foreign agricultural service
Uruguay: Selling U.S. Food Products
Market Brief - Sector
Prepared by: Kenneth Joseph, FAS/Buenos Aires
Date: 30-Oct-1998
U.S. Embassy GAIN Report UY8005
This
report was prepared by the USDA's Foreign Agricultural Service for U.S.
exporters of food and agricultural products. This information is in the
public domain and may be reprinted without permission. Use of
commercial or trade names does not imply approval nor constitute
endorsement by USDA/FAS.
TABLE OF CONTENTS
Uruguay in Brief
General Information
Trade Information
Mercosur
The Market for Imported Food Products
Food Distribution
Market Segmentation
Imported Food Products
Price/Cost of Imported Food Products
Uruguayan Import Duties for Selected Products
Market Problems
How to Import Food Products
Major Supermarkets
Major Wholesalers
Major Food Importers
Useful Addresses
Customs Brokers
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SELLING U.S. FOOD PRODUCTS IN URUGUAY
Uruguay in Brief
Uruguay
has traditionally been a market-oriented economy, but since 1990 it has
accelerated on the liberalization track. Liberalization has been
supported by two Administrations and has included MERCOSUR (the
Southern Common Market) integration, reducing deficit spending,
downsizing government and controlling inflation.
GDP grew 5.2 percent in 1996 and 5.1 percent in 1997, and continued growth is projected for 1998. Inflation has declined in the last six years, totaling 15.1 percent in 1997, the lowest in the past 28 years. A single digit inflation is projected for 1998.
The Uruguayan Central Bank allows the peso to float against the dollar in the short-run within a seven-percent band. Over the medium-term, the Central Bank is allowing the peso to slowly depreciate against the dollar at a rate slightly less than the inflation rate.
In 1997, imports grew faster than exports. Export growth was led by traditional exports (mostly meat, wool and leather). Import growth was led by imports of capital goods, reflecting major investments that are taking place. Uruguayan trade is highly concentrated with other MERCOSUR states. The United States is the third largest commercial partner, exporting primarily machinery and equipment and industrial supplies, while imports are concentrated in meat and leather.
Interest rates in pesos, especially for consumer credits are declining, but still remain very high in real terms (between 33 and 67 percent). Despite the high rates, consumer credit grew significantly in 1997.
General Information (1997)
Population: 3.15 million
Montevideo: 42 percent of total
Population Growth Rate: 0.57 percent
Labor Force: 1.38 million
Unemployment: 11.6 percent (1997 average)
GDP: $19.9 billion (estimate)
GDP per capita $6,320 (estimate)
Average Monthly Household Income
- Montevideo: $1,335 (Dec 97)
- Interior: $ 745 (Dec 97)
Trade Information (12 months ended in November 1997)
Exports: $2.7 billion (Brazil, Argentina, U.S., China)
Commodities: processed meat, textiles, leather, dairy, chemicals.
To the U.S.: $161.8 million
Imports: $3.6 billion (Brazil, Argentina, U.S., Italy)
Commodities: industrial supplies, machinery & equipment, oil & fuels, non- durable consumption goods
From the U.S.: $427.6 million.
Mercosur
Mercosur integration continues to advance at a rapid pace despite some internal conflicts. Duties among Mercosur's members (Argentina, Brazil, Paraguay and Uruguay) were largely eliminated and a common external tariff for most products was implemented on January 1, 1995. Chile and Bolivia were accepted as Associate Members of Mercosur in 1996 and 1997 respectively. Mercosur's Common External Tariff varies between 0 and 23 percent. Traditionally high Uruguayan trade with neighboring Argentina and Brazil increased even more with Uruguay's integration into Mercosur. Under Mercosur, exports to its partners have grown from 41 to 46 percent of total exports while imports from Mercosur have risen from 40 to 44 percent of total imports.
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THE MARKET FOR IMPORTED FOOD PRODUCS
The
Uruguayan market has been opened to imports since the '70's, but high
costs for importing, of about 200 percent, acted as a trade barrier to
protect the local industry. In 1990, Uruguay took a step further in
liberalizing its economy. Current cost of importing has fallen
dramatically to an average of approximately 35 percent. As result of
this, imports have been growing significantly.
Exports of food products to Uruguay have good potential. With the opening of the economy, many of the inefficient local food industries were forced to shut down, and those in which the country had advantages have gained in efficiency. That is the case of the dairy (except for ice creams), beef, cold cuts, fish products, fruits and vegetables, rice and bakery sectors. There are opportunities to export many food products to Uruguay, but particularly those in which the local industry is not very competitive. Imported food products, especially from Brazil and Argentina, are substituting for many domestically-manufactured products. The main reasons for such an import demand are:
significantly lower costs for importing;
improved quality of the imported products, which in most cases are better than the domestic products;
market diversification; and
expanding demand.
