Required Report - public distribution

**Date:** 2/6/2006

**GAIN Report Number:** CI6003

CI6000

**Chile**

**Food Processing Ingredients Sector**

**Annual Report**

**2006**

**Approved by:**

![](media/image1.wmf)Christine M. Sloop, Agricultural Attache

Office of Agricultural Affairs

**Prepared by:**

Office of Agricultural Affairs, U.S. Embassy, Santiago

-   **Report Highlights:** A key market driver for food processing is
    Chile's strong economy, which has rebounded since the end of 2003.
    Supermarket sales are growing 7% steadily per year since 2004, when
    sales were US\$5.6 billion, and are expected to grow another 7% in
    2006.

Consumption trends influencing the type and quality of inputs being used
include easy-to-prepare food, new fast foods and snack foods, diet and
light foods continue capturing market share. Organic foods are being
adopted at a much slower rate but there increasing presence in the
market is also marking a trend. The recent slow economic period drove
price sensitivity to an all-time high among food processors.

The market continues to consolidate through mergers, leaving a wide gap
in size and capacity between the leading food producers and the universe
of small ones

Includes PSD Changes: No

Includes Trade Matrix: No

Annual Report

Santiago \[CI1\]

\[CI\]

Table of Contents

[Section I. Market Summary 3](#section-i.-market-summary)

[Country Overview 3](#country-overview)

[Size of Chilean Food Processing Industry
3](#size-of-chilean-food-processing-industry)

[Macro-Economic Factors and Key Demand Drivers in Food Processing Sector
4](#macro-economic-factors-and-key-demand-drivers-in-food-processing-sector)

[Advantages and Challenges facing U.S. Food Ingredient in Chile
4](#advantages-and-challenges-facing-u.s.-food-ingredient-in-chile)

[Section II. Road Map for Market Entry
5](#section-ii.-road-map-for-market-entry)

[A. Entry Strategy 5](#a.-entry-strategy)

[B. Market Structure 7](#b.-market-structure)

[C. Company Profiles 8](#c.-company-profiles)

[D. Sector Trends 21](#d.-sector-trends)

[Section III. Competition 22](#section-iii.-competition)

[Section IV. Best Product Prospects
23](#section-iv.-best-product-prospects)

[Section V. Post Contact and Further Information
26](#section-v.-post-contact-and-further-information)

# Section I. Market Summary

## Country Overview

Chile, with a population of 15.9 million, is a very centralized country
with an estimated 5.5 million living in and around the greater Santiago
area. The capital city of Santiago hosts most of the industrial activity
and business activities in general. In 2005, Chile's GDP (purchasing
power parity) reached US\$112 billion and per-capita GDP of nearly
US\$6,800 (depending on exchange rate). GDP growth reached approximately
6.3% benefit from high copper prices, solid export earnings
(particularly forestry, fishing, and mining), and stepped-up foreign
direct investment. Santiago, the capital city, is home to some 40
percent of the population and the great majority of the HRI sector
companies that would purchase imported food products.

Chileans spend on average around 20% of their household income on food,
drinks and tobacco. In per capita terms, Chile is the second biggest
consumer of bread in the world (98 kilos per year) after Germany, the
3^rd^ consumer of tea (800 grs), and an important consumer of pastas,
rice, seafood, carbonated beverages and beer. Supermarkets are the
leading retail channel for food products.

Chile has a longstanding commitment to trade liberalization and has
signed free trade agreements with the European Union, Mexico, Canada,
Korea, EFTA, Central America, Mercosur, Singapore/New Zealand, Ecuador,
the U.S. and is negotiating agreements with Japan, China, India,
Malaysia, Thailand, Peru and Bolivia. The U.S.-Chile Free Trade
Agreement was signed on June 6, 2003 and took effect on 1 January 2004.
The U.S.-Chile Free Trade Agreement reduces the previous 6%
across-the-board tariff to 0% for 87% of non-agricultural products
immediately, and for three quarters of agricultural products within 4
years, the rest over 12 years. U.S. and Chile Tariff Schedules for all
Harmonized Tariff System customs codes can be found at
[www.ustr.gov/new/fta/Chile/text/](http://www.ustr.gov/new/fta/Chile/text/),
"Section 3. National Treatment and Market Access for Goods".

According to Chilealimentos, (Food Companies Association) over the last
decade the Chilean food sector experienced the most pronounced annual
growth in the world: 132%. Food sector exports are the second largest
Chilean export sector reaching US\$8.2 billion in 2005, comprising 10%
of GDP, second after mining.

[]{.mark}

In 2005, the leading imported food products were: rice, canned tuna,
whisky, chocolates, candy, cereals, potatoes prepared or canned, rum,
beer, pasta, cheese and cookies. The origin is mostly from Latin America
(52%), with half of this from Argentina (26%). Other supplier countries
were: Thailand (21%, rice), and England (10% whisky).

The main Chilean processed food industries are those related to dairy
products, processed or canned seafood, crackers/cookies, candy,
chocolates, canned peaches, jams, tomato sauces, pasta and juices.

## Size of 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
    US\$810 million in 2005. Certain sub sectors continue to see strong
    growth as more people join the work force and eat out-of-home, as
    domestic help salaries rise and their availability drops. Especially
    promising products are convenience and fast foods, out-of-home foods
    (snacks, etc., which are surprisingly consumed more by lower-income
    households and young consumers than others), and health and light
    foods.

-   The number of Chilean food processing companies has shrunk through
    mergers and acquisitions during the last couple of years. Currently,
    53 companies dominate the market.

-   The "gourmet food" sector includes spices and sauces; cheese and
    dairy products; red meat, poultry and seafood products; prepared
    foods and soups; pastas, grains and legumes; bakery; crackers and
    snacks; desserts, confectionery and drinks. The sub sectors with the
    largest market share are: spices (11.1%); tea (5%); cheese (5%);
    coffee (5%), and snacks (4.7%).

## Macro-Economic Factors and Key Demand Drivers in Food Processing Sector

-   Artesian production of bakery products still dominates Chile's
    packaged food market, with 80% of total bakery sales concentrated in
    traditional bakeries. Of this 80%, approximately 43% is sold through
    bakery distribution companies and 37% in stores. The other 20% is
    sold at supermarket chains.

