Food Processing Sector

An Expert's View about Food , Beverages and Tobacco in Chile

Posted on: 16 Dec 2011

Health and wellness concerns are a growing trend for the consumer, as well as easy-to-prepare foods and snack foods. The organic food market, while still small, has also been steadily growing over the past several years. The market continues to consolidate through mergers, leaving a wide gap in size and capacity between the leading food processers and the smaller ones.

THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY Required Report - public distribution Date: 11/28/2011 GAIN Report Number: CI1045 Chile Food Processing Ingredients Chile?s Food Processing Sector Post: Santiago Approved By: Rachel Bickford, Agricultural Attache Prepared By: Richard Hartley, Agricultural Assistant Report Highlights: Consumer spending on food and beverages has risen significantly over the past few years and reached US$ 27.4 billion in 2010. This growth has been mainly propelled by higher living standards, falling unemployment and increased purchasing power. Health and wellness concerns are a growing trend for the consumer, as well as easy-to-prepare foods and snack foods. The organic food market, while still small, has also been steadily growing over the past several years. The market continues to consolidate through mergers, leaving a wide gap in size and capacity between the leading food processers and the smaller ones. Section I. Market Summary A. Country Overview Chile, with a population of 17 million, is a very centralized country with an estimated 10 million living in and around the capital city of Santiago. In 2010, Chile?s GDP (purchasing power parity) reached US$257.9 billion, with a per-capita GDP of US$15,400. Over the past 15 years annual growth has averaged 5.4%, while per capita income has more than doubled. Despite the economic slowdown in 2009, GDP growth in 2010 was 5.3% and is expected to reach 5.9% in 2011. Chile has a longstanding commitment to trade liberalization and has signed international trade agreements with 85% of the world?s GDP and 80% of the world?s population. To name a few, they have trade agreements with the U.S., Mexico, Canada, the European Union, South Korea, Central America, Mercosur, Japan, China, India and Turkey. The U.S.-Chile Free Trade Agreement took effect in 2004. Once signed, nearly 95% of Chilean Products and 90% of U.S. products were immediately tariff free. The remainder has tariff reductions in stages until 2016, when all products will be tariff free. Tariff Schedules can be found at www.ustr.gov/new/fta/Chile/text/, ?Section 3. National Treatment and Market Access for Goods.? Consumer spending on food and beverages continues to rise significantly. This growth is mainly propelled by improved living standards as a result of falling unemployment and increased purchasing power. This makes the purchase of processed food products an option for more individuals, and offers food and drink manufacturers opportunities to launch new, value-added products. With higher personal incomes, people are shifting from locally produced staples to more expensive branded products, and are integrating processed packaged foods to their diets. B. Overview of Food Sector The Chilean food industry is primarily based on the country?s agricultural resources and remains, to a significant degree, dependent on agro-based exports. The agricultural industry is one of the staples of the Chilean economy, generating around US$4 billion in exports annually. It represents around 25% of the country?s GDP and is the second most important exporting sector after copper. The Chilean food system employs 1.2 million people, representing almost 20% of the country?s economically active population. It is expected that by the year 2030 the GDP generated by the food sector will account for more than 35% of Chile?s GDP, and one out of three workers will have jobs within this industry. Chile has excellent natural conditions to continue developing its agro-industrial and food industries. The country?s southern hemisphere location means that it produces crops during the opposite seasons to the world?s major consumer markets in the northern hemisphere. In addition, its elongated north-south orientation means that harvests can be staggered throughout the growing season. Furthermore, the country?s relative geographical isolation (desert in the north, the Andes mountain range to the east, the Pacific Ocean to the west and south), which together with a strict government policy, maintains Chile as a country free from most pests and diseases. According to the Food and Agriculture Organization of the United Nations, Chile?s food exports have grown at an average annual rate of 10% over the past decade. This ranks Chile as the fastest growing food exporting country, supplying more than 150 countries around the globe with fresh and processed foods and beverages. The fruit, wine, poultry, pork, beef and fish-farming industries each offer tremendous export potential as a result of global trade liberalization, particularly between Chile and Asia. These