Imported
food products for mass consumption are typically purchased from
Argentina, Brazil and Chile, while imports from Europe and the United
States are aimed at the middle and higher income sectors and are
generally more upscale foodstuffs and beverages. U.S. companies most
likely will have good opportunities to access the mass market through
the development of the private label concept.
* Food Distribution
Supermarkets have the largest variety and product diversification focusing primarily on the middle and higher income stratums. They currently account for approximately 35-40 percent of the country's total food sales ($1 billion), which is not as high as in other countries in the region where their share exceeds 70 percent. The balance is in the hands of smaller traditional grocery stores. However, with the opening of hypermarkets (+9,000 sqm) and the most probable arrival of a few strong foreign supermarket chains (especially French chains) in the near future, market shares early next century are expected to change significantly.
The major supermarket chains are estimated to
account for about 25 percent of all sales. Supermarket penetration in
Montevideo is much higher than in the interior, where their market
share drops to a little over 10 percent. However, most industry sources
agree that the three largest chains each has approximately 30 percent
of Uruguay's total supermarket sales. The following are the top
supermarket chains with their number of stores:
Montevideo TotalCountry
* Disco 15 23
* Devoto 8 11
* Tienda Inglesa 7 1
There are other minor supermarket chains like Multiahorro, Manzanares Pronto, Manzanares Almacenes and Ta-Ta.
There are about 40 "specialty stores" in Montevideo and 30 in Punta del Este. These are usually small and sophisticated and carry a wide selection of imported confectionary, cigarettes, beverages, candy, snacks, and some foods. They are very popular among Uruguayans and tourists. There is no chain of these stores.
A private estimate shows that imported foodstuffs in Uruguay are sold in the following stores:
%
supermarkets 55
self-service 20
kiosks 15
specialty stores 10
A more detailed analysis of sales by product category shows the following:
Product Supermarkets % Spec. Stores
% Kiosks
%
confectionary 5 10 85
spices 60 40
pasta 80 20*
bonbons 40 60
toppings 50 50
* and restaurants
The
current development of private label products is very limited. However,
most large retailers are in the process of developing store brands and
it would be timely for U.S. suppliers to contact supermarkets. This
opens great potential to access this market with high-volume products.
Sources indicate that private label products will be widely available
to the public in about 1-2 years from now.
* Market Segmentation
More than 50 percent of Uruguay's population lives in its capital city, Montevideo. Given this concentration, Montevideo is the market to address. The rest of the country is more modest and there are a few medium-sized cities, such as Salto, Paysandu and Colonia. However, there is one market with a strong seasonal impact and that is Punta del Este. This important beach resort is where most affluent Argentines and Brazilians like to spend their summer holidays (mid-December through February). During the high season, the volume of sales of some products compares to that of Montevideo. Annual total sales of imported food products per location are estimated as follows:
%
Montevideo 60
Punta del Este * 25
Duty Free Shops ** 8
Interior *** 7
* includes Piriapolis
** Airport, ferry boats and Rivera city (border with Brazil)
*** Salto, Paysandu and Colonia cities
Uruguay's estimated socioeconomic structure is as follows:
%
middle-high and high 10
middle 40
low 50
* Imported Food Products
Most food products coming in from non-Mercosur countries pay import duties of between 13-23 percent, while those from other Mercosur countries are duty free (although there are a few exceptions). Regional products have freight advantages (they are cheaper and more flexible with volumes). Argentine and Brazilian food products have a good image and, although not necessarily true, they are perceived as less expensive. Many large Argentine and Brazilian food processors, some owned by foreign entities, have either subsidiaries or distribution centers in Uruguay making trade very fluid. Most large food processors located in the Mercosur region are rapidly adapting to this new globalized market trying to take advantage of all the possibilities of expansion.
European food products have had a long presence in this market. Most importers indicate that it is much easier to do business with them than with U.S. exporters. Europeans are very flexible, give personalized service and are always willing to do business. European food and beverage products have very good image. U.S. products in general also have very good image and reputation, although not too well associated to food products, as they are more recent in the market. There is a general perception that "if it's American, it's got to be good". Furthermore, freight costs from the U.S., for a 20-foot dry container, are more than 50 percent higher than from northern Europe.
When exporting food products into the Uruguayan market, three factors have to be carefully analyzed:
* taste
* price
* shelf life
* Best Prospects
Most sources indicate that there is great potential for U.S. beer, because of its image and quality. However, they are not so positive in importing wine as they state that local wines have improved significantly and Chile and Argentina have very competitive wines. Moreover, the importation process for wine is quite complicated.
Retailers are very interested in the following products: breakfast cereals, snacks, confectionary, canned fruits, vegetables and fish, olives, frozen vegetables, sauces, oils, soups, beer, juices, and carbonated beverages.