-   The market continues to consolidate through mergers, leaving a wide
    gap in size and capacity between the leading food producers and the
    universe of small ones; consumers and the small producers have
    little power and influence over prices.

```{=html}
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-   A key market driver for food processing is Chile's strong economy,
    which has rebounded since the end of 2003. Supermarket sales are
    growing 7% steadily per year since 2004, when sales were US\$5.6
    billion, and are expected to grow another 7% in 2006.

-   Consumption trends influencing the type and quality of inputs being
    used include easy-to-prepare food as more people join the workforce
    and spend less time at home, as out-of-home meals become more
    frequent, as young people continue adopting new fast foods and snack
    foods and as diet and light foods and beverages continue capturing
    market share. Organic foods are being adopted at a much slower rate
    but there increasing presence in the market is also marking a trend.
    The recent slow economic period drove price sensitivity to an
    all-time high among food processors.

## Advantages and Challenges facing U.S. Food Ingredient in Chile

  ----------------------------------- -----------------------------------
  **Advantages**                      **Challenges**

  U.S. food inputs are known for      Quality of food ingredients is said
  their quality. They meet respected  to have become very similar from
  FDA & USDA standards. Health        the U.S., Europe, Asia, etc., and
  concerns are low.                   many European inputs meet U.S.,
                                      European and Japanese standards.

  The U.S. is a strong, traditional   U.S. food input producers sometimes
  trading partner and its products    are not as aggressive in following
  are welcome.                        up sales leads as European or other
                                      suppliers.

  The U.S.-Chile Free Trade           Prices for U.S. products may still
  Agreement, which went into force on be higher than local products or
  January 1, 2004, is making U.S.     imports from nearby countries. FOB
  products more competitive.          prices for U.S. inputs, even before
                                      adding freight, insurance and
                                      duties, often are 10-14% higher, or
                                      more, than local prices for
                                      equivalent quality. This remains
                                      true even after the import tariffs
                                      for U.S. products have been reduced
                                      or eliminated.

  The rapidly dropping U.S. Dollar    The Argentine and Brazilian
  exchange rate, 11% in 2005, will    recessions and currency
  make U.S. inputs more competitive.  devaluations preceded the U.S.
                                      dollar's depreciation, so that
                                      their products displaced U.S. raw
                                      materials, and U.S. products will
                                      have a hard time recovering their
                                      market position.

  Certain companies have corporate    Purchase decisions are often global
  requirements to purchase U.S.       and are influenced by headquarters,
  inputs, for example Nestlé for      not just local management.
  products re-exported to the U.S.    

  Shipping from the U.S. is cheaper   U.S. ingredients are often more
  and quicker than from Europe.       expensive than local equivalents.
                                      The FOB cost is sometimes 10%
                                      higher.

  Rising consumer spending and        Price sensitivity became stronger
  adoption of foreign food types      than ever during the economic slump
  favor new types of inputs.          in 1999.
  ----------------------------------- -----------------------------------

# Section II. Road Map for Market Entry

## A. Entry Strategy

## 

-   U.S. food ingredient producers who 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 and type of end users. 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.

-   Sales in Chile are made based on a relationship of personal trust,
    and personally visiting the country and demonstrating products to
    potential distributors and end-users is fundamental for generating
    solid, durable business relationships.

-   Market access is open to all products from all countries. Except for
    products covered by a Free Trade Agreement, all products pay a
    standard, across the board 6% tariff. 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.

-   U.S. food products are sought after and respected for their
    dependably high quality levels, but prices are generally
    uncompetitive. To compete in Chile, U.S. producers need to focus on
    profit margins, which are very often significantly lower in Chile
    than in other countries which are not as open to the world as Chile
    is. Specialty products and chemicals have a better chance of success
    than more basic inputs, which are often sourced locally.

-   Distribution trade is very receptive to U.S. products as they are a
    guarantee of quality and good packaging and therefore low losses. As
    soon as possible, buyers will try to buy direct, without a local
    middleman, because they cannot pass those margins on to the product
    price and remain competitive.

-   U.S. exporters are considered to be less flexible or agile than
    others in their ability and willingness to meet market requirements.
    Prices are key in this aspect as is a more active marketing style
    than American producers are used to at home, and minimum order
    quantities are often too high for this market, especially during the
    initial stages of market penetration. Local distributors also expect
    the manufacturer to share in marketing and promotion efforts and
    expenses.

**What You Must Do to Successfully Enter and Develop the Chilean
Market**

The key market success drivers are a strong proactive attitude,
long-term commitment to the market, conscientious follow-through of
exporting effort; marketing and promotion; adapting to competitive local
price points and margins; customer service and terms of payment. The
Chilean market for ingredients imported from the U.S. is small compared
to sales in the U.S., even at a State level. High U.S. market shares are
linked mainly to a product's uniqueness (e.g. peanut butter, baked
beans, etc.) or special characteristics (above-average quality or
quality consistency especially with respect to human health, service,
international corporate headquarters requirements, quick response and
delivery capabilities, etc.). Low U.S. market share is generally due to
the high impact of freight costs on commodity products, the acceptably
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]{.underline}: U.S. suppliers are all-too-often less
aggressive and persistent than European or Asian ones, or even Latin
American competitors. The Chilean market is not large but it is
sophisticated, innovative and competitive, and already being supplied by
many world-class local and international suppliers. It should not be
considered as a spot market but must be systematically developed with
strong marketing and promotion campaigns in order to conquer and
maintain market share.

[Stress Marketing and Customer Service]{.underline}: Building strong
personal relationship based on personal trust is very important in Chile
and in other Latin American countries towards establishing a strong,
profitable long-term business relationship with a potential distributor
or client. Personally visiting with potential or appointed distributors
and with large clients is the best way to build up sales. Also, follow
up, providing good support and consistently responding to technical
inquiries will keep other competitors at bay with a client or
distributor. For example, when a potential Chilean client contacts a
U.S. supplier and requests a quote, the supplier should not ignore the
opportunity and should respond as soon as possible, regardless of the
value of the order. If not, he will probably not be contacted again and
will not be considered as a possible regular supplier. Reliable delivery
schedules are also a plus. Shipping from the U.S. is faster than from
Europe or Asia, and effective freight forwarders or brokers can make a
difference in earning a better reputation than other global competitors.

[Try to Match Local Quality, Prices and Margins]{.underline}: Chile is a
very price-conscious and competitive market as a result of being open to
imports from all nations and a low universal tariff rate (currently 6%).
The U.S. has a free trade agreement with Chile, so tariffs are ever
lower for U.S. products. U.S. products are well known and respected for
their reliable quality control and high food ingredient standards,
especially regarding human health aspects. However, quality standards of
suppliers around the world have been increasing and reaching comparable
levels due in part to automation and modern technology, and it is now
possible to find quality products in most parts of the world. U.S.
producers must either offer top quality products at a competitive price
or compensate with special characteristics, better service, support,
warranties, etc. Contacts regularly emphasize that the quality
difference between U.S. food ingredients and their international
competition is seldom large enough to justify the significantly higher
prices charged by U.S. suppliers. Except for a few very
quality-conscious end users such as Nestlé, which observes very high
quality guidelines enforced by the corporate headquarters especially for
product lines such as infant foods and baby formulas, non-U.S. food
ingredient suppliers out-compete U.S. suppliers on price in Chile. If
U.S. suppliers want to compete successfully in Chile, they must be
willing to lower their US.-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]{.underline}: On the other hand, the significant drop of the U.S.
Dollar against other currencies during 2004-2005 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 during 2006
than when the U.S. Dollar strengthens again, so we encourage U.S. food
ingredient suppliers to explore the Chilean market now.

[Consider Terms of Payment]{.underline}: European suppliers very
commonly grant open accounts and long terms of payment (up to 90 to 120
days). They also enjoy strong support from governmental export promotion
financing. 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 will lower costs. Taking
advantage of U.S. Government-sponsored export financing or risk
insurance programs will also strengthen the food ingredient exporter's
financial and competitive position.

[Tap into Centralized Purchasing by International
Corporations]{.underline}: When dealing with global or 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 previous business relationship, approaching headquarters or
subsidiaries in the U.S. is a good way to explore the company's product
and technical requirements and thus potential business opportunities
within that corporation and with its Chilean subsidiary.

[Find a Good Distributor]{.underline}: Unless a sales program in Chile
can be sustained by direct sales to a few large clients (and many
processed food sectors are dominated by a small number of exactly these
type of companies), a local distributor will be a crucial business
partner. Chilean clients expect to be able to deal directly with a local
representative for placing orders, voicing complaints and obtaining
technical and pre- and post-sales support. Correct selection of a
qualified distributor is of the highest importance, since the reputation
of the U.S. supplier will rest on the ability of the distributor to
provide prompt and reliable ordering, stocking and delivery services to
clients. The distributor's quality and performance standards should
match those of the U.S. supplier's as closely as possible, and this is
often not easy to find in Chile. Also, when possible, only one
distributor with a wide regional distribution network that covers as
many market sectors and regions as possible should be selected.
Appointing more than one distributor can often result in price wars that
minimize profit margins and therefore marketing or promotional efforts.
The availability of qualified distributors is not large, so a good
initial choice is fundamental and should be a very well thought-out
consideration.

[The strongest recommendation]{.underline} to U.S. food ingredient
suppliers wanting to enter the Chilean market is to be as aggressive or
committed as European competitors in their marketing, to make an effort
to develop and nurture strong relationships with good distributors and
clients so that the U.S. supplier becomes a trusted business partner,
and then to be willing to compete by limiting profit margins to the
degree necessary and possible while maintaining quality and service in
order to compete, at least in the initial stages of market penetration.
The relationships of trust and open communication with potential
distributors and especially with clients will be the key to being given
the chance to learn about what products are required and which ones
present the best market potential opportunities for that particular
supplier's ingredients.

## B. Market Structure

Food ingredient distribution patterns are different for local and for
imported products, and are changing with time. Local inputs are
purchased direct from the producer by all but the smallest food
processors. Imported ingredients are more commonly handled by local
distributor/representatives or wholly owned subsidiaries for the smaller
users. Large processors like to import their products directly to
maximize savings, and deal with the logistics themselves.

Generally, if sales volumes are not too high, direct imports will not be
of interest to Chilean buyers as 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 to handle the
import process, health approval and open marketing permitting, marketing
and promotion, selling and stocking.

As food processors seek to rationalize their costs, they are leaning
more towards direct purchases and away from middlemen with time. As the
big processors get bigger, they reach economies of scale by negotiating
direct with the supplier, even on a global scale. Logistics companies
have become a strong market player in the past five years, but they work
with finished products and are not involved in raw materials. Thus,
unlike bigger processors, smaller buyers still depend on distributors to
manage their stock.

The food processors sales generally go mostly to supermarkets, followed
by traditional retailers and to a small extent to institutions (HRI food
services). Institutional sales are often handled as a separate business
by the processors. Smaller neighborhood stores have been continuously
decreasing in number 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]{.underline}

