Food and beverage to Chile

(Last updated: 02 May 2008)

Trends and opportunities

The market

Chile’s population is 16 million, 50 per cent in Santiago, and 75 per cent concentrated in three major cities. According to the Economist Intelligence Unit, Chile is the most competitive economy in Latin America (22nd worldwide); a fast growing upper class of 2MM consumers with more than AU$85,000/year income, and a big middle class of 4MM consumers with AU$25,000 to 35,000/year income. GDP per capita is US$8,000+ per annum.

Chile is one of the most open economies in the world (FTAs with over 85 per cent of the world GDP), and a well recognised platform for doing business in the rest of Latin America.

Chile’s multicultural diversity is reflected in large foreign communities (British, German, Spanish, Italian,…2000 Australians). All this is reflected in the wide variety of F&B products from all over the world.

Chilean 'westernised' taste and consumption patterns have made food and beverage from Europe and USA highly attractive and accepted. Consumers are used to foreign products and open to try new products.

Chile has a modern, highly competitive supermarket industry, which reported sales of $5.5 billion in 2005 (60 per cent of total Chile retail sales). Two key hypermarket chains (Jumbo and Lider), considered to be world class models, account for 70 per cent of supermarket sales, have national coverage, and operate both with direct imports and import agents. Only Jumbo accounts for 50 per cent of imported gourmet food.

Jumbo is part of Cencosud Holding’s retail business, with 15 megastores (>15,000sqm), seven of which are specifically located in high income consumer areas. It leads the gourmet F&B imports (about 70 per cent of supermarket business) and is also present in Argentina, becoming the leading player in both countries in 2005 and recently entered into Colombia and Peru. Jumbo’s new differentiation strategy is to increase the offering of international products to their customers.

Gourmet stores at the main malls are also attractive for consumers, however their import capacity is limited and full container volumes are too risky. Consolidated containers could be an option if a wide range of attractive products with long shelf life can be selected.

Food importer/distributors have a strong import capacity as well as distribution to the main channels (eg. hypermarkets, stores, etc). Their core business is domestic or regional (Latin-American) products distribution, so the margin of the imported products has to be incentive enough to dedicate resources.

Trends include:  

• Healthy eating habits, especially on kids products (healthy snacks, fruit based products).
• High concentration of consumption in the leading hypermarkets (two chains), who also compete for the best international gourmet section at the stores.

The following challenges exist in the food and beverage sector:

• Chile has an international vast range of F&B products at the shelf of hypermarkets. The market is many times considered a trial/test market by multinationals (Unilever, Nestle, etc), so is normal for consumers to see all type of products, from all over the world, with very attractive prices.
• Competition is intense, so imported products need to have the right price strategy/positioning oriented to very demanding consumers, in a 'crowded' market offering, high price sensitivity. Premium and high end priced products at origin will translate into unaffordable prices into the Chilean market.
• Hypermarkets are working with high margins in imported products. Their business is based in margin and not volumes, so a 40 per cent margin for them can be normal. The industry does not work with fixed prices from suppliers.
• Good looking/image and package of imported products is expected, and will position the product in the medium to high end of the market.
• English packaging is normal and no changes in label or package are required.
• Products should have at least six months shelf life due to long freight timings from Australia (45-60 days).
• New and/or different products are highly recommended to consider promotional efforts such as in-store tastings for a launching period to have a successful market entry. Austrade has planned and implemented such programs with great success for Australian suppliers. 

Sit back and view Austrade's Australia Food Promotion at Chile's largest retailer, Jumbo.  Activities included tasting, promotional activities and special exhibitions at 20 hyperstores. January 2008

Opportunities

Potential opportunities:

• Value add or differentiated snack food
• Health and diet products, healthy snacks, fruit bars, etc
• Salad dressings and spices
• Beer
• Breakfast breads, cakes, crackers, rice crackers
• Chile competes against Australian suppliers of wine in the world market, however there might be complementary opportunities in terms of varieties (Shiraz and blends, Riesling) or wines with modern new look and technologies

All products must have a good and balanced quality-cost equation at origin. Due to import costs (high freight rates and taxes) and retail margins, it is highly probable that Australian products will be priced at the top range of their category. An international positioning will allow a minor premium price, which is often very competitive.

Tariffs, regulations and customs

There is a flat six per cent tariff on all imports from Australia, and an 18 per cent value added tax (VAT) on all products sold. The VAT is applied to the cost insurance freight (CIF) value plus the eight per cent import duty. Some luxury goods such as liquors, wine, beer, non-alcoholic beverage ingredients are subject to surcharges of 15 per cent.

General information:

• Standard payment terms: 90 days bill of lading, letter of credit.
• General import duty: six per cent. Additional tax for alcohol (15 per cent)
• 20ft container costs more than US$4,000.
• Health restrictions and protocols are very strict. Technical forms have to be provided by the manufacturer, with detail in some ingredients and categories. Also credentials and data from testing institutes and procedures that provide health certificates might be required.
• Technical standards and quality controls are established by the Instituto Nacional de Normalizacion (National Bureau of Standards), Chile's representative in the International Standards Organisation. Its requirements are in accordance with the internationally accepted norms, referred to as basic requirements.
• Most non-tropical fresh fruits and vegetables are prohibited due to strict plant quarantine controls.
• Labels can be in English. Law establishes that white stickers will be added by the importer with: some nutritional information, name and address of the importer, packaging or distribution firm, number and date of the health service authorisation.

Marketing your products and services

Market entry

Market entry requirements include:

• Brochures (digital and physical)
• Price lists, US dollars (or AU$), FOB
• Product samples (Austrade instructions are key to follow)
• Competitive pricing considering the value chain costs
• Having a product launch or promotional support to build awareness and trial(product for tastings, promotional funds, etc)
• Food shows are a way of introducing products and getting to know potential representatives and importers

Austrade activities:

• Diplomatic Bazaar (December). 10,000 high end consumers on a one day event looking for interesting products (also F&B novelties) for all countries.
• Austrade has been working for over five years with Jumbo to try to set a continuous supply of Australian products. An 'Australian Showcase' that involved about 20 companies and 100+ products was launched in January 2008.
• Potential event for the future - Alimenta (October). Finest yearly F&B show in Chile. Organised by Expotrade Chile.

What Austrade can do:

• Introduce you to key players in the market (retail, importers, and others.
• Provide market assessment, price/product research, market strategy.
• Logistics and co-ordination with customers (samples delivery, promotional material delivery, presentations to customers, work with agencies).
• Assist with F&B show participation and co-ordination for Australian prospects.

Contact details

The Australian Trade Commission (Austrade) is the Australian Government’s trade and investment development agency, operating as a statutory agency within the Foreign Affairs and Trade portfolio.

Austrade assists Australian businesses contribute to national prosperity by succeeding in trade and investment, internationally, and promoting and supporting productive foreign investment into Australia.

Austrade:

• Delivers services that assist Australian businesses initiate, sustain and grow trade and outward investment.
• Promotes Australia as an inward investment destination and, with the States and Territories, supports the inflow of productive foreign direct investment.
• Administers the Export Market Development Grants scheme.
• Undertakes initiatives designed to improve community awareness of, and commitment to, international trade and investment.
• Provides advice to the Australian Government on its trade and investment development activities.
• Delivers consular, passport and other government services in designated overseas locations.

A list of Austrade offices (in alphabetical order of country) is available.

More information

For further information please contact Austrade on 13 28 78 or email info@austrade.gov.au

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