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Chile Country Profile

Market Overview:

Euromonitor reports that Chile’s economy will gather momentum in 2018. Steady gains in private consumption and exports will be the main drivers. A significant rise in copper prices along with a rebound in mining investment will also help the economy. The economy will strengthen gradually in the future as private sector prospects improve, copper prices rise and exporters benefit from gains in competitiveness.

  • Chile’s economy is slowly improving. Real GDP will increase by 2.7% in 2018 after gains of 1.7% in 2017
  • Private final consumption (in real terms) rose by 2.4% in 2017 and growth of 3.1% is expected in 2018 as household income rises
  • Unemployment was 6.6% in 2017and it will not change in 2018. - New labor regulations intended to provide more flexibility came into effect in 2017 but they will require time to bear results
  • Growth is expected to recover gradually as private sector prospects improve, copper prices rise and exporters benefit from improvements in competitiveness
  • Real GDP should grow by about 3% per year in the medium term

The rate of population growth in Chile is slowing. In 2017, population reached 18.1 million, up from 15.3 million in 2000. Meanwhile, population is ageing. The median age had risen to 34.4 years in 2017, 5.5 years more than the figure for 2000. In 2030, 16.5% of the population will be over 65 years, up from 11.1% in 2017. Such a demographic change could soon reduce the country’s rate of potential growth.

USDA’s Office of Agricultural Affairs (OAA) in Santiago, hereinafter referred to as “Post” reports that Chile, with a population of 17.6 million in 2017, and is a centralized country both economically and demographically. It is estimated that in and around the country’s capital, Santiago de Chile in the metropolitan region, 46.5% of the GDP is produced and more than half of the population live. Chile has an open economy and is very committed to trade liberalization. Chile has 26 trade agreements with 66 economies - notably the U.S.-Chile Free Trade Agreement (FTA), which entered into force in 2004. As of 2015, all trade tariffs were successfully eliminated and 100% of all U.S. exports enter Chile duty-free.

Chile is the largest market for U.S. consumer food exports in South America. The 2017 total of consumer food exports to Chile grew a whopping 39% to nearly US$676 million, a new record high by US$175 million. Chile is also now the largest market in South America for U.S. processed food product exports, totaling US$472.4 million, up 35% and also a new record high by about US$66 million. Top processed food exports to Chile in 2017 included:

  • Beer and wine
  • Processed/prepared dairy products
  • Food preparations
  • Prepared/preserved meats
  • Condiments and sauces
  • Non-alcoholic beverages
  • Distilled spirits and other alcoholic beverages
  • Chocolate and confectionery
  • Snack foods

U.S. exporters have some distinct advantages in the Chilean food market:

  • Clear rules and transparent regulations offered by the government allow for fair competition
  • The purchasing power of Chile’s middle and upper-middle income consumers continues to rise
  • The U.S.-Chile free trade agreement resulted in 0% duties for all U.S. agricultural products as of January 1, 2015
  • Chile’s largest retailers have operations in other Latin American countries making it a gateway to other Latin American markets
  • American brands are well-regarded as high quality with many well-known brands already present in the market
  • Demand for premium processed foods and beverages that provide convenience and health benefits continue to increase

Challenges for U.S. food exporters in the Chilean food market include:

  • Chile has FTAs with 66 countries worldwide, and they do not depend on imports from a specific region - Instead, imports that offer the best price and quality worldwide are the most attractive
  • Chilean customers are accustomed to competitive prices due to the openness of the economy - Moreover, economic slowdown has increased their price-sensitivity
  • The establishment of personal relationships is often not a priority for U.S. companies - Chileans value face-to-face meetings and strong personal relationships
  • The nutritional labeling law could increase costs of packaging products
  • There is a lack of awareness about the all the different types and qualities of some U.S. products by Chilean consumers and importers; i.e. premium quality beef cuts, high quality cheeses and dairy products, health food products etc. that do not exist in Chile - Thus more marketing and knowledge is required

Retail Sector:

According to Euromonitor, retail sales in the packaged food market in Chile had been estimated to reach US$13.6 billion in 2017. That represents a growth rate of 29.4% or US$3 billion since 2013. The forecast for growth in this market is also promising. By the year 2022, the retail sales in the packaged food market in Chile is expected to reach US$17.9 billion, a growth rate of nearly 24.2%, or nearly US$3.5 billion. High growth categories in the forecast include:

  • Breakfast cereals
  • Processed fruit and vegetables
  • Savory snacks
  • Ready meals
  • Processed meat and seafood
  • Sauces, dressings and condiments
  • Dairy products
  • Sweet biscuits, snack bars and fruit snacks
  • Ice cream and frozen desserts

Post reports that there are five main retail groups in Chile: Falabella, Cencosud, Walmart Chile, Ripley and La Polar. Falabella and Cencosud have department stores, home centers and supermarket/ hypermarkets; Chile has a modern, highly competitive supermarket sector. The Chilean market for retail food is composed of a mix of large supermarkets, mid-sized grocery stores, convenience stores, gas station markets and an array of smaller independent neighborhoods “mom-and-pop” shops.

