Market and Trade Data
Renewed Opportunities and Challenges for U.S. Suppliers
By Alicia de
also. . .
Colombia remains the second-largest market for U.S.
agricultural products in Latin America, trailing only
Colombia, long an important customer for U.S.
agricultural suppliers, now offers renewed
opportunities, due largely to its expanding and
developing economy and increasingly open market. In
fiscal 2006, Colombia purchased a record $799.75 million
in U.S. agricultural, fish, and forest products, up 37.5
percent from the previous year. Although bulk products,
mainly grains, accounted for most of the total,
intermediate and consumer-oriented product sales have
climbed sharply in recent years.
market is highly competitive and will become much more
open in the near future. Colombia and the United States
concluded negotiations of a bilateral FTA (free trade
agreement) in February 2006, and it was notified to the
U.S. Congress last August. FTA implementation, expected
in the second half of 2007 or early 2008, will provide a
major boost to the Colombian economy and imports of U.S.
Colombian gross domestic product grew 5.2 percent in
2005, surpassing the expected 4.5 percent. The increase
was due to the country’s excellent investment
performance, boosted by the expectations of the FTA and
improved physical security. The economy is expected to
have grown more than 5 percent in 2006.
Nevertheless, several factors still exert a negative
impact on the market. As a member of the Andean
Community, Colombia imposes a variable import duty
system on more than 150 products, resulting in high and
unpredictable duties. Colombia currently has relatively
high duties (generally around 20 percent) for processed
food products imported for the HRI (hotel, restaurant,
and institutional) sector and strict registration
requirements that cost an average of $800 per product.
Restrictive import licensing requirements block imports
of some U.S. products. Despite efforts of the Colombian
government, artificially low-priced contraband items
induce unfair competition and disrupt sales of legally
conflict and political unrest persist, threatening
personal security and hindering economic growth. Despite
significantly improved physical security, it remains a
concern, constraining business and investment.
Unemployment fell from 15.3 percent in 2004 to 13.4
percent in 2005, but is still significant.
Trends – and Some Surprises – Are Reshaping the Consumer
Colombia is a growing market of 42 million people. Its
medium- to high-income groups, about 50 percent of the
population, constitute an attractive market for U.S.
products; the medium-income group in particular is
driving demand for value-added products.
more significant factors reshaping the market:
in the labor force (40.3%) will continue to
stimulate demand for consumer-ready products.
75% of the population
is concentrated in 39 large and medium-sized cities,
all with modern supermarkets.
57.2% of the population
is less than 30 years old. Lifestyles are changing
represent nearly 24 percent of food spending.
are interested in foreign cuisine and eat out three
or more times per month.
Colombia’s middle class
represents 36.2 % of its total population.
in consumer tastes and consumption patterns and the rise
in women in the labor force have demanded new market
strategies. The remarkably young population, living
mostly in urban areas, has new tastes and preferences
and is more health-conscious and selective. Demand for
new high-value products is increasing.
Climate and Practices
Colombia has a highly sophisticated and developed
private sector. Colombian business people have good
knowledge of business practices abroad. Many of them
have been educated abroad, especially in the United
States. They share similar business practice and ethics
with U.S. entrepreneurs. Colombians tend to be friendly
and straightforward in doing business. Consequently,
despite Colombia’s political and social problems,
knowledgeable U.S. companies have been doing business
successfully here for years.
visas are valid for up to three years, can be renewed,
and can be used for multiple entries into Colombia for
stays of up to six months per visit. Although business
travelers may enter Colombia on tourist visas, business
people traveling on tourist visas should not sign
contracts, because they may be considered invalid and/or
food market, competition has intensified, and supply
channels have been streamlined. There are now a few
large players with strong purchasing and negotiating
power. Large numbers of end-users (retailers) buy
directly from suppliers and/or manufacturers abroad,
avoiding local representatives. Colombian businesses are
establishing direct contacts abroad to find new products
As a general rule, it is advisable for a U.S. supplier
to appoint a local agent or sales representative to help
with import procedures, sales promotions, and
after-sales service, despite the fact that Colombians
prefer to deal directly with manufacturers or through
their export divisions, rather than through outside
representatives or brokers. Most U.S. purchases are made
through established local importers, representatives,
and distributors. Importers offer a full line of
products to meet the domestic demand and expand market
some other suggestions on approaching this market:
Calculate your level of competitiveness based on
quality, price, and service to meet increasing
Consider innovative marketing strategies when
introducing products. Social marketing is a new and
increasingly popular approach. Leading retail chains
are deeply involved in social programs with
customers’ direct participation and alliances with
nongovernment organizations. For example, Carulla
customers are encouraged to donate small change for
housing and education.
Provide a guarantee of consistent product supplies
to large stores and hotel chains.
Tailor marketing strategies to meet the market’s
Take advantage of domestic food fairs and exhibits,
such as Alimentec, a trade show for food products
and ingredients held in Bogota every other year.
Be aware that hypermarkets and supermarkets base
shelf-space acceptance and allocations on
discounts, promotions, and/or additional costs.
Establish direct relations with leading companies
to develop a low-cost, direct sales approach and to
offer products and services.
Cultivate relationships with top executives,
i.e., marketing directors and purchasing managers.
Provide after-sales service and customer support,
which are decisive factors in securing subsequent
Keep in mind that category managers are key people.
They can offer services that are vital for the
successful development of a category. For example:
the category manager can determine the company that
gets priority benefits in the product category. The
manager can provide information that is vital to the
supplier, such presentation, exhibition, adequate
promotion of the products, etc.
material in Spanish to highlight products and
services available. Media have a great impact on
restaurant, and institutional) sector sales of food and
beverages were estimated at $1.8 billion in 2005 and are
expected to have grown 6 percent in 2006. The rising
value of the Colombian peso relative to the U.S. dollar
and strong competition in the restaurant sector have
made U.S. food products more attractive to purchasers.
