Colombia Country Profile

Market Overview:

Euromonitor reports that the Colombian economy’s rate of growth will pick up in 2018. An improvement in private consumption along with a rebound in construction and retail output provide support. Exporters will also see a second consecutive year of buoyant growth. Possible changes in the trade and monetary policies of the U.S. are a downside risk.

  • The Colombian economy is still struggling to adjust to the end of an oil and mining boom
  • Real Gross Domestic Product (GDP) is expected to grow by 2.8% in 2018 after gains of 1.6% in 2017
  • The real value of private final consumption rose by 1.6% in 2017 and a rise of 2.8% is expected in 2018 - A steep drop in interest rates supports consumer spending and public consumption is also rising.
  • The jobless rate was 9.3% in 2017 and it will fall to 8.9% in 2018 - A majority of workers are employed in the informal sector - The government has ambitious plans to create 2.4 million new jobs in the medium term
  • The economy should gradually improve owing mainly to higher oil prices and public spending on infrastructure
  • Growth of real GDP will reach about 3% per year by 2030

Colombia’s population was 49.1 million in 2017, up from 40.4 million in 2000. Total population will reach 53.1 million by 2030. Colombia’s median age stood at 30.9 years in 2017 – 6.5 years greater than in 2000. The fertility rate has been almost halved since 1980 and was 1.8 births per female in 2017 and it will fall to 1.7 births per female by 2030. The share of those of 0-14 years was 40.9% of the total in 1980 but had fallen to 23.5% by 2017 (still high by regional standards). The share of those over 65 years represented 7.7% of total population in 2017 and it will rise to 12.8% by 2030.

USDA’s Office of Agricultural Affairs (OAA) in Bogota, hereinafter referred to as “Post” reports that trade in U.S. agricultural products to Colombia has expanded as a result of the U.S.-Colombia Trade Promotion Agreement (CTPA), implemented in May 2012. Colombia is eager for access to other markets and has signed Free Trade Agreements (FTAs) with various countries and trade blocs, such as Canada, the South American Common Market (MERCOSUR), the European Union, South Korea, Costa Rica and a larger trade bloc, the Pacific Alliance, which includes Mexico, Peru and Chile. Colombia is awaiting final legislative and judicial approvals for FTAs with Israel and Panama.

Economic growth in the country means that millions of Colombians have moved out of poverty and into the low and middle income classes. These income adjustments have resulted in more household disposable income and changes in eating patterns, such as shifting diets from vegetable to animal proteins -- poultry consumption has almost doubled in the last ten years. Increasing demand for consumer-ready products has stimulated growth in fast food chain restaurants. This has impacted the food industry sector dramatically with food manufacturers desperately seeking a variety of high quality raw materials to adapt to changing consumer tastes and preferences.

Colombia is now the largest U.S. market for the export of agricultural products, which totaled over US$2.5 billion in 2017. That represents growth of 67% since 2013, the first full year of the CTPA. That is also more than US$1.3 billion more than Peru which is the 2nd largest market for U.S. agricultural exports. U.S. exports of consumer oriented food products to Colombia totaled US$570.6 million, growth of 5% over 2016. This makes Colombia the 2nd largest export market for consumer food products in South America after Chile. Colombia is the 2nd largest importer of processed food in South America as well, (again following Chile), importing US$442.3 million in 2017, but a decrease of 11%. Top processed food exports to Colombia in 2017 included:

  • Food preparations
  • Fats and oils
  • Processed/prepared dairy products
  • Prepared/preserved meats
  • Non-alcoholic beverages
  • Processed vegetables and pulses
  • Chocolate and confectionery
  • Dog and cat food.
  • Snack foods
  • Beer and wine

The U.S. enjoys some competitive advantages in the Colombian food market:

  • The U.S.-Colombia CTPA expands opportunities and market potential for many agricultural products
  • U.S. agricultural products have a reputation for high quality
  • Colombia is the largest agricultural trade destination for U.S. food product in South America
  • The growth of tourism and the hotel and restaurant sectors will require a greater array of raw materials and ingredients to make final products more appealing to foreigners and fast changing domestic consumer tastes and preferences
  • The growing lower and middle income population, specifically youth and working women of Colombia, are stimulating new food consumer trends and a growth in processed foods
  • Market opportunities for health foods and organic products are expanding given growing obesity trends and GOC support for healthy living campaigns

Challenges for U.S. exports of food products to Colombia include:

  • Colombia has trade agreements with many other countries increasing competition with U.S. products
  • Colombian per capita consumption for processed and semi-processed products is low - For example bread consumption (24kg/year) is low compared to other Latin American countries
  • U.S. products will have to maintain the reputation of higher quality in order to be competitive with local food processing companies, guaranteeing a consistent and uniform supply of products year round
  • There is a cultural misperception that frozen products are unhealthy and lack quality
  • Internal transportation costs from ports of entry are costly due to extremely poor infrastructure
  • Cold chain is deficient and Colombians have no clear understanding of this need to maintain product quality