Most consumption occurs in the Santiago Metropolitan Region since it concentrates 40% of the country´s total population. Supermarkets have the largest market share for Chile’s food sales, holding 48.2% of total food sales, mid-sized supermarkets hold 12.1% of total sells and Grocery stores have a market share of 21.2%. The most frequently found type of retail store is the grocery store with a total of 69,223 locations.

Chile is becoming increasingly urbanized, not only in the Metropolitan region but also in other provincial or second-tier cities. The retail industry has been adjusting to this trend especially grocery retailing that has been adopting a convenience model through chained convenience stores, forecourt retailers and smaller supermarkets.

Hypermarkets and supermarkets in the mid to high-income areas carry a varied assortment of specialty items with a relatively high degree of imported products. A rise in consumer sophistication in the mid to high socio-economic areas, in terms of products, brands and price, has resulted in increased demand for imported food products. These stores now account for 26% of total sales and offer customers fresh bakery goods, fresh seafood, coffee bars, prepared salads, pizzas, meat dishes, and the typical assortment of grocery products. Warehouse outlets and wholesale clubs have not yet made an appearance.

Despite the increasing selection of products and advances made in the supermarket sector as a whole, compared to the U.S., the selection of imported specialty products is still limited. About 10%-15% of products sold in supermarkets are imported, but this segment has grown by 85% over the last few years.

Post reports that Chilean demand for healthy food products continues to grow as people increase health awareness and income rises. U.S. products are perceived to be of high quality, safe, unique and reliable and consumers are increasingly searching for gourmet and differentiated products, providing opportunities for U.S. exporters. In regards to this trend the best product prospects are:

  • Dairy products
  • Juices
  • Cereal
  • Integral cereals, oats, and chai
  • Legumes
  • Antioxidant foods
  • Fruit snacks for children
  • Organic Coffee
  • Organic Tea
  • Organic Sugar

Food Service Sector:

Post reports that Chile offers excellent opportunities for U.S. food exports in the hotel, restaurant institutional (HRI) sector. Chile’s economy is ranked as a high-income economy by the World Bank and is considered South America’s most stable and prosperous nation in Latin America and the Caribbean, and Lonely Planet Travel Guide selected Chile as the top world destination you should visit in 2018. Hotels are expected to continue to thrive and this will provide export opportunities for U.S. producers. Hotels, restaurants and institutions seek to reduce operational costs by buying processed foods and ready-made meals which minimize labor costs.

The size of the middle class in Chile continues to expand along with average income. New lifestyle trends, such as more women in the workplace and healthier lifestyles are leading to rapid growth in consumer food service, a trend which is expected to continue over the next few years. New chains and international restaurants open each year. Subcontracted food service operators in the institutional sector are constantly growing, with providers developing products to suit each sub-sector.

As Chilean consumers look for more varieties, they will turn towards foreign brands. U.S. products are regarded for their high quality, reliability, and innovation. Foodservice is expected to grow through the increase of travel, tourism and retail outlets/channels. The growth of the foodservice sector was 3.6% in 2016 (value in constant prices). In 2017, a growth of 4.6% is expected, and in the period from 2016 to 2022, an increase of 25.3% is forecasted.

The overall hotel sector grew by 16% in 2015. While hotels still represent the greatest proportion of total value of sales (72%) in the accommodation sector, short-term rentals are growing rapidly. In 2015, short-term rentals doubled in the number of outlets present, increasing by 123.8% compared to the previous year. Hotel sales are expected to grow by 16% in sales from 2015 to 2020. As more and more people book accommodations online, not only will direct hotel sales increase but also those of intermediaries. These include websites that offer price comparisons or the “best deals”, this group experienced strong growth of 15% in 2016.

In 2016, there were 15,335 food service outlets in Chile, which represents a 6.7% increase over 2015. Independent restaurants do not only hold more outlets than chain restaurants but also grew faster in terms of new openings per year. Moreover, tourism is a strong contributor to growth of consumer foodservices. Despite a general slowdown in economic activity, food service growth is strong and consumers have not changed the frequency in which they eat out, however they are spending less amount of money on each occasion and opting for cheaper options.

Food delivery services increased in importance, not only in the fast food sector, but for healthier options. Delivery services provide a solution to the increasingly busy lifestyles that Chileans are leading as well as to the lack of motivation and knowledge required to prepare healthy meals. Furthermore, coffee shops show strong growth as well as juice and smoothie bars.

The two largest sectors for the institutional food service industry are the mining and education sectors. In 2014, the number of educational institutions of all levels reached a total of 16,372 establishments according to the Ministry of Education.

