Required Report - public distribution

**Date:** 11/29/2006

**GAIN Report Number:** CO6017

CO6017

**Colombia**

**Retail Food Sector**

**Annual**

**2006**

**Approved by:**

![](media/image1.wmf)R. Todd Drennan, Agricultural Attache

U.S Embassy

**Prepared by:**

Alicia de Jacobs, Marketing Specialist

**Report Highlights:**

Colombia is our largest export market for food and agricultural products
in Central and South America. In 2005, the United States supplied 36% or
\$791 million, of the total Colombian imports of food and agricultural
products. The supermarket sector continous to expand and offer a wider
selection of imported value-added food products. The United States and
Colombia negotiated a bilateral free trade agreement, which once
implemented, will provide additional opportunities for expanding U.S.
exports.

Includes PSD Changes: No

Includes Trade Matrix: No

Annual Report

Bogota \[CO1\]

\[CO\]

Executive Summary

In 2005, total Colombian food and agricultural imports were valued at
\$2.2 billion of which the United States accounted for 36% or \$791
million of the total, making Colombia our largest export market in
Central and South America. Agricultural imports from the United States
increased up 8.9% or \$65 million in 2005. In 2005, Colombia experienced
stronger economic growth compared to previous years. The GDP grew 5.2%
in 2005, surpassing the expected 4.5%. The increase was due to an
excellent performance of mostly foreign investments, which grew 23% over
the previous year, partially boosted by the expectations of the Free
Trade Agreement and improvement of security. In 2006, economic growth is
expected to reach over 5% for a second consecutive year.

Colombia's domestic demand and household consumption have grown steadily
over the last three years. The remarkably young population living in
urban areas has developed new taste and preferences and is more
health-conscious and selective. The growing percentage of women in the
workforce has increased the use of fast food restaurants and the demand
for new high-value added products. Economic realities and current
consumer trends indicate that buying decisions are primarily made based
on quality, price and after-sale service.

The supermarket sector in Colombia is one of the most modern in Latin
America, with estimated sales around \$4.0 billion in 2005. Despite
significant growth, fierce competition is a steady characteristic of the
Colombia's retail sector. Consumers have benefited from the "price war"
among competitors. Strategic alliances, such as Carulla-Vivero, took
place in an effort to modernize and capture market share. World-class
hypermarkets, such as Makro and Carrefour in Colombia, made their first
incursions into the country in 1998. Makro, the Dutch retailer was not
successful with its original format, mainly focused on institutional
sales, but changed administration, new services such as Makro finance
card offered to customers, improvement in product quality and variety
and open doors for the general public contributed to its recovery,
making Makro the 4^th^ retailer in sales and the number one for food
service in the country. Its sales are estimated at 70% to food service
and 30% to the general public. It has 8 stores in Colombia and continues
to expand. Carrefour has 26 stores and by the end of current year there
will be 31 stores opened in the country. Casino, a French retail firm
bought an additional 3.7% of Almacenes Exito shares, making the French
retailer the owner of 38.6% shares of Almacenes Exito. These investments
and share acquisitions have reshaped the retail sector in Colombia.
Another recent negotiation, worth mentioning, was the purchase of 19.8%
of Carulla-Vivero assets by the number one retailer Almacenes Exito.
This transaction took place in New York on August 19, 2006;
nevertheless, it is still subject to government approval. Among the
bidders for this transaction were Concosud, Wal-Mart and Carrefour.

Despite rapid modernization in the retail sector, traditional Mom and
Pop stores continue to consolidate as one of the most important
distribution channels in the country. They represent 60% of the retail
food market. The main reasons for the high percentage of sales in small
stores is convenience, the availability of credit, and the need to make
small purchases daily. These stores service mostly middle and
lower-income consumers. Likewise, the mom and pop stores are expanding
to become mini-markets that are effectively competing with supermarket
chains.

The outlook for 2007 is expected to be excellent. Additional factors are
expected to contribute to further expansion of the retail food market:
market leaders are investing in construction of new modern shopping
centers in which super/hypermarkets and cinemas are the cardinal points
-sale areas range between 6,000 and 12,000 sq meters- that offer a
complete variety of products and fulfill the increasing demand for
one-stop shopping. FENALCO, Consumers National Federation, indicates
that 18% of retail sales are done in shopping malls. Investment also
includes state-of-the-art technology, tailored logistics, such as
on-line purchases to save consumers time and money, remodeling and
improvement of service areas. The latest announcement in the retail
sector is the introduction of Falabella, a Chilean supermarket chain,
which opened the first store in the newest and most modern shopping mall
in Bogota, "Centro Comercial Santa Fe" in November 2006. Also, the
second largest retailer in Chile Ripley, plans to open in Colombia at
the end of 2007. Ripley's credit card is already accepted in
Carulla-Vivero and Carrefour stores.

Colombia and the United States concluded negotiations of a bilateral
free trade agreement in February 2006, and it was signed by both
governments in November 2006. Implementation of the agreement is
expected in the second half of 2007 or early 2008. The agreement will
provide a major boost to the Colombian economy and imports of food
products from the United States.

# Economic Outlook

Colombia continues its economic growth and stability. In 2005, GDP
growth was 5.2%, up from 4.79% in 2004. The target for 2006 is 5%.

The peso reevaluation was 9% in 2005, making imports more attractive. As
of September 2006, the peso has devaluated by 1.7% against the dollar.

The 2006 inflation target has been set at 4.5%, lower than the 4.9% in
2005.

Unemployment rate fell from 15.3% to 13.4%, but continues to hinder
faster economy recover.

![](media/image2.wmf)

![](media/image4.wmf)

![](media/image6.wmf)

**Colombian Food Industry**

-   The food industry is one of the largest and most vital sectors in
    the economy, accounting for 21% of industrial production, and 28.6%
    if beverages are included.

