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CONFECTIONARY IN CHILE

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CONFECTIONARY IN CHILE Powered By Docstoc
					   PRODUCT MARKET STUDY: CONFECTIONERY MARKET IN CHILE

                               Date : March 2006




Contents

  1. Product Definition

  2. Market Size and Behavior

  3. Confectionery Market

        3.1 Chocolate Confectionery
        3.2 Sugar Confectionery
        3.3 Chewing Gum

  4. Market trends

  5. Distribution

  6. Legislation

  7. Import Overview

  8. Imports by Category

        8.1 Chocolate Confectionery
        8.2 Sugar Confectionery
        8.3 Chewing Gum

  9. Import duty

  10. Trade fairs

  11. Analysis and opportunities

  12. Useful business contacts

Annex




                                       1
1.0         Product Definition


      1.1      The market study on Confectionery included the following HS codes:

                                    HS
                                                    Product Definition
                                  CODE
                                 18063100   Filled chocolate confectionery
                 CHOCOLATE
                                 18063200   Not filled chocolate confectionery
               CONFECTIONERY
                                 18069000   Other chocolate confectionery
                                 17049020   Boiled sweets
                                 17049030   Caramels, candies
                                 17049041   Containing caramel spread
                   SUGAR         17049049   Other sugar confectionery
               CONFECTIONERY     17049050   Pastilles
                                 17049060   Gums containing sugar
                                 17049070   Nougat
                                 17049090   Other sugar confectionery
                                 17041010   Chewing gum sugar - coated
                CHEWING GUM
                                 17041090   Chewing gum non sugar - coated




2.0         Market Size and Behavior


      2.1      In 2005, confectionery in Chile (in terms of sales) grew at a rapid pace
               of 8% compared with 4% in 2004. The growth was spurred by the
               increased in consumer spending as a result of sustained economic
               growth of 5% over the last 5 years, increased in sales promotions by
               local companies and the rising trend towards snacking.

      2.2      The confectionery market size in Chile is estimated worth of US$ 500
               million a year. Over the last five years, the market has been growing at
               an average rate of 3.8%. Chocolate confectionery alone accounts for
               55% of the total sales, followed by sugar confectionery at 35% and
               chewing gum at 10%. [Refer to Table 1]

                                   Table 1
          Retail Sales of Confectionery by Subsector (2001 - 2005)
                                (US$ Million)
                                              2005 2004 2003              2002    2001
CHOCOLATE CONFECTIONERY                      283.5 261.1 248.5            237.6   230.5
SUGAR CONFECTIONERY                          183.8 171.9 170.0            165.8   159.1
CHEWING GUM                                   51.7  48.8    45.6           43.6    41.1
TOTAL CONFECTIONERY MARKET                   518.9 481.8 464.0            447.0   430.7
Source: Euromonitor




                                             2
  2.3          In terms of sales volume, the confectionery market reached 67,700
               tones in 2005, an increase of 4.7%, compared to 64,600 tones
               consumed in 2004. The bulk of the consumption was led by sugar
               confectionery and chocolate confectionery, reaching 34,500 tones and
               27,900 tones, respectively. Chewing gum registered volume of 5,160
               tones.

      2.4      Needless to say, local manufacturers and resident multinational
               producers dominate the confectionery market, being that six
               companies garner more than 90% of the market share. The leading
               company in Chile is Empresas Carozzi S.A. holding a market share of
               39%. The next is Arcor SAIC (a subsidiary of Arcor Argentina) at 24%.
               Close behind the two leaders is Nestlé Chile S.A. with 19% share.
               Other significant players in the industry are Calaf S.A. (3%) and
               Cadbury Stani Adams Chile (1%).

      2.5      Confectionery sales reach its peak during holidays or festivities or
               special occasions. Eastern Eve (second Sunday of April) alone
               explains 47% of the chocolate annual sales. Other important holidays
               in Chile are: Saint Valentine‟s Day (14th February), Children‟s day
               (second Sunday of August) and Halloween (31st October).


3.0         Confectionery Market

      3.1 Chocolate Confectionery

            3.1.1 Chocolate confectionery represents the largest segment in the
                  Chilean confectionery industry. For the period 2001-2005, the
                  average sales were over US$ 252 million. It absorbed more than
                  50% of total sales of confectionery.