Because of the scale and volume problems, we foresee
that companies in the U.S. which are prepared to consolidate products
for Uruguayan importers or retailers will have great opportunities in
this market.
* Price/Cost of Imported Food Products
Supermarket markup in foods are estimated as follows:
%
High rotation 30
Low rotation 45
Confectionary 50
There is an IVA (value added tax) of 23 percent. Given the high markups, it is likely that profitability of supermarkets is very good. Slotting fees are something relatively new in this market. Due to personal friendship and contacts, typical of small markets, importers who have been in business for years currently do not pay for shelf space, but the new companies are charged quite heavily.
Importers' margins are very high, but they state that doing business in Uruguay is very costly because of inefficiencies, inflation and small scale. Their margins vary between 30 and 70 percent, depending on the product's rotation.
As a rough calculation, a product which costs $1.00
FOB at an US port, will cost $1.50 at the importer's warehouse and
$3.50 to the consumer (all taxes included).
* Uruguayan Import Duties for Selected Products
13% 17% 19% 21% 23%
fzen vegetables canned fruits b'kfast cereals snacks confectionary
fresh fruits orange juice ham sauces chocolate
pork chicken meat canned fish soups beer
oil roasted nuts uncooked pasta ice cream c.beverages
* Market Problems
The
main problem we see for a U.S. food company in exporting to Uruguay is
volume. Although Uruguay has a small population, there is a good
potential for the substitution of domestic products for imported
products. Supermarkets, which currently have a relatively low market
share, practically do not import directly because of volume
limitations. Therefore, food products are primarily imported by
importers which have access to practically all local retailers, both
large and small, thus handling more efficient volumes. However, as the
supermarket sector gets more competitive and increases its market
share, as has happened already in most countries in the region, the
volumes which they will handle could encourage them to import directly
reducing the cost of having a trader in between. However, importers
indicate that by that time, most major international food brands will
be in their hands and therefore, supermarkets will need to continue
buying from them.
* How to Import Food Products
There are no serious problems to import food products into Uruguay. Of all the import procedures, registering the products in the Servicio de Regulacion Alimentaria (Service of Food Regulation) in the Intendencias (certainly in Montevideo's) is the most troublesome. Importers usually ask exporters to be patient with this bureaucratic step. Many companies have had problems as the Intendencias follow the requirements from a several-decades-old food code. If an exporter has a problem at this stage, they should contact this office for guidance. We are not aware of any U.S. food product which has not been able to eventually access this market because of the Intendencia's registering requirements.
Import permits for animal origin food products are obtained at the office of the Animal Health Division, Ministry of Agriculture. The importer needs to present a letter stating from where he is importing, to whom and the quantity involved. Once a week a committee analyzes all the requests. If approved, a resolution is signed stating the different sanitary certifications which have to accompany the merchandise. This is applicable to large volumes or small samples. Usually importers apply for large volumes and gradually import the products under one same permit. However, if the sanitary conditions change in the exporting country, import permits will be canceled.
For fruits and vegetables, importers need to present an AFIDI, with the specific certificates for that product. If it is a new or unknown product, it will be analyzed by a committee which will then determine the phytosanitary requirements for its importation.
Approval for importation of all other food products, including health and nutritional items, are under the responsibility of the Ministry of Public Health. Importers should contact the office listed in the last section of this report. Wine falls under the authority of the Instituto Nacional de Vitivinicultura (INAVI).
Local custom brokers usually know how to deal with import procedures. A list of possible brokers is provided at the end of this report.
Once the imported products arrive in Uruguay accompanied by all the necessary documentation and health certificates and all taxes and expenses are paid, the products have to be registered in the Intendencia (19 in total) where they will be marketed. In general, most sources indicated that if registered in the Intendencia of Montevideo, the most logical one because of its market size, the other 18 will probably accept it.
Major Supermarkets Major Wholesalers
* Supermercados Disco * Carrau y Cia.
del Uruguay S.A Att: Roberto Carrau
Att: Carlos Pombo Fernandez D.A. Larraniaga 344
Jaime Sudanez 2627 Montevideo, Uruguay
Montevideo, Uruguay Tel: (598-2) 58-6751/6759
Tel: (598-2) 71-3820/7250 Fax: (598-2) 57-0706
Fax: (598-2) 71-7903
* Supermercados Devoto Hnos. * H. Faroppa S.A.
Att: Nestor Bagnasco, Gerente de Compras Roberto Garrido
Gral. Paz 1404 M. Herrera y Obes 4016
Montevideo, Uruguay Montevideo, Uruguay
Tel: (598-2) 600-0707 Tel: (598-2) 39-8758/6471
Fax: (598-2) 601-7707
* Supermercados Tienda Inglesa * Luis Cirilli e Hijos
Att: Harry Pugh Angel Salvo 214
Av. Italia 5820 Montevideo, Uruguay
Montevideo, Uruguay Tel: (598-2) 39-8654
Tel: (598-2) 61-9351 Fax: (598-2) 39-3451
Major Food Importers
* Altama S.A. * Tronil S.A.
