Colombian market opens wide to U.S. agricultural products

Sometimes it pays to look beyond first impressions. Though plagued by negative perceptions, Colombia has emerged over the past six years as a stable growth market for U.S. exporters of agricultural products.And it continues to beckon with opportunity as interested agricultural exporters set forth to explore.

There have been plenty of market-shaping changes recently. Following implementation of a market liberalization scheme called apertura or economic opening in 1991, U.S. agricultural exports to Colombia have dramatically increased.

Prior to apertura, imported food items were barely visible in the supermarkets of Colombia's major cities. But today, practically all major chains allocate significant shelf space to imported canned foods, breakfast cereals, condiments, snack foods and consumer-ready meat products.

No doubt about it, American food sales to Colombia are on a roll. U.S. agricultural exports to Colombia hit a record $616 million in 1996, up from only $121 million in 1990.

At that time, Colombia ranked as the second largest market for U.S. agricultural products in Latin America - behind only Mexico. A decline in U.S. agricultural exports in 1997 to $537 million dropped Colombia to third place, behind Mexico and Venezuela.

The decline was due in large part to stagnation in the general economy and reduced sales of bulk agricultural commodities, particularly wheat, corn and soybeans. Prospects for 1998 are much improved, and Colombia is expected to resume its position as the No. 2 market in Latin America in 1998.

Colombian trade data show that the U.S. market share of Colombia's total agricultural imports has risen during the period of apertura from 29 percent of total import value in 1991 to 42 percent in 1995 and to 45 percent in 1996.

Major U.S. exports to Colombia consist of corn, wheat, soybeans, soybean meal, tallow, cotton and consumer-ready foods such as poultry meat, snack foods, fresh fruit, dairy products and processed fruit and vegetables.

After nearly a year of slow or negative growth, recently released Colombian government data indicate that the economy grew at a robust 4.7 percent in the third quarter of 1997. Government forecasters anticipated economic growth of 3 to 4 percent for calendar 1997 and are looking toward 5 percent for 1998.

Although overall sales of U.S. bulk agricultural commodities to Colombia in 1997 were down 22 percent, exports of cotton and rice set new record levels.

Total export value for U.S. intermediate agricultural products reached a record $155 million in 1997. Among this group, sales of soybean meal, planting seeds, hides and skins and other intermediate products all set record sales levels in the Colombian market.

Demand for U.S. high-value, consumer-ready agricultural products remained exceptionally strong last year despite the downturn in the Colombian economy.

U.S. exports of consumer-oriented products to Colombia in 1997 totaled nearly $86 million, up 2 percent over 1996 and only slightly below the record $87 million posted in 1995. Exports of breakfast cereals and pancake mix, fruit and vegetable juices, fresh fruit and pet foods all registered record sales volumes in 1997.

Trade Policies Create Sales Opportunities

Before 1991, the Colombian market was largely closed to most commodities as the government pressed a basic policy of food self-sufficiency. U.S. agricultural exports have benefited from apertura's virtual elimination of import quotas, a reduction in import tariffs and improvements in import licensing procedures.

Colombia's agricultural sector continues to move from a protectionist government regime that allowed inefficient production to flourish to an open system that compels domestic producers to compete openly with foreign suppliers. Key elements of the Colombian economy, most notably agriculture, are coping with the loss of production subsidies and the introduction of competing imported products.

Although the government has tried to soften the impact of the structural changes, its message has been consistent: Colombian agriculture must adapt to find its competitive position in a global environment.

The decision to eliminate the protective cover that once shielded Colombian agriculture from the world community has compelled the nation to redirect toward commodities in which it enjoys a comparative advantage. Clearly, the climate and topography of Colombia are not well-suited for grain and oilseed crops.The move away from grain, oilseed and cotton cultivation to perennial crops and livestock production is underway.

Colombia, however, is well suited to produce coffee, cut flowers, sugarcane, bananas, other specialized fruits and vegetables and African oil palm. The area devoted to perennial crops has risen from 1.2 million hectares in 1990 to 1.4 million in 1996.

Land previously devoted to field crops is being redirected to livestock production. The value of Colombia's livestock production in 1996 rose 5 percent over 1995 and is up 27 percent in real terms over 1990. Colombian agricultural imports (including fish and seafood products) rose from $1.4 billion in 1995 to $1.8 billion in 1996 - a rise that is largely attributed to a decline in domestic production which necessitated a sharp increase in grain, soybean and soybean meal imports.