## C. Company Profiles

The Chilean Securities Market is policed by the Chilean Securities and
Exchange Commission (SVS). There are 489 open corporations traded in the
Chilean Stock Market, and only these are required by law to publish
financial statements in Chile.

[List of Food Sector Corporations listed in the Stock
Market]{.underline} (therefore, the only ones that are obliged to
publish financial statements or any financial results):

[]{.mark}

Financial Statements for Years 2003, 2004 and period January --
September 2005

Millions of US Dollars

+------------+--------+--------+--------+---------+---------+---------+
|            | Sales  | Sales  | Sales  | Profit  | Profit  | Profit  |
|            | 2003   | 2004   | 2005   | 2003    | 2004    | 2005    |
|            | J      | J      | J      | Jan-Dec | Jan-Dec | Jan-Sep |
|            | an-Dec | an-Dec | an-Sep |         |         |         |
+------------+--------+--------+--------+---------+---------+---------+
| Exchange   | 699.12 | 609.37 | 511.45 | 699.12  | 609.37  | 511.45  |
| rate       |        |        |        |         |         |         |
+------------+--------+--------+--------+---------+---------+---------+
| C.C.U.     | 563    | 690    | 664    | 79      | 74      | 56      |
| (beer,     |        |        |        |         |         |         |
| non-alc.   |        |        |        |         |         |         |
| beverages) |        |        |        |         |         |         |
+------------+--------+--------+--------+---------+---------+---------+
| Andina     | 567    | 679    | 652    | 23      | 66      | 62      |
| (non-alc.  |        |        |        |         |         |         |
| beverages) |        |        |        |         |         |         |
+------------+--------+--------+--------+---------+---------+---------+
| Empresas   | 398    | 502    | 459    | 21      | 25      | 20      |
| Carozzi    |        |        |        |         |         |         |
| (pasta,    |        |        |        |         |         |         |
| chocolate, |        |        |        |         |         |         |
| cookies,   |        |        |        |         |         |         |
| candies)   |        |        |        |         |         |         |
+------------+--------+--------+--------+---------+---------+---------+
| Iansa      | 368    | 379    | 301    | -14     | -18     | 8       |
| (sugar)    |        |        |        |         |         |         |
+------------+--------+--------+--------+---------+---------+---------+
| Soprole    | 241    | 291    | 281    | 10      | 16      | 14      |
| (milk,     |        |        |        |         |         |         |
| dairy      |        |        |        |         |         |         |
| products)  |        |        |        |         |         |         |
+------------+--------+--------+--------+---------+---------+---------+
| Polar      | 108    | 133    | 154    | 7       | 10      | 10      |
| (C         |        |        |        |         |         |         |
| oca-Cola)) |        |        |        |         |         |         |
+------------+--------+--------+--------+---------+---------+---------+
| Watt´s     | 264    | 325    | 303    | 5       | 16      | 11      |
| (jams,     |        |        |        |         |         |         |
| sauces,    |        |        |        |         |         |         |
| soups,     |        |        |        |         |         |         |
| etc.) (1)  |        |        |        |         |         |         |
+------------+--------+--------+--------+---------+---------+---------+
| (2         | 700    | 911    | 1,100  | n/a     | n/a     | n/a     |
| )Agrosuper |        |        |        |         |         |         |
+------------+--------+--------+--------+---------+---------+---------+
| \(3\)      | 86     | n/a    | n/a    | -3      | -6      | -6      |
| Lucchetti  |        |        |        |         |         |         |
| (pasta)    |        |        |        |         |         |         |
+------------+--------+--------+--------+---------+---------+---------+
| P          | 59     | 77     | 71     | 3       | 11      | 1       |
| rocesadora |        |        |        |         |         |         |
| de Leche   |        |        |        |         |         |         |
| del Sur    |        |        |        |         |         |         |
+------------+--------+--------+--------+---------+---------+---------+
| Copefrut   | 68.8   | 87.6   | 63.3   | 2       | 3       | 5       |
| (fruit and |        |        |        |         |         |         |
| juices)    |        |        |        |         |         |         |
+------------+--------+--------+--------+---------+---------+---------+
| Sofruco    | 23     | 30     | 27     | 2       | 2       | 2       |
| (fruit)    |        |        |        |         |         |         |
+------------+--------+--------+--------+---------+---------+---------+
| Coca-Cola  | 324    | 261    | 236    | -50     | -100    | -6      |
| Embonor (1 |        |        |        |         |         |         |
| of 3 Coke  |        |        |        |         |         |         |
| bottlers)  |        |        |        |         |         |         |
+------------+--------+--------+--------+---------+---------+---------+
| TOTAL      | 3,701  | 3,368  | 4,248  | 87      | 102     | 177     |
+------------+--------+--------+--------+---------+---------+---------+
| Source:    |        |        |        |         |         |         |
| SVS        |        |        |        |         |         |         |
| (Chilean   |        |        |        |         |         |         |
| Securities |        |        |        |         |         |         |
| and        |        |        |        |         |         |         |
| Exchange   |        |        |        |         |         |         |
| C          |        |        |        |         |         |         |
| ommission) |        |        |        |         |         |         |
|            |        |        |        |         |         |         |
| Notes: (1) |        |        |        |         |         |         |
| In         |        |        |        |         |         |         |
| September  |        |        |        |         |         |         |
| 2004       |        |        |        |         |         |         |
| Empresas   |        |        |        |         |         |         |
| Santa      |        |        |        |         |         |         |
| Carolina   |        |        |        |         |         |         |
| S.A.       |        |        |        |         |         |         |
| became     |        |        |        |         |         |         |
| Watt\'s    |        |        |        |         |         |         |
| S.A.       |        |        |        |         |         |         |
| (owner of  |        |        |        |         |         |         |
| Santa      |        |        |        |         |         |         |
| Carolina   |        |        |        |         |         |         |
| winery,    |        |        |        |         |         |         |
| Watt's     |        |        |        |         |         |         |
| (juices,   |        |        |        |         |         |         |
| jams),     |        |        |        |         |         |         |
| Loncoleche |        |        |        |         |         |         |
| and Calo   |        |        |        |         |         |         |
| (dairy     |        |        |        |         |         |         |
| products), |        |        |        |         |         |         |
| Superior   |        |        |        |         |         |         |
| (margarine |        |        |        |         |         |         |
| and edible |        |        |        |         |         |         |
| oils), Il  |        |        |        |         |         |         |
| Ga         |        |        |        |         |         |         |
| stronomico |        |        |        |         |         |         |
| (pastas),  |        |        |        |         |         |         |
| Cecinas    |        |        |        |         |         |         |
| Felco      |        |        |        |         |         |         |
| (sausage)  |        |        |        |         |         |         |
| and        |        |        |        |         |         |         |
| Fehrenberg |        |        |        |         |         |         |
| (          |        |        |        |         |         |         |
| liqueurs). |        |        |        |         |         |         |
| Sales are  |        |        |        |         |         |         |
| 41% dairy  |        |        |        |         |         |         |
| products,  |        |        |        |         |         |         |
| 39% oil    |        |        |        |         |         |         |
| products,  |        |        |        |         |         |         |
| 17% fruit  |        |        |        |         |         |         |
| products,  |        |        |        |         |         |         |
| 2%         |        |        |        |         |         |         |
| subsid.,   |        |        |        |         |         |         |
| 1%         |        |        |        |         |         |         |
| prepared   |        |        |        |         |         |         |
| foods and  |        |        |        |         |         |         |
| sausage)   |        |        |        |         |         |         |
|            |        |        |        |         |         |         |
| (2)Ag      |        |        |        |         |         |         |
| rosuper\'s |        |        |        |         |         |         |
| sales 2005 |        |        |        |         |         |         |
| are from   |        |        |        |         |         |         |
| January to |        |        |        |         |         |         |
| December   |        |        |        |         |         |         |
|            |        |        |        |         |         |         |
| \(3\)      |        |        |        |         |         |         |
| Lucchetti  |        |        |        |         |         |         |
| is now     |        |        |        |         |         |         |
| Indalsa    |        |        |        |         |         |         |
| own by     |        |        |        |         |         |         |
| Córpora    |        |        |        |         |         |         |
| Tres       |        |        |        |         |         |         |
| Montes: 25 |        |        |        |         |         |         |
| product    |        |        |        |         |         |         |
| line such  |        |        |        |         |         |         |
| as:        |        |        |        |         |         |         |
| juices,    |        |        |        |         |         |         |
| drinks,    |        |        |        |         |         |         |
| deserts,   |        |        |        |         |         |         |
| coffee,    |        |        |        |         |         |         |
| pastas,    |        |        |        |         |         |         |
| oils,      |        |        |        |         |         |         |
| soups,     |        |        |        |         |         |         |
| creams,    |        |        |        |         |         |         |
| etc.       |        |        |        |         |         |         |
+------------+--------+--------+--------+---------+---------+---------+

**[Descriptions of Chilean Processed Food Sectors and of Key Food
Processing Companies]{.underline}**

The companies profiled in each section are representative of that
sector, and their sizes or sales, end-use channels, production plants
and procurement channels illustrate the Chilean market and procurement
trends.

**1) Red Meats and Poultry Meat**

The retail sector is rapidly expanding and has become a driving force
for food imports. Grocery stores sell approximately 60% of all meat
products consumed in Chile. Another fast-growing sector is foodservice,
specifically U.S. casual dining chains such as Applebee's, TGI Friday's
and Ruby Tuesday.

U.S. pork gained free access to Chile in January 2004 due to the
U.S.-Chile Free Trade Agreement (FTA). Through the first eight months of
2005, U.S. pork and pork variety meat exports to Chile increased 42% in
volume to eight metric tons (mt) and 115% in value to US\$39,147
compared to the same period last year.

The Chilean pork industry's expansion into international markets is
creating a shortage in the domestic pork supply as exports are more
lucrative. Animal disease issues prevent several Brazilian states from
sending pork to Chile, increasing the potential for the U.S. industry.

[]{.mark}

Chile opened its market in late July, 2005 to both chilled and frozen
boneless U.S. beef from animals of under 30 months of age. Through the
first eight months of 2005, U.S. beef and beef variety meat exports to
Chile increased 419% in volume to 14 mt and 393% in value to US\$58,210
compared to the same period last year.

The FTA provides for the mutual recognition of each country's beef
grading systems, allowing USDA to certify U.S. beef for export to Chile.
The agreement also removes all tariff and quota restrictions for beef in
January 2007.

Chilean meat availability is 75 kilos per capita. In 2005 the national
production of meat was close to 1.2 million tons, 7% higher than 2004.

Chile is a net exporter of white meats (pork 46% of all meat exports,
poultry 33% and turkey products 8%) and a net importer of red meats.
Special meats such as pork jowls and chicken thighs are in part
imported.

Meat imports have grown achieving a 15.3% increase during 2005 compared
to 2004 with 129,580 tons (US\$509.2 million). The main importers are:
Supermarket chain Cencosud ("Jumbo") (28,575 tons with 22.1% market
share), Quinto Cuarto (15,782 tons) and supermarket chain D&S ("Lider")
(12,661 tons). Boneless red meat is the most imported representing 92%
of total imports during 2005.

[Meat Market in Chile, metric tons, 2005]{.underline}

  ----------------- ----------------- ----------------- -----------------
  Product           Bovines           Pork              Poultry

  **Produced**      221,000 tons      405,000 tons      450,000 tons

  **Imported**      107,000 tons\*    525,000 tons      9,700 tons

  **Exported**      16,000 tons       81,000 tons       57,000 tons

  Source: ODEPA                                         

  Notes: From                                           
  January until                                         
  October                                               
  2005/\*boneless                                       
  ----------------- ----------------- ----------------- -----------------

Processing plants, with direct links to cattle farmers, are displacing
stockyards in the beef distribution chain. The beef processing industry
is a tight sector, where 68% of the market is controlled by no more than
five companies with high levels of vertical integration (including Lo