-   The industry has state-of-the-art technology and modern
    communications.

-   Colombia is a major producer of many intermediate and consumer-ready
    categories, such as sauces and spices, dairy products, breakfast
    cereals, confectioneries, baked goods, poultry feed, pet food,
    vegetable oils and margarines.

-   Some domestic food manufacturers import products from foreign
    affiliates and label the product with their brand name.

-   The number of store-brand products is increasing very rapidly.
    Supermarkets currently have more than 2,000 of these products on
    their shelves.

-   Colombia and Argentina have the fastest growth in the store-brand
    products (30%) in Latin America.

-   Store--brand products have strong presence in food and pet food
    categories.

-   The food-processing sector depends heavily on imports of ingredients
    like spices, dry mixes for sauces, modifiers, preservatives,
    enhancers, flavorings and thickeners.

![](media/image7.wmf)

**Colombia's Food and Agricultural Imports from the United States --
2004-2005**

+------------------+-------+-------+----------------+-------+-------+
| **PRODUCT**      | **2   | **2   | **PRODUCT**    | **2   | **2   |
|                  | 004** | 005** |                | 004** | 005** |
+------------------+-------+-------+----------------+-------+-------+
|                  | **U   |       |                | **U   |       |
|                  | S\$** |       |                | S\$** |       |
|                  |       |       |                |       |       |
|                  | *     |       |                | *     |       |
|                  | *MILL |       |                | *MILL |       |
|                  | ION** |       |                | ION** |       |
+------------------+-------+-------+----------------+-------+-------+
| Meat and Edible  | 5     | 8     | Lacs, Gums,    | 5     | 5     |
| Meat Offals      |       |       | Resins, Other  |       |       |
|                  |       |       | Vegetable      |       |       |
|                  |       |       | Saps/ Extracts |       |       |
+------------------+-------+-------+----------------+-------+-------+
| Fish, Shellfish, | 0.6   | 0.9   | Mis. Grain,    | 48    | 55    |
| Mollusks         |       |       | seeds,         |       |       |
|                  |       |       | soybeans       |       |       |
+------------------+-------+-------+----------------+-------+-------+
| Dairy Products,  | 2     | 4     | Animal or      | 16    | 14    |
| Eggs, Honey      |       |       | Vegetable Fats |       |       |
|                  |       |       | and Oils       |       |       |
+------------------+-------+-------+----------------+-------+-------+
| Products of      | 2     | 2     | Preparations   | 4.7   | 11    |
| Animal origin    |       |       | of Meat and    |       |       |
|                  |       |       | Fish           |       |       |
+------------------+-------+-------+----------------+-------+-------+
| Live Trees and   | 3     | 2.2   | Sugars and     | 3.9   | 5     |
| Plants, Bulbs,   |       |       | Confectionery  |       |       |
| Roots            |       |       | Products       |       |       |
+------------------+-------+-------+----------------+-------+-------+
| Vegetables       | 1.6   | 2.3   | Cocoa and      | 1.3   | 1.4   |
|                  |       |       | Cocoa          |       |       |
|                  |       |       | Preparations   |       |       |
+------------------+-------+-------+----------------+-------+-------+
| Edible Fruits    | 8.4   | 14    | Cereal         | 3.8   | 2.4   |
| and Nuts, Citrus |       |       | Preparations,  |       |       |
| Fruits           |       |       | Flour,         |       |       |
|                  |       |       | Starches,      |       |       |
|                  |       |       | Milk, Bakery   |       |       |
|                  |       |       | products.      |       |       |
+------------------+-------+-------+----------------+-------+-------+
| Soybean meal     | 74    | 58    | Preserved food | 4.8   | 5.5   |
+------------------+-------+-------+----------------+-------+-------+
| Grains           | 424   | 434   | Miscellaneous  | 18.5  | 21.2  |
|                  |       |       | Edible         |       |       |
|                  |       |       | Preparations   |       |       |
+------------------+-------+-------+----------------+-------+-------+
| Edible Fruits    | 8.4   | 14    | Beverages,     | 1.6   | 1.6   |
| and Nuts         |       |       | Spirits and    |       |       |
|                  |       |       | Vinegar        |       |       |
+------------------+-------+-------+----------------+-------+-------+
| Residues and     | 5     | 5     | Cotton         | 96    | 106   |
| Waste from Food  |       |       |                |       |       |
| Ind              |       |       |                |       |       |
| ustries/Prepared |       |       |                |       |       |
| by-Products      |       |       |                |       |       |
+------------------+-------+-------+----------------+-------+-------+

Source: DIAN (Revenue and Customs Agency).

# 

# Main U.S. Food Products Imported --2005

+------------+-------------------------------------------------+-------+
| **Des      | **Products**                                    | ##    |
| cription** |                                                 | ##### |
|            |                                                 | # US\ |
|            |                                                 | $ Mil |
|            |                                                 | lions |
+------------+-------------------------------------------------+-------+
| 02         | Pork, fresh or frozen, offals, pig and poultry  | 2.4   |
|            | fat                                             |       |
+------------+-------------------------------------------------+-------+
| 04         | Dairy, eggs, honey, whey, cheese and curd       | 3.9   |
+------------+-------------------------------------------------+-------+
| 07         | Vegetable                                       | 2.2   |
+------------+-------------------------------------------------+-------+
| 08         | Edible fruits and nuts                          | 14.0  |
+------------+-------------------------------------------------+-------+
| 09         | Edible animal offals                            | 3.9   |
+------------+-------------------------------------------------+-------+
| 15         | Fats and oils                                   | 13.8  |
+------------+-------------------------------------------------+-------+
| 16         | Prepared meat, fish, deboned chicken            | 10.7  |
+------------+-------------------------------------------------+-------+
| 17         | Sugars                                          | 4.8   |
+------------+-------------------------------------------------+-------+
| 18         | Cocoa, chocolate bars,                          | 1.4   |
+------------+-------------------------------------------------+-------+
| 19         | Baking related products                         | 2.3   |
+------------+-------------------------------------------------+-------+
| 20         | Preserved foods                                 | 5.5   |
+------------+-------------------------------------------------+-------+
| 21         | Miscellaneous foods                             | 21.2  |
+------------+-------------------------------------------------+-------+
| 22         | Beverages                                       | 1.6   |
+------------+-------------------------------------------------+-------+

Source: World Trade Atlas

# Market Situation for Retail Food Products

![](media/image8.wmf)

Source: AC Nielsen

-   The supermarket sector in Colombia is one of the most modern in
    Latin America, and in 2005 reported sales of \$4 billion.

