Food & Beverage Processing Equipment
A Top Export Prospect for Colombia

The above statistics are unofficial estimates
Source: Vademécum de Mercados. La Nota Económica. Aug 2011, World Atlas
2011 market data is estimated with an increment of 5% per year from 2010
Total Market Size is the estimated value of the Colombian Food Processing and Beverage Industry

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Overview

The Colombian Processed Food and Beverage Equipment market caters to an industry that produces approximately US$ 22 billion in revenue per year. The food industry is comprised of 10 sub sectors: Sugar mills, rice mill, cereal mills, oils and fats, dairy products, chocolates and candy, meat products, animal food products, bread and pasta and others. The beverage industry is also comprised of three subsectors: Beer, Carbonated Soft Drinks & Juices and spirits.

In 2010 the Food Industry grew on a whole (+ 6.31% from ‘09) while the beverage industry decreased in sales (- 9.63%), driven in part by an unprecedented tax increase imposed on the beer market, to cover the cost of an emergency relief program. Within these industries, the Dairy, Animal Food and Carbonated Soft Drinks & Juices were the three markets highlighted as the most attractive in terms of supply machinery and equipment. To put into perspective the importance of the Food and Beverage import market, this industry accounts for 5.4% of all the Colombian imports. In other words, if Colombia imported approximately US$ 40 billion in 2010, US$ 2.16 billion is the amount of imported goods that came into the country to supply the food and beverage companies.

The Colombian sugar mills sold approximately 2.1 million tons of sugar in 2010, of which 1.4 million was sold for domestic use. According to the Colombian Association of Sugar Cane Growers (Asocañas), Colombia exported 828.752 tons of sugar and sold 1.1 million tons to the local market during 2011. Production in 2010 registered a 38.5% decrease from 2009 figures, as production was negatively impacted by the strong rainy season that hit Colombia in 2010.

The Colombian Rice Mill sector is the third largest in America, after Brazil and United States. This sector was also negatively impacted by the rainy season in 2010, as many of the crops were flooded. The Colombian Cereal Mill sector is probably the Food sector that most depends on imports in the form of raw material for processing finished goods. Colombia currently doesn’t produce enough wheat to cover its cereal output, which forces the industry to import 99% of its wheat consumption. According to The National Federation of Farmers Grain and Legumes (Fenalce), during 2011 Colombia imported 1.1 million tons of wheat.

The Oil & Fats sector in Colombia has benefited from a stable growth, which has led to a 5% annual increase in net sales. Within this sector, approximately 66% of the production is used to make table and cooking oils, while 23% is used to make margarine. The Dairy products market in Colombia has been witnessing a modernization in terms of production and commercialization of various innovative products. In preparations for the Free Trade Agreement (FTA), this sector has been making technical improvement to the farmer production process, and developing more added value products.

Despite the harsh conditions that affected the crops, in terms of winter and fungus, the overall production of cacao (chocolate) grew 17% from 2009 comparisons. This is a sign of the growing trend in the Chocolates and Candy industry, which estimates that 2011’s production will have an increase of 45,000 tons.

The overall processed Meat products sales fell roughly, -4% in 2010. The loss in sales were attributed to the lower meat prices, and at the same time a loss in export revenue, as the Venezuelan government blocked imports coming from Colombia for part of 2010. The animal food industry was seriously impacted by the change in trade benefits that Colombia faced in 2010. As almost all the raw material for animal food products produced in Colombia comes from imports, the delay in extending the Andean Trade Promotion and Drug Eradication Act (ATPDEA) - a trade preference system by which the U.S. grants duty-free access to a wide range of exports from four Andean countries: Bolivia, Colombia, Ecuador, and Peru - hurt the balance sheet for many of these companies.

For almost 45 years, the Colombian beverage industry has been characterized by the rivalry of two domestic conglomerates (Postobon and Bavaria), which faced each other in the carbonate soft drinks, water, juices and even beer sectors. The beer industry was affected in 2010 by new tax imposed by the government but it remains a very profitable industry dominated by SABMiller. In terms of demand, the Soft Drinks and Juices sector saw an overall growth of approximately 17% from 2009 to 2010. The domestic spirit production is 100% owned by the government, and more specifically 100% produced by the individual Colombian States. Each state has autonomy over the spirits sold in their territory, and imposes the quotas and tariffs that each out-of-state spirit has to pay to enter this market. There has been a long-standing war between state spirits to protect each other’s market and liquor brands.

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Sub-Sector Best Prospects/Services

Based on the market data and growing demands, and taking into consideration the following recap of market entry of machinery, processing equipment and raw material to supply local food and beverage production, the following sectors as the most attractive in terms of overall supply/investment:

Source; BPG index

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Opportunities

The recent influx of economic data regarding direct foreign investment (+ 50% from 2010), exports (+ 41% from 2010) and a decrease in unemployment, show that Colombia is on its way to perform at all time highs in terms of economic activity. However, despite the positive performance in terms of the economical and social outlook, Colombia still presents major challenges that hold it to marginal growth in terms of competitiveness in comparison to other countries in the world. Of the main obstacles that the Food, Beverage and Packaging industries face on a day-to-day basis; logistics/transportation, a cultural lack of innovation, and contraband are probably the key issues that foreign and domestic companies are challenged with. Nevertheless, the industry has been growing in average a 5 percent per year.

After more than 5 years in the works, the USA legislative body (Senate and House of Representatives) has approved the USA – Colombia Free Trade Agreement (FTA). As of October 12, 2011, the US has agreed to enter a period of non-tariff trade that will come into action as soon as both governments finish the implementation phase. Over 80% of US exports of consumer and industrial products entering to Colombia will become duty free immediately (upon finished the implementation phase), with the remaining 20% of products being phased into zero tariffs over the following 10 years. With average tariffs on US industrial exports ranging from 7.4% to 14.6%, the newly signed FTA will significantly increase the competitiveness of US food machinery and packaging equipment into the Colombian market. Colombia is not a producer of this type of machinery; therefore the FTA will bring more opportunities for the US industry.

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Resources

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