Consumers Get Their Say in Growing Dominican Market

By Carlos Suarez

On this vibrant island nation around 800 miles southeast of Miami, chickens may still rule the roost on import demand, but consumers are getting a say. Today, foods for people are beginning to give poultry feed a run for their money as the growing taste for new, consumer-ready products brings wider trade opportunities.

The Dominican Republic ranks as the No. 1 U.S. agricultural export market in the Caribbean, but its traditional shopping list is basic fare--mainly grains, tobacco, oilseed products, tallow, grease and wood products. A large share of U.S. exports typically goes to the chickens and hogs in the form of corn and soybean meal.

Until recently, U.S. shipments of consumer foods were barely worth a mention, amounting to little more than a few buckets of sand on a beach. But times are changing. Import restrictions have been relaxed, and many Dominicans have more money to spend. With the development of an increasingly open, modern and diverse market structure, consumer interest in imported foods and beverages is adding new variety to the mix.

To be sure, bulk and intermediate farm commodities still dominate, making up more than 70 percent of the $604 million in total U.S. agricultural, wood and seafood product shipments in 1997. Yet consumer foods have been coming on strong, and sales are higher than ever, rising on a wave of burgeoning demand from grocery stores, fast-food restaurants and first-class tourist hotels.

Since 1990, U.S. consumer food exports to the Dominican Republic have increased nearly 450 percent from $16 million to a record $86 million last year. These products now account for more than 16 percent of total U.S. agricultural exports to this market, compared with 6 percent in 1990.

This gain is all the more impressive--and welcome--because it comes on top of continued strong demand for the traditional products. In fact, U.S. exports of bulk and intermediate farm products (although more variable from year to year) also climbed to record-high values in 1997, as did U.S. forest product exports.

Sales of consumer foods have simply risen at a faster, steadier pace since the decade began. Starting from a sliver, they are now carving out a healthy slice of a growing market pie.

Fast Foods and Tourists Give a Boost

Among Caribbean nations, the Dominican Republic is second only to Cuba in size and population. Its population is around 8 million, supplemented by perhaps 2 million or more tourists who visit each year.

Although unemployment problems persist and average income--slightly lower than that of Jamaica--has room to grow, the economy is expanding. Per capita gross domestic product has risen steadily over the last several years, reaching an estimated $1,750 in 1997. Inflation is moderate, and the Dominican peso has been relatively stable.

Thanks to a stable, growing economy and an expanding urban middle-class, many Dominicans have more disposable income and the confidence to spend it. At the same time, economic and trade policy reforms have opened the door to increased imports and foreign investment, bringing more choices to consumers.

While progress in lifting protections for core domestic industries has been slow, some nontariff trade barriers have already been reduced or eliminated, and customs procedures have been improved. The government recognizes that further reforms must be undertaken to meet its Uruguay Round commitments.

The liberalization of the economy has helped spur a rapid expansion of U.S. fast-food chains. U.S. or U.S.-affiliated outlets of virtually every variety--hamburger, pizza, taco, donut and ice cream chains--have entered the market. Although local products are often used, many of these eateries rely on imports from the United States to provide the consistent supply and quality needed for various menu items.

Another source of increased import demand is the steady growth of the tourist industry. The last few years have seen a significant expansion in hotels, restaurants and resorts catering to tourists and their tastes.

To attract more business and satisfy their U.S., Canadian, European and other guests, the upscale facilities typically import a variety of high-value foods and beverages: fresh, nontropical fruits and vegetables; wines and beer; a variety of snack foods; the more expensive meat cuts; and ice cream and other dairy products.

Grocery Industry Embraces Choice

Changes in the Dominican marketplace go much deeper than the fast-food eateries, tourist-centered menus and other direct imports of the food service sector. The general availability of more imported products has helped introduce Dominican consumers to new foods, influencing local tastes and eating habits.

Today, urban office workers who once returned home each day for lunch are now just as likely to eat out, often at a fast-food restaurant. Families that once sat down each morning to the traditional large breakfast of tropical fruit, bread and some combination of eggs, cheese, ham or fried salami may now pour a quick meal from a box of U.S. breakfast cereal.

Food trends and influences from the outside world, and especially the United States, are coming in from various sources. Many Dominicans live or vacation in the United States, and most have family members living there. The increasing travel in both directions, as well as the cable television now enjoyed in higher income urban households, has sharply increased the exposure to U.S. foods and product promotions.

Middle- and upper-income urban consumers--younger consumers particularly--are interested in trying new products and tend to respond favorably to well-planned promotions. Nearly half the country's population is under age 20, and more than 60 percent live in urban areas.

