The Colombian Processed Food and Beverage Equipment market caters to an industry that produces approximately US$ 26 billion in revenue per year. In order to evaluate the potential of this sector as a market to supply imported machinery, processing equipment, and a variety of food and beverage-packaging lines, the following is a breakdown of the Food and Beverage market into subsectors. This distinction will not only provide clarity towards which product categories are clearly more attractive than others, but also allow foreign investors to study their portfolio of products based on the sub-industries that they supply.
In 2010 the Food Industry grew as a whole (+ 6.31% from „09) while the beverage industry decreased in sales (- 9.63%), driven in part by an unprecedented tax increase imposed on the beer market, to cover the cost of an emergency relief program. Within these industries, the Dairy, Animal Food and Carbonated Soft Drinks & Juices were the 3 market highlighted as the most attractive in terms of supply machinery and equipment.
To put into perspective of the importance of the Food and Beverage import market, this industry accounts for 5.4% of all the Colombian imports. Meaning, if Colombia imported approximately US$ 40 billion in 2010, US$ 2.16 billion is the amount of imported goods that came into the country to supply the food and beverage companies. As part of this Latin America tariff benefit, Brazil has appeared as an ambitious player in this field, and with the help of the Brazilian government, they have become a new key supplier in this market. Although the European Union and several Mercosur countries now have a preferential treatment over the US in terms of imports into Colombia, the recently approved FTA between Colombia and the United states will certainly change the dynamics of this competitive landscape.
Market Data and Demand
To fully understand the trends and movements in demand that the Food and Beverage processing industries are facing, it is necessary to conceptualize the key characteristics that define each category.
The Food Product Industry in Colombia tends to be broken down in sub-sectors, which allow analysts and investors alike to avoid making generalizations of a US $18 billion industry, and make specific reads on different food product categories. This categorization will allow the investor community to understand the dimension and the competitiveness of each market. Within the Food Product market, Dairy and Animal Foods are the 2 largest sectors in Colombia. These 2 sectors combine for approximately 33% of total industry sales.
The Colombian sugar mills sold approximately 2.1 million tons of sugar in 2010, of which 1.4 million was sold for domestic use. Production in 2010 registered a 38.5% decrease from 2009 figures, as production was negatively impacted by the strong rainy season that hit Colombia in 2010. Colombia is expecting a production of 2.3 million tons of sugar in 2011, as internal consumption increases. In terms of market demands, there has been an increase in health conscious consumers, which have led many sugar mill company‟s to launch healthier sugar alternatives.
It is important to highlight that for more than the last five years, the sugar mills in Colombia have been diversifying their portfolio and investing in the commercialization of Ethanol via sugar cane transformation. The Ethanol production from the sugar mills reached 287 million liters in 2010.
The Colombian Rice Mill sector is the 3rd largest in America, after Brazil and United States.
This sector was also negatively affected by the rainy season in 2010, as the rain flooded many farms. This industry/sector has over 40 companies producing rice, and among the main problems that affect this industry is the price instability that goes up and down between semesters.
The Colombian Cereal Mill sector is probably the Food sector that most depends on imports in the form of raw material for processing finished goods. Colombia currently doesn‟t produce enough wheat to cover its cereal output, which forces the industry to import 99% of its wheat consumption. (Wheat is the main ingredient in the elaboration of cereal products).The main difficulty that this sector faced in 2010, was the rise in prices, which in part was driven by the rise in petroleum cost.