Valledor, Friosa and Carnes Ñuble (AASA Holding), and Matadero de
Temuco). The rest are distributed in 93 production locations throughout
the country. The AASA group is the main actor in the sector. The red
meat consumption per capita is 22.5 kilos. The poultry sector production
during 2004 was 535,002 tons and from January-November 2005 498,535
tons. Annual consumption stands at 27 kilos per capita. There are three
holdings representing 90% of the national industry. These holdings are:
Agrosuper (60% market share), Ariztía and Tarapacá (Arica) (32%) and
Agrícola Don Pollo (8%).

They are also vertically integrated, from producing the feed to
distributing to the retailers. Cured meats have a large market. San
Jorge, PF, Super, Winter and La Preferida are the leaders among some 40
sausage and cold cut makers. Annual consumption per person is 11.5
kilos.

**Cured Meat productio**n

  ------------------------------ ----------------------------------------
  **Year**                       **Tons**

  2001                           168,000

  2002                           180,000

  2003                           187,857

  2004                           199,568
  ------------------------------ ----------------------------------------

+---------------+--------------+--------------+---------+-------------+
| **Company**   | **Sales      | **End-Use    | **Pro   | **          |
|               | (US\$)       | Channels**   | duction | Procurement |
| **(Product    | 2004**       |              | Locati  | Channels**  |
| Types)**      |              |              | on(s)** |             |
+---------------+--------------+--------------+---------+-------------+
| Agrícola      | US\$260      | Retail, HRI  | Chile   | N/A         |
| Ariztía       | million      | and Exports  | (4)     |             |
| (chickens and | (2005)       |              |         |             |
| turkey)       | chicken (30% |              |         |             |
|               | of market),  |              |         |             |
|               | turkey (40%  |              |         |             |
|               | of market)   |              |         |             |
+---------------+--------------+--------------+---------+-------------+
| Cecinas La    | US\$15       | Retail       | Chile   | Pork:       |
| Preferida     | million      |              | (1)     | Direct      |
| (sausage and  |              |              |         | (Local);    |
| cold cuts)    |              |              |         | Bovine:     |
|               |              |              |         | Importers   |
+---------------+--------------+--------------+---------+-------------+
| Cecinas San   | 30% mkt      | Retail       | Chile   | Direct      |
| Jorge         | share. 3,000 |              | (1)     | (Local)     |
| (sausage and  | tons per     |              |         |             |
| cold cuts)    | month.       |              |         |             |
+---------------+--------------+--------------+---------+-------------+
| Agrosuper,    | US\$49       | Retail and   | Chile   | Own         |
| Cecinas Super | million,     | HRI          | (4)     | Production  |
| (sausage and  |              |              |         |             |
| cold cuts)    | 130.000      |              |         |             |
|               | tons, 50%    |              |         |             |
|               | mkt. share   |              |         |             |
+---------------+--------------+--------------+---------+-------------+
| AASA Group    | US\$228      | Retail, HRI  | Chile   | Pork: Own   |
| (Frival(8%);  | million. 46% | and Exports  | (6)     | Production; |
| Friosa(7%);   | mkt share.   |              |         | bovine: Own |
| Carnes        |              |              |         | Production  |
| Ñuble(4%) y   |              |              |         | and Direct  |
| Con-Cón(3%))  |              |              |         | (Local);    |
| (bovine       |              |              |         | Grains:     |
| sl            |              |              |         | Importers   |
| aughterhouse) |              |              |         |             |
|               |              |              |         |             |
| []{.mark}     |              |              |         |             |
+---------------+--------------+--------------+---------+-------------+
| Matadero Lo   | US\$140      | Retail and   | Chile   | Bovine:     |
| Valledor      | million      | HRI          | (6)     | Direct      |
| (bovine       |              |              |         | (Local);    |
| sl            |              |              |         | Pork: Own   |
| aughterhouse, |              |              |         | Production  |
| largest in    |              |              |         | and         |
| Chile)        |              |              |         | Importers   |
+---------------+--------------+--------------+---------+-------------+
| Productos     | US\$80       | Retail and   | Chile   | Pork: Own   |
| Fernández     | million. 15% | HRI          | (2)     | Production, |
| (Cecinas PF - | Mkt share.   |              |         | Bovine:     |
| sausage and   |              |              |         | Importers   |
| cold cuts)    |              |              |         |             |
+---------------+--------------+--------------+---------+-------------+
| Sopraval      | US\$60       | Retail and   | Chile   | Direct      |
| (turkeys -    | million,     | HRI          | (2)     | (Local and  |
| part of       | 1,200 tons,  |              |         | Foreign),   |
| Agrosuper)    | 60% Mkt      |              |         | D           |
|               | Share.       |              |         | istributors |
|               |              |              |         | (Local and  |
|               |              |              |         | Foreign)    |
+---------------+--------------+--------------+---------+-------------+
| Super Cerdo   | US\$151      | Retail and   | Chile   | Own         |
| (pork - part  | million,     | HRI          | (1)     | Production  |
| of Agrosuper) | 110,000      |              |         |             |
|               | tons, 50%    |              |         |             |
|               | mkt. share   |              |         |             |
+---------------+--------------+--------------+---------+-------------+
| Super Pollo   | US\$220      | Retail and   | Chile   | Own         |
| (chickens -   | million,     | HRI          | (2)     | Production  |
| part of       | 223,000 tons |              |         |             |
| \*Agrosuper)  |              |              |         |             |
+---------------+--------------+--------------+---------+-------------+

Note:\* Agrosuper is the main producer of meat and fresh food with US\$1
billion sales.

**2) Edible Fish and Seafood Products**

Chile has the fifth largest fishing industry and frozen and prepared
(canned or fresh) seafood are traditional local consumption and export
products. The Robinson Crusoe brand pioneered the frozen fish sector 45
years ago, and now competes with Geomar, Pacífico del Norte, Pesquera
San José (which has a 55% market share) and others. Salmon and trout
farming is a relatively recent Chilean industry, which started exporting
in 1981 and has now boosted Chile to the No. 2 salmon producer after
Norway. Whereas traditional fish preparation requires little in the way
of ingredients, salmon farming generates strong potential for fish food
producers and takes up most of the fishmeal produced by offshore
fisheries.

Main exporters of canned seafood and fish

+------------------------------------------+-------------+-------------+
| ####### Exporters                        | **Kilos**   | **U.S. \$   |
|                                          |             | FOB**       |
+------------------------------------------+-------------+-------------+
| Pesquera San José S.A.                   | 32,822,356  | 34,479,192  |
+------------------------------------------+-------------+-------------+
| Empresa de Desarrollo Pesquero de Chile  | 7,611,860   | 15,914,157  |
+------------------------------------------+-------------+-------------+
| Pesquera Camanchaca                      | 11,381,825  | 15,808,105  |
+------------------------------------------+-------------+-------------+
| Foodcorp Chile S.A.                      | 11,676,818  | 12,527,383  |
+------------------------------------------+-------------+-------------+
| Pesquera Mar Brava S.A.                  | 1,951,687   | 11,797,710  |
+------------------------------------------+-------------+-------------+
| Pesquera Bio-Bio S.A.                    | 10,838,826  | 11,337,765  |
+------------------------------------------+-------------+-------------+
| Source: Chilealimentos 2005              |             |             |
+------------------------------------------+-------------+-------------+

Main exporters of frozen seafood and fish

  ------------------------------------------- ------------ ---------------
  **Exporters**                               **Kilos**    **U.S. \$ FOB**

  Pesquera Palacios S.A.                      139,986      1,180,645

  Soc. Pesquera Pacifico Austral Ltda.        76,809       522,111

  Shellfish S.A.                              43,873       471,994

  Pesquera Deep Sea Food Ltda.                46,841       467,889

  Source: Chilealimentos 2005                              
  ------------------------------------------- ------------ ---------------

+---------------+--------------+--------------+---------+-------------+
| **Company**   | **Sales      | **End-Use    | **Pro   | **          |
|               | (US\$)       | Channels**   | duction | Procurement |
| **(Product    | 2004**       |              | Locati  | Channels**  |
| Types)**      |              |              | on(s)** |             |
+---------------+--------------+--------------+---------+-------------+
| Geomar (fish  | US\$2        | Exclusive    | Chile   | Direct      |
| products)     | million      | distributor  | (2)     | (Local)     |
|               |              | in New York  |         |             |
|               |              | for gourmet  |         |             |
|               |              | stores       |         |             |
+---------------+--------------+--------------+---------+-------------+
| Pesquera San  | 55% market   | Retail and   | Chile   | Own         |
| José (fish    | share frozen | Exports      | (3)     | Extraction  |
| products)     | and canned   |              |         |             |
+---------------+--------------+--------------+---------+-------------+
| Robinson      | Canned fish  | Retail       | Chile   | Own         |
| Crusoe (fish  | and sea food |              | (2)     | Extraction  |
| products)     | 54% mkt      |              |         |             |
|               | share        |              |         |             |
+---------------+--------------+--------------+---------+-------------+

**3) Dairy Products**

The dairy food processing sector, the nucleus of the dairy industry
production chain, is made up of around 15 companies that run 28 plants
which process 75% of the local milk production, and where the leading
four companies buy most of the milk. These four companies are Nestlé
(Swiss) and Soprole (New Zealand Dairy Board Fonterra) of foreign
capital, plus the local Loncoleche (Watt's) and Colun (La Unión
Agricultural and Milky Coorperative) operations. The other companies are
mid-sized or small and most of them produce cheese. The milk producers
are the main suppliers, and supermarkets are the main retailers. Dairy
products, at 7.5%, are the second largest supermarket perishable sales
group after meats.

The dairy market is estimated at US\$700 million of which the ice cream
market is US\$100 million and is dominated by Savory (Nestlé) and
Bresler (Unilever).

Dairy market Share 2005

![](media/image2.wmf){width="3.9583333333333335in"
height="2.0416666666666665in"}

Source: Fedeleche (Chilean Milk Producers Asociation)

+---------------+--------------+--------------+---------+-------------+
| **Company**   | **Sales      | **End-Use    | **Pro   | **          |
|               | (US\$)**     | Channels**   | duction | Procurement |
| **(Product    |              |              | Locati  | Channels**  |
| Types)**      | **2004**     |              | on(s)** |             |
+---------------+--------------+--------------+---------+-------------+
| Nestle        | US\$500      | Retail       | Chile   | Direct      |
| (dairy,       | million      |              | (7)     | (Local and  |
| c             |              |              |         | Foreign),   |
| onfectionery, |              |              |         | D           |
| cereals,      |              |              |         | istributors |
| dehyd. soups) |              |              |         | (Local and  |
|               |              |              |         | Foreign)    |
+---------------+--------------+--------------+---------+-------------+
| Soprole       | US\$177      | Retail       | Chile   | N/A         |
| (milk, dairy  | million      |              | (4)     |             |
| products)     |              |              |         |             |
+---------------+--------------+--------------+---------+-------------+
| Colún (Milk,  | US\$193      | Retail       | Chile   | N/A         |
| dairy         | million      |              | (2)     |             |
| products)     |              |              |         |             |
+---------------+--------------+--------------+---------+-------------+

**4) Prepared Fruit, Prepared Vegetables, Oilseed Products (Sauces, Oils
and Other Frozen, Canned and Dried Products)**

This food market is dominated by those companies that export the most:

###### Frozen Food

[]{.mark}

  ---------------------------------------- --------------- ---------------
  **Exporters**                            **Kilos**       **U.S. \$ FOB**

  Comercial Fruticola S.A.                 12,484,057      21,833,923

  Fruticola Olmue S.A.                     5,742,995       10,895,340

  Alimentos Naturales Vitafoods            4,750,505       9,447,142

  Exportadora Frucol Ltda.                 5,769,886       7,930,056

  Soc. Agroindustrial Valle Frio Ltda.     5,133,348       7,345,336

  Arlavan S.A.                             5,368,495       7,022,468

  Source: Chilealimentos 2005                              
  ---------------------------------------- --------------- ---------------

[]{.mark}

###### Canned Food

  ------------------------------------ ----------------- -----------------
  **Exporters**                        **Kilos**         **U.S. \$ FOB**

  Empresas Carozzi S.A.                87,009,674        56,688,334

  Aconcagua Foods S.A.                 74,648,032        56,623,057

  Conservera Pentzke S.A.              24,111,375        22,866,167

  Agrofrut Rengo S.A.                  15,133,143        15,152,888

  Agroindustrias Lafken S.A.           5,979,926         10,137,163

  Alimentos Indal S.A.                 8,352,030         6,372,473

  Watt's S.A.                          7,179,594         6,199,256