Retail Sector:

Euromonitor has reported that retail sales value of the packaged food market in Colombia reached nearly US$11.6 billion in 2017. That ranks Colombia as the 5th largest packaged food market in Latin America. It is also the 26th largest retail food market in the world, larger than Vietnam, Hong Kong, Taiwan and Malaysia as examples. The 2017 figure also represents an increase of 21.6% from the 2013 value, or US$2 billion. They also forecast the value of retail sales in packaged food to increase to US$15 billion by 2022, an increase of nearly 22.5% or over US$2.7 billion from the 2017 amount. High growth products in the forecast include:

  • Sweet biscuits, snack bars and fruit snacks
  • Ice cream and frozen desserts
  • Baby food
  • Savory snacks
  • Confectionery
  • Ready meals
  • Processed fruit and vegetables
  • Processed meat and seafood
  • Breakfast cereals

Post reports that western style large supermarkets are part of a noteworthy retail transformation in the last decade with major, domestic and international grocery chains opening new stores, of varying sizes, at intense rates. Over the past seven years, the U.S. retail chain PriceSmart has developed a significant presence in Colombia, opening a total of seven stores in the country; Cali (two stores), Barranquilla, Bogota (two stores), Pereira and Medellin. Discount stores have increased market share and continue opening outlets throughout the country offering wide private label portfolios cheaper than traditional grocery chains. Koba-D1 now has over 600 outlets; Justo y Bueno has over 450 outlets while Ara has over 370 throughout the country.

Euromonitor reports that the recent expansion of the product offering in supermarkets has been a way to respond to the limited variety offered in discounters. Supermarkets have opted to increase their product range in each category in order to offer products in diverse quantities and prices, from which consumers can choose (sometimes up to 10 different brands). This makes it easier for consumers to adapt their purchases to their economic situation and helps supermarkets present themselves as outlets to take care of the needs of all consumers. Even their private label products compete with products on the same display, and those products that do not have high enough rotation are placed in a clearance sale.

Discounters offer cheap products, which has impacted different grocery retailers. Despite this, supermarkets did not stay quiet and lose sales; on the contrary, they launched a commercial offensive that combines two concepts: that they are a one-stop-shop for food shopping, and the implementation of click-and-collect in their online platforms. The first proposal has a cultural background. Consumers who buy in discounters cannot always find all the products they want, so they go to a supermarket to buy what they are lacking. This is the reason why supermarkets are expanding their product variety and advising consumers to buy all their food supplies from them, to avoid having to go somewhere else. This is complemented by the second proposal of click-and-collect, which means buying through web pages or by telephone and deciding between picking up the order at the supermarket, or home delivery, which is now being offered.

A relevant factor that started in 2017 in retailing and affected the products sold in supermarkets was the increase in prices as a result of the tax reform, which increased VAT by three percentage points on virtually all products. This factor added to the upwards inflation rate and the slowdown of the economy. Therefore, supermarkets modified their strategies to retain their customers or attract new ones; they launched new deals to encourage consumption, such as the return of the taxes on purchases, the inclusion of a greater supply of private label products at different prices, and inventory clearance sales with considerable discounts.

In the slow economic context, with increased unemployment, taxes and prices, more informed consumers increasingly compared supermarket services, so the competition amongst them to retain customers or attract new customers is in presenting themselves as offering the best benefits. Days of special discounts are offered by Éxito and Carulla. Loyalty points and alliances with Cafam Family Welfare Fund grant discounts or credit money to consumers who buy at Éxito. Supermercados Colsubsidio, through its integral card, grants discounts and small consumer loans at low interest rates, which can be used towards purchases. Olímpica combines products in offers to encourage consumers to purchase; for example, buy its own brand of milk and get chocolate free.

The varied offer of hypermarkets, together with the incorporation of small consumer foodservice outlets and banking services, is leading hypermarkets to go far beyond being just retailers of groceries. In addition, they are strengthening consumer visits for lunch and snacks, implementing technological innovations and participating in events within outlets. Hypermarkets are going beyond offering goods in large quantities; other activities can also be carried out along with doing the grocery shopping, such as going to the bank and having a coffee or lunch break, amongst others. The infrastructure of hypermarkets now also incorporates components that promote social encounters.

The dynamic but moderate expansion plans of hypermarkets means they are moving into areas of the country that traditionally had a presence of a certain retail brand; La 14 in the west, Sao in the north and Almacenes Éxito in the northwest are examples. However, the competition has no internal borders; what used to be the almost exclusive territory of certain stores is now territory which is shared with new players; AlKosto arrived on the Caribbean coast, Jumbo in Valle del Cauca, La 14 in Bogota and Sao in Antioquia. The reign of some retailers in certain areas of the country is fading every day, and the direct competition is increasing.