            3.1.2 However, Chile is still a country with low consumption of
                  chocolates. While in Switzerland the average chocolate
                  consumption per capita is above 10 kg per year, the figure is below
                  2 kg per year for Chile.

            3.1.3 Chocolate confectionery is expected to be the most dynamic
                  category within confectionery which posted a sales growth of 9% or
                  valued at US$22.4 million in 2005 over the previous year. This
                  category demonstrated higher sales due to significant advertising
                  and product development in recent years.




                                            3
                                     Table 2
        Retail Sales of Chocolate Confectionery by Subsector (2001- 2005)
                                   (US$ Million)
                                             2005   2004   2003    2002   2001
Tablets                                      151.1 138.0 127.7 122.4 112.1
Countlines                                     9.2   8.4    7.8      7.5  11.0
Bagged selflines/softlines                     5.4   5.1    4.9      4.7   4.5
Boxed assortments                             60.5  56.7   53.9     50.5  52.0
Seasonal chocolate                            40.0  36.9   40.3     37.9  36.1
Chocolate with toys                            0.9   0.9    0.8      0.9   0.9
Alfajores                                     16.4  15.0   12.9     13.7  13.9
Other chocolate Confectionery                  0.1   0.1    0.1      0.1   0.1
Total Chocolate Confectionery                283.5 261.1 248.5 237.6 230.5
Source: Euromonitor


        3.1.4 Table 2 showed the product preferences of the Chilean consumers.
              Chocolate tablets are by far the high sales product, being that this
              type alone constituted 53% of the sub-sector total sales value.
              Chilean consumers favor tablets made of plain milk with filled
              varieties. Chocolate boxed assortments were ranked second in
              preference attaining a 21% share. The mentioned products had
              been growing at 9% and 6% rates, respectively.

        3.1.5 In Chile, chocolate is considered as a fast rotation product and an
              “impulse purchase” becauseits purchase is not planned
              beforehand.

        3.1.6 Major brands competing in this market are Costa, Ambrosoli (both
              from Empresas Carozzi), Sahne Nuss, and Trencito (Nestle).


    3.2 Sugar Confectionery Market

        3.2.1 Sales of sugar confectionery in 2005 grew by 6.9%. This category
              has been growing below the growth for chocolate confectionery,
              mainly because manufacturers focus their attention more into
              chocolate confectionery. However, the growth in 2005 was higher
              than the average growth of 2.6% for the period 2001-2004.

        3.2.2 Table 3 showed that boiled sweets were the leading product in this
              category, representing 24% share in the overall sugar confectionery
              sales value, followed by medicated confectionery (23%) and
              pastilles/gums/jellies (22%).

        3.2.3 However, the medicated confectionery registered the highest sales
              growth of 8%. The product in question may be described as 'throat
              lozenges' or 'cough lozenges' used for short-term thoat pain relief.
              They are marketed for the purposes of relieving coughs and throat


                                          4
                irritations. Ingredients include those found in ordinary confectionery
                but, in addition, almost all products include menthol and eucalyptus
                [eucalyptus oil is distilled from the eucalyptus tree leaves and can
                be used for cleaning, deodorising and in very small quantities in
                food supplements; especially sweets, cough drops and
                decongestants]. Generally, the products are pleasant tasting and
                emits the „cooling‟ sensation

        3.2.4 Toffees/caramels and pastilles/gums, each recorded a steady
              growth of 7%, followed by mints and boiled sweets (both grew at a
              5% rate).

                                      Table 3
           Retail Sales of Sugar Confectionery by Subsector (2001- 2005)
                                   (US$ Million)
                                              2005   2004 2003 2002         2001
Mints                                         10.1    9.6     9.5    9.3     8.8
Boiled sweets                                 43.6   41.4    41.7    39.3    37.7
Pastilles, gums, jellies and chews            41.2   38.5    37.5    36.9    35.8
Toffees, caramels and nougat                  30.6   28.4    28.0    27.7    26.8
Medicated Confectionery                       42.8   39.5    38.9    38.5    36.6
Lollipops                                     11.4   10.8    10.6    10.3    9.7
Liquorice                                      0.0    0.0     0.0    0.0     0.0
Other sugar Confectionery                      4.0    3.8     3.8    3.8     3.7
Total Sugar Confectionery                    183.8 171.9 169.9 165.8        159.1
Source: Euromonitor


        3.2.5 The leading companies in this market are Empresas Carozzi with
              54.5% of market share, followed by Arcor (29%), Calaf (5.1%) and
              Cadbury Stani Adams Chile (4%).