sectors also benefit from the government?s efforts to diversify its export sector away from copper to high value-added agricultural exports ? most notably salmon and wine. Multinational food manufacturers have a long history of investing in Chile and firms such as Nestlé and PepsiCo have manufacturing plants in the country. Although domestic consumption of processed food is rising steadily, most food and drink firms investing in Chile focus on how they can utilize the country?s extensive natural resources and network of trade agreements to boost their sales in markets outside of Chile. C. Size of the Chilean Food Processing Industry The processed (packaged) food sector?s annual growth is represented by the sector?s exports, which grew from US$717 million in 2004 to more than US$1.5 billion in 2008. The processed food sector is one of the main growth generators in Chilean exports, mainly due to the production increase of fruits and vegetables in their different formats (canned, dehydrated, frozen and juices). Other major exports are chocolates, cookies, candies and refreshments. Each one of these products has its origin in more than 200 industrial plants throughout the country. About 10-15% of products sold in supermarkets today are imported. This segment has grown by 85% over the last five years. The number of Chilean food processing companies has shrunk through mergers and acquisitions during the last couple of years. At this time fifty three companies dominate the market. As food processors seek to rationalize their costs, the trend is towards direct purchases and away from middlemen. As the big processors continue to grow, they reach economies of scale by negotiating directly with the supplier, even on a global scale. Smaller buyers still depend on distributors to manage their stock. Manufacturers in mature sectors such as pasta, oils and fats have launched value-added products in order to develop high value niches in their market. The following foreign food imports are in the highest demand: snack foods, healthy snacks, energy products, specialty drinks, cookies, tuna, ?light? snacks and candies, baked goods and mixes, sweets, gums and chocolates. D. Macro-Economic Factors and Key Demand Drivers in the Food Processing Industry The market continues to consolidate through mergers, leaving a wide gap in size and capacity between the leading food producers and the small ones. Convenience is the main trend in packaged food. Consumption trends influencing the type and quality of inputs being used include: Easy-to-prepare food as more people, including women, join the workforce and spend less time at home Out-of-home meals become more frequent as young people continue adopting new fast foods and snack foods as part of their diet Light foods and beverages continue capturing market share Consumers declare that the most valued benefit from specific items is health, quality, convenience and security. Functional foods are part of the usual shopping list of Chileans, especially among women and the medium and upper classes. Chileans give important credit to brands (in 80% of the cases, it determines the purchase selection due to its quality recognition). The small organic food market has been steadily growing over the past eight years. The market, which was worth only US$200,000 in 2003, today represents US$ 7.4 million in sales and is expected to grow to US$53 million by 2013. The high price of organic goods is the main obstacle preventing some from consuming these alternative food products. Organic production in Chile is primarily an export driven activity. E. Advantages and Challenges facing U.S. Food Ingredients in Chile Advantages Challenges The U.S. is a strong trading partner Quality of food ingredients from around the world has become through the U.S. Chile FTA and its very similar, abiding by U.S. and European standards. products are welcome. U.S. food inputs are known for their Chile has FTAs with many countries, allowing them to be price quality. They meet respected FDA & conscious and highly competitive; therefore removing USDA standards. Health concerns are low. dependency from any particular region. Certain companies, such as Nestlé, have Prices for U.S. products may still be higher than local products corporate requirements to purchase U.S. or imports from nearby countries, even after the FTA. FOB inputs for products intended for export to prices for U.S. inputs tend to be at least 10% higher than local the U.S. prices for equivalent quality. Rising disposable incomes have generated Price sensitivity is strong due to high inflation and the interest in foreign and higher quality economic downturn. foods. Section II. Road Map for Market Entry A. Entry Strategy U.S. food ingredient producers that want to enter the Chilean market can deal with local food processors directly or with representatives/agents/distributors depending on the product and on the application. Large corporations increasingly prefer to import directly from foreign suppliers, while smaller processors are often not able to purchase whole containers