-   Hyper and supermarkets share of the market is 40% with strong
    competition from traditional Mom'n Pop stores, which accounts for
    60% of total sales.

-   Fierce competition continued among retailers in 2005.

-   At present, hyper/supermarket target market is the low-medium income
    bracket consumer.

-   The "mall construction fever" in well-populated neighborhoods is
    part of the hyper/supermarket expansion strategy.

-   There are several new mall construction projects nation wide.

-   Aggressive marketing campaigns as well as fidelity cards have led
    marketing strategies.

# Distribution Channels

**Market structural changes in the retail sector**

# 

+-----------------------+----------------------------------------------+
| Structural changes    | Arrival of international competitors.        |
| and consolidation are |                                              |
| occurring rapidly     | Alliances, merging and acquisitions.         |
|                       |                                              |
|                       | Changing consumer lifestyles.                |
+-----------------------+----------------------------------------------+
| International         | International hypermarkets such Makro and    |
| competitors have      | Carrefour have brought in new formats,       |
| shaken the market     | forcing the local market to adjust and       |
|                       | become more competitive and creative.        |
+-----------------------+----------------------------------------------+
| Foreign alliances are | Alliances such as Carulla-Vivero with        |
| reshaping the market  | Almacenes Exito, Crunch-Frito Lay,           |
|                       | Unilever-Varela- Disa-Best Foods,            |
|                       | Noel-Bimbo-Danone, etc. are beneficial to    |
|                       | the food industry and to consumers.          |
+-----------------------+----------------------------------------------+
| New paradigms for     | Internet, telemarketing and supermarket      |
| businesses            | home-delivery.                               |
|                       |                                              |
|                       | Gas Marts making their presence felt in the  |
|                       | market.                                      |
+-----------------------+----------------------------------------------+
| Changing shopping     | Better-informed and more demanding           |
| habits and patterns   | consumers.                                   |
|                       |                                              |
|                       | Consumers choose hypermarkets for precooked, |
|                       | pre-packaged, and frozen products.           |
|                       |                                              |
|                       | More consumers shop at supermarkets, and     |
|                       | less at wet markets.                         |
|                       |                                              |
|                       | One to three visits per month to the         |
|                       | supermarket for a wide variety of            |
|                       | high-quality and safe food products at low   |
|                       | prices, supplemented by several trips to     |
|                       | mom'n pop and specialty shops for daily      |
|                       | products.                                    |
+-----------------------+----------------------------------------------+
| New markets niche     | Rural areas are being explored as a new      |
|                       | market niche for mass consumption products.  |
|                       | The goal is to open more                     |
|                       | supermarket/hypermarket stores closer to     |
|                       | rural consumers areas.                       |
+-----------------------+----------------------------------------------+

**The Economic Groups in the Food Industry**

Nacional de Chocolates Total portfolio amounts to \$440.4 million of
which 74%

(\$325.9 million) is concentrated in the Food Industry

> \*Colcafe \*Doria \*Compañia \*Compañia \*Dulces de \*Zenu
>
> \*La Bastilla \*Comarrico Nacional de de Galletas Colombia S.A. \*Rica
> Rondo
>
> Chocolates NOEL CR S.A. \*Suizo
>
> \*Hermo
>
> \*Cunit

**Advantages for U.S. Companies and Products**

  -----------------------------------------------------------------------
  The Colombian supermarket industry is one of the most modern and
  sophisticated in Latin America.

  Locally established multinational firms are taking advantage of their
  brand names to position new imported products.

  There is a general perception that U.S. products are of good quality
  and value. Many Colombians have traveled and studied abroad and have
  developed a taste for U.S. products.

  Major retailers have expanded the number of stores and floor space
  during the last few years. The trend is to continue their geographical
  expansion. They are now present in major Colombian cities. The market
  share of hyper/supermarkets is 40% and the "mom and pop" is 60%. They
  are increasingly offering imported food products.

  Hyper/supermarkets continue to consolidate as one of the most important
  distribution channels in the country. Many chains have gained greater
  negotiation power with manufacturers, giving them access to continuous
  price promotions and marketing activities.

  Gas Mart stores are readjusting their line of products. Besides snack
  foods, candy, soft drinks, ready-to-heat and ready-to-eat products,
  dairy products and cereals, they are focusing on fast food sales. The
  gas marts are potential markets for new products.

  Nearly 60% of the Colombian population is under 30 years of age and has
  been exposed to changing lifestyles. The remarkably young population,
  70 percent of which lives in urban areas, has new tastes and
  preferences and is more health-conscious. With rising female
  participation in the workforce and more fast food outlets, demand for
  new high-value products is increasing.

  Upscale and middle-income Colombian families are eating out more
  frequently, at least twice a month, devoting 24% of food spending for
  meals away from home. Fast food restaurants stand out as winners in the
  last three years.

  Information and technology have become strong tools for food marketing.
  The uniform product code and scanners at point of sales have been
  fundamental to collaborative planning, forecasting and replenishment
  aimed at increasing profitability and stock control.