    3.3 Chewing Gum Market

      3.3.1 In 2005, sales of chewing gum increased by 6% to US$ 51.7 million
            from US$ 48.8 million in 2004. Between 2001 and 2005, its sales
            value grew over US$10 million as shown in Table 4.

      3.3.2 The leader in this category was bubble gum – a product focused on
            children and teenagers- accounting for 49% market share, followed
            by sugar-free gum which holds a substantial share of 42%.
            Sugarised-gum absorbed the remaining 7% share. Both the sugar-
            free gums and sugarised are oriented towards adult consumers.

      3.3.3 For the period 2001-2005, the average growth in sales of sugar-free
            gum outpaced that of sugarised gum at 5.7% annually. On the other




                                           5
                hand, sugarised-gum registered a stagnant sales growth since 2003
                and a decreased annual growth of 4.8% over the last five years.


                                     Table 4
             Retail Sales of Chewing Gum by Subsector (2001- 2005)
                                  (US$ Million)
                                      2005      2004  2003     2002      2001
Sugarised gum                          3.4       3.4    3.4      4.0      4.2
Sugar-free gum                        21.9      20.7   19.5     18.9     17.6
Functional gum                         1.1       0.9    0.7      0.2      0.0
Bubble gum                            25.3      23.8   22.0     20.5     19.4
Total Chewing Gum                     51.7      48.8   45.6     43.6     41.1
Source: Euromonitor


       3.3.4 The leading companies in this sub-sector are Arcor and Cadbury
             Stani Adams Chile, with 80% and 15% market share, respectively.

       3.3.5 Major brands competing in the market are Big Time, Dos en Uno, Miti
             Miti (the three of them owned by Arcor), Dentyne, and Bubbli‟s (sold
             by Cadbury Stani Adams Chile).



4.0         Market Trends

      4.1     It is increasingly becoming common for consumers to snack outside
              typical mealtimes. This trend was driven by city employees who are
              living further from their residence. Many people purchase confectionery
              sold by individuals on the street or in the bus or from the kiosks before
              getting into the bus in order to have something to munch on the way
              back home or office.

      4.2     In chocolate confectionery, a trend towards higher-quality products
              was prevailing with the launch of new products with a premium
              positioning. Plain milk chocolates continue being the preferred type of
              chocolate.

      4.3     The trend towards high quality “premium” chocolates is being explored
              by small and medium family owned local companies such as Brunatto
              and Varsovienne which are developing chocolate varieties by mixing
              cocoa with spices (such as pepper) or dairy products (i.e. cheese) in
              order to have difference and obtain tasty chocolates. Although sales
              are relatively small (only 2% of the total chocolate confectionery
              market), there is a growing niche demanding this type of “premium”
              chocolates, both locally and overseas.



                                            6
      4.4      The medicated confectionery is showing an uptrend since the last two
               years due to the fact that people seek for self-medication now more
               than ever before with concerns related to throat problems, where
               medicated confectionery is used for short-term pain relief. Moreover,
               marketing campaigns and new launches from companies such as
               Arcor and Cadbury are expected to lead the growth of 9% in the years
               ahead for medicated confectionery.

      4.5      Even though Chilean consumers are becoming more health-conscious,
               sugar-free products are yet to be associated with dietary restrictions.
               Sugar-free products still have insignificant market share in contrast
               with sugarised products. In chocolate confectionery and sugar
               confectionery, sugarised products leads with at least 94% share of
               sales over the sugar-free products (meaning Chileans like sweet
               confectionery), even in the medicated confectionery. This is different in
               the case of chewing gums, where sugar-free products are unbeatable
               because Chilean consumers consider it as healthier than sugarised
               gum, which helps contributing to teeth decay.



5.0         Distribution

      5.1      Local manufacturers of confectionery usually deal directly with large
               customers ranging from supermarkets, convenience stores, gas
               stations to department stores. The latter establishments include
               confectionery among their core product lines especially during
               holidays.

