Retail Food Sector

An Expert's View about Retail Sales in Venezuela

Posted on: 12 Apr 2012

The retail sector in Venezuela continues to be an important point of sale for U.S. importers.

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: 3/1/2012 GAIN Report Number: VE1159 Venezuela Retail Foods Retail Food Sector Approved By: David W. Cottrell Prepared By: Jonathan Martinez Report Highlights: The retail sector in Venezuela continues to be an important point of sale for U.S. importers. There are 162,054 retail outlets, including supermarkets (chain and independents), mom & pops, and government-owned stores in Venezuela selling food and beverages. Most Venezuelan supermarkets are modern and offer high-quality service to customers. Imports of consumer- oriented products from the United States grew from US$84 to US$127 million between 2006 and 2010. Post: Caracas USA Pavilion at the 16th Annual Americas Food & Beverage Show and Conference Interested in exporting to Venezuela? Don?t forget to come to Miami? If you are reading this report because you are interested in exporting to Venezuela, come to the AMERICAS FOOD & BEVERAGE SHOW MIAMI in September 2012. What: 16th Americas Food & Beverage Show and Conference When: September 24-25, 2012 Where: Miami Beach Convention Center In 2011 there were 388 booths, 365 exhibiting companies, and more than 7,000 attendees. ?For more information on how to become an exhibitor in the American Pavilion, click on this link ?For more information about the show please click on the logo above or this link SECTION I. MARKET SUMMARY Most of the privately owned supermarkets in Venezuela are controlled by descendants of Portuguese immigrants who came to Venezuela in the 1950?s. At that time, the sector was characterized by many disparate, small groups of outlets called ?bodegas? or ?abastos? that did not have sophisticated import mechanisms or customer service. However, the sector has changed significantly since the 1980's, and today most of the supermarkets offer quick, high-quality service to customers. One of the reasons for this change is that the new generation of supermarket owners has attended international trade shows where they learned the latest trends, including technology. Both the public and private sectors are involved in Venezuela?s retail food sector. In 2003, the Government of Venezuela (BRV) created state-owned food production facilities, a distribution system, and supermarkets. Products offered through the government?s network of retail stores are sold at lower prices than traditional supermarkets, creating competition with the private sector hypermarkets, supermarkets and small outlets. Most of the major supermarket and hypermarket chains in Venezuela belong to the National Supermarket Association (ANSA). Exchange Rate Policy Since early 2003, strict control policies govern and limit transactions with foreign exchange. Currency trading is illegal and all transactions must be approved by the government?s Foreign Exchange Administration Commission (CADIVI). Importers must register with CADIVI and apply formally for foreign currency transactions. When approved, the transactions are first liquidated through the Central Bank and finally through commercial banks. Currently, the exchange rate is set at 4.30 Bolivars per one US Dollar. Food Price Controls Since January 2003, the BRV imposed a price control policy on basic food and processed food products. Only the Ministries of Agriculture and Land (MAT); Food (MINAL); and Health and Social Development (MSDS) can recommend changes to the controlled-price list, and include: a) adding or removing products from the list, and b) increasing or decreasing prices of specific food products. Products currently under price control are: rice, oatmeal, corn flour, pasta and bread, beef, chicken and poultry products, sardines and tuna, corn oil, sunflower oil, blended oil, powdered milk, pasteurized milk, milk infant formulas, soy milk, white cheese, margarine, peas, lentils and black beans, refined sugar and brown sugar, tomato sauce, bologna sausage and salt. The list of products under price control and their current prices can change without notice, so exporters should regularly review the situation. A. PUBLIC SECTOR: FOOD RETAIL MERCAL Created in April 2003, MERCAL or "Mercado de Alimentos C.A.", markets food products