or prefer that a distributor manage logistics and their inventory. Eventually, large sales volumes would justify establishing a local subsidiary to guarantee customer service and quality levels. All edible products must be approved by the Chilean health authorities and receive a registration number and open sales permit before being put on the market. Distribution trade is very receptive to U.S. products as they are a guarantee of quality and good packaging. When possible, buyers try to avoid local middlemen and buy direct in order to keep profit margins and remain competitive. U.S. exporters are considered to be less flexible in their ability and willingness to meet market requirements. Prices are key in this aspect, as is a more active marketing style than U.S. producers are used to domestically. Keys for Market Entry The large U.S. market share in Chile?s food processing industry is linked mainly to a product?s uniqueness or special characteristics (i.e. above-average quality with respect to human health, service and delivery capabilities). Low U.S. market share is generally due to the high impact of freight costs on commodity products, the high quality of products offered at much more attractive prices by other regional competitors, or the inability to adapt product and packaging to local standards. Export Success is a Result of a Proactive Attitude and Long Term Commitment: U.S. suppliers are often less aggressive and persistent than European or Asian counterparts. The Chilean market is not large but it is sophisticated, innovative and competitive. It should not be considered as a spot market; instead, it must be systematically developed with strong marketing and promotion campaigns in order to gain and maintain market share. Establish Personal Relationships and Maintain Customer Service: Make an effort to develop strong relationships with distributors and clients so that the U.S. supplier becomes a trusted business partner. Personal visits and having trustful, open communication will help solidify and expand your business opportunities in Chile. In addition, follow-up, provide good support and respond to technical inquiries in order to keep the client satisfied. Try to Match Local Quality, Prices and Margins: U.S. producers must either offer top quality products at a competitive price or compensate with special characteristics, better service, support, warranties, etc. For U.S. suppliers to compete successfully in Chile they must be willing to lower their U.S.-based profitability expectations and work with the lower pricing and profit margins common in the Chilean market. Take Advantage of the Window of Opportunity due to Low Dollar Exchange Rate: The trend in the weak U.S. dollar has made U.S. products more competitive. A strong effort to take market share away from competitors in the Chilean market will be more productive while the dollar is low. The average exchange rate in the past four years is US$ 1 = 533 Chilean Pesos (CHP); in 2011 the U.S. Dollar averaged at 474 CHP. Consider Terms of Payment: European suppliers very commonly grant open accounts and long terms of payment (up to 90 to 120 days). U.S. suppliers should try to move away from letters of credit towards open accounts as soon as the client?s credit worthiness and payment performance are established. This change will lower costs. Taking advantage of U.S. Government-sponsored export financing or risk insurance programs will also strengthen the exporter?s financial and competitive position. Tap into Centralized Purchasing by International Corporations: When dealing with international food processing companies in Chile, any existing relationship with other international divisions or with headquarters of that company should be fully exploited to gain an edge with the Chilean subsidiary. Even without a previous business relationship, approaching headquarters or subsidiaries in the U.S. is a good way to explore the company?s product and technical requirements. Thus, potential business opportunities can be developed within that corporation and with its Chilean subsidiary. Find a Good Distributor: Unless a sales program in Chile can be sustained by direct sales to a few large clients, a local distributor will be a crucial business partner. Chilean clients expect to deal with a local representative for placing orders, voicing complaints and obtaining technical support. The selection of a qualified distributor is important since the reputation of the U.S. supplier will rest on the ability of the distributor to provide reliable ordering, stocking and delivery services to clients. Also, only one distributor with a wide regional distribution network should be selected if possible in order to avoid price wars that minimize profit margins. B. Market Structure Food ingredient distribution patterns are different for local and imported products, and are changing with time. Local inputs are purchased directly from the producer by all but the smallest food processors. Imported ingredients are more commonly handled by local distributors/representatives or wholly owned subsidiaries