The three main institutional service companies are Sodexo Chile, S.A., Central de Restaurantes Aramark, and Compass Catering, S.A., led by Aramark. Aside from the large players, many smaller national companies serve the market. The smaller companies will often supply a few schools or companies and guarantee a direct and personal contact to their clients as well as flexibility, client-tailored and individual solutions. Canal Horeca magazine reports that the main players in the sector are incorporating the health trend into their offerings by offering healthy menus, transparent nutritional information and adapting to changing demands. The smaller companies also adapt their menus both by shifting towards higher quality ingredients as well as by offering healthier menu options.

Post reports that the Chilean HRI sector typically does not import products directly. Instead, they purchase the products from local distributors or from wholesalers. Therefore, the best entry method for U.S. companies is to supply directly to local distributors, agents or wholesalers who will then distribute among the HRI industry.

International hotels may have their own distribution network arranged by the company headquarters. According to post sources, branded hotels in Chile do not have a centralized supply chain as each hotel has an independent purchasing department.

Post sees two main categories that have the best potential for sales in Chile: processed foods and gourmet products. Hotels and restaurants demand processed food in order to reduce operational costs. Specifically, their objective is to decrease labor and reduce costs. Most importantly, companies aim to guarantee the standards and high quality of their food. In hotels, high quality “ready-to-serve” food is in high demand, so that a chef only needs to give few touches and focus on presentation. Post sees potential in four specific areas:

  • Meat: pre-portioned fillets
  • Prepared vegetables
  • Pastries, desserts, baked goods, ideally ready-made
  • Other prepared food products: i.e. ready to serve pasta

Food-Processing Sector:

Post advises that according to the Chilean Central Bank, the food manufacturing industry (food, drinks, and tobacco) represented 5% of overall GDP in 2016, with industry value rising by 3.9% over 2015. Chilealimentos, the Chilean association of food processing companies, reports that the Chilean food industry is the main productive activity in the country, with annual sales of $34 billion. Furthermore, 54% of total food production is destined to the domestic market and 46% is exported to more than 190 countries worldwide. According to InvestChile, the Chilean government’s agency for promoting direct foreign investment, food exports in 2016 amount to US$15.6 billion.

There are three main reasons for Chilean companies to import food ingredients:

  • If the products are not available domestically through local production;
  • If it is cheaper to import rather than buy domestically;
  • If imported products offer a higher quality than those available in the domestic market;

Total sales, based on retail value of the food processing industry at constant 2016 prices reached US$14.7 billion in 2016, growing 3.8% over 2015. Furthermore, between 2016 and 2021, the industry is expected to grow by a compound annual growth rate (CAGR) of 3.2%. Demand for healthier products is growing with particular regard to value-added products. Increased awareness of the health aspects of food has made consumers more selective about their food choices.

New ingredients are being used in the production of healthier products especially those adapted to consumers with food intolerances, such as lactose and gluten free products. Alongside there is a rising demand for organic foods. Chilean companies seek to reformulate and develop new products that do not need to carry a warning label from the nutritional labeling law. Therefore, new ingredients are needed, which can be perceived as healthier substitutes (for example sweeteners instead of sugar) or new innovations on how to produce tasteful products within the same price range, but with healthier ingredients.

The conditions in Chile favor the food processing industry due to three main reasons: (1) the natural conditions, such as various climatic zones from the dessert to the Antarctic, allow a vast array of products to be produced; (2) its location in the southern hemisphere offers counter-seasonal production for Europe and the United States, which is very attractive for international food processing countries that depend on the all-year supply of agricultural products; (3) Chile’s is geographically isolated, owing to its location between the Andes Mountains in the east and the Pacific Ocean in the west, and enforces strict regulation on food imports further protecting the local production from foreign most diseases and pests.

The presence of skilled professionals in the agricultural sector combined with national efforts to advance technology makes Chile an attractive location for the food industry. Furthermore, the Chilean government actively supports production of high-value agricultural exports.

Post reports that best prospects for U.S. exporters in the Chilean food processing sector include:

  • Healthy foods: Superfoods, functional foods, sweeteners and natural alternatives, spreads, free-from products and private label products
  • Snacks: Dried fruit & fruit snacks, rice snacks, vegetable and bread snacks and other natural foods & snacks
  • Meat Products: Pork
  • Dairy Products : Low-Fat powder milk & other milk types and premium cheese
  • Ready-made meals: fresh and healthy ingredients, premium ready-made meals and shelf stable ready-made meals
  • Breakfast Cereal: Muesli and granola
  • Coconut Products
  • Creative Condiments
  • Alternative Grains
  • Value Added Baked Goods: Packaged flat bread and pita, wholegrain bread and bread with natural ingredients, gluten free bread and “light” varieties of bread
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