at low prices. The stores sell government-subsided products to the lower economic classes. Products include powdered milk, precooked corn flour, black beans, rice, vegetable oil, sardines, pasta, sugar, bologna, margarine, deviled ham, eggs, mayonnaise and sauces. MERCAL?s food distribution web has expanded to 15,743 points of sales that includes mostly small stores (see table 1). The government entity, CASA (Corporaction de Abastecimiento y Servicios Agricolas), is in charge of purchasing domestic and imported food and agricultural products. The prices at MERCAL are lower than the controlled-priced products sold by supermarkets (see table 2). During 2003, imported foods represented 70 percent of all products offered at MERCAL stores, with the remaining 30 percent sourced locally. Currently, CASA has stated that they import about 60 percent of its food products, with the remaining products purchased locally. Many of the products sold at MERCAL are under CASA?s private label Table 1. MERCAL: Format and Numbers FORMATS NUMBER OF VENUES MERCAL I Owned by the (154 sq mts and larger) government 210 MERCAL II Owned by the (300 sq mts and larger) government 1,008 SUPERMERCAL Owned by the (440 sq mts and larger) government 35 MERCALITO (small Privately owned mom & pop stores) (franchi ,978 sed 13) MOVILES (trucks selling products to remote Privately owned 94 areas) (franchised 3) DISTR by the IBUTION CENTERS Owned government 118 TOTAL 15,743 Source: Mercal?s web page, 2011 Table 2. MERCAL Prices vs Controlled Prices Product ice Controlled Prices Package / Si ERCAL Prze M (Bolivares)* (Bolivares)* Beef 1 Kilogram 10.56 22.74 Corn Flour 1 kilogram 1.63 4.06 Wheat Flour 1 kilogram 2.86 10.40 Powder Milk 1 kilogram 7.89 24.80 Margarine 500 grams 1.66 14.55 Sugar 1 kilogram 1.72 6.11 Mortadela (bologna) 1 kilogram 5.10 22.51 Pasta 1 kilogram 1.96 4.33 Chicken 1 kilogram 5.03 15.61 Black Beans 1 kilogram 2.83 5.30 Rice 1 kilogram 1.69 5.62 Vegetable Oil 1 liter 4.33 21.10 Lentils 1 kilogram 2.02 4.85 Source: Mercal?s web page, 2011. *US$1 = 4.30 Bolivares State-Owned Enterprises Created in 2004, the Venezuelan Agricultural Corporation (CVA) is a state-holding enterprise, with the following processing subsidiaries: CVA Cereals and Oilseeds; CVA Dairy; CVA Sugar and CVA Inputs. The main objective of the CVA is to supply the state-owned food distribution chain (MERCAL). According to CVA?s regulations published in the official gazette, these industries produce pre-cooked corn flour, pastas, milled rice, powdered milk, refined sugar and various agricultural inputs though the establishment of processing plants, and they also entitled to import and export raw and processed food products. In December 2009, the Corporación de Mercados Socialistas (COMERSO) was created, to coordinate the commercial distribution programs devised by the Bolivarian Government. The Productora y Distribuidora de Alimentos (PDVAL) administers and supplies the COMERSO chain. In January 2010, after several months of negotiations with majority holders the Bolivarian Government announced the expropriation of the supermarket chain, ?Supermercados Exito?, the French group, ?Casino?, and the Colombian ?Almacenes Exito,?. In November 2010, the Government bought 81 percent of the shares of the CATIVEN Supermarket Chain (also owned by the Casino Group). With this acquisition, the Venezuelan government became the owner of 35 stores that were renamed Abastos Bicentenario (formerly Supermercados CADA), six stores of Gran Bicentenario (formerly Hipermercado Exito), eight distribution centers and a trucking fleet. The Bicentenario is controlled by the Socialist Market Corporation (COMERSO). B. PRIVATE SECTOR: FOOD RETAIL There are more than 1,500 privately owned supermarkets (both chain and independents) in Venezuela selling food and beverages. There are an additional 159,657 traditional ?abastos? or ?bodegas? (mom & pops), located on nearly every block in Venezuela?s cities and towns, especially in middle-and low-income neighborhoods. The major chains of supermarkets are modern and offer high-quality service to customers. Among them are: Central Madeirense, Excelsior Gama, Plaza?s, Sigo, Makro, Unicasa, El Patio and Garzon. These chains are located not only in Caracas but some have a presence in major cities throughout of the country. Most of the major supermarket