  Source: Chilealimentos 2005                            
  ------------------------------------ ----------------- -----------------

###### Dried Products

  --------------------------------------- --------------- ---------------
  **Exporters**                           **Kilos**       **U.S. \$ FOB**

  Prunesco S A                            10,650,193      26,304,462

  Frutas De Exportación S A               12,249,388      25,279,938

  Productos Silvestres Ltda.              9,102,181       16,183,225

  Pacific Nut Company Chile S A           4,288,927       16,083,756

  Invertec Foods S A                      2,838,850       12,750,699

  Del Monte Fresh Produce (Chile)         6,124,356       11,235,206

  Hojas Export Limitada                   3,106,924       10,292,180

  Source: Chilealimentos 2005                             
  --------------------------------------- --------------- ---------------

The oilseed market is estimated at US\$110 million of which Watt's has
35% market share and Luchetti 17%, while Carozzi has 25% in tomato
sauce.

Prepared fruit, prepared vegetables, oilseed products and other frozen,
canned and dried products have an exportation focus. It is estimated
that by the year 2010 Chile will be exporting US\$2 billion of processed
food in total.

**5) Confectionery Products**

[]{.mark}

The confectionery market in Chile is estimated in US\$350 million,
(64,000 tons) with an annual growth of 3%. The main brands are Arcor Dos
en Uno, Costa (Carozzi) and Ambrosoli (Carozzi). The prices are the
lowest in Latin America because it is a very competitive market.

Carozzi has 30% of the cookie market, 43% of the chocolate market and
61% of the candy market. The latter represents 40% of Carozzi's total
income.

The biggest challenge for these brands is to compete with the private
label supermarket brands which are imitating their packages and products
for a lower price, and the imported products which force them to improve
their quality standards.

[]{.mark}

The chocolate confectionery industry in Chile produces approx 11,500
tons per year; the value of that production is US\$80 million. The
chocolate market is dominated by three companies: Arcor Dos en Uno,
Carozzi and Nestlé. The excellence chocolate market is dominated by
Bozzo, Varsovienne, Damien Mercier, Félix Brunatto, Dos Castillos.

Annual per capita consumption of cookies is 2 kg, chocolates is 5 Kg,
vs. 10 Kg in Europe. The strong seasons for the 25,000 ton chocolate
market are autumn and winter.

The most important companies in this sector are exporters:

[]{.mark}

  ------------------------------------------ -------------- --------------
  **Exporters**                              **Kilos**      **U.S. \$
                                                            FOB**

  Ind. de Alimentos Dos en Uno Ltda.         11,398,341     25,466,709

  Empresas Carozzi S.A.                      6,898,696      19,503,106

  Nestle Chile S.A                           1,508,531      2,522,189

  Exportadora E Importadora Mas Ltda.        772,649        1,383,993

  Soc. Importadora y Exportadora Halcon      576,430        1,104,403

  Source: Chilealimentos 2005                               
  ------------------------------------------ -------------- --------------

[]{.mark}

[]{.mark}

[]{.mark}

+---------------+--------------+--------------+---------+-------------+
| **Company**   | **Sales      | **End-Use    | **Pro   | **          |
|               | (US\$)       | Channels**   | duction | Procurement |
| **(Product    | 2004**       |              | Locati  | Channels**  |
| Types)**      |              |              | on(s)** |             |
+---------------+--------------+--------------+---------+-------------+
| Arcor-Dos en  | US\$140      | Retail       | Peru    | Direct      |
| Uno           | million      |              | (1)     | (Local and  |
| (c            |              |              | Brazil  | Foreign);   |
| onfectionery) |              |              | (4)     | Importers   |
|               |              |              | Ar      |             |
|               |              |              | gentina |             |
|               |              |              | (27)    |             |
|               |              |              | Chile   |             |
|               |              |              | (3)     |             |
+---------------+--------------+--------------+---------+-------------+
| Carozzi       | US\$450      | Retail, HRI  | Chile   | Direct      |
| (pastas,      | million, 70% | and Exports  | (10)    | (Local and  |
| Costa and     | Mkt share in |              | Peru    | Foreign)    |
| Ambrosoli     | c            |              | (4)     | D           |
| confectionery | onfectionery |              | Ar      | istributors |
| brands,       | products.    |              | gentina | (Local and  |
| sauces,       |              |              | (2)     | Foreign)    |
| dairy)        | C            |              |         |             |
|               | ookies(30%), |              |         |             |
|               | cho          |              |         |             |
|               | colates(43%) |              |         |             |
|               | Candies      |              |         |             |
|               | (61%)        |              |         |             |
+---------------+--------------+--------------+---------+-------------+
| Nestle        | US\$500      | Retail       | Chile   | Direct      |
| (dairy,       | million      |              | (7)     | (Local and  |
| c             |              |              |         | Foreign),   |
| onfectionery, |              |              |         | D           |
| cereals,      |              |              |         | istributors |
| dehyd. soups) |              |              |         | (Local and  |
|               |              |              |         | Foreign)    |
+---------------+--------------+--------------+---------+-------------+

**6) Baked Goods**

[]{.mark}

In per capita terms Chile is the top bread consuming country in the
Americas with 220 lbs. per year, second globally only to Germany with
235lbs. During the 90\`s sales dropped given the "light products"
penetration in the market, nevertheless, the sector is expected to grow
to 240lbs. per capita by 2010.

The bakery market is estimated at US\$1.4 billion; 80% of the companies
are small or medium size.

Three percent of household income is spent on bread, compared to 1% in
developed nations. Currently the bakery market is dominated by Ideal,
controlled by the Mexican group Bimbo, followed by Castaño, and San
Camilo. In second place in importance are the bakeries in the
hypermarkets and megamarkets owned by the leading supermarket chains.
Supermarkets cover 20% of the bread market. These are followed by a
large number of smaller neighborhood bakeries that do not have the
purchasing power of the big ones and do not buy their ingredients
direct.

Cookies and other baked goods (Dunkin Donuts is present in Chile) are
made by a few large companies, especially McKay (part of Nestlé, 40%
market share and top of mind) and Costa 30% (Carozzi), as well as
imported brands. But the Chilean cookie market is small compared to
bread: barely 5 lbs. per capita per year compared to over 20 lbs. in the
U.S. and Europe.

+---------------+--------------+--------------+---------+-------------+
| **Company**   | **Sales      | **End-Use    | **Pro   | **          |
|               | (US\$)       | Channels**   | duction | Procurement |
| **(Product    | 2004**       |              | Locati  | Channels**  |
| Types)**      |              |              | on(s)** |             |
+---------------+--------------+--------------+---------+-------------+
| Ideal - Bimbo | n/a          | Retail       | Chile   | Direct      |
| Chile         |              |              | (1)     | (Local and  |
|               |              |              |         | Foreign)    |
+---------------+--------------+--------------+---------+-------------+
| Panaderías    | n/a          | Retail and   | Chile   | Direct      |
| Castaño       |              | HRI          | (2 - 35 | (Local and  |
| (bakery       |              |              | stores) | Foreign);   |
| chain)        |              |              |         | D           |
|               |              |              |         | istributors |
|               |              |              |         | (Local);    |
|               |              |              |         | Importers   |
+---------------+--------------+--------------+---------+-------------+
| San Camilo    | n/a          | Retail and   | Chile   | Direct      |
| (bakery       |              | HRI          | (20     | (Local);    |
| chain)        |              |              | s       | D           |
|               |              |              | tores/7 | istributors |
|               |              |              | pro     | (Local)     |
|               |              |              | duction |             |
|               |              |              | loc     |             |
|               |              |              | ations) |             |
+---------------+--------------+--------------+---------+-------------+

**7) Snack Foods (Savory and Sweet Snacks and Nuts)**

The savory snacks market in Chile is estimated at around US\$150 million
with over 24,000 tons.

There are 5,000 tons per year of sponge cakes commercialized in Chile.
Schools are the main sales channel. Ideal has 60% of the market share of
this product.

Snack bars saw the most benefit from the increased trend towards
snacking. They should lead the packaged food market in both volume and
value growth in 2006. Increased availability of snack bars in outlets
like convenience stores and kiosks, consumers' healthy perception of the
product and increased snacking between meals are all factors in the
strong growth.

Potato chips are the most lucrative product category. Savory snacks,
snack nuts and popcorn follow.

[]{.mark}

Frito-Lay (Owner of Evercrisp Chile) has 47% of the market share of
sales to supermarkets, followed by ICB (Marco Polo and Don Juan) with
21%.

[]{.mark}

+---------------+--------------+--------------+---------+-------------+
| **Company**   | **Sales      | **End-Use    | **Pro   | **          |
|               | (US\$)       | Channels**   | duction | Procurement |
| **(Product    | 2004**       |              | Locati  | Channels**  |
| Types)**      |              |              | on(s)** |             |
+---------------+--------------+--------------+---------+-------------+
| Evercrisp     | N/A          | Retail and   | Chile   | N/A         |
| (Frito-Lay -  |              | HRI          | (1)     |             |
| snack foods)  |              |              |         |             |
+---------------+--------------+--------------+---------+-------------+
| ICB Marcopolo | US\$110      | Retail and   | Chile   | Direct      |
| (Café do      | million      | HRI          | (3)     | (Local and  |
| Brasil -      |              |              |         | Foreign)    |
| snacks, nuts) |              |              |         |             |
+---------------+--------------+--------------+---------+-------------+

**8) Beverages, Non-Alcoholic**

During 2005 the sector sold US\$1.05 billion, amounting to 1.8 billion
liters of which 85% were carbonated beverages, 9% mineral water and 6%
juices and nectars. Chileans consumed on average 111 liters per capita
of non alcoholic beverages in 2005; including 94 liters of carbonated
beverages, 10 liters of mineral water and seven liters of juices and
nectars.

Non-alcoholic beverages are the third most consumed food and beverage
category by Chileans, after bread and meat. They are distributed through
traditional channels (63%), supermarkets (25%) and consumption in food
establishments (12%).

Last year, Coca-Cola (including Embonor and Polar) had a 65.6% soft
drink market share, followed by Ecusa (CCU-Pepsi) with 21.5%. According
to Feller Rate in mineral water, Ecusa has 64% market share (brands
Cachantún and Porvenir); followed by Andina (Vital).

In juices and desserts, Carozzi is the most important player with 60% of
the market.

According to the Association of non-alcoholic beverages (Anber) there is
room for new products, especially under the health and sport concept,
such as mineral waters or light/diet beverages which are growing over
10% per year. Also consumption of energy beverages is becoming a new
trend in Chile, representing 1% of the market with 155,000 cans sold per
month.

+---------------+--------------+--------------+---------+-------------+
| **Company**   | **Sales      | **End-Use    | **Pro   | **          |
|               | (US\$)**     | Channels**   | duction | Procurement |
| **(Product    |              |              | Locati  | Channels**  |
| Types)**      | **2004**     |              | on(s)** |             |
+---------------+--------------+--------------+---------+-------------+
| Coca-Cola     | US\$160      | Retail and   | Chile   | Direct      |
| Embonor (non  | million      | HRI          | (6)     | (Local and  |
| alc.          |              |              | Bolivia | Foreign)    |
| beverages)    |              |              | (6)     |             |
+---------------+--------------+--------------+---------+-------------+
| Embot. Andina | US\$559      | Retail       | Chile   | Direct      |
| (Coca-Cola,   | million      |              | (3)     | (Local and  |
| non alc.      |              |              | Brazil  | Foreign)    |
| beverages)    |              |              | (2)     |             |
|               |              |              | Ar      |             |
|               |              |              | gentina |             |
|               |              |              | (2)     |             |
+---------------+--------------+--------------+---------+-------------+
| Embotelladora | US\$133      | Retail       | Chile   | Direct      |
| Coca-Cola     | million      |              | (3)     | (Local);    |
| Polar (non    |              |              | Ar      | Distr       |
| alc.          |              |              | gentina | istributors |
| beverages)    |              |              | (4)     | (Local);    |
|               |              |              |         | Importers   |
+---------------+--------------+--------------+---------+-------------+

**9) Beverages, Alcoholic**

The Chilean beer market is estimated at US\$450 million and the annual
consumption per capita is about 27 liters. Only10% of this market is
Premium.

Compañía de Cervecerías Unidas (CCU) owned by the Luksic group, has a
90% share of the market, followed by Cervecerías Chile, controlled by
Inbev with 10%.

35% of beer sales are registered during the summer season, specially
from December to February. In Chile only five of the 44 types of beer
that exist are produced.

[]{.mark}

Wine and alcohol exports grew from US\$840 million in 2004 to US\$890
million during 2005. However, future growth will not be helped by the
weak dollar and cannibalism among Chilean wineries with foreign
