annual rates of growth will be around 4% in the medium term – roughly equal to the IMF’s estimate of potential growth. To address large infrastructure needs, the government plans to step up spending by more than three percentage points of GDP over the medium term. Steady gains in private final consumption should more than offset a fall in private investment. A more expansionary fiscal policy should also support the economy.  

Nicaragua has sharply reduced the incidence of poverty. According to the 2014 household survey, 29.6% of the population was living in poverty (down from 42.5% in 2009). Per capita consumption has also been rising briskly in recent years. Managua hopes that participation in the Central American Free-Trade Agreement will provide a boost to its economy.

Several large investment projects are planned which should increase the potential rate of growth. New energy projects scheduled for completion by 2018 will boost electricity production. Construction of the Nicaraguan Canal – if implemented – would easily dwarf the Panama Canal. When completed, the canal would be more than 280 kilometers long and 30 meters deep. The canal would be built by private Chinese investors at an estimated construction cost of US$50 billion (more than 4 times Nicaragua’s GDP). So far, however, very little information is available on the financing, construction timetable, and enclave features of the project. The project must also secure investment and overcome strong environmental objections.

Consumer-oriented products are attractive to the young and rising middle class segment. Consumption of processed foods, like sweetened-flavored soft drinks, processed sweets and snacks have grown in urban areas. This is related to consumer habits. The Nicaraguan diet is high on carbohydrates but low on proteins, vegetables and fruits.  More than 65% of the local population’s daily calories are derived from carbohydrates.  

Total U.S. agricultural exports to Nicaragua declined 1% to US$218.5 million in 2016. U.S. exports of consumer oriented products dropped 18% to US$70.7 million in 2015, 32% of the agricultural total. Nicaragua imported US$62.7 million of U.S. processed foods in 2016, a drop of 22%. Top processed food exports to Nicaragua in 2016 included food preparations, fats and oils, soups, processed vegetables and pulses, processed/prepared dairy products, chocolate and confectionery, snack foods and processed/prepared meats.  

USDA’s Office of Agricultural Affairs, OAA, in Managua, hereinafter referred to as “Post” reports that CAFTA-DR has provided market opportunities for U.S. exports to Nicaragua. The treaty has also provided opportunities for Nicaraguan exports to the U.S. especially for meat, dairy, seafood, agricultural produce and processed foods.  Expansion of the supermarket chains has increased consumer demands for new products, especially healthy products. Growth from the tourism sector has led to food service sector growth.   

In addition to the CAFTA-DR Nicaragua also has Free Trade Agreements, (FTAs), with Mexico, Panama, Taiwan and the European Union, (EU). Nicaragua’s market as a whole is small, but has growth potential. It has benefited by the implementation of CAFTA-DR. Nicaraguan consumers view U.S. food products as safe and of high quality. A large number of Nicaraguans have lived or have relatives in the U.S. and have developed a taste for American products. Franchises of ready-to-eat products have expanded in the country, including Pizza Hut, Dominos, McDonald’s and Burger King. 

Nicaragua’s imports of consumer-oriented products increased from US$1.8 billion in 2013 to US$2.1 billion in 2015, where food products made up for 30% of the imports. The main exporters of consumer oriented products to Nicaragua are the U.S., Mexico, Costa Rica and Guatemala. For food and beverages specifically, Central American countries play an important role. Asia is increasing its exports of multiple consumer-oriented products, but their exports are not limited to foods.

Retail Sector:

Euromonitor has estimated that the retail sales of packaged food products in Nicaragua reached US$204.4 million in 2016. Of the Central American region, this is the smallest market in the assessment. This also represents an increase of US$16.4 million or 28.9% from 2012. They also forecast the packaged food market to grow to US$325.7 million by 2021, an increase of over US$102.6 million or 46%. High growth categories in the forecast include savory snacks, processed meat and seafood, sauces dressings and condiments, ready meals, processed fruit and vegetables, sweet biscuits, snack bars and fruit snacks as well as baby food.

Post reports that supermarket chains have expanded in the country, especially those owned by Walmart (La Union, MaxiPali and Pali). There are 84 retail stores in Nicaragua: 8 La Union supermarkets located in Managua and in some main cities like Granada, Leon and Masaya, 65 Pali and 11 MaxiPali dispersed throughout the country. The Pali and MaxiPali are mid-range stores that target smaller cities (towns) and popular neighborhoods in Managua. Their customers seek quality at the lowest price before anything else and usually don’t have a predominant preference over specific brands or products.  

La Union and La Colonia cater to a more upscale segment. These stores are often looking for new products to import and to learn about new trends. La Colonia (Mantica Group) has 18 supermarkets in Managua and in some of the main cities. Five new stores were opened this year alone. There are two PriceSmart stores in Managua, one recently inaugurated in Carretera Masaya. PriceSmart is directed at medium and high income families who seek larger presentations (volume) at the benefit of saving and stocking up for their numerous family members. New convenience stores that cater to a segment with higher purchasing power such as Porta’s, Stop and Go, and Economarket are becoming popular and are opening more establishments on the main entrances/exits to the city, especially in Carretera Masaya were there are many new residential developments.  