and hypermarket chains in Venezuela belong to the National Supermarket Association (ANSA). Additionally, there are hundreds of independent supermarkets throughout the country that also belong to ANSA. (see Table 3). Pharmacies have also been growing rapidly in the last decade. The store layouts now includes aisles dedicated to food and beverages (similar to Walgreens or CVS). The three major pharmacies are Saas (180 stores), Farmatodo (135) and Locatel (50). These pharmacies also are members of ANSA. Food Imports and Distribution U.S. exporters normally ship their products to distributors that import, stock, and deliver to the retailer?s distribution center or individual stores. Major supermarket chains are all capable of direct purchasing and may deal directly with foreign suppliers; however, even the largest retailers depend heavily on local distributors for imported products. The smaller supermarkets, local chains and independent supermarkets purchase through distributors and specialized importers. The major retailers are developing increasingly sophisticated distribution systems. However in the case of frozen foods and perishables, retail stores still depend heavily on local distributors. In general, the Venezuelan cold chain infrastructure for frozen and refrigerated products needs significant upgrades to improve the quality and capacity. Trends A major expansion of convenience stores is anticipated as gas stations begin to add them to their facilities. But it should be noted that bakeries have traditionally served as convenience stores for Venezuelan consumers. Bakeries continue to be the outlets closest to home, where consumers can buy a range of products for everyday use such as bread, milk and dairy products, coffee, newspapers, soft drinks, and snacks, as well as processed meats. Most of them also make sandwiches and other simple foods, and they sell cakes and other gift products. Venezuelans are not accustomed to shopping at gas stations, except when driving along an inter-city highway. Though consumers from all socioeconomic levels shop at the major private retailers, clients tend to be from the middle and upper-income groups. Lower economic classes are more likely to frequent the government-owned stores because of the lower prices. However, in the last couple of years, the lowest economic classes are shopping in the privately owned supermarkets as their purchasing power has increased. Store hours are getting longer, more on Sundays and holidays. But most stores provide uninterrupted service from 8:00 a.m. to 9:00 p.m. and in some cases until 10:00 pm. The 24-hour-format is not common in most parts of Venezuela for security reasons. Some major supermarket chains and pharmacies have some stores open 24 hours. Hypermarkets, major supermarkets, and some independent supermarkets have created their own store brands which have been well accepted by consumers. They are considering expanding the range of products. Supermarkets and department stores continue to carry the largest selection of U.S. products. Marketing, through TV commercials, radio, and newspaper inserts is common. Supermarkets and hypermarkets like Plaza?s, Makro, Unicasa, Excelsior Gama and Central Madeirense have been more successful by placing their catalogs in newspapers as weekend- issue inserts. Increasing application of information-recording and processing technology, including price readers, scanners, bar codes, affiliation cards to detect individual consumption habits, etc. Trends in Services Offered By Retailers Major supermarket chains are preparing and selling meals for consumption at the store or carry-out (Home Meal Solutions - HMS), as a way of attracting customers. Makro, among other hypermarkets, are beginning to add fast food services within the store. In some cases these services are international franchises. Most supermarkets chains are devoting more space and assigning modern equipment to frozen foods. Specific shelves are increasingly being devoted to the foods targeted toward ethnic and religious communities. Though organic products are not common due to the high prices, there are a few organic stores opening in the major cites of the country. Table 3. Private Retail Outlets in Venezuela (Self Service) TYPE OF STORE NUMBER OF STORES Supermarkets (Independent) 1,250 Supermarkets (Chain) 250 Pharmacies 650 