Grain imports have increased steadily from 750,000 metric tons in 1990 to 3.2 million in 1996. Grain imports largely consist of corn, wheat, rice and barley. Oilseed imports, mostly soybeans, increased over the same time period from less than 10,000 tons to 335,000 tons, while soybean meal imports rose from 80,000 tons to more than 435,000 tons.

As a result of the growth in imports and a downward trend in domestic production, Colombia's overall food self-sufficiency ratio has fallen from 95 percent in 1990 to 84 percent in 1996.

With Colombia placing priority on its dairy, livestock and poultry industries, together with a growing population and a downward trend in grain and oilseed production, long-term sales opportunities are bright for U.S. wheat, feedgrains (particularly corn), soybeans and soybean meal.

Meanwhile, the Colombian textile industry, beset by a disappointing outlook for domestic cotton production, increasingly depends on imported cotton. Colombia's growing rice deficit must be also covered by imports; millers are therefore interested in purchasing American rough rice.

The government of Colombia authorized on January 20, 1998, 200,000 tons (rough equivalent) of rice imports. An additional 130,000 tons of rough rice imports was authorized on February 17, for delivery by May 31, 1998.

Consumer-Ready Foods Jockey for Position

Colombian importers are continually on the prowl for new products to offer consumers. In the last half dozen years since imports were first allowed by the Colombian government, there has been a dramatic increase in the number of firms handling the food import business and in import product diversity.

However, many importers who initially looked to the United States because of the close proximity are now considering lower-cost regional products. This is particularly true for fresh fruit and wine from Chile and processed foods from Venezuela and Ecuador. Most food imports from these countries enjoy lower transport costs and enter duty-free due to trade agreements with Colombia.

In order to enhance market share, U.S. exporters would do well to emphasize the superior quality and diversity of their product lines which often are unmatched by alternative regional suppliers. Popular imported consumer-ready food items include fresh fruit, canned and dried fruits and vegetables, candy, spices, processed meats, ice cream, cheese, beer and specialty items such as soups, sauces, salad dressings and mayonnaise.

U.S. exporters enjoy a particular marketing advantage in private label consumer-ready products offered to the larger supermarket chains. Colombian supermarkets also are interested in importing processed products with labels of local food chains.

As the number of microwave ovens increases in Colombia, demand for appropriate products is increasing and the U.S. is well-positioned to capture the lion's share of the growth in this food sector. As of today, only imported microwave popcorn has established a significant presence in the market.

Frozen foods in general represent an underdeveloped product area in Colombia's supermarkets. At present, Pillsbury's line of frozen pizzas and Green Giant brand of vegetables are providing leadership to U.S. exports in this category. U.S. frozen prepared meals, vegetables and pastry products have significant marketing potential and face little competition from competing suppliers.

The Colombian market offers sales opportunities for U.S. exporters of high-quality margarine, specialty oils/fats (high-temperature oils), products formulated for the bakery trade and high-quality U.S. table wines.

Local restaurants seek imported draft beer, which is not currently available, while a strong demand exists for imported juices and low-priced flavored drink products.

A Vibrant Middle Class Drives Demand

With a total population of nearly 42 million people, Colombia is the third largest country in Latin America. A vibrant middle class with a per capita income ranging between $7,000 and $11,000 constitutes nearly 55 percent of the population. Most middle- and upper-income families have traveled to the United States and are familiar with American food products and restaurant chains.

Colombians have ready access to cable and satellite television, which beams America into their homes on a daily basis. Many Colombians, particularly young adolescents, quickly adopt key elements of U.S. lifestyle and changing fashions.

Approximately 80 percent of all Colombians live in urban areas.The four largest population centers are Bogota (6 million people), Cali/Palmira (2.3 million), Medellin (2 million) and Barranquilla (1.2 million). Colombian food preferences and purchasing habits have changed dramatically in recent years in response to urbanization and the influence of international communication media.

The number of women entering the workforce has increased nearly 170 percent over the past 20 years. Thus, preparation of meals in the home is giving way to convenience foods and the increasing tendency to consume meals outside of the home.

Retail and Restaurant Sectors Develop Rapidly

Upper- and middle-income families increasingly purchase their food needs at modern supermarkets instead of the traditional corner grocery or open-air markets. A recent study conducted by the Colombian Federation of Merchants concluded that nearly 90 percent of all urban Colombians now shop at supermarkets that tend to pattern their distribution, handling, storage, wholesale and retail systems closely after U.S. models.

In Colombia, there are six or seven important supermarket chains with two or three dominating in each of the larger cities. These chains usually act as their own agents when importing processed foods in large quantities or use import wholesalers when purchasing limited volumes of selected items.