In the search for better incomes and a higher standard of living, people continue to migrate to the cities--where, incidentally, they have greater access to imported products. In addition, urbanization has contributed to the growing number of women in the work force, increasing the demand for meals that are faster and easier to prepare.

Quick to take notice, food distributors have made some dramatic changes to better respond to consumer demands. Supermarkets are growing in numbers and are devoting more shelf space to fruits and vegetables, snacks and a variety of prepared foods--often imported--that were not readily available in the past.

An extensive grocery distribution network has sprouted, involving not just the handful of importers of the past, but more than a hundred large and mid-size companies. Wholesalers consolidate individual items as needed, often supplying both the supermarkets and the more traditional grocery stores (colmados).

Supermarkets, which mostly serve higher income consumers, offer the greatest variety of imported products, but the colmados often stock small quantities of well-established imported brands. Convenience stores and gas-and-shop service stations have also sprung up in the last few years--another outlet for a variety of grocery products.

Where's the Growth?

All these changes have generated new opportunities for U.S. foods, which have a favorable image among Dominicans for quality, wholesomeness and generally good value for the price. Opportunities appear to be developing in a number of sectors, from snacks to seafood.

Snack foods represent a growing market as more Dominicans catch the noshing habit, influenced by U.S. trends and product promotions. Although the market for chips is dominated by local manufacturers, primarily Frito-Lay Dominicana, some of the ingredients are imported, and imported brands of chips and other salty snacks are also coming in.

Other popular snacks where imports play a significant role include candy bars, cookies and popcorn. Total U.S. snack food exports to this market were valued at a record $11.8 million in 1997, up from $1.8 million in 1990. Most snack foods are sold through the colmados, rather than through supermarkets, and children make up more than half of the market.

Breakfast cereals are sold mainly through supermarkets to upper income urban consumers, in part because of the higher cost compared with the traditional staple, eggs. After showing promise in the early 1990s, U.S. sales went flat--then picked up again last year following intense promotions and competition among brands. In 1997, U.S. breakfast cereal exports rose to a record $3.5 million, up more than 40 percent since 1990.

U.S. cereals dominate the market. Some competing brands from Europe, Mexico and Central America are available, and small amounts are produced locally under U.S. license, but most consumers still choose U.S. brands.

Though corn flakes seem most popular with adults, children increasingly opt for the sweetened varieties. Cereals with fiber or other healthful ingredients appeal to upper class consumers who have been exposed to U.S. trends. Dry cereals are the largest sellers, but oatmeal and cream of wheat are also popular. They are imported in drums and packaged locally.

Other food categories where import demand has grown include fresh and processed fruits and vegetables; red meat and poultry products, often for fast-food and tourist restaurants; and dairy products, including an expanding market for ice cream and yogurt.

Demand for imported seafood is also rising. Although surrounded by water, the country does not produce enough seafood to meet local demand, especially during the tourist season. U.S. exports of squid, shrimp, octopus and other fish and seafood products reached a record $5.9 million last year, more than four times 1990's export value.

Facing the Competition

While U.S. exporters are finding opportunities, they are also encountering competition--much of it from inside the country. Because price is always a factor, locally produced and processed foods often have an advantage. For example, local poultry meat has replaced some U.S. cuts formerly imported for fast-food chains, though processed nuggets from the United States continue to grow in popularity.

Consumers with higher incomes have tended to favor imported products, preferred for their generally higher and more consistent quality compared with locally processed foods. Unaccustomed to the competition, local manufacturers have often been consigned to the lower end of the market.

However, many Dominican processors are now making adjustments. They are upgrading their facilities and packaging in an effort to be more competitive in the rapidly growing mid- and high-end of the market.

Europe and South and Central America are also vying for sales in a number of product categories. Central America is competing in breakfast cereals, South American suppliers are challenging U.S. suppliers of vegetable oil, beef and seafood, while France, Spain and Chile provide strong competition for U.S. wines.

A number of countries sponsor food promotions in the Dominican market. Spanish foods are well promoted and already have a significant presence, benefitting in part from the many Dominicans in the food and grocery business who trace their origins to Spain.

Although competition from other suppliers will continue, the favorable view of U.S. products and the expanding demand for a wider variety of foods are expected to support further growth in sales. As many U.S. exporters have found, the opportunities on this island nation amount to a good deal more than chicken feed.

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The author is an agricultural specialist with the FAS Office of Agricultural Affairs in Santo Domingo. Tel.: (809) 221-688-8090; fax: (809) 685-4743; E-mail: agsantodomingo_po@fas.usda.gov

Last modified: Thursday, October 14, 2004 PM