More than 1,000 wholesalers, retailers and distributors operate in Nicaragua. These have the capacity to reach many markets without the need of other intermediaries. They target both the modern supermarket chains and the traditional local markets. The expansion of the modern marketing channel exposes consumers to a greater variety of products. This means there is a higher demand of grocery items and that the purchasing habits show a trend towards more use of supermarkets. More Nicaraguans now visit the larger supermarkets looking for a wider variety of products from which to choose.

Post advises that supermarkets purchase most of their imported products through local distributors. Very few products are imported directly by retail chains. Wholesale clubs, such as PriceSmart, import most of their products, but also sell locally produced food products. Some experts believe that PriceSmart will have a positive effect on the industry by familiarizing the Nicaraguan population with new products, most of which are from the U.S. Some convenience stores import directly from the U.S. and also from distributors, with the exception of Gas Marts, which have yet to sell imported products. 

Best Product Prospects:        

Post estimates that over 75% of the value of food imported into Nicaragua comes from the U.S. The remainder is sourced from Costa Rica and Guatemala. The U.S. dominates the import market with a variety of meats of poultry, pork and ham.  There is less on dependence on beef imports as local production is high. Similar market share is reported for many grains, vegetables and dairy products, as well as sauces and condiments. Products with good potential for growth in the future as the economy develops are ready-to-eat meals, microwave foods, and T.V. dinners. Sales opportunities for these items should benefit even more as more households obtain refrigerators and freezers. There are good opportunities for consumer-oriented products, primarily food preparations, non-alcoholic beverages (sweetened and flavored), snacks (including cookies and wafers) and sweets, breakfast cereals and pastries.

Food Service Sector:

Post reports that the hotel restaurant institutional (HRI) sector offers good opportunities for export sales. This sector has been growing constantly at an average of 5% -7% in recent years with total sales of US$175.4 million in 2015. Within the HRI sector, 90% of the food service business is dedicated to restaurants and about 10% hotels. The HRI sector is a strong customer of local importers and distributors. The HRI sector generally does not import directly because of low volumes and a preference to build upon the expertise of importers and distributors. The largest hotels and restaurants have established working relationships with importers and sometimes purchase supplies from retail stores. Smaller restaurants and hotels buy from retail stores frequently.

Restaurants have largely grown due to the direct increase in both domestic and foreign tourism. There is a tendency for Nicaraguans from all economic levels to frequent restaurants as part of their social and family outings. Also the tourism government institution has strengthened its efforts to promote tourism internationally. Nicaragua has appeared in famous magazines over the last 3 years as one of the top destinations.

According to daily newspaper La Prensa, there are over 11,970 hotel rooms in the main cities as of 2014. There are two segments of tourists traveling to Nicaragua; one seeks the “backpacker” experience and the second segment seeks a luxurious and exotic getaway at a fairly reasonable price. The first segment travels with a low budget and seeks affordable prices. The second segment has been historically reduced, but it is growing at the pace of new resorts construction and availability vacation rentals in the country. Per data from the Ministry of Tourism, the average tourist spends about US$60 per day in lodging, food and drinks. This creates the need for more hotels and restaurants to cater to this type of traveler. Owners often seek to reduce costs to maintain accessible prices and a fair quality of the products and services.  

Other private sector participation in the HRI sector division comes from convenience stores, which also hold some good opportunities for food service providers. They continue to expand their supply of goods and now include coffee, sandwiches, chicken and pizza, as more affordable alternatives to some restaurants. The convenience stores that are part of the fuel stations have become very popular. 

Food-Processing Sector:

Post reports that the Nicaraguan food processing industry has been growing over the last years at an annual rate of 5% -8%. The industrial products processed in Nicaragua are mainly meats, sugar, cookies and crackers. The local supply of various food products, especially those in the consumer oriented groups is very limited. The Nicaraguan food industry is mostly involved in primary processing activities of local products for the export market. Very few snacks, chips, biscuits, and sugar confectionery are produced locally. This leaves good opportunities in the domestic market for foreign suppliers. Nicaraguan industries import high volumes of intermediate products such as additives and ingredients from foreign suppliers. The sector is still underdeveloped when compared with the rest of Central America.

The Nicaraguan market is price driven, so the food ingredients offered must be competitive in price and quality. The best distribution channel to enter the food industry market in Nicaragua depends on the product to be supplied. Food ingredients consumed by large industries are generally imported directly from U.S. suppliers. Food ingredients utilized by small industries, e.g., bakeries and restaurants are distributed through existing wholesalers.

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