The direct competition amongst players in hypermarkets, and indirect competition with other retail players, has energized products and prices as competitive factors to gain share, benefiting consumers. The expansion of other business models, such as discounters and warehouse clubs, invigorated the portfolios of products and prices of hypermarkets, thus boosting the competition amongst players. No player is willing to make room for others. The competition to expand share in hypermarkets is seen as healthy. Some sell products with very low profit margins to gain a presence and include complementary goods or services; this makes hypermarkets a different experience for consumers.

Euromonitor reports that convenience stores are a complex channel to assimilate into Colombian culture. These stores are seen as modern and organized, but at the same time, as small supermarkets close to homes; their identity is not clear to the general population. Even the market players themselves have been learning what a convenience store really is; some, such as Surtimax, have ended up identifying themselves as discounters. Since it is a relatively new retail model in the country, consumer recognition is still underway. It should be noted that each neighborhood in the country has its peculiarities, and consumption patterns need to be identified by the convenience stores themselves. This is something that OXXO has identified, and it adapts in each place that it locates. Although the format is the same, there are no two outlets that are quite the same, because it adapts to each neighborhood.

Starting in 2013, Almacenes Éxito entered into alliances with neighborhood stores through its discounters brand Surtimax, enabling the expansion of the brand based on the strong national presence of these stores. This is now being revised to replicate the model in its convenience stores formats, known as Express, both for Carulla Express and for Éxito Express. Yet it wants to go a step further, seeing the franchise model as a strategy to accelerate its expansion, building the logistics to develop its business in the main cities and municipalities that border the capital. If this strategy works, it would be different from the expansion strategy that has traditionally been used in Colombia, and is very clear in convenience stores, whereby OXXO continues to increase the direct opening of stores, without using franchising

Almacenes Éxito wants to implement a complementary and integrated system that reaches every consumer. Its Express formats of convenience stores have the same benefits as supermarkets and hypermarkets, along with proximity. It has also been incorporating a portfolio of its own branded products which provides lower prices, similar to the prices offered in discounters; looking not only to compete with traditional stores, but also with the fastest growing retail model, discounters. For the leader, its convenience stores are an extension to its already diverse channels; it seeks to position itself in many channels with different retail models.

Post reports that Colombia is a fast growing market for value-added food products. Surveyed retailers and food importers feel there is significant potential for new products in all food categories:

  • Healthy and ethnic food categories are especially new and fast growing
  • Wines, craft beers and gourmet products are penetrating the market with excellent results
  • Organic food products are a new trend and retailers are searching for the best suppliers

Food Service Sector:

Euromonitor reports that amidst a slowing Colombian economy the new tax reform approved at the end of 2016 had a negative impact on consumer food service in 2017. Consumer food service was being influenced by the extension of 8% consumption tax to franchises that cannot be credited against operators’ expenses and by an increase in the value added tax (VAT) from 16% to 19%. Consumers also had to cope with inflation and a decelerating GDP, although the impact of direct taxes tends to be more tangible and inversely proportional to the willingness to spend. This negative effect is evident in consumer food service, which showed flat growth in 2017.

Euromonitor reports that in 2018, consumer food service is likely to return to stronger value growth as the economy is expected to recover from the downsizing events of 2016 and 2017 (higher inflation and local currency devaluation that affected consumption through higher unit prices). The market is predicted to experience lower inflation and will assimilate the current local currency exchange rate and higher taxes, some of them directly impacting consumer food service such as consumption tax and VAT.

This expectation is shared by most of the chains operating in Colombia, which are continuing with expansion plans as they preserve a positive long-term perspective of the market’s performance. After recovery, health awareness will continue to boost sales of brands with this focus. A higher number of brands may also introduce this concept to attract more discerning consumers as witnessed with Juan Valdez, which is introducing “Artezanos” a new bakery line made with organic ingredients; One Pizzeria with its “healthy pizza” menu; Crepes & Waffle launching its line Arte-sano; and Frisby introducing its “healthy” menu amongst others.

Ahead of moderate growth, consumer food service more demanding but budget-cautious consumers. Diversification is a key strategy followed by many brands to expand the customer base and it is performed in different ways. Menu and day-part expansion is one of the most important ways to achieve diversification. For example, burger fast food chain El Rodeo is opening Café Saloon which acts as a specialist coffee shop aiming to attract consumers looking for a snack between main meals. Another example is the lunch menu expansion of bakery fast food chains such as Pan Pa' Ya, which is strengthening its lunch menu and Oma a brand mainly known as a specialist coffee shop working on the expansion of Oma full-service restaurants with a home delivery option.