for the small processors. Large processors prefer to import their products directly to maximize savings and deal with the logistics themselves. If sales volumes are not high, direct imports will generally not be of interest to Chilean buyers because the costs and effort required to get an edible product approved are disproportionately high. In this case, it is more reasonable to have a local representative/distributor handle the import process, health approval, marketing, promotion, selling and stocking. The food processors mainly sell to supermarkets, followed by traditional retailers, and then to institutions (HRI food services). Institutional sales are often handled as a separate business by the processors. Small neighborhood grocery stores have been decreasing in importance as they cannot match the efficiencies and location advantages of market-leading hypermarkets. The supermarket sector is dominated by a few chains. Distribution Channel Diagram Foreign Input Local Input Supplier Supplier Most Very Little ly Chilean Distributor Very Little Mostly Large Food Processor Small Food Processor C. Company Profiles Top 15 Food Industry Companies in Chile Growth 2010 % of R Sales in Sales End Use Production ank Company Product Type US$ from Channels Location Million 2009- 2010 EMBOTELLADORA Non-alcoholic R Chile, etail & 1 AND 1,898 29.3 ntina, INA beverages HR ArgeI Brazil Retail & 2 AGRO s & fish, SUPER Meat 1,800 5.9 e prepared meals HR ChilI Alcoholic & non- C alcoholic ÍA. CERVECERIAS Retail & Chile, 3 UN beverages, 1,790 16.7 IDAS (CCU) HRI Argentina confectionary products Pasta, confectionary EMPRESA products, S Retail & Chile, Peru, 4 CAROZZ chocolates, flour, 1,030 15.1 I HRI Argentina salsas, tomato paste, desserts, fruit pulp Confectionary products, dairy Retail & 5 NESTLÉ CHILE products, baked 856 7 HR Chile I goods, beverages, prepared meals VIÑA CONCHA Y Retail & 6 TORO Wine 799 14.4 HR Chile I COCA-COLA Coca-Cola Retail & Chile, 7 EMBONOR 629 17.5 products HRI Bolivia Dairy products, fruit concentrates, juices & nectars, Retail & 8 WATT?S jams, oil, 624 23.7 HR Chile I condements, pastas, hams & sausages, wines 9 SOPROLE Retail & Dairy products 579 7.7 HR Chile I Sugar, pet food, Retail & 10 EMPRESAS IANSA 501 29.9 ru feed & fodder HR Chile, PeI EMBOTELLADORA C Chile, oca-Cola Retail & 11 COCA-COLA POLAR 486 13.7 (KOPOLAR products HR Argentina, I ) Paraguay Chicken, cold 12 AGRíCOLA Retail & ARIZTíA meat, turkey, 409 4.5 HR Chile I cheese, seafood Retail & 13 COLÚN Dairy products 362 11 HR Chile I VIÑA SAN PEDRO Retail & 14 TARA 283 14.7 PACÁ Wine HR Chile I , fishoil, Retail & 15 CORPESCA Fishmeal 277 13.8 frozen fish HR Chile I Source: America Economia Descriptions of Chilean Processed Food Sectors and of Key Food Processing Companies by Specialization 1. Red Meat and Poultry The poultry industry is the largest meat producer in Chile, producing 43% of total meat production in 2010. Pork accounted for 40% and beef 16%. In 2008 pork overtook beef to become the country?s second preferred meat after chicken. Pork is the fastest growing sector with consumption having increased by 58.87% during the last 10 years, compared to a 33.92% increase in poultry and a 2.95% decrease in beef consumption over the same period. Chile imports most of its beef from Paraguay, but because of the discovery of Foot and Mouth Disease identified in late 2011, shipments have been halted and other suppliers are being sought. This is a great opportunity for U.S. suppliers to gain market share in the Chilean market. Product Bovine Pork Poultry Local Production (2010) 210,700 tons 498,000 tons 536,000 tons Imported (2010) 135,000 tons 12,708 tons 64,320 tons Exported (2010) 6,968 tons 99,925 tons 89,069 tons Source: ODEPA/Index Mundi Producers The market in Chile is very concentrated with five companies producing 75% of meat in the country. The AASA Group is the leader in the beef sector. Agrosuper through its various brands is the dominant producer in the market. Agrosuper?s ?Super Pollo? poultry brand has 53% market share. Agrosuper also leads the pork market through ?Supercerdo? with 65% market share. Agrosuper?s Sopraval is the market leader in turkeys with 64% market share. For a full list of Chilean producers see: http://www.mercantil.com/rc/port_select_companies.asp?acti_code=412&code2=&countrysearch=1&lang=eng For a list of suppliers of food ingredients and machinery see: http://www.mercantil.com/SE/makequeryactivities.asp?keywords=meat&Countrychk=1 Main Importers/Suppliers: Beef Rank Company US$ FOB Volume (Kg) 1 PARIS S.A. $150,696,192 29,361,194 2 COMERCIAL D&S S.A. $114,129,292 22,440,161 3 RENDIC HNOS. S.A. $ 84,095,298 15,729,178 4 MARFRIG CHILE S.A. $ 44,621,820 9,214,982 5 COMERCIAL CERRILLOS S.A. $ 32,225,366 7,186,263 6 SOC.COMERCIALIZAD.DEL SUR LTDA $ 31,742,058 6,313,606 7 GLOBAL PRODUCTS S.A. $ 20,441,928 4,461,685 8 DISTRIBUIDORA KARMAC LTD $ 19,508,952 3,864,020 9 COMERCIALIZADORA INTERANDINA S $ 18,908,180 3,949,172 10 SUPERMERCADO SAN FRANCISCO S.A $ 17,217,522 3,503,721 Source: Chilean Customs Pork Rank Company