Liquor stores 205 Hypermarket Cash & Carry 42 Traditional (not self service) including ?Abastos? (Mom & pops) 159,657 Total 162,054 Source: National Supermarkets Association (ANSA), 2011 figures. Table 4. Major Retailers in Venezuela RETAILER NAME OUTLET TYPE NUMBER OF STORES CENTRAL MADEIRENSE SUPERMARKET 45 BICENTENARIO (Public) SUPERMARKET 35 DIA A DIA Practimercados SUPERMARKET 32 UNICASA SUPERMARKET 26 EXCELSIOR GAMA SUPERMARKET 21 CENTRO 99 SUPERMARKET 14 SAN DIEGO SUPERMARKET 12 PLAZA?S SUPERMARKET 11 VIVERES DE CANDIDO SUPERMARKET 8 FLOR C.A. SUPERMARKET 7 SUPREMO SUPERMARKET 7 UNIMARKET SUPERMARKET 5 LUVEBRAS SUPERMARKET 5 EL PATIO SUPERMARKET 5 DON SANCHO SUPERMARKET 4 FRONTERA SUPERMARKET 4 SUPER ENNE SUPERMARKET 4 LUZ SUPERMARKET 3 SAN TOME SUPERMARKET 3 SAGRADA FAMILIA SUPERMARKET 3 MERCATRADONA SUPERMARKET 3 SU CASA SUPERMARKET 3 SIGO SUPERMARKET 3 FRANCIS SUPERMARKET 2 LICARCH SUPERMARKET 2 LOS CAMPITOS SUPERMARKET 2 REY DAVID SUPERMARKET 4 EL DIAMANTE SUPERMARKET 2 LA PAZ SUPERMARKET 2 *Supermarkets with only one store are not included. RETAILER NAME OUTLET TYPE NUMBER OF STORES MAKRO HYPERMARKET 35 BICENTENARIO (Public) HYPERMARKET 6 EXCELSIOR GAMA HYPERMARKET 2 CENTRAL MADEIRENSE HYPERMARKET 3 EL NUEVO MERCADO HYPERMARKET 1 EUROMERCADO HYPERMARKET 1 SAN DIEGO HYPERMARKET 3 GARZON HYPERMARKET 3 JUMBO MARACAY HYPERMARKET 1 TELEMUNDO HYPERMARKET 1 KROMI MARKET HYPERMARKET 1 LA FRANCO ITALIANA HYPERMARKET 1 LHAU HYPERMARKET 2 MERKAPARK HYPERMARKET 1 PLAN SUAREZ HYPERMARKET 3 RATTAN MARGARITA HYPERMARKET 3 SANTO TOME HYPERMARKET 1 SUPER LIDER CAGUA HYPERMARKET 1 VIVERES DE CANDIDO HYPERMARKET 2 *Supermarkets with only one store are not included Table 5. Advantages / Challenges for U.S. Exporters targeting Venezuela?s Retail Sector Advantages Challenges Venezuelan consumers consider U.S. Government-imposed foreign products to be high-quality. exchange control and price controls. Many Venezuelan make frequent trips to the U.S. and are influenced by its culture. Imported products are expensive for most consumers, who are Retail stores are modernizing and adding very price-sensitive. more freezer space to accommodate frozen foods. Venezuelan infrastructure for handling frozen and refrigerated There is a proliferation of malls and products still needs improvement. accompanying expansion in the retail establishments selling U.S. products. Mercosur countries have trade agreements with Venezuela Local retailers see U.S. suppliers as a giving them preferential duties reliable source in terms of volume, for some products. standards and quality. It may be difficult to obtain import permits and food Two thirds of the population are below 30 yea registration numbers for some rs of age heavily influenced by U.S. cul products. ture through media, and are open to ready-to-cook and ready-to-eat imported food products. High inflation rate. Per capita income is rising. SECTION II. ROAD MAP FOR MARKET ENTRY A. Entry Strategy U.S. exporters can approach Venezuelan buyers through a large importer, wholesaler/distributor, or through a specialized importer. Regardless of the strategy, most U.S. exporters need a local partner to educate and update them about product registration procedures, business practices, and market consumer trends and development. Wholesalers/distributors and importers play an important role for Venezuela?s supermarket retailers. Although some supermarkets have tried to import through consolidators, the bulk of supplies come from local agents or importers. Large supermarket retailers are more likely to import directly from U.S. suppliers. Local importers are a must when selling U.S. food exports to Venezuela?s convenience stores or traditional retail outlets; since they know how the retail market works. SECTION III. COMPETITION Local producers are the main suppliers of consumer-ready products. Venezuela has a relatively strong food processing industry and leading Venezuelan brands have excellent distribution networks, are well-positioned in the market, and enjoy high brand awareness with consumers. Some of these companies include Empresas Polar (rice, corn flour, beverages, beer, pasta, mayonnaise, vegetable oils, ice cream among others), Alfonzo Rivas & CIA (cereals, condiments, and canned foods), Pastas Capri, Pastas Sindoni, Monaca and Mocasa. There are many other companies distributing