In addition to the supermarket chains, numerous individual food stores of various sizes exist, along with chains of convenience stores similar to the U.S. 7/eleven model. Also important are the specialty food stores that concentrate on imported foods, which are found in higher income neighborhoods of Bogota, Medellin and Cali.

A dramatic increase in the number of U.S.-based fast-food chains in Colombia is a noteworthy development of the past 10 years. McDonald's is expanding rapidly in the country's principal cities, while Kentucky Fried Chicken, Pizza Hut, Burger King and Domino's Pizza are all present.

Traditionally, hotels, restaurants and institutions have obtained their imported food requirements from importers who sell only to institutional customers. Recently, these importers have begun to diversify their distribution lines to include sales to supermarkets and other retail outlets. In many cases, importers of institutional type foods obtain their supplies through major U.S. food brokers such as Henry Lee or Sysco. Some U.S.-based fast-food franchises in Colombia obtain all of their food ingredients through these institutional importers.

Spreading the Word: New Market Development Activities

The U.S. agricultural attache's office at the American Embassy, Bogota, recently initiated a program of market development activities to help U.S. exporters capitalize on the excellent sales opportunities in the Colombian market.

In June 1997, the office participated in AgroExpo, the largest agricultural trade fair in Latin America. Nearly 250,000 visitors turned out from Colombia and other countries throughout the Andean region.

The U.S. booth was a simulated U.S. supermarket featuring more than 100 U.S. food products from fruit to pet food, including some 20 new-to-market products.

This event marked the first time in more than two decades that U.S. foods were displayed and promoted by USDA at a major trade event held in Bogotfi. Also at the U.S. booth were representatives of the Florida Department of Citrus and the California Tree Fruit Association.

A U.S. exhibit was also featured at the Cali/Palmira trade show in August 1997. It was an opportunity to promote U.S. high-value, consumer-ready food products in the Cali market, to introduce the U.S. Angus Aberdeen beef cattle breed and to heighten the visibility of U.S. Holstein dairy cows among local producers.

A small U.S. supermarket was created on the fairgrounds. It meant remodeling an 80 square-meter building, bringing in electricity, installing refrigeration and freezer equipment and adding U.S.-style advertising features.

The event was publicized through the local media and several U.S. companies displayed their products and sales literature.

At minimal cost, useful trade leads were developed, Colombian importers/distributors expressed serious interest in the "U.S. supermarket" products on display, and the collaboration of eight of the largest Colombian importers of U.S. consumer-ready foods increased the excitement of product diversity.

Local marketing representatives of the Washington State Apple Commission, the local franchisee of a U.S. donut company and the distributor of a major U.S. ice cream manufacturer that recently entered the Colombian market made a notable presence. During the four days of the show, nearly 75,000 visitors passed through the U.S. supermarket, enjoying the opportunity to sample U.S. food products for the first time.

Forty importer trade leads were sent to the Foreign Agricultural Service in Washington, roughly the same number of trade leads submitted during entire fiscal year 1996.

This event also was instrumental in introducing U.S. Angus cattle, a relatively unknown breed in Colombia. An American exporter of Angus bulls and a U.S. exporter of livestock embryo products spoke at the livestock conference, a central feature of the fair.

In addition to the Angus cattle, nine American Holstein dairy cows were exhibited, including the grand champion of Colombia's Buga fair. Milk production from this cow was measured on a daily basis and results displayed to a fascinated public.

These trade show efforts represent the first time U.S. suppliers have been offered a coordinated platform for promoting their products in Colombia in more than a decade.

Upcoming Events

The agricultural office at the American Embassy Bogota will participate in Alimentos 98, which will be held July 22-26, 1998.

Attendees at this upcoming show will include food importers, wholesale food distributors, supermarket chains and other smaller independent retailers, institutional food buyers (representing restaurants, hotels and clubs) food processors and government officials. Show organizers anticipate that this event will have an international flavor, with regional buyers from the Andean member states, Central America, the Caribbean and other countries of South America.

U.S. exporters may rent booth space directly from Corferias, the local show organizer or participate through the booth which will be taken by the Agricultural Attache in Bogota.

Companies may send a representative or, if this is not possible, the Agricultural Attache will distribute sales literature and display product samples for a fee of $150.

For additional information on Alimentos 98, write to:

Office of the Agricultural Attache American Embassy, Bogota Unit 5119 APO AA 34038

David Rosenbloom is the Agricultural Attache at the U.S. Embassy, Bogota, Colombia.

Tel.: (571) 315-2138 Fax: (571) 315-2181; E-mail: [email protected]

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