importers (US and European importers usually take on a new Chilean wine
at the expense of another Chilean winery).

Consumption in Chile is a very low 16 liters per capita (compared to
England 22 liters or Argentina 40 liters), so wineries are trying to
increase this consumption and to specifically incentivize the
consumption of premium wines.

  ------------------------------------------------- ---------------------
  **Main Wine Exporters**                           

  **Jan- Oct 2005**                                 

  **Company**                                       **Million US\$**

  Viña Concha y Toro S.A.                           110.2

  Viña San Pedro S.A.                               34.1

  Viña Santa Rita S.A.                              33.6

  Viña Cono Sur Ltda.                               27.5

  Viña Errázuris Panquehue S.A.                     19.3

  Viña Undurraga S.A.                               18.4

  Viña Montes S.A.                                  17.9

  Viña Carmen S.A.                                  16.4

  Viña Tarapacá Ex Zavala S.A.                      15.8

  Vinos de Chile S.A. Vinex                         13.6

  Viña Santa Carolina S.A.                          11.1

  Viña Valdivieso S.A.                              10.4

  Viña La Rosa S.A.                                 10.4

  Viña Los Vascos S.A.                              10.3

  Bodegas y Viñedos Sta. Emiliana                   10.1

  Source: El Mercurio                               
  ------------------------------------------------- ---------------------

[]{.mark}

In the pisco market, CCU had 17% with Ruta Norte and Ruta Sour,
competing with Control and Capel, pisco companies of a long tradition
that used to share, in almost equal parts, a US\$150 million market. In
2005 CCU agreed to buy 80% of Capel, becoming the biggest actor in the
sector with a 50% market share.

[]{.mark}

Licores Mitjans and Fehrenberg (Empresas Santa Carolina) are the leading
liqueur manufacturers competing with abundant imports.

+---------------+--------------+--------------+---------+-------------+
| **Company**   | **Sales      | **End-Use    | **Pro   | **          |
|               | (US\$)**     | Channels**   | duction | Procurement |
| **(Product    |              |              | Locati  | Channels**  |
| Types)**      | **2004**     |              | on(s)** |             |
+---------------+--------------+--------------+---------+-------------+
| Viña Concha y | \$338        | Retail, HRI  | Chile   | D           |
| Toro          | million      | and Exports  | (10)    | istributors |
|               |              |              |         | (Local);    |
|               |              |              |         | Importers   |
+---------------+--------------+--------------+---------+-------------+
| CCU           | \$700        | Retail and   | Chile   | D           |
|               | millions     | HRI          | (19)    | istributors |
|               | (Including   |              |         | (Local);    |
|               | wine (Viña   |              |         | Importers   |
|               | San Pedro    |              |         |             |
|               | and 3 more), |              |         |             |
|               | beer (47% of |              |         |             |
|               | total sales) |              |         |             |
|               | non          |              |         |             |
|               | alcoholic    |              |         |             |
|               | beverages    |              |         |             |
|               | and          |              |         |             |
|               | c            |              |         |             |
|               | onfectionary |              |         |             |
|               | products     |              |         |             |
+---------------+--------------+--------------+---------+-------------+

**10) Dry Goods and Condiments (Canned Soup, Dry Mixes, Pasta, Pet Food,
Seasonings)**

[]{.mark}

The condiment market is estimated at US\$20 million. ICB is the leader
with its brands Don Juan and Marco Polo with 39% of the sector sales,
followed by Gourmet, a Chilean company founded in 1958 with sales of
US\$ 6 million. Other brands include Sabu, McCormick, Frutisa,
Carmencita, the Italian Drogheria & Alimentari and the supermarket
brands. Almost all of the seasonings are imported from different
countries worldwide.

Chile is the third largest country in per capita pasta consumption with
8.7 Kg per person per year. Production of pasta in Chile achieves
130,000 tons, exporting only 18,000. Carozzi is the most important
company in the pasta sector, with 51% of market share and close to 100%
of penetration in Chilean homes. In 2003 Carozzi bought Parma, adding 9%
of the market share. Lucchetti (now called Indalsa owned by Córpora Tres
Montes) is the second company with 36% of the pasta market. Close to 75%
of the pasta is sold through supermarkets, the rest through traditional
retailers.

+---------------+--------------+--------------+---------+-------------+
| **Company**   | **Sales      | **End-Use    | **Pro   | **          |
|               | (US\$)       | Channels**   | duction | Procurement |
| **(Product    | 2004**       |              | Locati  | Channels**  |
| Types)**      |              |              | on(s)** |             |
+---------------+--------------+--------------+---------+-------------+
| Carozzi       | US\$450      | Retail, HRI  | Chile   | Direct      |
| (pastas,      | million      | and Exports  | (6)     | (Local and  |
| c             |              |              | Peru    | Foreign)    |
| onfectionery, |              |              | (3)     | D           |
| sauces,       |              |              | Ar      | istributors |
| dairy)        |              |              | gentina | (Local and  |
|               |              |              | (3)     | Foreign)    |
+---------------+--------------+--------------+---------+-------------+
| Lucchetti     | N/A          | Retail, HRI  | Chile   | Direct      |
| (pasta)       |              | and Exports  | (3)     | (Local and  |
|               |              |              |         | Foreign)    |
+---------------+--------------+--------------+---------+-------------+
| ICB (Marco    | US\$110      | Retail and   | Chile   | Direct      |
| Polo, Don     | million      | HRI          | (3)     | (Local)     |
| Juan)         |              |              |         |             |
+---------------+--------------+--------------+---------+-------------+

Canned soup is not as popular in Chile as it is in the US, but powdered
or dehydrated soup in envelopes is very popular. Maggi (Nestle) is the
traditional leader, but others like Naturezza, Knorr and Ipal have
gained market through heavy advertising.

According to AC Nielsen, Chileans spend approximately US\$35 per year in
food for dogs and cats. However, 70% of the 4 million pet owners mix
home food with pet food. In Chile there are 120,000 tons of pet food
consumed annually amounting to US\$120 million. Pet food points of sale
are predominantly supermarkets, home centers, fairs (ferias), stores,
pet shops and veterinary clinics.

The main pet food importers that distribute to supermarkets and retail
stores are Effem (Whiskas), Nestle (Friskies, Purina, Alpo), Café do
Brazil (Canta Claro), and Pet Market (Bil Jac, Precept, ANF, Star Pro,
Pet Time, Must, and Windy Hill). Major international brands such as
Pedigree, Friskies, Whiskas Eukanuba and Champion are all present in the
Chilean market.

[]{.mark}

  ----------------------------------- -----------------------------------
  **Quality**                         **Brand**

  Premium                             Alpo, Dog Chow, Pedigree, Purina

  Mid-range                           Champ, Doko, Champion, Master Dog

  Low-end                             Cachupin, Rocky
  ----------------------------------- -----------------------------------

[]{.mark}

With the FTA, U.S. pet foods gained preferential access as tariffs fell
to zero. This put U.S. products on a more competitive footing with
Argentina, by far the largest supplier to Chile with annual sales of
nearly \$17 million.

[]{.mark}

**11) Specialized Food Ingredients (Additives, Preservatives,
Thickeners, Sweeteners)**

This sector is increasingly controlled by Chinese products. Large
companies such as Carozzi import most of their ingredients from China
because it is cheaper even than buying locally. Cape Food is one of the
important Chinese distributors of sweeteners in Chile, in additives
Granotec is the leader and Hochschild distributes imported
preservatives. U.S. products are not very popular because of their cost.

Other important companies are: 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.

+---------------+--------------+--------------+---------+-------------+
| **Company**   | **Sales      | **End-Use    | **Pro   | **          |
|               | (US\$)       | Channels**   | duction | Procurement |
| **(Product    | 2004**       |              | Locati  | Channels**  |
| Types)**      |              |              | on(s)** |             |
+---------------+--------------+--------------+---------+-------------+
| Cramer        | N/A          | Food         | Chile   | Direct      |
| (colors,      |              | Processor    | (2) USA | (Local and  |
| flavorings,   |              | Companies,   | (1) and | Foreign);   |
| thick, etc.)  |              | Beverages,   | 11      | D           |
|               |              | ph           | other   | istributors |
|               |              | armaceutical | co      | (Local and  |
|               |              | l            | untries | Foreign);   |
|               |              | aboratories, |         | Importers   |
|               |              | cosmetics,   |         |             |
|               |              | detergent    |         |             |
|               |              | producers    |         |             |
|               |              | and          |         |             |
|               |              | Households   |         |             |
+---------------+--------------+--------------+---------+-------------+
| Duas Rodas    | N/A          | Directly to  | Brazil  | Direct      |
| Chile (food   |              | food         | (2)     | (Local and  |
| additives)    |              | manufacturer | Chile   | Foreign)    |
|               |              |              | (1)     |             |
|               |              |              | Ar      |             |
|               |              |              | gentina |             |
|               |              |              | (1)     |             |
+---------------+--------------+--------------+---------+-------------+
| Iansa (sugar) | \$224        | Retail and   | Chile   | Tomatoes    |
|               | million      | HRI          | (12)    | and Fruit:  |
|               |              |              | Perú    | Direct      |
|               |              |              | (1)     | (Local);    |
|               |              |              | Brasil  | Own         |
|               |              |              | (1)     | Production; |
|               |              |              |         | Sugar:      |
|               |              |              |         | Importers,  |
|               |              |              |         | Direct      |
|               |              |              |         | (Local)     |
+---------------+--------------+--------------+---------+-------------+
| Puratos de    | N/A          | Bakery,      | Around  | From Head   |
| Chile         |              | s            | the     | Office in   |
| S.A.(bread    |              | upermarkets, | world   | Belgium;    |
| and pasta     |              | breadmaking  | (57)    | Direct      |
| industry      |              | plants       | Chile   | (Local);    |
| ingredients)  |              |              | (2)     | D           |
|               |              |              |         | istributors |
|               |              |              |         | (Foreign)   |
+---------------+--------------+--------------+---------+-------------+

**12) Prepared Meals (Mixed Ingredient "Ready-to-Eat" or "Ready-to-Heat"
Retail and Food Service Meals and Entrees)**

Sociodemographic changes involving an increase in the number of working
women, new active lifestyles among younger professional urban sectors
have produced an increasing trend towards consumption of ready-made or
prepared foods. This, together with general economic growth means
opportunity for U.S. exporters who already sell US\$44 million in this
subsector a year to Chile's 16 million consumers.

[]{.mark}

Local food manufacturers, quick to respond to the new demand, prepare
convenience foods such as prepared pizzas, Italian dishes, Chilean-style
frozen casseroles and sandwiches.

Higher income families consume more prepared meals because of price.

## D. Sector Trends

Between 1974 and 2005, materialized foreign investment totaled US\$ 59
billion. Of this amount, almost 90% has entered the country since 1990.
Although mining takes the lion's share of this, the food industry is the
fourth with US\$2 billion.

As the market and the economy develop and mature, foreign direct
investment is shifting from start up operations to purchasing existing
ones.

Foreign direct investment has long been present in the Chilean food
processing industry, with the likes of Nestlé, Coca-Cola, Pepsico, the
N.Z. Dairy Board and others currently as key players. But the bulk of
the industry is controlled by large Chilean capital companies that are
still growing larger through mergers and growth into neighboring
countries (Brazil, Argentina, Peru, etc.).

Some local companies are already producing for exports in addition to
their local sales. New free trade agreements with countries like China,
will require production to expand and to develop new and better products
to export into new markets in addition to other traditional export
markets.

Chilean processed food quality standards are in most cases world-class
and require top quality ingredients, while price will continue to be the
deciding factor at time of purchase. Customer service and fast delivery
are also important factors as processors increasingly deal directly with
local and foreign suppliers.

The light, or diet, and healthy food trends are gaining momentum as
obesity is recognized as a widespread and hard-to-control problem at all
age levels.

Organic foods, though not very much in demand here yet, are on the rise.

Easily prepared foods and snacks are growing rapidly as more people eat
out-of-home and on the run, and less time is available for lengthy food
preparation at home by a shrinking availability of domestic maids.

# Section III. Competition

The leading local products are produce, poultry and pork, a good variety
of seafood (including salmon), fruits and wine. Imported products are
mainly beef from Argentina, Brazil and Uruguay, and legumes and cereals
such as corn and wheat from Argentina and Canada. Chileans still value