      5.2      Even though supermarket and hypermarket accounts for 66.5% of the
               general home purchases made by Chilean consumers but in the case
               of confectionery, these retailers represents 36% of the total
               confectionery sales.

      5.3      Confectionery is often regarded an impulse purchase and therefore
               non-traditional channels – such as kiosks, street and bus vendors-
               accounts for an estimated 29% of its sales.

      5.4      Informal channels became very important in the sales of confectionery.
               In Chile, there is substantial number of street and bus vendors who sell
               food products often purchased in bulk from distributors. The reason is
               that many workers have to spend several hours a day commuting in
               the public transport services. This helped spur sales of confectionery
               made in the buses and streets when commuters purchase
               confectionery to quench their hunger temporarily until they get home
               for dinner.



                                             7
      5.5       Traditionally, the most common product for street and bus vendors was
                impulse ice cream. However, this became very competitive in recent
                years and vendors increasingly turned to sugar confectionery, gum and
                small cans of soft drinks. Street vendors follow a seasoning sales
                tactic; during summer and spring time, they mainly sell ice creams,
                while during winter and autumn they switch to confectionery products.

      5.6       A factor that had a favorable impact on the confectionery business
                growth is the expansion in distribution outlets. Convenience stores,
                particularly those affiliated with petrol stations, expanded in recent
                years and impulse products such as count lines [confectionery located
                near the cashier] and chocolates in forms of small tablets are gaining
                popularity in such outlets. In 2005, petrol station operators such as
                Copec, YPF and Esso had invested heavily in opening new
                convenience stores within their petrol stations. This type of distribution
                represents an estimated 8% of the total sales of confectionery.


6.0         Legislation

      6.1       According to the Chilean Food Sanitary Law, in article 398, chocolate
                is defined as “a homogeneous mix obtained from cocoa pasta and/or
                cocoa with addition of sucrose, milk, honey or other permitted
                additives”.

      6.2       Most chocolate confectionery commonly comes with cocoa solids
                which contributes to the brown coloration. According to the regulation,
                chocolate must contain a minimum of 25% of cocoa solids, 18% of
                cocoa lard, 14% of non-fatty cocoa solids and a maximum of 55% of
                sucrose. Chocolate should not contain colorants.

      6.3       A special requirement must be observed for medicated confectionery
                where it must be specially packaged in a way comparable to other
                medicinal lines, e.g. blister pack or individually sealed, and not
                packaged in a similar fashion to confectionery.

      6.4       With regards to labeling, considering that confectionery is for human
                consumption, the labels must comply with the following specifications:

            -      Labels must be printed in Spanish; this can be done either direct
                from Malaysia or through the coordination with the local distributor.
                Products labeled in other language different from Spanish (i.e. English)
                must be re-labeled in Chile before it is allowed for selling.




                                               8
                   -   Indicate the country of origin.

                   -   Indicate the principal ingredients used in the product (in
                       descendant order according to its proportion) and its
                       additives.

                   -   Presentation type or form of the product (i.e. chocolate in
                       tablets)

                   -   Additional information: net weight (in grams or kilograms),
                       storage instructions, date of manufacturing, expiration date,
                       name of the company (usually the name of the importer)

                   -   The label must indicate the import code number given by the
                       local Ministry of Health.

Useful contacts:

 MINISTRY OF HEALTH
Address: Mac-Iver 541 Santiago, Chile.
Tel: (56 -2) 639 4001.
Web: www.minsal.cl
Email: greyes@minsal.cl
Contact person: Ms. Gloria Reyes
Function: To answer enquiries regarding local certifications and health
regulations established by the Government of Chile.



 SERVICIO AGRICOLA Y GANADERO (SAG)
Address: Av. Portales 3396, Estación Central, Santiago Chile
Tel: 56-2-601-9526 / 601-0787
Fax: 56-2- 6817894
Website: www.sag.cl (English version available)
Email: pedro.elorza@sag.gob.cl
Contact person: Mr. Pedro Elorza, Metropolitan Region Head
Function: To monitor and assure that companies located in Chile comply with
regulations established by SAG for livestock and agricultural products.