  On line services are becoming popular. Retail leaders have renewed the
  online sales service with last-e-business technology. This service is
  offered both domestically and abroad and covers around 90 percent of
  Colombian municipalities.

  A Voluntary Good Conduct Business Code was signed by industrial
  associations, suppliers, producers, hyper/supermarkets and other
  retailers, aimed at establishing fair and well-defined trading rules.
  It is a self-regulatory code that tends to avoid all existing
  complaints about unfair purchasing/ advertising/pricing practices and,
  discriminatory policies.
  -----------------------------------------------------------------------

# Challenges to U.S. Companies and Products

  -----------------------------------------------------------------------
  A relatively new trend in Colombia is an increasingly strong demand for
  gourmet products and a growing popularity of wine, which reflects a
  change in lifestyle.

  Importers demand competitive prices, good quality and consistent supply
  availability.

  Category management practices include charging slotting fees for
  products, which are absorbed by the supplier.

  The shift from essential to high-quality foods continuous. A good
  number of consumers opt to trade down to less expensive options of
  basic products due to economic difficulties. Consequently,
  manufacturers have made great efforts in launching low-priced products
  and offering price promotions for well-known products. A surplus of
  ordinary low-priced food products coexists with a shortage of
  high-quality food products. Colombians are now selective shoppers.

  Investment in new outlets continues as part of the effort to penetrate
  regional markets and attract unattended consumers.

  Market leaders are investing in construction of modern shopping centers
  in which super/hypermarkets and cinemas are the cardinal points.
  Investment also includes state of the art technology, logistics,
  remodeling and improving service areas.

  Private brands are expanding rapidly. Colombia and Argentina are the
  countries with the fastest growth in the store-brand products category
  (30%) in Latin America.

  The limited cold storage transportation network is still a limiting
  factor for the future development of the food sector.

  Besides the basic duty, the Andean community assesses a variable duty
  on 13 basic commodity groups and related products. This system results
  in high and varying duties for a number of products, including pet
  food, poultry and cheese.

  Other non-tariff barriers to imported products are import licensing and
  sanitary (beef and poultry) restrictions.

  Some trade agreements with U.S. competitors make several U.S. products
  less competitive, such as zero import duties on wine and temperate
  fruits from Chile and soybeans from Paraguay.

  The Colombian government has changed investment policy to attract new
  foreign investors. Joint ventures, franchising and licensing agreements
  are increasing in number and value.

  The import process still has many layers. However, the GOC has
  introduced key modifications to simplify the paperwork significantly.
  Furthermore, as of June 2004, the import declaration form was
  eliminated but other requirements remain. Import/export procedures and
  customs clearances could be completed and submitted by internet.
  Nonetheless, registration of new products with INVIMA could take a long
  time if required information is not complete.
  -----------------------------------------------------------------------

**Illustrative Import Duties for Food Products**

  --------------------------------------- ---------------- ---------------
  **Products**                            **Basic Duty %** **Basic Plus
                                                           Variable %\***

  Powdered Milk/Cheese                    20               50

  Wine/Beer                               20               none

  Fruits/Vegetables                       15               none

  Raw Coffee, Tea and Spices              10               none
  --------------------------------------- ---------------- ---------------

\*As of October 31^st^, 2005

**Market Entry Strategy**

General guidance to access the Colombian food market, enhance
competitive sales of food products, and introduce new products:

-   Calculate your competitive position on the equation of high quality,
    moderate price and good service to meet increasing foreign
    competition.

-   Consider innovative marketing strategies when introducing new
    products. Social marketing strategy is a new approach. Sales
    generate funding for social programs.

-   Provide guarantee of consistent supply of products to large stores,
    hotel chains and institutional markets. Marketing strategies must
    meet the specific needs of the Colombian market.

-   Reinforce activities, such as trade exhibits, product sampling,
    advertising, etc.

-   Be aware of hyper/supermarkets conditions to assign shelf space,
    accept or reject discount and promotion campaigns.

-   Establish direct relations with leading companies to develop a low
    cost, direct sales approach and to offer products and services.

-   Develop a relationship with top executives, i.e., marketing
    directors, purchasing managers, and expose them to U.S. business
    practices. Take advantage of domestic food fairs and exhibitions.

-   Include after-sales service and customer support, which are decisive
    purchasing factors.

-   Promotional materials translated into Spanish would be very well
    regarded.

**Market Entry Strategy**

**Importers and Distributors**

-   Colombia is considered a natural market for U.S. products and
    technology, due to its proximity and good trade relations with the
    United States. Colombia and the United States negotiated a bilateral
    free trade agreement, which should be implemented in late 2007 or
    early 2008.

-   Competition in food retailing has intensified; hence supply channels
    have been streamlined because supermarkets/hypermarkets are making
    direct imports from suppliers.

-   Suppliers have lost control of the market share that they controlled
    in the past.

-   There are now a few large players with strong negotiating and
    purchasing power. Large number of end-users are purchasing directly
    from suppliers and/or manufacturers abroad, avoiding local
    representatives.

-   Only large importers and distributors with a broad knowledge of
    U.S.-Colombian market practices will remain in the market.

-   Small importers and distributors will find it more difficult to
    compete, except with quality product categories that are not
    attractive to large importers.

-   Import overhead is around 30-40% of the total product value after
    duties.

