Colombia Country Profile

Market Overview:

Euromonitor reports that Colombia has been one of the fastest-growing countries in the region in recent years but the pace is slowing. Real Gross Domestic Product (GDP) grew by 1.8% in 2016 after gains of 3.1% in 2015. A rebound to 2.6% growth is forecast for 2017. Government consumption is accelerating while private consumption slows.  An increase in infrastructure spending and an improvement in private investment provide support. A double-digit decline in exports is a drag on the economy.  Voters’ rejection of the peace deal with FARC hurts Foreign Direct Investment (FDI) inflows but the government has concluded a new deal that will not require voters’ approval. The economy will improve with growth of real GDP reaching 3.6% by 2020.  Support will come from the government’s infrastructure investment program, a rise in private investment and a modest recovery in non-traditional exports.

Policy makers’ intention is to gradually move the economy away from its present commodity dependence. To achieve this goal, growth of productivity must accelerate. To boost productivity growth, Colombia has launched an ambitious plan to develop its transport infrastructure with help from the private sector. Between 2015 and 2023 the program, known as the Fourth Generation or 4G, is expected to modernize 6,000 kilometers of roadway at a cost of US$10.7 billion. Colombia depends on its road network for more than 80% of internal transport. Additional investments by privately owned infrastructure groups (valued at US$3.3 billion) are also planned. A total of 35-40 projects are expected to be approved by the end of 2016.  

The U.S. is the largest supplier of food and agricultural products to Colombia and it is now the largest export market for U.S. agricultural products in South America. Colombia is also ranked 12th in the world as a U.S. agricultural export market. In 2016, U.S. exports of agricultural products dropped only 1% to just under US$2.4 billion. Of that amount, US$543 million were consumer oriented, an increase of 8% and also 23% of the agricultural total. Colombia is the largest importer of processed food in South America as well, importing US$496.8 million in 2016, an increase of 9%. Top processed food exports to Colombia in 2016 included food preparations, processed/prepared dairy products, fats and oils, prepared/preserved meats, processed vegetables and pulses, non-alcoholic beverages, chocolate and confectionery, snack foods and dog and cat food.

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) and the European Union. Colombia is awaiting final legislative and judicial approvals for FTAs with South Korea, Costa Rica, Israel, Panama and a larger trade bloc, the Pacific Alliance, which includes Chile, Peru and Mexico.  Colombia is currently negotiating FTAs with Turkey and Japan.  

In recent years, the Colombian food industry has undergone unprecedented consolidation and structural change through mergers, acquisitions, divestitures and new foreign competitors entering the market. This widespread consolidation in the retail, Hotel-Restaurant-Institutional (HRI) and food processing industry was driven by expected efficiency gains from economies of scale, resulting in significant impacts on market share and food prices. As well, internet e-commerce sales are becoming more popular and direct marketing through credit card promotions, flyers, polls, and sales calls to either home or office sites including home delivery service, are also growing popularity. It is also important to note that distribution channels have become more efficient with the increased presence of foreign competitors.

Post advises that it will be critical for U.S. exporters entering the Colombian market to best understand the customer’s needs and how to meet their purchasing requirements and specifications, in addition to all standards and regulatory expectations of the Government of Colombia (GOC) to avoid issues at ports of entry. Critical considerations for market entry include the following: Foremost is that competition is based on quality, price and service. Innovative marketing strategies are imperative in order to penetrate the market; including social marketing techniques continue to be very strong, using sales to generate funding for social programs.

Post adds that U.S. suppliers should develop ways to meet the needs of the Colombian market through personal visits to better understand the market and identify needs of buyers and consumer trends; and to use consolidation when exporting small amounts of product. They add for food service exports it is best to establish direct contact with hotel and restaurant chains and to develop business relationships with top executives like marketing directors, purchasing managers, and expose them to U.S. business practices. They suggest participation in local trade and promotion shows, such as Alimentec, Agroexpo, Expovinos, Agrofuturo, and also be part of trade delegations.

Post also notes that many Colombian companies’ representatives visit trade shows in the U.S., such as the American Food and Beverage Trade Show and the Fancy Food Winter/Summer Shows, which are great opportunities to meet and educate Colombian importers. They suggest developing Spanish marketing/communication materials; work closely with local importers to comply with food import regulations to facilitate the registration and import of food products and minimize port of entry risks, and to support the importer with promotional campaigns.