                                            9
7.0         Import Overview


      7.1     Total confectionery imports by Chile in 2005 amounted to US$ 40.3
              million, a growth of 7.6%, from US$ 37 million in 2004. The figure has
              reached the US$ 40 million mark recorded in 2002 after two
              successive declining growth of 0.67% and 5.99% in 2003 and 2004,
              respectively.

      7.2     Imports were led by chocolate confectionery, accounting for 51% share
              of total confectionery imports, followed by sugar confectionery at 44%
              and chewing gum at 5%. This composition has been maintained over
              the last four years, indicating the consumption preferences in Chile.

      7.3     In terms of import growth, chewing gum registered the highest rate of
              30.1% to US$ 1.9 million in 2005 from US$1.4 million in 2004. Sugar
              confectionery rose 15.6% while chocolate confectionery showed a
              meager growth (0.07%). [Refer to Table 5].

                                                             Table 5
                                                    Overall Imports of Confectionery in Chile (2002 - 2005)
                                            2005                           2004                            2003                     2002
                                              %
                                  US$ CIF         % growth    US$ CIF     % share % growth    US$ CIF     % share % growth    US$ CIF     % share
                                            share
       CHOCOLATE CONFECTIONERY 20,586,515 51%       0.07%    20,573,126    55%    -11.63%    23,279,938     58%     5.99%    21,964,183    55%
       SUGAR CONFECTIONERY       17,788,464 44%    15.60%    15,387,886    41%     4.11%     14,779,894     37%    -6.29%    15,771,972    39%
       CHEWING GUM               1,907,073   5%    30.08%     1,466,055     4%    -16.30%    1,751,568      4%    -25.25%    2,343,084      6%
       GRAND TOTAL               40,282,052 100%    7.63%    37,427,067    100%    -5.99%    39,811,400    100%    -0.67%    40,079,239    100%
       Source: Lexis Nexis Chile


      7.4     When analyzing the imports of confectionery by Chile in 2005 (valued
              at US$ 40.2 million) with the total retail sales of confectionery recorded
              in the same year in the market (valued at US$ 518.9 million), the
              proportion shows that imported confectionery represents only 7.7% of
              the annual sales, meaning to say that the market is concentrated with
              sufficient local production.

      7.5     The reason is because Chile is home to major multinationals (i.e.
              Nestlé) and regional manufacturers (such as Arcor) of confectionery
              products other than established local players such as Empresas
              Carozzi, being that the majority of the confectionery in Chile is locally
              manufactured.




                                                      10
8.0        Imports by Category

      8.1 Chocolate Confectionery

           8.1.1 Chile‟s imports of chocolate confectionery reached US$20.6 million
                 in 2005, a similar amount imported one year ago. Argentina was
                 the main supplier taking up 50.4% market share, followed by Brazil
                 at 21%. Both of these countries are members of MERCOSUR and
                 therefore enjoy preferential tariffs when exporting products to Chile.
                 Also, Argentina is the headquarters of one of the major
                 confectionery manufacturers –Arcor- being that the company
                 produces in Argentina and export its products to its subsidiaries in
                 neighboring countries.

           8.1.2 Suppliers that recorded significant expansion in exports were
                 Venezuela which grew by 179,359% to US$495,308 and England
                 by 71.4% to US$482,267. There were no exports recorded by
                 Malaysia during the period 2002-2005. [Refer to Table 6 ] .