# Illustrative List of Main Importers and Distributors

+----------------+-----------------+---+----------------+----------------+
| **Importer**   | **Product**     |   | **Importer**   | **Product**    |
+----------------+-----------------+---+----------------+----------------+
| Effem Colombia | Pet food,       |   | Quala          | Meat,          |
|                | confectionary   |   |                | vegetables     |
+----------------+-----------------+---+----------------+----------------+
| Provyser       | Processed       |   | Frito Lay      | Food           |
|                | inputs for fast |   |                | preparations,  |
|                | food            |   |                | seasonings,    |
|                |                 |   |                | cereals        |
+----------------+-----------------+---+----------------+----------------+
| Frutcom S.A.   | Fresh fruits    |   | Ancla y Viento | Seafood        |
+----------------+-----------------+---+----------------+----------------+
| Imporfenix     | Fresh fruit     |   | Procaps        | Juices,        |
|                |                 |   |                | vegetables,    |
|                |                 |   |                | vegetable oils |
+----------------+-----------------+---+----------------+----------------+
| Globalim       | Juices, Kosher  |   | Congrupo       | Pop corn,      |
|                | food products   |   |                | sauces,        |
|                |                 |   |                | cheeses,       |
|                |                 |   |                | vinager,       |
|                |                 |   |                | ketchup        |
+----------------+-----------------+---+----------------+----------------+
| Pacific        | Fish fillets,   |   | Frigocargo     | mechanical     |
| Seafood        | crustaceans     |   | Internacional  | de-boned       |
|                |                 |   |                | chicken meat.  |
|                | Ginger.         |   |                |                |
+----------------+-----------------+---+----------------+----------------+
| Comestibles    | Canned food     |   | Nabisco Royal, | Peanuts,       |
| Alfa           | products        |   | Inc.           | sweets,        |
|                |                 |   |                | biscuits,      |
|                |                 |   |                | pastry         |
+----------------+-----------------+---+----------------+----------------+
| Pesquera       | Seafood         |   | Fedco          | Line of        |
| Jaramillo      |                 |   |                | processed food |
|                |                 |   |                | products,      |
|                |                 |   |                | canola oils    |
+----------------+-----------------+---+----------------+----------------+
| DISNACO        | Beer            |   | Productos      | Juices         |
|                | (Budweiser),    |   | Naturales de   |                |
|                | Gatorade        |   | Cajica         |                |
+----------------+-----------------+---+----------------+----------------+
| Co             | Fresh and       |   | Griffith de    | Broths,        |
| mercializadora | frozen          |   | Colombia       | vegetables,    |
| Nacional de    | vegetables      |   |                | spices         |
| Alimentos      |                 |   |                |                |
+----------------+-----------------+---+----------------+----------------+
| Agrodex        | Cheese,         |   | Colanta        | Juices, frozen |
|                | poultry/turkey  |   |                | meat           |
|                | preparations,   |   |                |                |
|                | spices,         |   |                |                |
+----------------+-----------------+---+----------------+----------------+
| Franchise      | Cheese, sweet,  |   | Suizo          | Pork/chicken   |
| Systems de     | ham, juices,    |   |                | meat           |
| Colombia       | dry vegetables  |   |                |                |
+----------------+-----------------+---+----------------+----------------+
| Promesa de     | Breakfast       |   | Comestibles    | Pork and       |
| Colombia       | cereals         |   | Dan            | poultry meat,  |
|                |                 |   |                | frozen         |
+----------------+-----------------+---+----------------+----------------+
| Dislicores     | Wine, liquor    |   | Dicermex       | Wine, liquors, |
|                |                 |   |                | food products  |
+----------------+-----------------+---+----------------+----------------+
| Casino         | Beer,           |   |                |                |
| Internacional  | chocolates,     |   |                |                |
|                | baby food,      |   |                |                |
|                | canned fruits   |   |                |                |
|                | and vegetables, |   |                |                |
|                | non-alcoholic   |   |                |                |
|                | beverages, etc. |   |                |                |
+----------------+-----------------+---+----------------+----------------+

# Market structure and sub-sector profile

-   Hypermarkets are opening new stores with a different format in the
    low-income areas to compete with the mom and pop.

-   Hyper/supermarkets are striving to provide customers with excellent
    service and quality products at competitive prices.

-   Hyper/supermarkets are increasing in number and sales volume.
    Supermarkets do not complain of low profits, on the contrary new
    stores and new formats are appearing nationwide.

-   Ranked by sales, Exito (4), Carulla/Vivero(15), Olimpica (18),
    Alkosto (28) Carrefour (22),and Cacharreria la 14 (40) are among the
    top 50 Colombian companies.

-   Despite considerable expansion, hyper/supermarkets are far from
    reaching the average of one store per 8,000 people in developed
    countries. Colombian average is 1/25,000.

-   Supermarket business is prospering in Colombia. There are six main
    chains with approximately 464 outlets

-   The Colombian traditional Mom\'n Pop stores continue to consolidate
    as one of the most important distribution channels in the country.
    Mini-markets continue to be a strong competitor.

