PROCESSED FOOD INDUSTRY
Processed Food Industry
Truly a rising star, the agribusiness sector is battling on two fronts to stay ahead of demand, with both export figures and local consumer interest peaking simultaneously after several years of build-up. Once a fledging industry that had grown out of the large fresh agriculture export business, agribusiness has since come into its own with branding, extensive marketing campaigns and technological advancement to meet its rapidly expanding growth horizon. More than 1500 firms are active in this sector, producing 323 products for 117 countries.
The agribusiness is defined in Chile as the processing of fruits and vegetables for consumption by secondary markets after initial fresh consumption. This includes frozen, dried and canned products as well as juices, chocolates, crackers and candy, and bottled wines. In the early 1980s, the industry as such was barely getting started, buth the growing Chilean economy, coupled with a strong emphasis on export markets, has driven expansion of 15% annually for a decade and a half.
- 3 -
The reason for such growth has been a steady concentration in investment by firms in the sector and foreign technological transfer by way of direct investment and joint ventures. As a value-added product line, the industry has projected that it will be able to equal or exceed the value of fresh fruit exports in time. At present, however, 10 products account for half of all exports, with wine leading the pack at one-fifth, then tomato puree and juice, and finally non-wine grape juices.
The primary products after these are unfermented apple juice, raisins, plums and other dried fruit, uncooked pastas, canned peaches, raspberries and blackberries, frozen corn, peas and other vegetables and canned vegetables such as tomatoes, peas and asparagus. Export values in 1998 had topped US$ 500 million despite weakened demand from Asia, a temporary factor as consumer economies there adjust to financial problems of the past year.
The industry has grown in part as a result of a steady supply of high quality fruits and vegetables from national producers. Since the northern hemisphere is off-season when Chile is in production, the United States, Europe and Asia are natural markets for both traditional and agribusiness output. And Chile boasts ideal growing conditions, with few problems from insects or fungi to interrup productivity. Investment over the past decade has been driven, too, by Chle‟s increasing willingness to compete on even terms, even lower tariffs unilaterally, with neighbouring countries. Such trade accords eventually help Chile‟s industrial food production base, since competing on an international level requires state-of-the-art production and management. Lower wage costs and ready supply of raw materials keep costs below that of most competitors, making Chilean agribusiness products very competitive.
Some key factors favouring agribusiness development in Chile are:
; Ideal climate, opposite to the northern hemisphere growing season. ; Natural barriers against pests and disease.
; Well-developed export base, local know how, and trained workers.
; Production areas within reach of ports, irrigation resources
2) Availability of major raw materials for agro processing
Based on the country‟s diverse agricultural, livestock and fisheries resources, this
sector has not generally needed to import many raw materials and ingredients. Approximately 33% of Chile‟s continental territory; i.e., approximately 25 million hectares, is suitable for agriculture. There is, therefore, plenty of agricultural resources. However, major exceptions are wheat, milk powder, sugar and tropical products.
Chile also has natural advantages for fishery, dairy, meat, cereals and wine production. These include rocky, loose soil and warm, dry summers with cool nights and little wind.
- 4 -
3) Status of major food processing industries
a) Fruits and vegetables
The production and export of canned, dehydrated and frozen fruits and vegetables continues to grow vigorously. The leading categories are dried fruits and vegetables (raisins, prunes, peppers, rose hips, etc.), frozen fruit (raspberries, etc), tomato products, fruit juice (apple, grape, etc.), canned fruit (peaches, cherries, etc.), fruit preserves and powdered juice drink.
Canned fruit and vegetable exports had increased over 200% from 1990 (US$ 97,6 million) to 1999 (US$ 215,4 million), the most important products being canned peaches and tomatoe pulp which account for 60% of exports.
The main dehydrated products being exported are raisins, plums, apricots, peaches, tomatoes, green and red pepper and spinach.
Juice is the newest product in the processed fruit and vegetable industry. The increasing availability of fruit export surplusses has led to a tremendous growth. The main varieties used are apples, grapes, kiwis and berries.