US$ FOB Volume (Kg) 1 COMERCIAL CERRILLOS S.A. $11,341,035 4,395,455 2 CIAL ALIMENTOS S.A. $ 9,652,224 3,777,734 3 MARFRIG CHILE S.A. $ 6,531,696 2,335,405 4 CECINAS WINTER S.A. $ 1,238,386 439,253 5 GLOBAL PRODUCTS S.A. $ 765,587 269,509 6 TAK S.A. $ 557,856 265,424 7 COEXCA S.A. $ 444,144 192,698 8 GLOBAL TRADE COMPANY S.A. $ 370,011 165,659 9 FRIOSA $ 311,188 120,281 10 SOC.COMERCIALIZAD.DEL SUR LTDA $ 135,211 46,723 Source: Chilean Customs Poultry Rank Company US$ FOB Volume (Kg) 1 COMERCIAL D&S S.A. $11,631,360 6,328,340 2 GLOBAL PRODUCTS S.A. $11,256,968 9,113,695 3 AGROSUPER COM D.ALIM LTDA $ 9,976,525 9,338,856 4 MARFRIG CHILE S.A. $ 6,750,016 3,640,904 5 COMERCIAL CERRILLOS S.A. $ 6,548,966 4,841,214 6 CIAL ALIMENTOS S.A. $ 5,594,200 3,523,890 7 PARIS S.A. $ 5,152,045 3,088,179 8 DISTRIBUIDORA KARMAC LTD $ 2,989,191 1,870,183 9 DISTRIBUIDORA ORIENTE LTD $ 2,346,147 984,840 10 SOC.COMERCIALIZAD.DEL SUR LTDA $ 2,316,405 1,697,840 Source: Chilean Customs 2. Edible Fish and Seafood Products Chile has a highly competitive seafood industry with salmon ranking as the country?s second most important export after copper. With 2,600 miles of coastline and 18,600 miles of canals, archipelagos and fjords, Chile has one of the five richest marine areas in the world. In the salmon industry alone there are 1,200 companies offering goods and services, employing 53,000 people. Chilean seafood is sold as fresh, chilled, frozen, canned, dried, salted and smoked. In comparison to meat consumption, domestic demand for fish is relatively low. In many sectors of the economy Chile is trying to increase the valued added of its products, and this is also the case in the seafood industry. Technology and packaging to prolong the preservation of products in the industry are in demand, possibly creating opportunities for U.S. companies. Main Seafood Producers Rank Company Exports US$ FOB Volume (Kg) 1 CIA.PESQUERA CAMANCHACA S.A. 178,768,171 79,001,582 2 SALMONES MULTIEXPORT S.A 161,674,379 20,512,815 3 CORPESCA S.A. 140,685,036 87,826,296 4 MAINSTREAM CHILE S.A 136,795,633 23,607,436 5 AGUAS CLARAS S.A 124,114,553 18,395,909 6 PESQUERA LOS FIORDOS LTDA 106,336,025 16,420,728 7 TRUSAL S.A. 103,529,833 13,465,195 8 SALMONES ANTARTICA S.A. 102,868,230 13,847,883 9 MARINE HARVEST CHILE S.A. 97,263,127 11,300,117 10 PROD.DEL MAR VENTISQUEROS S.A 90,768,385 12,550,068 Source: Chilean Customs A comprehensive list of companies working in the seafood industry as producers or suppliers of equipment can be found in the following business directories: Manufacturers: http://www.mercantil.com/rc/port_select_activities.asp?area_code=1165&lang=eng&onlyweb Exporters: http://www.mercantil.com/rc/port_select_activities.asp?area_code=1168&lang=eng&onlyweb Commercial Fishing: http://www.mercantil.com/rc/port_select_activities.asp?area_code=1177&lang=eng&onlyweb 3. Dairy Products The Chilean dairy food processing sector is very concentrated. The market has been estimated at approximately US$ 1.5 billion in 2010. Six companies receive 90% of the milk to process it. These six companies are Nestlé (Swiss) and Soprole (New Zealand) of foreign capital, plus the local Colun, Watt?s, Surlat and Mulpulmo operations. The milk producers are the main suppliers, and supermarkets are the main retailers. Quantity of Milk Purchased for Processing (2010) Rank Company Liters 1 SOPROLE 462,734,397 2 COLUN 424,337,413 3 NESTLE 385,545,447 4 WATT'S S.A. 231,266,760 5 LACTEOS MULPULMO 130,967,265 6 SURLAT 111,630,573 7 QUILLAYES 67,192,973 8 DANONE CHILE S.A. 53,698,709 9 ALIMENTOS PTO. VARAS 19,100,709 10 CHILOLAC 9,155,079 11 A. CUINCO 105,843 Source: Odepa 4. Prepared Fruit, Prepared Vegetables, Oilseed Products (Sauces, Oils and Other Frozen, Canned and Dried Products) This subsector has played a large role in the growth of Chile?s exports in the last decade, primarily due to the production increase of fruits and vegetables in their different formats (canned, dehydrated, frozen and juices). This market is dominated by the following exporters: Frozen Fruit Exporters (2010) Rank Company US$ FOB Quantity (Kg) 1 COMERCIAL FRUTICOLA S.A. $35,231,273 13,518,181 2 FRUTICOLA OLMUE S.A. $30,559,200 13,022,439 3 ALIMENTOS Y FRUTOS S.A. $23,442,204 9,703,459 4 SOC. AGROINDUSTRIAL VALLE FRIO $11,781,319 5,919,387 5 SOC.AGRIC.Y FRUTICOLA LEON LTD $11,097,840 5,727,547 Source: Chilean Customs Canned Fruit Exporters (2010) Rank Company US$ FOB Quantity (Kg) 1 AGROFOODS CENT.VALLEY CHILE S. $10,626,097 5,500,606 2 ACONCAGUA FOODS S.A. $ 7,088,083 5,693,861 3 FRUTAS DE CURICO LIMITADA $ 6,577,654 2,205,681 4 CONSERVERA PENTZKE S.A. $ 5,439,516 4,296,423 5 PARMEX S.A. $ 4,590,973 708,975 Source: Chilean Customs Dried Fruit Exporters (2010) Rank Company US$ FOB Quantity (Kg) 1 PRUNESCO S.A. $34,529,692 17,094,931 2 FRUTAS DE EXPORTACION S.A. $19,185,339 9,977,972 3 AGROINDUSTRIAL SURFRUT LTDA. $14,413,735 2,876,226 4 INVERTEC FOODS S.A. $11,235,066 2,340,298 5 AGR.Y COM.SUPERFRUIT LTDA. (E) $10,644,248 5,125,985 Source: Chilean Customs A comprehensive list of companies working in the prepared fruit and