## 

##  Hypermarkets and Supermarkets

+------------------+------------------+-----+----------+--------------+
| **Name of        | **Ownership**    | *   | **Lo     | **Type of    |
| Retailer / Type  |                  | *\# | cation** | Purchasing   |
| of Retail        |                  | of  |          | Agent(s)**   |
| Outlet**         |                  | Out |          |              |
|                  |                  | let |          |              |
|                  |                  | s** |          |              |
+------------------+------------------+-----+----------+--------------+
| Hypermarkets     |                  |     |          |              |
+------------------+------------------+-----+----------+--------------+
| Carrefour        | 100 % France     | 26  | Bogota,  | Importer/    |
|                  |                  |     | Cali,    | direct /     |
|                  |                  |     | Pereira, |              |
|                  |                  |     | M        | local        |
|                  |                  |     | edellín, |              |
|                  |                  |     | Ibague,  |              |
|                  |                  |     | Barr     |              |
|                  |                  |     | anquilla |              |
+------------------+------------------+-----+----------+--------------+
| Alkosto          | 100% Local       | 6   | Bogota,  | Importer/    |
|                  |                  |     | Villav   | direct /     |
|                  |                  |     | icencio, |              |
|                  |                  |     | Pasto,   | local /      |
|                  |                  |     | Ipiales  | producers /  |
|                  |                  |     |          | distributors |
+------------------+------------------+-----+----------+--------------+
| Makro of         | 57% Holland      | 8   | Bogota,  | Importer/    |
| Colombia         |                  |     | Cali     | direct /     |
|                  | 43% Antioqueno   |     | P        |              |
|                  | Group            |     | ereira,M | local /      |
|                  |                  |     | edellin, | producers /  |
|                  |                  |     | Barra    | distributors |
|                  |                  |     | nquilla, |              |
|                  |                  |     | Ibague   |              |
+------------------+------------------+-----+----------+--------------+
| Almacenes Éxito  | 38.6% Casino --  | 100 | M        | Importer/    |
|                  | France           |     | edellin, | direct /     |
| Ley, Pomona      |                  |     | Bogota,  |              |
|                  | 24.5% Cencosud   |     | Cali,    | local /      |
|                  |                  |     |          | producers /  |
|                  | 36.9 Others      |     | Other    | distributors |
|                  |                  |     | Main     |              |
|                  |                  |     | Cities   |              |
+------------------+------------------+-----+----------+--------------+
| Carulla 82       | 30% New          | 153 | Main     | Importer/    |
|                  | Bridge-USA       |     | Cities   | direct /     |
| Vivero 15        |                  |     |          |              |
|                  | 19.8% Almacenes  |     |          | Local /      |
| Surtimax 21      | Exito            |     |          | producers /  |
|                  |                  |     |          | distributors |
| Merquefacil 35   | 50.2% Others     |     |          |              |
+------------------+------------------+-----+----------+--------------+
| Supertiendas     | 100% Local       | 90  | Mai      | Im           |
| Olimpica         |                  |     | n/Middle | porter/local |
|                  |                  |     | Cities   |              |
|                  |                  |     |          | producers /  |
|                  |                  |     |          | distributors |
+------------------+------------------+-----+----------+--------------+
| Cacharreria La   | 100% Local       | 19  | Cali,    | Importer/    |
| 14               |                  |     | Pereira. | direct /     |
|                  |                  |     | Ma       |              |
|                  |                  |     | nizales, | local /      |
|                  |                  |     | Buen     | producers /  |
|                  |                  |     | aventura | distributors |
+------------------+------------------+-----+----------+--------------+
| Colsub           | 100% Local       | 20  | Regional | Local        |
| sidio1/Privately |                  |     | Bogota   | producers/   |
| subsidized       |                  |     |          | distributors |
+------------------+------------------+-----+----------+--------------+
| Cafam/ Privately | 100% Local       | 42  | Regional | Local        |
| subsidized       |                  |     | Bogota   | producers/   |
|                  |                  |     |          | distributors |
+------------------+------------------+-----+----------+--------------+

**Hypermarkets**

-   In 2005 Almacenes EXITO, number one retailer in Colombia, reported
    total sales of \$1.5 billion. Carulla-Vivero, retailer number 2,
    reported sales of \$0.9 billion. Carrefour, retailer number 3,
    reported \$0.7 billion in sales.

-   Main retailers attract mainly upscale and middle-income shoppers.
    However, the low-income group is taking advantage of low price
    campaigns and premiums offered by large stores.

-   All offer a wide variety of high-quality imported products at
    reasonable prices.

-   Shoppers mainly buy pre-cooked, pre-packaged and frozen products,
    beverages & wine.

-   The three main retailers have gained recognition in the market for
    the appealing new products, including gourmet products and wines.

-   All chains have opened outlets in main cities. The coffee zone is
    particularly appealing because of tax privileges and large
    population.

**Hypermarket / Supermarket Sales**

US\$ billion

  ------------------------------------------------- ---------------------
  **Store**                                         **Total Sales**

  HYPERMARKETS                                      

  Almacenes Éxito S.A.                              1.5

  Carrefour                                         0.7

  Makro of Colombia                                 0.2

  Alkosto/Corbeta                                   0.05

  **SUPERMARKETS**                                  

  Carulla-Vivero                                    0.9

  Olimpica                                          0.7

  **TOTAL**                                         **4.0**
  ------------------------------------------------- ---------------------

Source: Superfinanciera and the companies.

## Mom'n Pop / Traditional Markets

-   The Mom'n Pop store concept is very important in Colombia and
    captures 60% of the food market share. These stores are scattered
    throughout all neighborhoods.

-   This store format is small in size (20 to 200 square meters) but
    large in number (approximately 450,000 in Colombia). They offer
    basic products, and have a small inventory.

-   Most products available are perishable: milk, eggs, fresh fruits and
    vegetables, including potatoes, and some processed foods.