As to frozen products, plant capacity has increased from 12,000 to 60,000 ton/year over the past few years. The main export varieties are asparagus and berries.
Economic reforms implemented over the past 15 years have encouraged investment in new plant and equipment in the processing sector. The installed capacity of the frozen
fruits and vegetables industry in Chile is about 800 tons/day of finished products, or approximately 200,000 tons per season.
b) Meat and Poultry
While interesting opportunities are emerging, most meat and poultry production is used for domestic consumption. Modern technology is used in all stages of the industrial process. 15 out of total 340 slaughter-houses control nearly 80% of the beef meat market. Similarly, the poultry and swine processing industry is vertically integrated with four firms dominating the sector..
Dairy activity has a longstanding tradition in Chile. Over the last few decades this sector has experienced significant technological changes, mainly as a result of foreign investment. The main dairy goods being produced in Chile are milk, cheese, butter, cottage, powder milk, cream, yoghurt, blancmange, condensed milk and powdered buttermilk. The dairy market is presently controlled by 6 companies.
- 5 -
Chilean fish processing firms have invested heavily to produce value added products tailored to the tastes of consumers worldwide. The result is an increase in value added exports with higher profit margins on the same basic low production costs. The top product is fishmeal, which is used in countries around the world primarily as an animal feed. Chile‟s main markets for fishmeal are Asian countries such as Japan and China. Frozen products follow fishmeal, making up a third of exports. An increasingly strong market, frozen fish and shellfish are in demand both domestically and abroad. This demand has fueled major investment in advanced processing equipment and worker training. Japan, again, consumes most Chilean frozen fish. The United States and Spain are also major buyers. Refrigerated fish is another key market, reaching consumers principally in the USA. Canned fish is the smallest part of exports. Market indicators show that production will increase by 12% annually in the coming years thanks to investment and demand factors.
e) Cereal based products
No information available.
f) Other processed food
i) and ii) Alcoholic beverages / Soft drinks
In brewing, M/s Compania Cervecerias Unidas (CCU) commands a market share of 85-90 percent with brands including Cristal, Escudo and Royal Guard. CCU markets Anheuser Busch products as well under a joint venture arrangement. CCU‟s affiliated soft drink bottler controls a 25% market share with Pepsi and various local brands. Coca-Cola bottlers dominate the remaining three-fourths of the market for soft drinks and bottled water.
Chile is also a major producer of wine. The Chilean wine business in the last few years has been explosive and promises to continue to amaze. Nearly five centuries old, wine-making underwent a dramatic transformation in the 1980s, taking advantage of naturally plague-free wines and an ideal climate to produce quality wines that were almost immediately competitive with Europe‟s master vineyards. Sales skyrocketed in
1998, capping more than a decade of record growth, to US$ 501 million in export value from US$ 13 million in 1986. Unwilling to rest on their laurels, Chilean winemakers have begun to market their products as never before, placing Chile among the top three or four winemaking countries worldwide.
- 6 -
The wine industry should be in for a continued run up as international demand grows. Heavy continuous investment in technology and vines means Chile will be able to keep pace with demand for fine wines, growing on the order of 12% annually in the USA and 9% annually in Britain. Add to those growth rates Japan‟s surprising new interest in Chilean wines -export to Japan rose 340% to US$ 82.7 million in 1998- second only to U.S. consumption.
No information available.
iv) Chocolate confectionery
Chile has four manufacturers of confectionery, chocolates and biscuits, including Nestle, Costa, Dos en Uno and Calaf. These companies are increasingly penetrating international markets, particularly neighbouring countries.
v) Miscellaneous food items
Grain Mill and bakery products
Grain mill activities include the processing of wheat, one of Chile‟s main crops with over 500 thousand planted hectares. Local demand totals approximately 1.8 million tons supplemented occasionally by small import volumes. There are 104 major mills
plus over 300 smaller mills located throughout the country. Over 90% of all wheat processed is white and rest is durum. Ownership of these companies is almost entirely local.
