by Clay Eastwood, Manager of International Marketing

clay-eastwood
Clay Eastwood, Manager of International Marketing

Monthly Market Highlight

Colombia continues to be at the forefront of rapidly expanding U.S. pork export markets. In 2017, U.S. pork and pork variety meat exports to South America were up 57 percent by volume and 58 percent by value. Specifically, U.S. pork and pork variety meats to Colombia exceeded 152 million pounds (up 56 percent) and were valued at more than $163 million (up 56 percent). As of 2017, the U.S. held 86 percent market share of total pork and pork variety meat imports in Colombia, followed by Chile (7 percent), Canada (6.5 percent), and the European Union (<1 percent). Trade in U.S. agricultural products to Colombia has expanded as a result of the U.S.-Colombia Trade Promotion Agreement (CTPA), implemented in May 2012. Colombia is the leading destination for U.S. agricultural exports in South America, followed by Peru and Chile. In 2017, U.S. agricultural exports to Colombia were valued at $2.5 billion. Top imported U.S. pork and pork variety meats to the country include boneless hams, boneless picnics, St. Louis-style spare-ribs, trimmings, fat, skin, hearts, and brisket bones. The National Pork Board, along with the U.S. Meat Export Federation (USMEF), are working to defend market share thereby positioning U.S. pork as safe and healthy, while also focusing on its consistency and quality.

Expansion of U.S. agricultural exports to Colombia over time.
Source: USDA
Imports of animal protein in Colombia
Source: OECD

Overview of Colombia

Colombia, officially the Republic of Colombia, is a country primarily situated in the northwest of South America. Colombia shares a border to the northwest with Panama, to the east with Venezuela and Brazil, and to the south with Ecuador and Peru. The sovereign state of Colombia is a unitary, constitutional republic comprising thirty-two departments. Colombia is one of the most ethnically and linguistically diverse countries in the world, with its rich cultural heritage reflecting various European, African, and indigenous influences. Its urban centers, like Bogota, Medellin, Cali, and Barranquilla, are mostly located in the highlands of the Andes Mountains and the Caribbean coast. Colombia also encompasses Amazon rainforest, tropical grasslands, and both Caribbean and Pacific coastlines. Subsequently, it is one of the world’s 17 megadiverse countries. Colombia has a national GDP of $309 billion and a population exceeding 49 million. Colombia’s growing economy has played a role in driving domestic and imported protein per capita consumption growth. In 2017, the U.S. exported $2.5 billion worth of agricultural products to Colombia, a staggering 107 percent increase from 2007.

According to the USDA, in 2017, U.S. agricultural exports to Colombia totaled $2.5 billion, making it the 12th largest market. Source: USDA

Animal Protein Consumption

Poultry is the most widely consumed animal protein in Colombia followed by beef, pork, and fish. Per capita consumption of pork has continued to increase over the last ten years, and fish consumption remains steady. Simultaneously, poultry consumption has nearly doubled over the last ten years, whereas beef consumption has remained relatively stable. Colombia’s diverse cultural landscape allows for an increased opportunity for pork, and specifically U.S. pork, as a versatile and economical protein choice for consumers.

Animal protein consumption continues to increase. Source: OECD

Domestic Industry

Poultry and beef production largely dominate domestic animal protein production followed by pork and fish. In 1995, the Colombian government created the Colombian Pork Checkoff which has helped increase domestic pork production across the country. Currently, about 20 percent of domestic production is from backyard operations, but the Colombian pork industry is making strides to modernize its production and slaughter practices. Alliances between smaller scale producers to increase production efficiency and vertical integration are two examples of an advancing Colombian pork industry.

Domestic self-sufficiency for Colombian pork production is roughly 78 percent with high feed costs being the largest contributor to the cost of production. Slaughter continues to expand at an average rate of 7 percent per year. Much of this growth in production and consumption can be attributed to increased education on pork’s health benefits, advancements in biosecurity, and the development of traceability programs.

Colombia’s domestic protein production has changed in the last 10 years.
Source: OECD

Retail Sector

Western style, large supermarkets are part of a noteworthy retail transformation in the last decade with major, domestic and international grocery chains opening new stores, of varying sizes, at intense rates. Over time, discount stores have increased market share and continue opening outlets throughout the country offering wide private label portfolios cheaper than grocery chains. Traditional retail is still the most common retail format in Colombia. Outlets are small, independent, and are present all around the country; a recent commerce survey concluded that in Bogota there is a “mom-and-pop”-style store for every 94 homes. Small remote towns only count on these traditional stores to cover their basic food and beverage needs since modern retail is not yet present. Mom-and-pops usually offer small/individual packaging products (one sausage, small oil bottles, etc.) and purchase frequency is higher.

Online commerce is also becoming more common among Colombians. Most retailers have websites available for shopping online, and various smartphone applications ease the grocery shopping experience. According to Euromonitor, food and beverages are among the products preferred by Colombian consumers when buying online. Recent tax reform led to a VAT increase from 16 percent to 19 percent that increased prices and affected Colombian consumer purchase decisions. As a consequence, consumers started looking for more affordable, good quality products, leaving room for private label options and hard discount stores.

Colombia’s leading retailers.
Source: USDA Gain Report

Looking Ahead

In 2012, the United States and Columbia entered into a free trade agreement (FTA) that removed tariffs on all pork products, with the exception of hog guts, bladders, and stomachs, by 2016. By 2021 the tariff on hog guts, bladders, and stomachs will also be removed. While the FTA with Colombia has increased U.S. exports overall, there is still an opportunity for increased consumption of pork across the country. In response to this, and through an $80,000 NPB investment in 2018, the National Pork Board and Colombia Association of Pork Producers (CAPP) have reached an agreement to partner on increasing consumer consumption of all pork in the Colombian market. By not focusing solely on increasing the marketing of U.S. pork, but of all pork, NPB and CAPP believe that this will return a high rate of investment to both Colombian and United States pork producers in the long-term.

Colombian Gross Domestic Product (GDP) grew at 1.8 percent in 2017, slower than previous year growth rates, but still higher than other Latin American economies. Millions of Colombians have moved out of poverty and into the low and middle-income classes. These income adjustments have resulted in more household disposable income and changes in eating patterns, such as shifting diets from primarily vegetables to include more animal proteins. In August 2018, U.S. pork and pork variety meat exports to Colombia reached 127 million pounds (up 45 percent) and were valued at $131.7 million (up 41 percent) year-to-date. The dramatic changes seen in Colombia’s food industry sector coupled with food manufacturers desperately seeking a variety of high-quality raw materials to adapt to changing consumer tastes and preferences leaves U.S. pork well positioned for continued growth in the Colombian market.