Negotiation of the FTA has also increased interest in
U.S. food products.
hotels and restaurants in Colombia buy food products
from importers and retailers specializing in food
service. Fruits and vegetables are mostly bought from
wholesalers. Dairy products are bought directly from
Colombian plants and distributors.
restaurants — Italian, French, Mexican, Cajun, Japanese,
Chinese — buy essential ingredients from specialized
importers. Restaurants that import directly are local
ones, like Crepes and Waffles, and upscale outlets.
International food chain franchises such as McDonald’s
and T.G.I. Friday’s also import directly.
service sector has benefited from the arrival of
world-class hypermarkets, such as Makro and Carrefour,
which are oriented toward serving it. Domestic chains
such as Alkosto, Carulla, and Exito have also developed
strategies to serve the sector.
with its increasing number of hypermarkets, Colombia has
a decreasing number of HRI sector importer/distributors.
Foreign processed food brokers, the major HRI suppliers,
face strong competition from domestic producers of
processed foods and beverages.
Quick-service and fast-food restaurants, especially
franchises, are expanding rapidly. Most fast-food
restaurants are U.S. franchises, but several domestic
fast-food restaurants use U.S. techniques and marketing
hotel and restaurant sector has potential for growth
driven by tourism, though it continues to be affected by
persistent internal conflict. The government campaign
"live Colombia and travel in it" has fostered domestic
tourism throughout the country.
Marta is the only destination with large hotels catering
exclusively to tourism. Foreign tourism is still
relatively small and generally concentrated in the
historic colonial walled city in Cartagena.
International business travel is generally confined to
Bogota, Medellin, Cali, Cartagena, and Barranquilla.
Processing on the Cutting Edge
Colombia is a major producer in many intermediate and
consumer-ready categories such as sauces, spices, dairy
products, breakfast cereals, confectionery, baked goods,
poultry feed, pet food, oils, and margarine.
and international competition has influenced Colombia’s
food processing industry, which is characterized by its
initiative, efforts to maintain state-of-the-art
technology, and innovation in products and retail
presentation. The most developed subsectors are those
that process dairy, sugar, poultry, edible oils and
greases, cacao, chocolate, confectionery, and
lines have diversified and new products have entered the
market: the dairy industry with lactose-free products,
the meat industry with lowfat products, the baked goods
industry with high-fiber and whole-wheat products, and
the oil and fats industry with low-cholesterol oils.
Nevertheless, import opportunities exist in Colombia’s
food processing sector. Its industry relies heavily on
imported inputs, such as thickeners, preservatives,
modifiers, flavorings, dry mixes for sauces, and spices.
Changing Retail Sector
The Colombian retail sector can be divided into three
areas; 1.) formal, which includes hypermarkets and
supermarkets; 2,) traditional, which includes small
mom-n-pop stores and street vendors; and 3.) convenience
stores. Each of these areas caterers to a different
Colombian consumer based on levels of disposable income,
tastes and preferences.
Hypermarkets are steadily reshaping the retail sector as
well as the HRI sector in Colombia. International retail
giants Carrefour, Makro and Casino (Exito and Carrulla
stores), as well as the sustained strength of domestic
players such as Alkosto, Olimpica, Colsubsisio, and
Cafam, make up the formal retail food sector in
Colombia. The supermarket sector in Colombia is one of
the most modern in Latin America, with sales estimated
at $4 billion in 2005. Fierce competition and a price
war has characterized Colombia’s retail sector since
2004, shrinking profits, but benefiting consumers. The
sector is consolidating as a result of a massive
structural change due to mergers and alliances that have
been taking place during the last five years. For
example, Almacenes Exito, the largest supermarket chain
in Colombia, purchased 19.8% of Carulla-Vivero, a
higher-end supermarket to expand its customer base. In
January 2006, the French food retailer Casino, which
held 38.7% of Almacenes Exito’s shares at that time,
purchased an additional 24%, becoming the controlling
share holder with 62.7% of total Exito’s shares.
Traditional stores continue to be the most important
food distribution channel in the country. These small
stores provide 60% of Colombia’s food needs (down from
67% in 2005), serving low and lower-middle income
families. The reason traditional stores remain important
is they provide services that neither hypermarkets nor
supermarkets can provide. These services include credit,
customized food products, and convenience. These stores
are located throughout all neighborhoods and domestic
wholesalers and distributors work closely with them to
adjust product inventory to meet consumer demands.
Convenience stores are a sales venue fairly new to
Colombia, and while they account for a small percentage
of food consumption, they are expanding in the form of
gas-marts. These stores complement local traditional
stores as they serve a specific community, provide a
custom selection of products and are opened for extended
hours. Gas-marts are also collocating with fast food
restaurants to ensure continued growth. Imports
represent less than 6 % of the store’s inventory, but
there are growing opportunities for exports of snack
foods, cereals, beverages and candy.
Colombian importers of ready-to-eat food products are
constantly seeking product alternatives to meet the
growing demands of Colombian consumers. The changing
retail market structure for food in Colombia has forced
distributors and suppliers to become more active in
importing food products. Supply channels have been
rapidly streamlined, and end-users such retailers, are
establishing contacts abroad. Continued economic growth
resulting in higher per-capita incomes and reduced
import tariffs will mean significant export
opportunities for U.S. exporters willing to enter the
de Jacobs is an agricultural marketing specialist in the
FAS Office of Agricultural Affairs in Bogota, Colombia.