Chile has the largest per capita wheat consumption, 145 Kgs., in Latin America. Bread and pasta make up the single largest item in the Chilean diet.
Major bakeries produce a wide variety of products, although most of them still use traditional methods.
Pasta production is mainly concentrated in two large enterprises: M/s Lucchetti and M/s Carozzi.
- 7 -
4) Total Imports of Processed Food Products (Sector wise - 1999)
Item AMOUNT / FOB-MILLION US$
Preparations of meat, of fish or of
crustaceans, molluscs or other aquatic 24.91 invertebrates.
Sugars and sugar confectionery 71.51
Cocoa and cocoa preparations 25.89
Preparations of cereals, flour, starch or 22.09
milk, pastry-cooks‟ products
Preparations of vegetables, fruit, nuts or 37.86
other parts of plants
Miscellaneous edible preparations 43.82
Beverages, spirits and vinegar 38.84
Residues and waste from the food 111.82
industries; prepared animal fodder
Tobacco and manufactured tobacco 7.31
5) Total Exports of Processed Food Products (Sector wise - 1999)
Item AMOUNT / FOB - MILLION US$
Preparations of meat, of fish or of crustaceans, molluscs or other aquatic 212.33 invertebrates
Sugars and sugar confectionery 24.05 Cocoa and cocoa preparation 26.59 Preparations of cereals, flour, starch or milk, pastry-cooks‟ products 35.21 Preparations of vegetables, fruit, nuts or other parts of plants 279.32 Miscellaneous edible preparations 127.64 Beverages, spirits and vinegar 556.43 Residues and waste from the food industry; prepared animal fodder 298.46 Tobacco and manufactured tobacco substitutes 12.99
- 8 -
PART - B
Indo-Chilean bilateral trade in respect of processed food products represents a
negligible fraction of either country‟s commerce.
i) Imports from India (item-wise)
Item Amount in US$ / 1999 Amount in US$ / 2000 Mushrooms, prepared/preserved US$ 41,043 Nil Other preparations of a kind used in animal feeding US$ 8,000 US$ 6,000 Other edible parts of plants prepare and preserved by vinegar / Nil US$ 1,000 acetic acid
and textured protein
substances Nil US$ 5,000
ii) Market share
- 9 -
iii) Exports to India (item-wise)
Item Amount inUS$/1999 Amount in US$/2000 Chewing gum w/n
sugar coated 2,000 10,000 Candies, chocolates 12,000 56,000 Other sugar
confectionery not 5,000 31,000 containing cocoa
Other chocolates and
food preparation 1,000 10,000 Other food
cocoa Nil 63,000 Sweet buiscuits waffles
and waffers 3,000 11,000 Wine of fresh grapes 3,000 3,000 Fishmeal unfit for 66,58,000 48,20,000 human consumption
i) Procedure for setting up of office / investment company / joint venture
Business in Chile can be conducted by way of participation by foreign investors in a limited liability corporation, through a corporation or a Chilean agent. With very few exceptions, there are no limits to the type of business that a foreign investor can carry out and there are no restrictions on ownership of domestic companies.
Foreign investment is ruled by DL600 statute, which is based on the following principles:
; Contractual agreement. Investors sign a contract with the Chilean Government which is automatically made law, setting terms for the investment over the life of the project and making all rights and responsibilities clear.
- 10 -
; Repatriation of capital. Money invested in Chile can be repatriated after one year with no restrictions on exchange rates and with no tax or duty up to the contractual amount.
; Repatriation of profits. All profits can be repatriated immediately in foreign currency with no restrictions, save paying appropriate taxes.
; Access to productive sectors. Foreign capital can own upto 100% of a Chilean corporation with no time limits for foreign ownership. The state has limited its role in productive sectors.
; Choice of tax system. Investors may choose an invariable tax system of 42% for the first ten years (extendable to 20 years on investment of more than US$ 50 million) or a lower normal rate equivalent to 35%. In either case, the first 15% is a corporate tax which is rebated upon remittance of profits abroad.
ii) Custom regulation including import duties applicable on major processed food products.