vegetable industry can be found in the following business directory: http://www.chilealimentos.com/link.cgi/ProductosEmpresas/empresas/ 5. Confectionery Products The confectionery market in Chile is estimated at US$657 million, which represents 5.2 kilos consumed per capita every year. The main brands are Arcor Dos en Uno, Costa (Carozzi) and Ambrosoli (Carozzi). The prices are among the lowest in Latin America because it is a very competitive market. Between 2001 and 2007, confectionery value sales in Chile increased by 44.5%. Value sales are forecast to further increase by 46.4% by 2013, according to Business Monitor International. Consumption per capita of chocolate is 2.6 kg, one of the highest in Latin America. The chocolate market is dominated by three companies: Arcor Dos en Uno, Carozzi and Nestlé. The high-end chocolate market is dominated by Bozzo, Varsovienne, Damien Mercier, Félix Brunatto, and Dos Castillos. The main channels of distribution for confectionary products and chocolates are the traditional grocery stores (54.1%) and supermarkets (45%). Exporters of Confectionary Products (2010): Rank Company US$ FOB Quantity (Kg) 1 IND.ALIMENTOS DOS EN UNO S.A. $ 4,112,213 1,508,201.00 2 EMPRESAS CAROZZI S.A. $ 3,376,139 1,197,327.00 3 TRANSP.Y EXPORT. OSTALMAR S.A $ 1,034,458 244,446.00 4 ALIMENTOS Y PROD.CONFITRES LTD $ 144,705 68,363.00 5 DISTR.COM.IMP. EXP.BENI LTDA $ 103,817 124,927.00 6 SOC.COMERCIAL FLORES Y VIVAR L $ 85,841 141,108.00 7 PURATOS DE CHILE S.A. $ 56,102 17,754.00 8 NOVAFOODS S.A. $ 51,821 13,166.00 9 SOC. IMP. Y EXP. HALCON LTDA. $ 24,322 58,523.00 10 BIGNO AYALA $ 22,797 9,113.00 Source: Chilean Customs 6. Baked Goods Chile is the top bread consuming country in the Americas with 98 kg consumed per capita annually, followed by Argentina (82.5 kg). Globally, it is second only to Germany with 106 kg per capita. 3% of household income is spent on bread, compared to 1% in developed nations. Currently, the bakery market is comprised of supermarkets, representing 21% market share, and bakeries, of which 98% are small or medium size. Of the 4,500 bakeries in the country, the main ones are Ideal (controlled by the Mexican group Bimbo), followed by Castaño and San Camilo. Cookies and other baked goods are made by a few large companies, especially McKay (Nestlé) with 40% market share and Costa (Carozzi) with 30%. The Chilean cookie market is small compared to bread. 7. Snack Foods (Savory & Sweet Snacks and Nuts) The snacks market in Chile is estimated at around US$800 million including cakes, nuts, crackers, and savory and sweet snacks. The three main players in the industry are Evercrisp (Lay?s, Doritos, Cheetos) with a 70% market share, Marco Polo (15%) and Kryzpo (8%). With a double-digit annual growth since 2003, Chile is one of the biggest snack consumers in the region (1.4 kilos per capita), but is still far behind countries like Mexico, the U.S. or Great Britain. 46% of sales are made through supermarkets, and 53% of sales are made through traditional groceries and convenience stores. 8. Non-Alcoholic Beverages The Chilean soft drinks market generated total revenues of $1.9 billion in 2010, representing a compound annual growth rate (CAGR) of 5% for the period spanning 2006-2010. Carbonates sales proved the most lucrative for the Chilean soft drinks market in 2010, generating total revenues of $1.6 billion, equivalent to 81% of the market's overall value. Following carbonates was mineral water with 10.5% of the market?s value, and then juices and nectars with 8.4%. The performance of the market is forecast to decelerate, with an anticipated CAGR of 4.8% for the five-year period 2010-2015. At this rate, the value of the market will be valued at $2.4 billion by the end of 2015. Consumption of carbonated drinks in Chile is among the highest in Latin America. Coca-Cola (U.S.) is the leading soft drink brand with 52% market share, but growing price consciousness has led to an increasing market share of private lable brand products. In 2009, supermarket brands accounted for nearly 25% of the total market share. Rising health consciousness has helped athletic drinks to become the fastest-growing sub-sector in recent years, more than tripling their sales volumes, from 3.2 million liters in 2006 to 11 million in 2010. Non-alcoholic beverages are the third most consumed food and beverage category by Chileans, after bread and meat. They are distributed through traditional channels (57%), supermarkets (30%) and consumption in food establishments (13%). Company Sales End-Use Production Procurement Channels (Non Alc. Beverages) (US$) Channels Location(s) 2010 Embotelladora Andina $1,898 Retail Chile (4) Direct (Local and Foreign) million Argentina (3) Brazil (4) Coca-Cola Embonor US$629 Retail and Chile (7) Direct (Local and Foreign) million HRI Bolivia (6) Embotelladora Coca- US$486 Retail Chile (3) Direct (Local); Distributors Cola Polar million Argentina (4) (Local); Importers Source: Corporate publications 9. Alcoholic Beverages The Chilean population drinks more than 8.5 hectoliters of alcoholic beverages