-   The future of Mom'n Pop stores lies in their ability to continue to
    meet needs of low and middle-class groups that are not met by
    supermarkets and hypermarkets.

```{=html}
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-   Special consumer services, such as small-unit sales, short-term
    credit to lower-income consumers, and proximity have been the
    foundation of their success.

-   This market is increasingly important to domestic
    wholesaler/distributors. Producers and distributors are adjusting to
    Mom'n Pop market needs with new and customized products.

-   Government and private institutions have organized and implemented
    marketing improvement programs, including credit sources,
    institutional framework, legal requirements and technical and
    managerial training aimed at fostering efficiency in the
    distribution of food and price reduction.

-   Mini-markets (superetes), a blend between Mon'nPop stores and
    supermarkets, are consolidating. In an area of 100 square meters,
    these better-equipped self-service stores offer basic staples,
    frozen products, fresh fruit and vegetables, beverages and cleaning
    products.

## 

## Gas Marts

-   Colombian convenience stores attached to gas stations continuous to
    be an important segment in the retail sector. It has had very good
    acceptance and is a venue for fast food, snacks, ready-to-eat, hot
    and cold beverages and other food staples. They complement the Mom'n
    Pop/Traditional stores. Another service offered in the gas marts is
    ATMs.

-   Imported products represent less than 6% of total products.

-   Fast food generates 60% of total sales. Beverages 30%.

-   Shoppers are young professionals, students and single people who
    either drive or walk to the store. Recent findings show that 75% of
    consumers belong to the neighborhood.

-   Gas Marts have had good impact on the market and have taken positive
    steps to ensure significant growth in the long term, particularly
    after alliances with fast food chains: Kokoriko and El Corral.

-   Gas marts are usually opened 24 hours

**Typical Product Lines**

-   Pre-cooked foods: Cup ramen soup, noodles (Union Food US), tacos,
    and dips (Pillsbury US).

-   Fast foods: hamburgers, hot dogs, and sandwiches.

-   Drinks: Hot chocolate (Cadbury's England), soft drinks, milk.

-   Snacks and cereals: snacks (Pepperidge Farm US), (Kellogg\'s)

-   Sweets: Nestle (Switzerland), chocolates (Cadbury's England)

-   Pasta: spaghetti (Lensi Italy)

-   Baby foods

-   Pet foods

-   Canned foods: fruits and vegetables

-   Liquor and beer to go

**Colombian Gas Marts**

  -----------------------------------------------------------------------
  Tiger Market -- ESSO\*

  On the Run -- MOBIL\*

  Select - SHELL

  Star Mart - TEXACO
  -----------------------------------------------------------------------

**Wet Markets**

-   These are part of Colombian traditional markets.

-   Each small town has a wet market that opens at least once a week,
    supplied by local and regional small-scale production.

-   Fresh perishable foods, (seasonal fruits, potatoes, and vegetable),
    live animals and homemade dairy products are offered at these "once
    a week markets".

-   Low-priced, bargaining markets, also provide food products for Mom'n
    Pop stores.

-   Number of wet markets estimated at 2,000 is declining slowly in
    larger cities.

-   CORABASTOS, a Central market of 420,000 square meters for perishable
    products. It also acts as warehouse and main point for food products
    spot market. It also handles large quantities of perishable products
    for retail sales.

-   CORABASTOS located in Bogota, handles daily 10,873 tons of food,
    which represent daily sales of \$9.4 million.

-   Acts as a price indicator for food products and functions as a spot
    market.

-   6,500 wholesalers meet daily to trade food products directly from
    producers and sell them to another 6,000 retailers.

-   Supplies food for nearly 10 million people in central Colombia and
    other central markets in the main cities.

**COMPETITION, CONSUMER- READY FOOD**

Colombia is a strong competitor in the production of:

  -------------------------------- --------------------------------------
  **Product**                      **Company**

  Dairy Products                   Nestle, Colanta, Alpina, Parmalat,
                                   Purace

  Breakfast Cereals                Kellogg's, Nestle, Quaker

  Snacks                           Frito Lay- Margarita, Savoy Brands,
                                   Yupi, Kraft Foods, Nabisco Royal

  Baked Foods                      Levapan, Bimbo, Ramo, Comapan

  Confectionery                    Nacional de Chocolates, Colombina,
                                   Noel, Chicle Adams, Comestibles Italo,
                                   Dulces de Colombia

  Oils and Margarines              Grasas S.A., Unilever, Lloreda,
                                   Acegrasas, Gravetal

  Dry Mixes for Sauces,            Unilever-Disa-Best Foods, California,
  Mayonnaise, Ketchup, Mustard,    La Constancia, El Rey, Productora de
  Jellies, and Condiments          jugos, Frutos del campo, La Coruña

  Poultry feed Products and Pet    Solla, Ralston Purina, Finca,
  Food                             Contegral, Italcol, Nestle Pet care.
  -------------------------------- --------------------------------------

-   Colombia grants preferential treatment to imported products from
    fellow members of the Andean Community. Also, bilateral agreements
    provide preferential import duties to countries such as Chile,
    Mexico, Brazil and Argentina.

-   Private labels are becoming very important. Store brands are
    included in nearly 30% of food product categories sold at
    supermarkets and hypermarkets.

# U.S. Competitors - 2005

![](media/image9.wmf)

# South America Market Share of Total World Imports - 2005

![](media/image10.wmf)

Source: World Trade Atlas

-   Colombia is a growing market for value-added food products. Economic