                                                                Table 6
                                             Top 10 Origins of Imports per Product Category 2002-2005
                                     2005                            2004                         2003                     2002
                                                                                 %
       COUNTRY          US$ CIF      % share % growth    US$ CIF     % share            US$ CIF   % share % growth    US$ CIF   % share
                                                                               growth
CHOCOLATE CONFECTIONARY
 1  ARGENTINA   10,383,995 50.44%            -8.22%     11,313,601 54.99% -21.68% 14,445,026 62.05%        9.34%     13,211,711 60.15%
 2    BRAZIL    4,329,550 21.03%             27.86%      3,386,199 16.46% 11.14% 3,046,657 13.09%         -24.24%    4,021,437 18.31%
 3    SWITZERLAND       975,920      4.74%   -15.72%    1,157,887    5.63%     49.43%   774,874   3.33%   65.26%      468,881     2.13%
 4     GERMANY            741,561    3.60%   -14.94%      871,784    4.24%      89.48%  460,101   1.98% -14.69%  539,320          2.46%
 5        USA             604,671    2.94%   -21.16%      766,985    3.73%       9.16%  702,615   3.02% -46.10% 1,303,548         5.93%
 6    VENEZUELA           495,308    2.41%   179359%        276      0.00%     -99.38%   44,704   0.19% 44604%      100           0.00%
 7 NETHERLANDS            490,836    2.38%    15.54%      424,837    2.07%      25.29%  339,075   1.46% 12.11%   302,454          1.38%
 8     ENGLAND            482,267    2.34%    71.37%      281,415    1.37%      73.66%  162,047   0.70% -29.81%  230,853          1.05%
 9       SPAIN            358,975    1.74%    16.93%      307,007    1.49%     -35.21%  473,832   2.04% -24.65%  628,849          2.86%
10     HUNGARY            288,680    1.40%    15.13%      250,737    1.22%     -27.79%  347,245   1.49% 15.64%   300,287          1.37%
 -     MALAYSIA              0          -         -          0          -           -       0        -      -        0               -
       Others           1,434,752    6.97%   -20.84%     1,812,398   8.81%     -27.03% 2,483,762 10.67% 159.61%  956,743          4.36%
      SubTotal          20,586,515   100%      0.07%    20,573,126   100%      -11.63% 23,279,938 100%   5.99%  21,964,183        100%
Source: Lexis Nexis Chile



           8.1.3 The largest import under this product category was “Other
                 chocolate Confectionery” (HS 18069000) which represented 30.3%
                 share of the total confectionery imports in 2005. The next largest
                 product was “Not filled chocolate Confectionery” (HS 18063200)
                 which represents 12.5% from the total imports, followed by “filled
                 chocolate confectionery (HS 18063100) at 8.4%. [Refer to Annex I
                 in page 17 of this study].




                                                                     11
     8.2 Sugar Confectionery

           8.2.1 Chile‟s total imports of sugar confectionery in 2005 stood at
                 US$17.8 million, a 15.6% growth over US$ 15.4 million registered
                 in 2004.

           8.2.2 Three products accounted for the bulk of imports under in this
                 category: HS 17049030 (Caramels, candies), HS 17049090 (Other
                 sugar Confectionery) and HS 17049060 (Gums containing sugar).
                 Each product represents 72.9%, 13% and 7% share of the total
                 sugar confectionery imports, respectively.

                                                                     Table 7
                                               Top 10 Origins of Imports per Product Category 2002-2005
                                     2005                              2004                            2003                      2002
   COUNTRY              US$ CIF      % share   % growth    US$ CIF     % share % growth    US$ CIF     % share % growth    US$ CIF    % share
SUGAR CONFECTIONARY
 1 ARGENTINA            7,732,648    43.47%      7.07%    7,222,354    46.94% 2.72%       7,030,809    47.57% -9.18%      7,741,103    49.08%
 2 COLOMBIA             4,548,210    25.57%     24.88%    3,642,169    23.67% -14.16%     4,243,100    28.71% 35.38%      3,134,159    19.87%
 3 CHINA                1,618,795    9.10%     564.45%     243,631      1.58% 58.26%       153,946     1.04% -21.34%       195,721     1.24%
 4 MEXICO                 819,826    4.61%      57.93%     519,095      3.37% 88.31%       275,666     1.87% 42.87%        192,946     1.22%
 5 BRAZIL                 619,480    3.48%     -28.35%     864,532      5.62% -21.97%     1,107,990    7.50% -34.45%      1,690,391    10.72%
 6 USA                    533,873    3.00%      22.04%     437,453      2.84% 32.80%       329,402     2.23% -53.03%       701,250     4.45%
 7 SPAIN                  299,580    1.68%     -30.76%     432,679      2.81% 13.32%       381,827     2.58% -29.57%       542,172     3.44%
 8 NETHERLANDS            223,870    1.26%      55.58%     143,897      0.94% -40.28%      240,969     1.63% 61.33%        149,362     0.95%
 9 BELGIUM                217,214    1.22%      -8.93%     238,518      1.55% 105.68%      115,967     0.78% -39.87%       192,872     1.22%
10 CANADA                 197,532    1.11%      16.07%     170,180      1.11% 131.93%       73,376     0.50% 187.32%        25,538     0.16%
 - MALAYSIA                  0          -       -100%      200,841      1.31% 62.22%       123,807      0.84%  0.00%          0         0.00%
       Others             977,436    5.49%     -33.66%    1,473,378     9.57% 78.19%       826,842     5.59% -31.47%      1,206,458    7.65%
      SubTotal          17,788,464    100%      15.60%    15,387,886    100%   4.11%      14,779,894    100%  -6.29%      15,771,972    100%
Source: Lexis Nexis Chile