every year, which represents a per capita consumption of more than 56.3 liters. The market generates US$ 1.7 billion annually, and represents 25% of total drink consumption. The beer subcategory has lately increased its share, to the contrary of wine and pisco. The trend has been to drink lighter alcoholic beverages. This tendency is observed also with the emergence of pre-mixed alcoholic beverages (with fruit juices). Alcoholic Beverage Market (2010) Wine 28% Pisco 6% Beer 64% Other 2% The Chilean beer market is estimated at US$1 billion and the annual consumption per capita is about 35.8 liters, representing a total annual consumption of more than 609.4 million liters. Only 10% of this market is Premium. The beer market is dominated by Compañía Cervecerías Unidas (CCU), which is majority owned by the Luksic Group. CCU claims 85.8% market share through brands like Cristal, Escudo, Kunstmann, Morenita and Royal, and the licenses for Heineken, Budweiser, Corona and Guinness. It is followed by Cervecerías Chile, controlled by Inbev, which represent 12% of the market. Wine production and exports have been growing at a much faster rate than its consumption in the country. Chile is the smallest per-capita consumer of wine of all wine producing countries. Revenue from wine exports hit a record high in 2010 selling US$ 1.5 billion ? more than double its level in 2000. This put Chile as the fifth largest wine-exporter behind France, Italy, Spain and Australia. Viña Concha y Toro is Chile?s largest wine producer and exporter, followed by Viña San Pedro. Top Wine Exporters (2010): Rank Company US$ FOB Quantity (Kg) 1 VINA CONCHA Y TORO S.A $280,154,438 106,616,810 2 VINA SAN PEDRO TARAPACA S.A. $ 94,196,785 36,765,211 3 VINA CONO SUR S.A $ 93,917,366 44,889,280 4 SOC.ANONIMA VINA SANTA RITA $ 55,859,984 13,348,668 5 RR WINE LTDA. $ 44,725,651 56,485,520 6 SOC.EXP. COM. VINA MAIPO LTDA $ 41,549,605 20,042,018 7 VINA SANTA CAROLINA S.A. $ 41,037,128 16,392,316 8 VINA ERRAZURIZ S.A. $ 37,245,256 8,728,662 9 MONTES SA. $ 36,517,138 5,881,450 10 VINA LUIS FELIPE EDWARDS LTDA. $ 35,825,540 14,546,263 Source: Chilean Customs 10. Dry Goods & Condiments (Canned Soup, Dry Mixes, Pasta, Pet Food, Seasonings) The size of the condiment market is estimated at US$25 million. The boom of ethnic food consumption in Chile has helped this market rise intensely. Almost all of the seasonings are imported from different countries worldwide. Chile is the third largest country in per capita pasta consumption with 9 kg per person per year. Production of pasta in Chile reaches 140,000 tons, exporting only 20,000. Carozzi is the most important company in the pasta sector, with more than 60% of market share and close to 100% penetration in Chilean homes. Lucchetti (owned by Corporacion Tresmontes) is the second largest company with 32% of the pasta market. Close to 75% of pasta is sold through supermarkets, the rest through traditional retailers. Company Sales End-Use Production Procurement Channels (Product Types) (US$) Channels Location(s) 2010 Carozzi (pasta, confectionery $1,030 Retail, HRI Chile (10) Direct (Local and brands, sauces, dairy) million and Exports Peru (4) Foreign) Distributors Argentina (2) (Local and Foreign) ICB (pasta, condiments & US$154 Retail and Chile (4) Direct (Local) sauces, coffee & tea, dried million HRI meat, chocolates, chips) Tresmontes (pasta, beverages, $110 Retail, HRI Chile (8) Direct (Local and oil, desserts, sauces, snacks, million and Exports Foreign) soups) Source: Corporate publications Canned soup is not popular in Chile, but powdered and dehydrated soups in envelopes are. Maggi (Nestle) is the traditional leader, but others like Naturezza and Knorr have gained market share through heavy advertising. The pet food market has also been growing. It is a competitive market with little consumer loyalty. In Chile, there are approximately 155,000 tons of pet food consumed annually amounting to US$137 million. The main pet food importers that distribute to supermarkets and retail stores are Effem (Whiskas), Nestlé (Friskies, Purina Dog Chow and Alpo) and Pet Market (Bil Jac, Precept, ANF, Star Pro, Pet Time, Must and Windy Hill). 11. Specialized Food Ingredients (Additives, Preservatives, Thickeners, Sweeteners) Large companies such as Carozzi import most of their ingredients from China because it is cheaper even than buying locally. U.S. products are not very popular because of their high cost. Some important companies in this sector include: Duas Rodas of Brazil (coloring agents), Inducorn (Corn Products Chile), Lefersa, (Chilean yeast company), Puratos Chile (bakery, pastry and confectionery industry supplier) Iansa (sugar) and Cramer. D. Sector Trends Chile received US$ 15.1 billion in foreign direct investment (FDI) in 2010, a 17 percent increase from 2009 The food and beverage industry is the third highest sector targeted by FDI Major international investors present in the food processing industry include Nestlé, Coca-Cola, PepsiCo and the New Zealand Dairy Board Most of the industry is controlled by large Chilean companies