Retail Sector:

Euromonitor has reported that retail sales value of the packaged food market in Colombia reached nearly US$10.9 billion in 2016. That ranks Colombia as the 5th largest packaged food market in Latin America. It is also the 27th largest retail food market in the world, larger than Vietnam, Hong Kong, Taiwan and Malaysia as examples. The 2016 figure also represents an increase of 17.8% from the 2012 value, or US$1.6 billion. They also forecast the value of retail sales in packaged food to increase to US$13.5 billion by 2021, an increase of nearly 23.4% or over US$2.7 billion from the 2016 amount. High growth products in the forecast include savory snacks, baby food, sweet biscuits, snack bars and fruit snacks, ready meals, ice cream, breakfast cereals and confectionery.

Colombia is the third most populated country in Latin America after Brazil and Mexico at 48.7 million inhabitants. About 75% of the Colombian population resides in urban areas. Colombia is atypical of Latin America with decentralized urban centers and four cities with over one million residents: Bogota (7.9 million), Medellin (2.5 million), Cali (2.4 million), Barranquilla (1.2 million) and Cartagena (1 million).  Urbanization is growing at a consistent 2% per year, stimulating changes in lifestyles and eating patterns. Urban households in Colombia are becoming more typically dual income, resulting in an increasing demand for food and shopping convenience.

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. For example, CENCOSUD of Chile recently purchased the Carrefour-Colombia subsidiary, establishing the retail chains Jumbo and Metro. Over the past five 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. Koba-D1, discount grocery store established in 2009, has developed a successful format of small outlets that offer products 30% to 40% cheaper than traditional grocery chains; D1 now counts over 500 outlets throughout the country and it is expecting to open 150 new stores in 2017.

Euromonitor reports that the purchasing habits of consumers within grocery retailers are changing due to the rapid expansion of discounters, which has changed the negotiating policies with its suppliers, innovated its offer and displayed its products, the location of its outlets and the payment methods for its customers by receiving only cash; bringing as a result, the selling of products of good quality, but at competitive prices, which sometimes are the cheapest in the country. The channel’s offer includes approximately 70% private label and involves a high turnover of products. Discounters’ outlets are found in all socioeconomic strata and besides D1, new players continue to enter such as Justo & Bueno that opened more than 110 locations across the country within one year.

The revolution of discounters has made the larger format stores (hypermarkets and supermarkets) change and adapt to new strategies. Almacenes Éxito, one of the leading retail players, has developed specific segmentation for each of its brands: Carulla, Surtimax, Éxito and Super Inter; aiming with each of them to provide proximity to its customers. In addition, both hypermarkets and supermarkets have made significant investments in their technological platforms to increase their presence on the internet and offer themselves as an alternative to virtual stores; likewise, they maintain loyalty programs through points, purchase special days and incentives of money refunds for purchasing private label products.

The convenience market in Colombia is rapidly expanding with the increasing presence of U.S. retail and food service chains. In addition, Colombian consumers are demanding more innovation in packaging, flavors and nutritional benefits. Smaller packaging is an increasing trend for different kinds of food with people interested in more economical, single portions.  

Best Product Prospects:

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:

Post advised that the Colombian Department of National Statistics (DANE) reported that hotel occupancy rates in 2015 were 53.6%, slightly higher compared to 2014 (52.4%). The hotel sector generates approximately 80 jobs per 100 rooms, according to the Colombian Hotel Association (COTELCO). The growing informal hotel sector is considered the principal threat to the industry by COTELCO.  The informal hotel sector is typically not officially registered with the Government of Colombia (GOC) and does not pay taxes. 

The GOC has supported the construction of new hotels in Colombia by providing property and business tax incentives; therefore, the Colombian hotel industry has expanded in recent years. Demand for luxury lodging is increasing and it is common to find high-end hotels not only in main cities, but also in smaller ones like Pereira or Bucaramanga. However, the drop in oil prices has affected the hotel industry in cities where oil industry has a major relevance like Yopal, where occupancy rate was 25% in 2015. Growing room supply in Colombia and local currency depreciation has resulted in a decrease in lodging rates, from US$124 in 2014 to $US93 in 2015.

The Colombia Restaurant Association (ACODRES) estimates that there are 65,000 restaurants throughout the country. The market share of the informal restaurant sector is 86%. Colombia is undergoing a gastronomy revival to attract tourists, resulting in a significant increase in high-end restaurant establishments in all major cities. The gastronomy revival supports more sophistication in restaurant opportunities, especially in the large cities, where the quality and service are comparable to high-end restaurants in other parts of the world. In addition, the fast food sector has grown rapidly, providing an excellent alternative to higher-end restaurants in times of economic slow-down. Colombians are becoming more inclined to eat in fast food restaurants due to dual income, working families who look for convenience and affordability in their dining out options.