freshness as much as possible but do consume large amounts of frozen
food, mostly local, for storage convenience and year-round availability.

[Comparative Chilean Food and Agricultural Product Imports, 2004 vs.
Jan- Nov 2005, Total Imports vs. US Imports, by Harmonized Tariff System
chapters]{.underline}

  ------------- --------------- ----------- ----------- --------- --------- ------- -------
  **Chapter**   **Description   2004        2005        2004      2005      2004    2005
                (from HSC)**                                                        

                                Total, US\$ Total, US\$ U.S. US\$ U.S. US\$ US\$ %  US\$ %
                                CIF x 1000  CIF x 1000  CIF x     CIF x             
                                                        1000      1000              

  1             Live Animals    4,386       4,068       1,479     2,198     33.7%   54%

  2             Meat and edible 271,426     322,417     183       416       0.07%   0.1%
                meta offal                                                          

  3             Fish,           13,731      15,475      179       188       1.3%    1.2%
                crustaceans &                                                       
                aquatic                                                             
                invertebrates                                                       

  4             Dairy prods;    46,137      72,047      4,362     4,139     9.4%    5.7%
                birds eggs;                                                         
                honey; ed.                                                          
                Animal pr.                                                          
                Nesoi                                                               

  5             Products of     25,685      28,918      1,543     2,122     6.0%    7.3%
                animal origin,                                                      
                nesoi                                                               

  6             Live trees,     7,416       7,872       634       379       8.5%    4.8%
                plants, bulbs                                                       
                etc.: cut                                                           
                flowers, etc.                                                       

  7             Edible          17,842      21,944      143       2,181     8%      10%
                vegetables &                                                        
                certain rotos &                                                     
                tubers                                                              

  8             Edible fruits & 45,332      50,782      6,777     7,709     15%     15.1%
                nuts; citrus                                                        
                fruti and melon                                                     
                peel                                                                

  9             Coffee, tea,    42,676      51,684      880       502       2.0%    1.0%
                mate & spices                                                       

  10            Cereals         234,246     217,302     11,489    11,502    5.0%    5.3%

  11            Milling         12,594      19,347      247       109       2.0%    0.6%
                products; malt;                                                     
                starch; inulin;                                                     
                wheat gluten                                                        

  12            Oliz sedes,     83,411      8,129       386       3,584     4.6%    4.4%
                etc.; misc.                                                         
                Grains, sedes,                                                      
                fruit, plant,                                                       
                etc.                                                                

  13            Lac; gums,      11,472      12,719      3,203     3,612     28.0%   28.4%
                resins & other                                                      
                vegetable sap &                                                     
                extract                                                             

  14            Vegetables      188         245         65        12        0.03%   5.1%
                planting                                                            
                materials &                                                         
                products nesoi                                                      

  15            Animal or       245,127     21,579      10,628    652       4.3%    0.3%
                vegetable fats,                                                     
                Oliz etc. &                                                         
                waxes                                                               

  16            Edible          29,119      31,299      341       347       1.2%    1.1%
                preparations of                                                     
                meta, fish,                                                         
                crustaceans,                                                        
                etc.                                                                

  17            Sugars and      983         97,592      1,493     2,135     1.5%    2.2%
                sugar                                                               
                confectionary                                                       

  18            Cocoa and cocoa 46,969      44,942      1,015     759       2.2%    1.7%
                preparations                                                        

  19            Prep. Cereals,  39,927      44,042      2,967     2,325     7.4%    5.3%
                flour, starch                                                       
                or milk; bakers                                                     
                wares                                                               

  20            Prep.           41,485      40,373      1,947     248       4.7%    6.1%
                Vegetables,                                                         
                fruit and nuts                                                      
                or other plant                                                      
                parts                                                               

  21            Miscellaneous   54,761      632         14,764    18,349    27%     29.0%
                edible                                                              
                preparations                                                        

  Total:                        1,274,913   1,113,408   64,725    63,468             

                                                                                     

  22            Beverages,      55.170      53.919      2.468     1.885     4.5%    3.5%
                spirits and                                                         
                vinegars                                                            
  ------------- --------------- ----------- ----------- --------- --------- ------- -------

[Principal Competing Countries of Origin for Selected Chapters, Jan-Dec
2004]{.underline}

  --------- -------------------------------------------------------------
  Chapter   Main Competitors - Percent of Total Imports

  2         Brazil -- 76.3%, Argentina -- 14.3%, Uruguay -- 4.4%,
            Paraguay -- 3.4%

  4         Argentina -- 44.8%, Uruguay -- 14.5%, U.S.A. -- 9.4%, Brazil
            -- 9.3%

  7         Canada -- 53.0%, China -- 17.2%, Argentina -- 8.1%, USA --
            8.0%

  8         Ecuador -- 69.6%, USA -- 14.9%, Argentina -- 3.2%, Mexico --
            3.2%

  9         Brazil -- 26.7%, Sri Lanka -- 23.4%, Argentina -- 21.7%, Peru
            -- 5.4%

  10        Argentina -- 66.1%, Canada -- 13.0%, Thailand -- 7.9%, USA --
            4.9%

  11        Argentina -- 52.0%, Holland -- 19.6%, Germany -- 5.8%,
            Uruguay -- 4.8%

  12        Argentina -- 57.8%, Brazil -- 6.8%, Paraguay -- 4.7%, USA --
            4.6%

  15        Argentina -- 65.8%, Peru -- 16.2%, USA -- 4.3%, Brazil --
            2.7%

  16        Ecuador -- 46.1%, Colombia -- 13.6%, Tailandia -- 12.4%,
            Brazil -- 7.5%

  17        Argentina -- 42.4%, Colombia -- 29.6%, Brazil -- 7.8%,
            Guatemala -- 7.3%

  18        Brazil -- 33.0%, Argentina -- 24.7%, Ecuador -- 14.4%,
            Colombia -- 4.0%

  19        Argentina -- 38.7%, Brazil -- 15.6%, Peru -- 10.9%, Mexico --
            7.8%

  20        Argentina -- 37.0%, Brazil -- 10.2%, Thailand -- 9.9%,
            Ecuador -- 9.0%

  21        USA -- 26.9%, Argentina -- 15.8%, Brazil -- 11.7%, Colombia
            -- 7.3%

  22        UK -- 30.0%, Argentina -- 22.0%, Ireland -- 7.9%, Mexico --
            5.8%
  --------- -------------------------------------------------------------

# Section IV. Best Product Prospects

We feel that it is crucial to stress that, especially in the case of
U.S. suppliers, how to sell effectively in Chile is at least as
important as determining which ingredients have market potential.
Sources mentioned that U.S. producers of food ingredients (as is also
true for other product categories) often have small market shares
because their European, Asian and other competitors are better marketers
and develop and follow more refined and persistent sales strategies.
U.S. food ingredient suppliers should research the market, communicate
directly and actively with large clients, follow through on quote
requests and fix long-term sales strategies on local prices and profit
margins (among other factors) which are usually lower than those in the
U.S.

A. [Products Present in the Market Which Have Good Sales
Potential]{.underline} - The U.S. food ingredients that have good market
potential can be observed in the table below. 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. These products include coloring agents, flavorings,
aromas, stabilizers and chemicals, certain dairy derivatives (weigh,
etc.), spices and others. Less sophisticated products like dairy
products are normally more competitive from nearby sources (e.g.
Argentina, Brazil), but the U.S. has a strong chance with new-to-market
products.

B. [Products Not Present in Significant Quantities Which Have Good Sales
Potential]{.underline} - U.S. products that are still fairly unknown in
the market but are being introduced by food chains such as T.G.I.
Friday's or Tony Roma's, such as specialty cheeses and other
ingredients, including sauces, have a good potential as the market
continues becoming more global.

C. [Products Not Present Because They Face Significant
Barriers]{.underline} - There are very few products not present in the
market because of significant barriers. The main one is poultry because
the Agricultural and Livestock Service has a non-specific Salmonella
count that makes it difficult to import. Fresh meats in general are much
more difficult to import than frozen or packaged processed meats for
health regulation reasons. The U.S. and Chile are engaged in technical
discussions and access for these products should open in the near
future.

The table below includes best prospects where U.S. producers are already
in the market and others where they should be able to compete if a
stronger marketing effort is made.

[Key Food Ingredients with Potential for US Producers, Principal
Competing Countries, Jan-Dec 2004]{.underline}

+-------+----------------+------+------+-----+-----------------------+
| **HS  | **Product**    | **To | **U  | **  | **Main Competing      |
| C     |                | tal, | S,** | US, | Countries**           |
| ode** |                | US\$ |      | M   |                       |
|       |                | CIF  | **   | kt. |                       |
|       |                | x10  | US\$ | S   |                       |
|       |                | 00** | CIF  | har |                       |
|       |                |      | x10  | e** |                       |
|       |                |      | 00** |     |                       |
+-------+----------------+------+------+-----+-----------------------+
| 0402  | Powdered milk  | 6    | 1    | 0.  | Uruguay-39%,          |
| .1000 | with 1.5% or   | ,279 | ,206 | 02% | Argentina 36%, Brazil |
|       | less fat       |      |      |     | 25%                   |
+-------+----------------+------+------+-----+-----------------------+
| 0402  | Powdered milk  | 8    | 0.0  | 0   | Argentina-87%,        |
| .2118 | with 26% or    | ,092 |      | .0% | Uruguay 10%, New      |
|       | more fat       |      |      |     | Zealand 2%            |
+-------+----------------+------+------+-----+-----------------------+
| 0404  | Whey           | 5    | 1    | 29% | Argentina 24%, New    |
| .1000 |                | ,368 | ,564 |     | Zealand 13%, Uruguay  |
|       |                |      |      |     | 11%                   |
+-------+----------------+------+------+-----+-----------------------+
| 0406  | Mozzarella     | 2    | 0.0  | 0   | Argentina-55%, Brazil |
| .1030 | cheese         | ,864 |      | .0% | 40%, Uruguay 5%       |
+-------+----------------+------+------+-----+-----------------------+
| 0406  | Gouda cheese   | 4    | 0.0  | 0   | Argentina-86%,        |
| .9010 |                | ,051 |      | .0% | Uruguay 13%, Germany  |
|       |                |      |      |     | 0.3%                  |
+-------+----------------+------+------+-----+-----------------------+
| 0406  | Cheese, other  | 1    | 9.1  | 0   | Argentina-28%,        |
| .9090 |                | ,509 |      | .6% | France-24%,           |
|       |                |      |      |     | Holland-11%           |
+-------+----------------+------+------+-----+-----------------------+
| 1001  | Durum wheat    | 15   | 0.0  | 0   | Canada-97%, Argentina |
| .1000 |                | ,151 |      | .0% | 2.5%                  |
+-------+----------------+------+------+-----+-----------------------+
| 1001  | Wheat other    | 29   | 7    | 24% | Canada-36%,           |
| .9000 | than Durum     | ,617 | ,258 |     | Argentina-35%,        |
|       |                |      |      |     | Paraguay-3.6%,        |
+-------+----------------+------+------+-----+-----------------------+
| 1108  | Corn starch    | 2    | 193  | 7%  | Argentina-91%,        |
| .1200 |                | ,709 |      |     | France-1%             |
+-------+----------------+------+------+-----+-----------------------+
| 1109  | Wheat gluten   | 3    | 0.0  | 0   | Holland-72%,          |
| .0000 |                | ,088 |      | .0% | Germany-15%, ,        |
|       |                |      |      |     | France-7%             |
+-------+----------------+------+------+-----+-----------------------+