that are growing even larger through mergers and growth into neighboring countries Local companies produce for exports in addition to their local sales Free trade agreements with countries like China have stimulated production and incentivized companies to develop new and better products for export Chilean processed food quality standards are mostly world-class and require top quality ingredients The light/diet and healthy food trends are gaining momentum as health and wellness concerns grow in Chile Easily prepared foods and snacks are growing rapidly in popularity as more people eat out-of-home and on the run III. Competition Competition from Mercosur suppliers remains fierce for meat, grains, soybean products and pet food, while domestic and European imports present the greatest challenge for U.S. processed foods. Comparative Chilean Food and Agricultural Product Imports U.S. U.S. % P Total Imports U.S. Imports Imports % Main Competitors (% of roduct 2010 (US$) 2010 (US$) C Market hange market share) Share ?10/?09 Beef $707,802,655 $5,573,821 361.97% Paraguay (61%), Brazil 0.79% (15%), Argentina (13%) Co Argentina (71%), arse G $261,488,786 $8,479,729 -44.17% 3.24% Paraguay (21%), rains U.S. (3%) D U.S. (39%), Argentina airy $43,497,682 $17,044,768 177.39% 39.19% (36%), New Zealand Products (5%) Esse rgentina (35%), ntial Oils $42,013,641 $7,896,320 18.96% 18.79% A U.S.(19%),U.K.(12%) Fish & uador (36%), Thailand $107,648,196 $664,884 -10.47% 0.62% Ec Seafood (16%), Colombia (15%) uador (89%), U.S. Fresh Fruit $64,271,018 $6,826,168 273.72% 10.62% Ec (3%), Peru (3%) China (63%), Fresh V $7,921,179 $201,342 -9.04% 2.54% Peru (25%), Argentina egetables (9%) Fruit & Argentina (38%), Brazil Vegetable $29,174,868 $1,284,167 23.53% 4.40% (36%), Juices South Africa (8%) Brazil (37%), Live Animals $7,309,650 $1,911,803 -46.55% 26.15% U.S. (26%), Canada (16%) Argentina (87%), U.S. Pet Food $67,749,514 $5,039,850 2.05% 7.44% (7%), Brazil (3%) Canada (46%), Pork $37,925,090 $10,022,477 272.3% 26.43% U.S. (26%), Brazil (21%) Argentina (60%), Brazil Poultry $105,825,639 $19,410,261 1700.4% 18.34% (21%), U.S. (18%) Processed Argentina (19%), Fruits & $130,373,663 $14,727,675 47.73% 11.30% Belgium (12%), Vegetables U.S. (11%) Argentina (66%), Rice $63,993,287 $810,636 181.24% 1.27% Vietnam (14%), Uruguay (7%) Argentina (31%), Snack Foods $96,445,795 $8,447,767 29.20% 8.76% Colombia (12%), U.S. (9%) Sugar/ $292,004,040 $2,362,163 23.55% 0.81% Colombia (39%), Sweetener/ Argentina (28%), Beverage Guatemala (26%) Bases Sri Lanka (42%), Tea $48,728,206 $384,150 94.32% 0.79% Argentina (32%), Brazil (8%) U.S. (74%), Wheat $157,110,050 $116,893,353 120.53% 74.40% Canada (22%), Argentina (3%) Argentina (31%), Mexico Wine & Beer $58,710,666 $11,619,076 209.94% 19.79% (31%), U.S. (20%) Source: Chilean Customs IV. Best Product Prospects Products present in the market which have good sales potential- In general, the food ingredients with the strongest market potential for U.S. producers are those that require fairly advanced processing technology and high quality standards. Coloring agents, flavorings and aromas Stabilizers and chemicals Dairy derivatives (i.e. whey, powdered milk, specialty cheese) Durum wheat, wheat gluten, corn starch Animal fat, fish and olive oils, vegetable fats and oils Gluten, glucose and other sugars Spices Pet Food Pork, Turkey and Chicken Products not present in significant quantities which have good sales potential- Products in this category are newly developed and recently introduced products with health certificates being finalized. Also, there are products, like beef, that are being sought because of recent situations from other supplying countries. Beef Ready-to eat meals/prepared plates Processed meat products Cocoa powder Protein concentrates and emulsifier agents Food processing machinery and equipment (i.e. freezing & refrigeration equipment, skinning machines, meat and bone separators, dehydrating equipment, waste recycling systems, vacuum packaging machinery, etc.) Products not present because they face significant barriers- There are very few products in this category. The U.S. and Chile are engaged in technical discussions regarding several of the products below. Salmonid eggs (new site inspection requirements by Chilean government) Honey and honey derived products (American Broth Disease) Fresh pork (self-imposed barrier) Genetically modified (GMO) products without registered events in Chile All poultry except chicken and turkey (i.e. duck) V. Post Contact and Further Information Mailing Address: Office of Agricultural Affairs U.S. Embassy, Santiago 3460 Santiago PL Washington D.C. 20521/3460 Street Address: Office of Agricultural Affairs U.S. Embassy. Santiago Av. Andres Bello 2800 ? Las Condes Santiago, Chile Tel.: (56 2) 330-3704 Fax: (56 2) 330-3203 E-mail: agsantiago@fas.usda.gov Websites: U.S. Department of Agriculture in Santiago Chile: http://www.usdachile.cl Foreign Agricultural Service homepage: http://www.fas.usda.gov
Posted: 16 December 2011

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