Breakfast of Chileans: Cereals Catching On

By Richard Blabey

In a country where most mornings still begin with the traditional European menu, the U.S.-style breakfast in a bowl is feeling its oats. Cereals are among the fastest growing grocery products in the small but hot Chilean market.

Imports of breakfast cereals reached $5.4 million in 1998, up nearly 50 percent since 1996, according to the Santiago Chamber of Commerce. Over the same three-year period, the U.S. share of this trade ranged from just over 40 percent to just under 32 percent.

Imported products are only part of the picture, as total retail cereal sales are estimated at $25-$30 million a year in this country of around 15 million people. Among leading brands, the Swiss firm Nestle dominates with around half of retail sales, followed by Kellogg with around 35 percent and Quaker Oats with 10 percent.

Other brands account for the remaining 5 percent, including Chile’s own Natur brand, with its puffed wheat and puffed rice cereals, produced by Industrias Productos Alimenticios.

Can’t Judge Box by Its Cover

Kellogg and Quaker Oats are the two major importers in Chile, buying and distributing cereals through their Chilean affiliates. However, brand names do not necessarily correlate with import sources.

In the last few years, imports of Kellogg cereals have come mainly from Argentina or Mexico. By contrast, Quaker Oats is a large and consistent supplier of U.S.-origin breakfast cereals to Chile.

And last year, Nestle sharply increased its imports into Chile, with more than half of these imports coming from the United States. Nestle has a strong food processing base in Chile and generally does not rely heavily on imports.

While big brands are firmly established in this market, the opportunities they create can also be enjoyed by smaller producers and exporters. Around 15 percent of imported cereals are purchased directly by wholesalers and supermarkets. In 1998, these direct imports were valued at more than $800,000--40 percent from the United States.

Promoting a Place on the Menu

Strong promotions by major firms deserve much of the credit for developing a growing breakfast cereals market in Chile. Chileans and cereals are not a natural mix.

Even today, the European roots of most of the population are not forgotten in the breakfast meal. The typical morning still begins with the "continental" fare of tea or coffee and bread, perhaps accompanied by juice, cheese or ham.

To change these eating habits, the major cereal companies are using in-store sampling to introduce consumers to the experience of enjoying a bowl of cereal with milk. Sugar-coated and chocolate- and fruit-flavored products tempt the children, while health-conscious adults can choose from an array of oat, granola and other nutritious, low-calorie selections.

Companion promotions may further sweeten the appeal. For example, some promotions prepackage a serving a cereal on top of a cup of fruit yogurt. Convenience is another attraction in a country where women now make up a third of the workforce.

Most cereal imports enter Chile under tariff classification 1904.10.00, defined as "products of a cereal base, made by swelling or roasting." Imports from the United States are assessed a 10-percent duty, while imports from Mexico, Canada and Venezuela enter duty-free because of Chile’s free trade agreements with those countries.

Imports from Mercosur countries enter with a 7-percent duty. In addition, Chile collects an 18-percent value-added tax on all retail sales.

Getting Your Spoon in the Door

Promotions by major cereal producers are transforming this market, creating broader opportunities in the breakfast food category. U.S. exporters interested in supplying breakfast cereals or related products to Chile can contact the following independent importers:

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The author is the U.S. agricultural counselor, Office of Agricultural Affairs, American Embassy, Santiago. Tel.: (011-56-2) 330-3313; fax: (011-56-2)330-3203; Internet e-mail: usfas@rdc.cl

Last modified: Thursday, October 14, 2004 PM