| 1502  | Animal fat,    | 4    | 312  | 7   | Uruguay-57%,          |
| .0010 | rendered       | ,006 |      | .7% | Argentina-35%         |
+-------+----------------+------+------+-----+-----------------------+
| 1504  | Fish-liver     | 48   | 8    | 18% | Peru-81%              |
| .2010 | oils, not      | ,437 | ,807 |     |                       |
|       | refined        |      |      |     |                       |
+-------+----------------+------+------+-----+-----------------------+
| 1509  | Olive oils,    | 964  | 3.7  | 0   | Spain-61%,            |
| .9000 | not virgin     |      |      | .3% | Argentina-32%, Italy  |
|       |                |      |      |     | 6%                    |
+-------+----------------+------+------+-----+-----------------------+
| 1516  | Vegetable fats | 4    | 195  | 4   | Ecuador-43%,          |
| .2010 | and their      | ,142 |      | .7% | Holland-23%,          |
|       | fractions      |      |      |     | Colombia-10%          |
+-------+----------------+------+------+-----+-----------------------+
| 1516  | Vegetable      | 9    | 593  | 6%  | Sweden-25%,           |
| .2020 | shortening     | ,780 |      |     | Ecuador-19%,          |
|       |                |      |      |     | Colombia-17%          |
+-------+----------------+------+------+-----+-----------------------+
| 1517  | Vegetable oil  | 47   | 0.0  | 0   | Argentina-100%        |
| .9010 | mixtures, not  | ,543 |      | .0% |                       |
|       | refined        |      |      |     |                       |
+-------+----------------+------+------+-----+-----------------------+
| 1517  | Vegetable oil  | 96   | 2.0  | 0   | Argentina-99%,        |
| .9020 | mixtures,      | ,260 |      | .0% | Malasia-0.1%          |
|       | refined        |      |      |     |                       |
+-------+----------------+------+------+-----+-----------------------+
| 1517  | Mixes of       | 46   | 0.1  | 0   | Argentina-77%,        |
| .9090 | animal with or | ,540 |      | .0% | Denmark-5%, Spain-3%  |
|       | without        |      |      |     |                       |
|       | vegetable oils |      |      |     |                       |
|       | and fats       |      |      |     |                       |
+-------+----------------+------+------+-----+-----------------------+
| 1701  | Refined cane   | 52   | 0.0  | 0.0 | Colombia--42%,        |
| .9910 | sugar          | ,706 |      |     | Argentina--26%,       |
|       |                |      |      |     | Brazil--10%           |
+-------+----------------+------+------+-----+-----------------------+
| 1702  | Glucose and    | 1    | 151  | 8   | Argentina-76%,        |
| .3000 | glucose syrup, | ,704 |      | .8% | France-10%,           |
|       | without        |      |      |     | Germany-2%            |
|       | fructose       |      |      |     |                       |
+-------+----------------+------+------+-----+-----------------------+
| 1702  | Other sugars   | 1    | 3.6  | 0   | Argentina-46%,        |
| .9090 |                | ,502 |      | .2% | Belgium-37%,          |
|       |                |      |      |     | Brazil-12%            |
+-------+----------------+------+------+-----+-----------------------+
| 1805  | Cocoa powder,  | 11   | 21.5 | 0   | Ecuador-38%,          |
| .0000 | not containing | ,167 |      | .2% | Brazil-25%,           |
|       | sugar or       |      |      |     | Holland-9%            |
|       | sweeteners     |      |      |     |                       |
+-------+----------------+------+------+-----+-----------------------+
| 1905  | Bakery or      | 2    | 543  | 21% | Argentina-31%,        |
| .9090 | pastry         | ,609 |      |     | Brazil-11%,           |
|       | products nesoi |      |      |     | Germany-9%            |
+-------+----------------+------+------+-----+-----------------------+
| 2106  | Protein        | 6    | 4    | 69% | Brazil-15%, New       |
| .1010 | concentrates,  | ,562 | ,523 |     | Zealand-12%,          |
|       | not textured   |      |      |     | Argentina-1%          |
+-------+----------------+------+------+-----+-----------------------+
| 2106  | Edible         | 22   | 6    | 30% | Argentina-15%,        |
| .9090 | preparations   | ,178 | ,724 |     | Belgium-10%,          |
|       | nesoi          |      |      |     | Holland-9%,           |
+-------+----------------+------+------+-----+-----------------------+

[Comparative Table, Key Food Ingredients with Potential for U.S.
Producers, (2004 - Jan-Nov 2005)]{.underline}

+---------+---------+---------+---------+---------+---------+---------+
| **HS    | *       | *       | *       | *       | *       | *       |
| Code**  | *2004** | *2005** | *2004** | *2005** | *2004** | *2005** |
|         |         |         |         |         |         |         |
|         | **      | **      | **US**  | **US**  | **US**  | **US**  |
|         | Total** | Total** |         |         |         |         |
|         |         |         | **US\$  | **US\$  | *       | *       |
|         | **      | **US\$  | CIF     | CIF     | *Market | *Market |
|         | US\$CIF | CIF     | x1000** | x1000** | Share** | Share** |
|         | x1000** | x1000** |         |         |         |         |
+---------+---------+---------+---------+---------+---------+---------+
| 04      | 6,279   | 14,651  | 1,206   | 0.0     | 0.02%   | 0.0%    |
| 02.1000 |         |         |         |         |         |         |
+---------+---------+---------+---------+---------+---------+---------+
| 04      | 8,092   | 15,202  | 0.0     | 0.0     | 0.0%    | 0.0%    |
| 02.2118 |         |         |         |         |         |         |
+---------+---------+---------+---------+---------+---------+---------+
| 04      | 5,368   | 8,209   | 1,564   | 2,789   | 29%     | 34%     |
| 04.1000 |         |         |         |         |         |         |
+---------+---------+---------+---------+---------+---------+---------+
| 04      | 2,864   | 5,653   | 0.0     | 0.7     | 0.0%    | 0.0%    |
| 06.1030 |         |         |         |         |         |         |
+---------+---------+---------+---------+---------+---------+---------+
| 04      | 4,051   | 9,092   | 0.0     | 0.0     | 0.0%    | 0.0%    |
| 06.9010 |         |         |         |         |         |         |
+---------+---------+---------+---------+---------+---------+---------+
| 04      | 1,509   | 1,516   | 9.1     | 12      | 0.6%    | 0.8%    |
| 06.9090 |         |         |         |         |         |         |
+---------+---------+---------+---------+---------+---------+---------+
| 10      | 15,151  | 16,715  | 0.0     | 2,382   | 0.0%    | 14%     |
| 01.1000 |         |         |         |         |         |         |
+---------+---------+---------+---------+---------+---------+---------+
| 10      | 29,617  | 20,017  | 7,258   | 3,443   | 24%     | 17%     |
| 01.9000 |         |         |         |         |         |         |
+---------+---------+---------+---------+---------+---------+---------+
| 11      | 2,709   | 2,593   | 193     | 37      | 7%      | 1.4%    |
| 08.1200 |         |         |         |         |         |         |
+---------+---------+---------+---------+---------+---------+---------+
| 11      | 3,088   | 3,763   | 0.0     | 0.0     | 0.0%    | 0.0%    |
| 09.0000 |         |         |         |         |         |         |
+---------+---------+---------+---------+---------+---------+---------+
| 15      | 4,006   | 5,311   | 312     | 0.0     | 7.7%    | 0.0%    |
| 02.0010 |         |         |         |         |         |         |
+---------+---------+---------+---------+---------+---------+---------+
| 15      | 48,437  | 35,103  | 8,807   | 0.0     | 18%     | 0.0%    |
| 04.2010 |         |         |         |         |         |         |
+---------+---------+---------+---------+---------+---------+---------+
| 15      | 901     | 1,230   | 3.7     | 11.5    | 0.3%    | 0.9%    |
| 09.9000 |         |         |         |         |         |         |
+---------+---------+---------+---------+---------+---------+---------+
| 15      | 4,142   | 1,954   | 195     | 86.2    | 4.7%    | 4.4%    |
| 16.2010 |         |         |         |         |         |         |
+---------+---------+---------+---------+---------+---------+---------+
| 15      | 9,780   | 11,347  | 593     | 114     | 6%      | 1.0%    |
| 16.2020 |         |         |         |         |         |         |
+---------+---------+---------+---------+---------+---------+---------+
| 15      | 47,543  | 49,966  | 0.0     | 0.0     | 0.0%    | 0.0%    |
| 17.9010 |         |         |         |         |         |         |
+---------+---------+---------+---------+---------+---------+---------+
| 15      | 96,260  | 92,801  | 2.0     | 44      | 0.0%    | 0.0%    |
| 17.9020 |         |         |         |         |         |         |
+---------+---------+---------+---------+---------+---------+---------+
| 15      | 46,540  | 3,344   | 0.1     | 109     | 0.0%    | 3.2%    |
| 17.9090 |         |         |         |         |         |         |
+---------+---------+---------+---------+---------+---------+---------+
| 17      | 52,706  | 62,171  | 0.0     | 10      | 0.0%    | 0.0%    |
| 01.9910 |         |         |         |         |         |         |
+---------+---------+---------+---------+---------+---------+---------+
| 17      | 1,704   | 2,422   | 151     | 210     | 8.8%    | 8.7%    |
| 02.3000 |         |         |         |         |         |         |
+---------+---------+---------+---------+---------+---------+---------+
| 17      | 1,502   | 2,295   | 3.6     | 225     | 0.2%    | 10%     |
| 02.9090 |         |         |         |         |         |         |
+---------+---------+---------+---------+---------+---------+---------+
| 18      | 11,167  | 9,403   | 21.5    | 23      | 0.2%    | 0.2%    |
| 05.0000 |         |         |         |         |         |         |
+---------+---------+---------+---------+---------+---------+---------+
| 19      | 2,609   | 4,046   | 543     | 638     | 21%     | 16%     |
| 05.9090 |         |         |         |         |         |         |
+---------+---------+---------+---------+---------+---------+---------+
| 21      | 6,562   | 12,111  | 4,523   | 7,382   | 69%     | 61%     |
| 06.1010 |         |         |         |         |         |         |
+---------+---------+---------+---------+---------+---------+---------+
| 21      | 22,178  | 28,075  | 6,724   | 8,472   | 30%     | 30%     |
| 06.9090 |         |         |         |         |         |         |
+---------+---------+---------+---------+---------+---------+---------+
| NOTE:   |         |         |         |         |         |         |
| The     |         |         |         |         |         |         |
| Customs |         |         |         |         |         |         |
| Data    |         |         |         |         |         |         |
| pr      |         |         |         |         |         |         |
| esented |         |         |         |         |         |         |
| in the  |         |         |         |         |         |         |
| tables  |         |         |         |         |         |         |
| above   |         |         |         |         |         |         |
| can be  |         |         |         |         |         |         |
| o       |         |         |         |         |         |         |
| btained |         |         |         |         |         |         |
| for any |         |         |         |         |         |         |
| p       |         |         |         |         |         |         |
| roduct, |         |         |         |         |         |         |
| i       |         |         |         |         |         |         |
| mporter |         |         |         |         |         |         |
| or      |         |         |         |         |         |         |
| recent  |         |         |         |         |         |         |
| time    |         |         |         |         |         |         |
| period  |         |         |         |         |         |         |
| through |         |         |         |         |         |         |
| the     |         |         |         |         |         |         |
| U.S.    |         |         |         |         |         |         |
| Com     |         |         |         |         |         |         |
| mercial |         |         |         |         |         |         |
| Service |         |         |         |         |         |         |
| S       |         |         |         |         |         |         |
| antiago |         |         |         |         |         |         |
| post by |         |         |         |         |         |         |
| con     |         |         |         |         |         |         |
| tacting |         |         |         |         |         |         |
| the     |         |         |         |         |         |         |
| S       |         |         |         |         |         |         |
| antiago |         |         |         |         |         |         |
| Foreign |         |         |         |         |         |         |
| Agric   |         |         |         |         |         |         |
| ultural |         |         |         |         |         |         |
| Service |         |         |         |         |         |         |
| office. |         |         |         |         |         |         |
+---------+---------+---------+---------+---------+---------+---------+

Wheat - Per capita wheat consumption is 140 kilograms per year. Chileans
are the largest consumers per capita of bread in the Western Hemisphere.
Although wheat production in Chile increased significantly over the past
decade, due to a combination of increased seeded area and improved
yields, imports from the U.S. could grow as the tariffs for U.S. wheat
drop and the protective tariffs against wheat flour are phased out as
mandated by the WTO.

Pulse and Specialty Crops - During the past decade, Chile\'s production
of pulse and specialty crops have decreased significantly and imports
have increased. Dry peas and lentils, for example, were previously grown
domestically in fairly large quantities but are now mostly imported.
Though a large portion of pulse or dried legumes has been coming from
Canada, the new U.S.-Chile FTA is expected to make U.S. suppliers more
competitive in the Chilean market.

Dairy products and ingredients (such as whey as mentioned above) from
the U.S. have good potential, as do confectionery and baking
ingredients. High-quality glazes were one such product.

# Section V. Post Contact and Further Information

Mailing Address:

Office of Agricultural Affairs

U.S. Embassy, Santiago

Unit 4118

APO AA 34033-4118

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@usda.gov>

Websites:

[http://www.usembassy.cl;]() U.S. Embassy Santiago homepage. First click
on "Food & Agriculture", then click on "Marketing Reports" for research
reports, and other pages for trade leads, contacts in Chile and more.

[http://www.fas.usda.gov;]() Foreign Agricultural Service homepage.