On most of the items 8% custom duty on CIF value is charged. Custom duties are being reduced by 1% every year till a target 6% is reached by 2003. IVA (Value Added Tax) at the rate of 18% is also charged after the custom duty has been calculated.
Specific duties are charged on some specific agricultural products such as Wheat, Sugar, Edible oil and Rice.
Tinned caviar is charged with 50% additional duty on luxury items.
Other additional taxes are charged on alcoholic drinks, wines, beer, natural or artificial soft drinks, mineral or thermal water and whisky, according to their alcohol content.
Import items from some countries enjoy preferential or zero tariffs on the basis of bilateral or multilateral Free Trade Agreements signed by Chile.
Food and agricultural items must comply with import regulations and standards such as:
; general and specific labelling requirements
; Packaging and container regulations
; Regulations on pesticides and other contaminants
; Product registration formalities
; Testing and certification
; Special documentation or Conformity Assessment requirements
; Other specific standards such as consumer packaging, wights and measures, vitamin enrichment requirements, etc.
- 11 -
A local agent or importer is absolutely necessary to clear food products for sale and distribution in Chile. Approval of sale is granted by health authorities on a shipment-to-shipment basis. There are no blanket product approvals. As a precaution, importers introducing new products to Chile sometimes submit samples of these products to the Chilean Institute of Public Health for analysis to confirm that they comply with existing regulations. The procedure for obtaining permission to import food products begins in the Health Service Office at the port of entry. The first step is to request „customs destination approval‟, which authorises the retrieval of the products from Customs and their transfer to bonded storage, where they must be stored intact and separate from other goods pending sampling and inspection by health authorities. Obtaining customs destination approval usually takes 72 hours (3 working days). Depending on the potential health risk and the necessary tests involved, the clearance process for sale within Chile may take upto 4 weeks. The following documents are recommended for facilitating clearance:
; A certificate of analysis of micribiological quality and/or physical chemical analysis ; A Health Certificate and/or Certificate of Free Sale issued by a recognized public health department in the country of origin confirming that the product is fit for human consumption, is sold freely throughout the country, and if processed, describing the product.
; A technical sheet
; Labels or empty containers or packages
; For irradiated foods: A certificate indicating the dosage level and a description of the packaging, a certificate issued by the competent government agency authorizing the plant to irradiate food products, a certificate recognizing that the plant is
included in the international inventory of irradiation plants. Certificates issued in the country of origin should be completed in or translated into Spanish. Fees for sampling and conducting tests are calculated according to product weight in kilograms.
iii) Current National Food Laws
The Ministry of Health is responsible for Food Sanitation, approval of food ingredients and labelling and packaging of processed foods. The Ministry is currently bringing Chile‟s food sanitation regulations into conformity with CODEX standards. The Ministry uses its power of decree to issue food regulations.
Chile also follows the Codex guidelines for pesticide residues on food. The Ministry of Health is responsible for preventing the contamination of foodstuffs. The Ministry of Health food regulations also set limits on heavy metals in specified food products, and mycotoxin and microbiological contamination.
The use of pesticides in Chile is regulated by the Division of Plant Protection of the Ministry of Agriculture.
- 12 -
The Agricultural and Livestock Service (SAG) under the Ministry of Agriculture is responsible for enforcing the animal and plant quarantine, including the meat law governing the beef industry. The Chief of the Department of International Affairs, Division of Livestock Protection, SAG is one of the Vice Presidents of the CODEX Commision.
Changes in Chile‟s regulations are announed in the Official Gazzette of the Republic of Chile at <www.diariooficial.cl>.
iv) Important seaport/airport engaged in handling cargo for
; “Comodoro Arturo Merino Benitez” Airport, Santiago (Santiago International Airport)
; Valparaiso Seaport
; San Antonio Seaport
v) Complete names and address of Food Industry Association.
Following are the concerned agricultural and processed food organisations in Chile:
1. Federation of Food Processors and Agro-Industries of Chile, FEPACH Ahumada 254, Ofc. 1209