According to Euromonitor, food service sales in Colombia increased 5% in 2015. The sector’s transactions grew by 2% in the same period. The most dynamic sectors have been specialty coffee shops, high-end bakeries, fast food establishments and food for home delivery. 

Experts in the Colombian restaurant sector claim that Colombian consumers have changed tastes and preferences in the last ten years, seeking out different kinds of menus and products offered, as well as becoming more demanding in food quality and product innovation. Survey results show that restaurants offering high quality meals, while charging minimal prices, are the preferred choice of Colombian consumers. Although chain restaurants are growing exponentially, strong competition from local, more informal restaurants remains. High-end restaurant sales will continue to grow as long as income distribution improves and the middle class continues to expand. The high-end restaurant market has opportunities in Bogota, Cali, Medellin, Barranquilla and Cartagena. The growth in restaurant chains has demonstrated that the franchising model, distributing costs with more points of sale and uniform prices and quality, has shown the most opportunity for restaurant industry investment.

Quick service and fast food restaurants represent one third of the market and are very popular in large cities. Quick service and fast food outlets are strategically located around working areas, food courts in shopping malls and on the side of main roadways. The convenience of fast food restaurants has supported dual income, working households with little time to prepare traditional meals on a moderate income. Competition among fast food chains is intense. For example, there are four fast food hamburger chains, both domestic and international, competing throughout Colombia: McDonald’s, Presto, El Corral and Burger King. A tactic of the fast food chains is to advertise and conduct promotional campaigns directly for children in order to attract families, whether it is for hamburgers, pizza or fried chicken.

The restaurant and food service sector is expected to expand as a consequence of growing incomes, higher participation of women in the labor force and more demands on a household’s time, resulting in a stronger incentive to dine out of home or demand home delivery food services. Restaurant chains are expected to perform better than independent, local restaurants.  

According to the DANE, the 2016 Colombian population is 48.7 million with almost 27% within the age range of 5 to 19 or the ages of likely attendance in school. It is estimated that five million are enrolled in private schools. Most schools serve lunch, which is often mandatory at the elementary and middle school levels and optional for high schools. Some schools contract the service from catering companies, but most schools have kitchens and prepare food on site. Food stuffs prepared at schools are purchased wholesale at establishments specialized in food services for schools. Snack food and beverage vending machines are in most schools for purchase. Sales of imported products in this sector are not significant; however, there is potential for growth in U.S. consumer-oriented-products, such as beverages and nutritional snacks.

There are more than one hundred urban, semi-urban and suburban social clubs in Colombia, offering sports facilities, such as tennis and golf, and restaurant opportunities, including banquet halls for weddings and other social gatherings. Due to the economic downturn in recent years, several mergers and acquisitions took place among various social clubs. Some clubs were bought by corporate businesses. Clubs continue to recover from low sales and declining memberships and have adopted strategies in order to increase sales, like offering services to non-members for social events. Social clubs are the second best market for upscale imported food products. The clubs source food and beverage needs from specialized food service establishments and importers of fine foods and wines.

Best Product Prospects:

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, chilled pork, processed turkey, yogurt cups, fresh fruits and processed fruits and vegetables are in demand. Soy sauce, tree nuts, sugar confections, cookies, chewing gum, black tea spices, wine and healthy food products also have good potential. 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.

There is a growing domestic demand for higher quality confectionary products and ingredients are needed to complement a large cocoa producing industry to develop better quality chocolates and other candies. The production in chocolates is burdened by very volatile domestic prices of milk, cocoa and sugar, which have risen in recent years. In general, Colombia imports about 15% of glucose consumption.

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.

The feed sector is a key market for grains and oilseeds and continues to source most needs from foreign suppliers. The U.S. is a major supplier of feed needs for Colombia. The CTPA will improve opportunities for trade in coarse grains and oilseeds as Colombian buyers continue to seek high quality feed ingredients at reasonable prices. With a bumper U.S. corn prices have fallen dramatically, turning Colombian buyers towards the United States.

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.

Best Product Prospects:

The following products categories represent the major export opportunities and some emerging opportunities for U.S. food products to Colombia that now enter duty free; soybean meal and oil, vegetable oil, and wheat flour. In 2016 U.S. exports of intermediate products which are where most food ingredients are classified reached US$563.8 million, 24% of the agricultural total. 

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