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Patience and Preparation Promise Profits in Venezuela
By Mora Paiva
U.S. exporters interested in
the opportunities presented in Venezuela’s marketplace need
to future-think. Although recession and inflation currently take
a toll on consumer incomes, the Venezuelan government is working
to better economic conditions. With improvements expected as soon
as the last half of 1999, there’ll be more bolivars
in consumers' pockets to spend for staples and convenience foods.
Fortunately, strong cultural ties, travel to the United States, proximity and the quality of U.S. products have led consumers to prefer U.S. products and brands.
The U.S. consumer-ready food industry has worked hard to take advantage of this. As a result, U.S. agricultural products are closing in on a one-third share of the entire Venezuelan imported foods market, with the consumer-oriented food sector showing almost a 60-percent gain in one year–leaping from $37 million in 1996 to $59 million in 1997.
The good news on exporting to Venezuela is that there are few barriers for consumer-ready food imports. And there are no quantitative restrictions. But face it, there’s a lot of paperwork. (Check out details in "Export Adventures in Venezuela," in the June 1998 issue of AgExporter.)
How the Demographics Shake Out
Out of Venezuela’s population of 22.5 million, about 20 percent earn enough to buy imported consumer-oriented food products. If the projections for improved economic conditions prove reliable, there will be increased purchasing power in this upper-income group, and more workers at lower incomes will buy items at least occasionally.
Venezuela’s youthful population--one-third under 18; two-thirds under thirty--is likely to stay that way due to a high birth rate.
The population is highly urbanized with 85 percent living in major metropolitan areas, mostly near the Caribbean coast. An increasing number of women working outside the home makes convenience foods a desirable part of the family dinner. Though statistics aren’t available, microwave ovens and refrigerators are common.
Competition Is Domestic, Third-Country
Venezuela has a well-developed food processing industry that produces high-quality products, with the joint venture playing a prominent part in the sector. Some established U.S. companies: Kellogg’s, Pillsbury and Nabisco.
Thanks to a shared border, common language and culture and a free-trade agreement, Colombia is Venezuela’s largest food trading partner.
No domestic production policies favor local production of high-value and consumer-ready foods over imports. However, Venezuela’s trade policies do favor Latin American countries.
Trade agreements play an important role in Venezuela’s international trade. Besides a bilateral agreement with Mexico, Venezuela belongs to the Andean Pact, whose members include Colombia, Peru, Ecuador and Bolivia. Pact members enjoy duty-free entry of food and agricultural products.
Negotiations are underway for setting up trade agreements with the northern states of Brazil. Additionally, Venezuela has tariff agreements with other Latin American countries for products such as wine, fruit and vegetable oils that compete directly with U.S. products.
Trends and Opportunities
Market trends tend to follow those in the United States:
U.S. producers of branded and private label frozen meals, pizzas, frozen uncooked vegetables, potato products, fish and baked goods hold strong market positions. Even Häagen-Dazs has made a significant foray into supermarket freezers with its tasty frozen treats.
The modernization of facilities and services carried out by two leading supermarket chains has pressured other retailers to restructure, open new outlets and offer customized services and products that did not exist before.
Distribution Well Established
Supermarkets handle over half of retail
food sales, while the rest are mostly at bodegas
(delicatessens) and abastos (mom and pop stores). National
and regional supermarket chains handle about 14 percent of
national sales; independents corner 40 percent. Many supermarkets
and some bodegas import directly.
The presence of hypermarkets and consolidation among supermarket chains and convenience stores offer new opportunities for U.S. exporters--reducing layers in the marketing channel and creating a freer economic environment. Here’s a list of the players in the distribution networks:
Wholesalers. Many processed and perishable foods, local and imported, are distributed through wholesalers. Often serving as importers, wholesalers tend to specialize in certain product lines or a small variety of products. They normally service small groceries, bakeries, other shops and municipal markets.
Supermarkets. The first major supermarket chain in Venezuela was established by Nelson Rockefeller in the 1950's. Most supermarkets and chains in the larger cities evolved from mom-and-pop neighborhood groceries. Some independent supermarkets have specialized in high-value products or transformed themselves into upscale deli stores.
Although local goods prevail at most supermarkets, imported goods are filling more shelves, including: canned and frozen foods, bottled sauces, spices, dried fruits and nuts, breakfast cereals, biscuits, delicatessen, liquor, wine and confectionary products.
Municipal Markets. City authorities set these stores up to supply lower income groups with inexpensive foods. Every county has at least one.
Small Shops and Convenience Stores. Lower income urban neighborhoods and interior towns support many abastos and bodegas. Though prices may be higher than at the supermarkets, these stores often offer credit to customers.
Hypermarkets. Exposure to the formats of hypermarkets has motivated consumers to demand more products and services at retail outlets. Customers like having access to non-grocery products as well as a florist, bakery, bank and even a utility company-- under one roof.
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The author is an agricultural specialist with the FAS Office
of Agricultural Affairs in Caracas, Venezuela. Tel.: (582)
977-0015; Fax: (582) 977-1680; E-mail: paivam@fas.usda.gov;
Homepage: www.amvenfood.org
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