sauces, dairy products, confectionery, snacks, processed fruits and grains. There are also several multinational producers/importers in Venezuela, including: Alimentos Heinz, General Mills, Kellogg's, Kraft Foods, Procter & Gamble, Frito Lay-Pepsico, Nestle, Bimbo, Cargill. Competition among importers depends on the category. Processed-food products are imported mainly from South American countries, primarily Colombia, Chile, Brazil, and Argentina. Nonetheless, imports of consumer-oriented products from the United States grew from US$84 to US$127 million between 2006 and 2010. SECTION IV. BEST PRODUCT PROSPECTS Table 6. The best products prospects in the Venezuelan retail market are as follows: Top 10 Venezuelan Agricultural High-Value Product Imports from the United States (Millions of U.S. Dollars) Product Description 2010 Rice 127.88 Vegetable Oils (Excluding Soybean Oil) 24.26 Snack Foods (Excluding nuts) 15.45 Non-Fat Dry Milk 12.22 Fresh Grapes 9.04 Tree Nuts 7.67 Instant Tea 7.32 Tomato Paste 4.18 Pet Foods 2.71 Fresh Apples 2.43 Besides those products mentioned above; other consumer-oriented products that have potential opportunities in this market are: breakfast cereals, processed fruits and vegetables, dairy products, chocolate, crab meat and squid. SECTION V. POST CONTACT AND FURTHER INFORMATION Office of Agricultural Affairs USDA/FAS United States Embassy Calle F con Calle Suapure, Colinas de Valle Arriba Caracas 1061, Venezuela Phones: (58-212) 907-8333 Fax: (58-212) 907-8542 E-mail: websites: (Caracas) Asociacion de Supermercados y Autoservicios (ANSA) (National Supermarkets Association) Ave. Principal de los Ruices Centro Empresarial Los Ruices Piso 1, Ofic. 116 Caracas 1071, Venezuela Tel: 58-212-234-4490/235-7558 Fax: 58-212-238-0308 Mercado de Alimentos MERCAL C.A. (Government Network) Av. Fuerzas Armadas, Esquina Socarras Edif. Torres Seguros Orinoco Tlf.: (58-212) 564-3856 Caracas. Camara Venezolana de la Industria de Alimentos (CAVIDEA) (Food Chamber) Av. Principal de Los Ruices Centro Empresarial Piso 5, Of. 510 (58-212) 237-6183 / 239.0918 Los Ruices Caracas. Ministerio de Agricultura y Tierras (equivalent to the Department of Agriculture) Av. Urdaneta, Edificio MAT (Antiguo Edif. Fondo Comun) Esq. Platanal a Candilito Plaza La Candelaria, Caracas Tel: (58-212) 509-0188 Fax: (58-212) 574-2432 Ministerio de La Salud y Desarrollo Social (MSDS) División Higiene de Alimentos (equivalent to the FDA) Edificio Sur, Piso 3, Ofic. 313 Centro Simón Bolívar, Caracas Tel: (58-212) 483-1533/484-3066 Fax: (58-212) 483-1533 Instituto Nacional de Salud Agrícola Integral-INSAI (equivalent to APHIS) Av. Francisco Solano López cruce con calle Pascual Navarro Edificio Torre Banvenez, pisos12, 13 y 14 Sabana Grande - Caracas Tel: (58-212) 705-3416 Ministerio de Alimentación (MINAL) Av. Andrés Bello, Edificio Las Fundaciones Caracas Tel: 58-212-564-8303 Comisión de Administración de Divisas (CADIVI) (Exchange Control Administration Commission) (58-212) 606-3499 / 3995 / 3904 / 3939 Fondonorma (COVENIN -Venezuelan Standards Agency) Director de Seguimineto y Control Servicio Autónomo Dirección de Normalización y Certificación de Calidad Avenida Andrés Bello, Edificio Torre Fondo Común, piso 11 Caracas. Tel: 58-212-575-4111 Fax: 58-212-574-1312/576-3701 Instituto Nacional de Estadisticas (INE) (National Statistics Institute) Avenida Boyacá, Edificio Fundación La Salle, Maripérez Caracas, Venezuela Tel: 58-212-781-1380 Telefax: 58-212-781-5412 782-1156 Camara Venezolano-Americana de Comercio e Industria (VENAMCHAM) (Venezuelan-American Chamber of Commerce) 2da.Av. de Campo Alegre, Torre Credival, Piso 10, Ofic.A, Caracas 1060, Venezuela Apartado Postal 5181 (Caracas 1010-A) Tel.: 58-212-263-0833/267-20-76/64-81 Fax: 58-212-263-20-60 Federacion Venezolana de Camaras y Asociaciones de Comercio y Produccion (FEDECAMARAS) (Venezuelan Federation of Chambers and Associations) Edf. Fedecameras, PH 1 y 2, Av. El Empalme, Urb. El Bosque, Caracas 1050,Venezuela Apartado de Correos 2568 (Caracas 1010-A) Tel.: 58-212-731-17-11/17-13/18-45/19-32/19-67 Fax: 58-212- 730-2097 ? 731-1907 Camara Venezolana de Franquicias (PROFRANQUICIA) Franchising 3ra. Transversal de Altamira con Avdas. Luis Roche y Juan Bosco, Oficentro Neur, Ofc. 4 Caracas, Venezuela Tlf. 58-212-266-8494/261-8613 Fax 58-212-261-9620
Posted: 12 April 2012