Diversification is expected to continue over the forecast period (to 2022) to gain the attention of increasingly demanding consumers. According to trade sources, another form of diversification that is likely to expand during the forecast period is menu extensions with localized meals. For example, breakfasts that offer “homemade” options will continue to be witnessed within outlets intending to extend traffic during various day-parts. This is already evident with Presto, McDonald’s (burger fast food), Archie’s Pizza (pizza full-service restaurants) amongst other brands.

Many brands such as Frisby, Archie’s Pizza, McDonald’s and Burger King now offer their own online ordering service to eliminate intermediaries. Some of them also have a mobile application. Consumers are encouraged to use a brand with dedicated ordering systems through the offer of special coupons and promotions for users. Finally, the next level of online ordering services includes platforms such as Rappi and Ubereats which work with their own delivery workforce. As they do not use the delivery system of outlets, they can transform takeaway into a home delivery, a factor that is fairly attractive for consumers and brands such as Crepes & Waffles and El Corral that are in demand but do not offer home delivery.

Strong expansion of shopping centers in both major and mid-sized cities has been vital for the development of consumer food service during the review period (from 2013). Shopping centers have become major entertainment and leisure locations for the family. Visiting shopping centers and eating in dedicated food areas are very popular plans and food courts are becoming central and opting for increasingly bigger areas in new developments.

More than 15 new shopping centers were launched in 2016, tripling the number from 2015 and this has allowed the expansion of brands such as Don Jediondo, which is mainly located in shopping centers. Newer shopping centers have a typical infrastructure with one or several anchor outlets (mainly large retailers), entertainment areas and cinemas, food courts mainly comprised of fast food chains and independent outlets and larger areas for full-service restaurants located close to food courts.

Post reports that Colombia is a fast growing market for value-added food products. Industry surveyed retailers and food importers feel there is significant potential for new products in all food categories:

  • Uncooked pasta
  • Pork meat and products
  • Processed turkey
  • Yogurt cups
  • Fresh fruits
  • Processed fruits and vegetables
  • Soy sauce
  • Tree nuts
  • Sugar confections

Ethnic food categories are especially new and fast growing. Gourmet products are penetrating the market with excellent results. Organic food products are a new trend and retailers are searching for the best suppliers.

Food-Processing Sector:

Post had reported that with a rising GDP per capita, millions of Colombians have moved out of poverty and into the low and middle income classes. These income adjustments have resulted in more household disposable income and changes in eating patterns, such as shifting diets from vegetable to animal proteins -- poultry consumption has almost doubled in the last ten years. Increasing demand for consumer-ready products has stimulated growth in fast food chain restaurants to support urbanization and more dining outside the home. This has impacted the food industry sector dramatically with food manufacturers desperately seeking a variety of high quality raw materials to adapt to changing consumer tastes and preferences. Colombia is a net importer of many food processing ingredients and trade opportunities abound.

Even though Colombia is a major producer and consumer of palm oil, the Colombian fats and oils sector must still import significant quantities of unrefined soybean oil, sunflower oil, and other oil seeds to meet industrial demand. For the milling sector, bakery and starches sector has benefited from innovation in packaging, flavors and healthier ingredients. Bread consumption has decreased due to low carbohydrate, “healthy eating” trends that have marginally changed food eating habits. The wheat milling and baking industry is rising to the challenge by conducting outreach campaigns to demonstrate that bread is a nutritional and healthy option for consumers, in addition to including new types of ingredients to capitalize on the trend.

In the beverage category, Coca-Cola had a new product called Jugos Del Valle and Postobon, a Colombia beverage producer, came out with the mark Windsor with flavored water such as H2Oh! Grupo Nacional de Chocolates, the largest Colombian food processor reported its alliance with Starbucks. Compañía Nacional de Chocolates is providing coffee for Starbucks brand “Via” which is sold to airlines, hotels, restaurants and some supermarkets.

The industry has state-of-the-art technology and modern communications. Colombia is a major producer of many intermediate and consumer-ready categories, such as sauces and spices, dairy products, breakfast cereals, confectioneries, baked goods, poultry feed, pet food, vegetable oils and margarines. Some domestic food manufacturers import products from foreign affiliates and label the product with their brand. The number of store-brand products is increasing very rapidly. Supermarkets currently have more than 2,000 of these products on their shelves.

Colombia is the largest U.S. export market in South America for intermediate products which is where most food ingredients are aggregated. In 2017 U.S. exports of intermediate products reached US$657.1 million, growth of 17% and 37% of the regions total, as well as 26% of the Colombian agricultural total. Top U.S. exports of intermediate products to Colombia in 2017 included:

  • Soybean meal and oil
  • Vegetable oils
  • Protein concentrates and textured substances
  • Food flavorings
  • Enzymes
  • Corn starch
  • Hop cone pellets
  • Protein isolates
  • Sugar, sweetener and beverage bases 
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