Colombia Country Profile
Euromonitor reports that Colombia's economy is gaining strength as a result of a surge in spending on infrastructure and record levels of foreign direct investment (FDI). Colombian FDI reached a record level US$16 billion in 2012, up from US$7.2 billion in 2009. Real Gross Domestic Product (GDP) grew by 3.9% in 2013 and gains of 4.4% are expected in 2013. Bogota claims that heavy oil deposits could hold up to 20 billion barrels of recoverable resources. This would give Colombia more reserves than major producers such as Mexico or Algeria. Officials expect up to US$50 billion in investment in mining and oil during the next decade. Colombia’s informal economy has been estimated to be between 20% and 40% of GDP. The fact that such a large portion of total economic activity lies outside the purview of government officials complicates policy matters.
The U.S. is the largest supplier of food and agricultural products to Colombia and it is the 4th largest market for U.S. agricultural products in Latin America. In 2013, U.S. exports of agricultural products grew 37% to just over US$1.5 billion. Of that amount, US$420.6 million were consumer oriented a new record high and an increase of 33% and 28% of the agricultural total. Top processed food exports to Colombia in 2012 included soybean oil, other processed foods, ingredients and beverage bases, baking inputs, mixes and dough’s, chocolate products, dry beverages, protein concentrate, prepared/preserved poultry, pet food and varietal cheese.
The U.S. reached a bilateral trade agreement with Colombia, known as CTPA, or U.S.-Colombia Trade Promotion Agreement. The agreement was finally entered into force in May 2012 and the impact on Food Export’s activities was immediate with dozens of trade inquiries from within the market. The CTPA had been anticipated for many years now, and it’s entry into force starts at a critical point. Colombia has agreed to or entered into a number of other trade agreements while the U.S. has been negotiating the CTPA.
Colombia has signed or is negotiating Free Trade Agreements (FTAs) with a number of other countries, including Canada, Chile, Mexico, Switzerland, the European Union, (EU), Venezuela, South Korea, Turkey, Japan, China, Costa Rica, Panama, and Israel. Colombia is also a founding member of the Pacific Alliance; a group formed in 2012 among Chile, Colombia, Mexico, and Peru to promote regional trade and integration. These countries, currently secondary suppliers into the Colombian food market, already enjoy preferential tariff treatment and should be considered viable competitors in the market.
Colombia is a developing market for consumer-oriented products. Colombia’s domestic demand and household consumption have grown steadily over the last three years. The large young population living in urban areas has developed new tastes and preferences becoming more health-conscious and selective. The growing percentage of women in the workforce has increased the use of fast food restaurants and the demand for new value-added products. Economic realities and current consumer trends indicate that buying decisions are primarily made based on quality, price and after-sale service.
ATO Bogota advises U.S. exporters to understand the Colombian 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. They feel innovative marketing strategies are imperative in order to penetrate the market and social marketing techniques continue to be very strong, using sales to generate funding for social programs. They advise 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 appreciate that they must use consolidation when exporting small amounts of product.
Retail Food Sector:
Euromonitor has reported that retail sales value of the packaged food market in Colombia reached US$17.1 billion in 2013. 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 Chile, Thailand and the Philippines as examples. The 2013 figure also represents an increase of 28.1% from the 2008 value, or US$3.7 billion. They also forecast the value of retail sales in packaged food to increase to US$20.7 billion by 2018, an increase of nearly 21% or over US$3.5 billion from the 2013 amount. High growth products in the forecast include noodles, sweet and savory snacks, dairy, chilled processed food, ice cream, meal replacement, canned/preserved food, pasta, and soup.
Colombia is the third most populated country in Latin America after Brazil and Mexico. Of the 47 million inhabitants, about 75% reside in urban areas. Colombia is atypical of Latin America with decentralized urban centers and four cities with over one million residents: Bogota, Medellin, Cali and Barranquilla. 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 in the major Colombian urban centers. The U.S. retail chain PriceSmart has also established a presence in Colombia opening three stores; two in Cali and one in Barranquilla, in the past two years. PriceSmart will be expanding to Medellin and Bogota in the future.
Euromonitor reports that convenience stores are expected to be the most dynamic channel, with a projected growth rate of 24% in constant value terms, and a rate 26% in terms of outlet numbers. This channel will continue to be in the sights of companies during the forecast period, and new alliances, such as that recently subscribed between Almacenes Éxito and ExxonMobil, might continue to appear in the coming years. The alliance is an agreement of business collaboration which establishes that ExxonMobil will offer 100 locations to Éxito located at petrol stations for the operation of convenience stores, and Éxito for its part is committed to buy petrol from ExxonMobil, which will be distributed in the petrol stations belonging to Éxito group.
Best Product Prospects:
Colombia is a growing market for value-added food products. Surveyed retailers and producers feel there is significant potential for new products in almost all food product categories. These include red meats, chicken, turkey, fish products, canned fruits and vegetables and fresh fruits. It also includes cereals, pasta, juices, bottled water, bakery items, wine, baby food and frozen foods, as well as health foods, dietetic, ethnic, and organic foods.
Food Service Sector:
Euromonitor reports that Colombian consumer foodservice sales are maintained positive figures in 2012, faring better than they did over the previous few years. The categories that registered the best performances were chained fast food, chained specialist coffee shops and chained 100% home delivery/take away, all of which posted double-digit growth rates. One of the most important factors behind this growth was the strong expansion in outlets registered by these categories.
Retail locations continued growing at a rapid pace, motivated by the expansion of shopping malls, not only in the main cities, but also in smaller cities. Also significant was high footfall in retail, which is contributing to the dynamism in this location and which is preferred by fast food, full-service restaurant and specialist coffee shop chains. The intensification of competition in consumer foodservice, with a strong expansion of local and foreign brands in a market that still has room for expansion, has led to the emergence of corporate groups, holdings and the arrival of investment funds that are vital for the injection of capital and which will enable aggressive expansion plans in the ensuing years.
Chained consumer foodservice recorded the highest growth rates in outlets, transactions and sales compared to independents, which still hold the largest share of consumer foodservice. Besides the strong expansion in terms of outlets recorded by local and foreign chains, other factors, such as promotions, restrained price increases, the introduction of new products and the growing importance of breakfast and brunch during weekdays as well as weekends, contributed to the strong performance of chained operators.
It is expected that during the 2013-2018 forecast period chains will accelerate their expansion in the country, reaching smaller cities, as chains have the financial strength to facilitate such rapid expansion. Furthermore, an increasing presence of new players in different categories is foreseen, such as in chained bakery fast food with brands, including Cinnabon, the growth of which is likely to accelerate. This will be supported by the expertise of Grupo Frisby, as well as Lovers from Conboca holding, which despite only having less than ten outlets in 2012, is expected to undergo a rapid expansion in the ensuing years.
The new alliances in complementary categories may lead to an increasing number of co-branded outlets, giving consumers new opportunities and consumption occasions in one place.
Food Processing Sector:
At last report from Post, the Colombian food-processing sector depends heavily on imports of ingredients like spices, dry mixes for sauces, modifiers, preservatives, enhancers, flavorings, and thickeners. The food industry is one of the largest and most vital sectors in the economy, accounting for 28% of industrial production and 22% of total source of employment. Multinational companies are penetrating the market making alliances with Colombian food industry, such as Danone in alliance with Colombian dairy producer Alqueria. PepsiCo entered the country with the mark Gamesa with and investment of US$35 million. The cookie brands are Mamut, Chispos, Lechetta, Florentinas, and Meloboms. Almacenes Exito is producing healthy products under the mark Taeq with at least 100 items.
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.