Att: Manuel R. Marghieri Att: Lidia Garrido, Director
Dr. Carlos Quijano 1217 Guadalupe 1666
Montevideo, Uruguay Montevideo, Uruguay
Tel: (598-2) 91-3139 Tel: (598-2) 924-9392
Fax: (598-2) 90-0867 Fax: (598-2) 924-3182
* Leopoldo Gross Y Asoc. * Orben S.A.
Att:
Mario
Gross
Att: Jaime Miller and Antonio Miller, Directors
Venezuela 1211 Rincon 531
Montevideo, Uruguay Montevideo, Uruguay
Tel: (598-2) 94-6090 Tel: (598-2) 915-3538/916-0072
Fax: (598-2) 94-6617 Fax: (598-2) 916-2074
* Maxpoint S.A. * Frylon S.A.
Att: Mr. Hidalgo, General Manager Att: Marcos Rohrer, General Manager
18 de Julio 878 Julio Herrera y Obes 1523
Montevideo, Uruguay Montevideo, Uruguay
Tel/fax: (598-2) 902-0854 Tel: (598-2) 900-1252
Fax: (598-2) 9003425
* Lucas Calcraft S.A. * Sadan S.A.
Att: Alejandro Sosa, Manager Att: Mario Kaczka, Manager
Treinta y Tres 1512 Convencion 1221
Montevideo, Uruguay Montevideo, Uruguay
Tel: (598-2) 916-3188 Tel: (598-2) 902-2727
Fax: (598-2) 916-3046 Fax: (598-2) 902-0837
* Graba S.R.L. * Benhayou Stanley
Att: Eduardo Babuglia, Manager Att: Stanley Benhayou, Director
Uspallata 1449 San Jose 971
Montevideo, Uruguay Montevideo, Uruguay
Tel: (598-2) 600-3433 Tel: (598-2) 908-4214
Fax: (598-2) 600-7012 Fax: (598-2) 901-7498
Useful Addresses
* Direccion General de * Direccion General de
Servicios Ganaderos (MGAyP) Servicios Agronomicos (MGAyP)
Constituyentes 1476 Piso 2 Millan 4703
11200 Montevideo, Uruguay Montevideo, Uruguay
Tel: (598-2) 42-6305/1402 Tel: (598-2) 309-2219
Fax: (598-2) 42-6304 Fax: (598-2) 309-2074
* Asociacion de Importadores * Servicio de Regulacion Alimentaria
y Mayoristas de Almacen Seccion Tecnologia Alimentaria
Rincon 454 Escs. 317 Intendencia Municipal de Montevideo
11000 Montevideo, Uruguay 18 de Julio 1360
Tel: (598-2) 96-0796 Montevideo, Uruguay
Fax:: (598-2) 95-6103 Tel: (598-2) 900-3032
Fax: (598-2) 902-0467
* Robert Gorter * Asociacion de Supermercados del Uruguay
Commercial Specialist Jorge Becker
Foreign Commercial Service Fax: (598-2) 903-1840
U.S. Embassy
Lauro Muller 1776
Montevideo, Uruguay
Tel: (598-2) 203-6061/408-7777 (ext. 2366)
Fax: (598-2) 408-8611
E-mail: gorterrh@montewpoa.us-state.gov
* Ministerio de Salud Pública (MSP)
Av. 18 de Julio 1892
Montevideo, Uruguay
Depto de Nutrición, 4to piso
Tel: 400-9022
Contacto: Dra. Sara Arbulo, Sub-Directora del Departamento
Custom Brokers
Gerardo Mendez Ignacio Anegon
Zabala 1372, piso 2 25 de Mayo 444, pisos 6 y 7
Montevideo, Uruguay Montevideo, Uruguay
Tel: (598-2) 916-8505 Tel: (598-2) 916-5434
Fax: (598-2) 915-5697
Cargo Center J. Rodriguez Gandarra y Cia.
Washington 236/8 Misiones 1554, piso 5
Montevideo, Uruguay Montevideo, Uruguay
Tel: (598-2) 916-3258 Tel: (598-2) 917-0262
Fax: (598-2) 916-3257 Fax: (598-2) 917-0263
Jose M. Facal & Cia. Rossati Ulive Carlos
Rambla 25 de Agosto de 1825 Zabala 1386, piso 4, esc. 403
No. 318, piso 8, of. 801 Montevideo, Uruguay
Montevideo, Uruguay Tel: (598-2) 915-8381
Tel: (598-2) 916-2828 Fax: (598-2) 915-5946
Fax: (598-2) 916-2494.