    recovery will be a driving force that will foster demand for new
    products at reasonable prices.

-   Healthy and ethnic food categories are new in the market but their
    acceptance and preference are growing fast.

-   Gourmet products are penetrating the market with excellent results.

-   Wine consumption has been increasing, with the growing popularity of
    wine among Colombians. Import tax reductions have favored
    importation of wines from all over the world.
    Hypermarkets/supermarkets are actively working in promoting wines
    from different sources as well as educating Colombian consumers.

# Surveyed retailers and producers feel there is significant potential for new products in almost all food product categories.

# Best Product Prospects 2006/2007

There is significant space for new products in ...

# Related Reports

+-----------+----------------------------------------------+----------+
| **Report  | #### Report Name                             | **Date** |
| No.**     |                                              |          |
+-----------+----------------------------------------------+----------+
| CO-5021   | Retail Food Market                           | 11-22-05 |
+-----------+----------------------------------------------+----------+
| CO-6001   | Oilseeds                                     | 07-29-05 |
+-----------+----------------------------------------------+----------+
| CO-6002   | Grain and Feed                               | 03-13-06 |
+-----------+----------------------------------------------+----------+
| CO-6003   | HRI -- Food Service Sector                   | 03-15-06 |
+-----------+----------------------------------------------+----------+
| CO-6008   | Trade Policy Monitoring Report               | 06-22-06 |
+-----------+----------------------------------------------+----------+
| CO-6009   | Biotechnology                                | 03-17-06 |
+-----------+----------------------------------------------+----------+
| CO-6013   | FAIRS Exporter Certificate                   | 09-28-06 |
+-----------+----------------------------------------------+----------+

# Post Contact Information

**Office of Agricultural Affairs**

**U.S. Embassy, Bogota, Colombia**

Calle 22D Bis, No. 47-51

Apartado 3831

Bogota, Colombia

**R. Todd Drennan**

Agricultural Attaché

U.S. Mailing Address: U.S. Embassy - Bogota

Agr Section, Unit 5119

APO AA 34038

Phone: (57-1) 315-2138

Fax: (57-1) 315-2181

Email: agbogota@usda.gov

# Darya Chehrezad

APHIS Attaché

(Agricultural and Plant Health Inspection Service)

U.S. Mailing Address: U.S. Embassy - Bogota

Agr Section, Unit 5103

APO AA 34038

Phone: (57-1) 315-2192

Fax: (57-1) 315-2191

Email: usdacol@colomsat.net.co

**COLOMBIAN GOVERNMENT CONTACTS**

**Ministry of Agriculture and Rural Development**

Colombian Agricultural Institute (ICA)

(Phytosanitary and Zoosanitary requirements office)

Calle 37, No. 8-43, Piso 4

Bogotá, Colombia

Deyanira Barrero-León

Deputy Manager Animal Health Protection and Regulation

ICA -Instituto Colombiano Agropecuario

Calle 37 \# 8-43, Of. 401

Bogotá, Colombia

Tel. (57-1) 320-3654, 332-3700/ext: 250 259

Cel pone: (315)899-7032

Fax: (57-1) 232-4695

e-mail: subgerencia.pecuaria@ica.gov.co

Jaime Cardenas, Head

Plant Inspection Guarantee-Health Risk

ICA -Instituto Colombiano Agropecuario

Calle 37 \# 8-43, Of. 401

Bogotá, Colombia

Tel: (57-1) 232-4709

Fax: (57-1) 288-1753

E-mail:sanidad.vegetal@ica.gov.co

**Ministry of Social Protection**

National Institute for the Surveillance of Food and Medicine (INVIMA)

Division of Food and Alcoholic Beverages

(Food Products registration and Health permits)

Carlos A. Robles

Carrera 68D \# 17-21 Zona Industrial

Bogotá, Colombia

Phone: (57-1) 294-87003 Ext. 3920

Fax: (57-1) 315-1762

E-mail: invimasal@invima.gov.co

**Ministry of Foreign Trade**

Juan Guillermo Castro

Director of Commercial Relations

Calle 28, No. 13A-15, 6th Floor

Apartado 240193

Bogotá, Colombia

Phone: (57-1) 606-7676 Ext. 1433

Fax: (57-1) 606-7539

E-mail:jcastro@mincomex.gov.co

For further information, visit the FAS home page at
[http://www.fas.usda.gov](http://www.fas.usda.gov/).

**MAIN RETAIL ORGANIZATIONS**

**ANDI**

Asociación Nacional de Industriales

Luis Carlos Villegas

President

Carrera 13 \# 26-45 Piso 6

Bogota, Colombia

Tel: (57-1) 336-1990

Fax: (57-1) 341-9988

E-mail: <lpineda@andi.com.co>

# FENALCO

Federacion Nacional de Comerciantes

Guillermo Botero

President

Carrera 4 \# 19-85

Bogota, Colombia

Tel: (57-1) 336-7800/350-0600

Fax: (57-1) 350-9424

E-mail: guillermobotero@fenalco.com.co

**MAIN HYPER/SUPERMARKETS**

ALMACENES EXITO

Dario Jaramillo

Commercial Vice-President

Av. Las Vegas

Carrera 48 \# 32B Sur 139

Medellín, Antioquia

Colombia

Tel: (57-4) 339-5920/339-6565

Fax: (57-4) 339-6036

E-mail: Dario.jaramillo@grupo-exito.com.co

**CARULLA-VIVERO**

Samuel Azout

President

Carrera 68D \# 21-35

Bogota, Colombia

Tel: (57-1) 570-8646/570-7500 Ext 1000

Fax: (57-1) 411-4194

E-mail: sazuot@carullavivero.com

**CARREFOUR**

Gregoire Kaufman

Merchandise Director General

Avenida 15 \# 106-57

Bogota, Colombia

Tel: (57-1) 657-9797

Fax: (57-1) 637-5256

E-mail: gregoire_kaufman@carrefour.com

**MAKRO DE COLOMBIA**

Javier Sanabria

Comercial Director

Carrera 39 \# 193-63

Bogota, Colombia

Tel: (57-1) 678-1616 Ext 1101/678-1323

Fax: (57-1) 678-2874

E-mail: <javier.sanabria@makro.com.co>

**SUPERTIENDAS OLIMPICA**

Antonio Char

General Manager

Carrera 36 \# 38-03

Barranquilla, Atlantico

Colombia

Tel: (57-5) 371-0245/371-0317

Fax: (57-5) 351-0263

E-mail: anchar@olimpica.com.co

**ALKOSTO**

Rafael Londono

Commercial Manager

Diagonal 72ª \# 57-02

Bogota, Colombia

Tel: (57-1) 437-6868

Fax: (57-1) 630-5812

E-mail:
[**rafael.londono@alkosto.com.co**](mailto:rafael.londono@alkosto.com.co)

**CACHARRERIA LA 14**

Lelia Cardona

General Manager

Calle 70 \# Carrera 1

Cali, Valle

Colombia

Tel: (57-2) 665-1817

Fax: (57-2) 665-1819

E-mail: <gerencia@la14.com>