           8.2.3 Argentina and Colombia continued to be Chile‟s major sources of
                 imports for sugar confectionery, together constituting 69% share of
                 total imports in 2005. Both countries have preferential tariffs with
                 Chile (0% import duty), where the former is a member of
                 MERCOSUR, while the latter is accorded tariff concessions under
                 the signing of the Economic Partnership Agreement. [Refer to
                 Table 7]

           8.2.4 Brazil which was the 3rd supplier to Chile in 2002 dropped to the 5 th
                 ranking overtaken by China and Brazil. Although Brazil enjoys the
                 same tariff benefits granted under the MERCOSUR, imports from
                 this country shrunk by 28.4% to US$ 619,480 in 2005 from
                 US$864,532 one year ago. Over the period under study, imports
                 from Brazil showed a downward trend which attributed to the rising
                 costs on several goods in that country due to the falling of the US
                 dollar.

           8.2.5 Among the top ten exporters to Chile, China has made strong
                 inroads, recording the largest growth of 564.5% in 2005 and
                 became the 3 rd largest supplier in the market. Exports increased




                                                                       12
                       more than 8-fold to US$1.62 million (9.1% share) from only
                       US$195,721 (1.2%) in 2002.

           8.2.6 Malaysia only exported sugar confectionery to Chile in 2003 and
                 2004, each valued at US$ 123,807 and US$200,841. There were
                 no exports from Malaysia in 2005.

     8.3 Chewing Gum

           8.3.1 The year 2005 saw Chile recorded a positive turnaround in imports
                 of chewing gum for the first time. Imports recorded a double digit
                 growth of 30.1% to US$ 1.9 million from US$1.5 million in 2004.

                       Brazil remained as the major supplier to Chile accounting for a
                       dominant market share of 69.9% of total imports for this product
                       category. Main reason for this leadership is because Cadbury Stani
                       Adams - one of the largest companies in the chewing gum sector –
                       has established its chewing gum production and packaging plants
                       in Brazil.

           8.3.2 Canada became the 2 nd largest supplier in the market with exports
                 in 2005 valued at US$120,686 or 6.33% share, followed closely by
                 Indonesia. For the first time, exports from Indonesia recorded a
                 value of US$84,279 in 2004 and it grew by 31.9% to US$111,148 in
                 2005. It was the leading supplier among ASEAN countries with
                 market share in the region of 5-6%. Another significant supplier in
                 the market was China which recorded import growth of 180,04% to
                 US$50,329 in 2005 from only US$278 one year ago. It emerged as
                 the 6th supplier ahead of Argentina, Mexico, Ecuador and Hungary.
                 [Refer to Table 8]

           8.3.3 For the period 2002-2005, Malaysia only recorded exports in 2004
                 of US$34,307 and in 2003 of US$34,536. Its share in the market
                 deteriorated from 2% in 2003 to zero in 2005.
                                                                      Table 8
                                                Top 10 Origins of Imports per Product Category 2002-2005
                                      2005                              2004                           2003                     2002
   COUNTRY                  US$ CIF   % share   % growth    US$ CIF     % share % growth   US$ CIF     % share % growth   US$ CIF    % share
CHEWING GUM
 1 BRAZIL               1,333,193     69.91%       23.58%   1,078,771   73.58%    73.40%    622,123    35.52%   -28.23%    866,853    37.00%
 2 CANADA                120,686       6.33%       43.89%    83,875      5.72%   -31.73%    122,859     7.01%   -17.09%    148,189     6.32%
 3 INDONESIA             111,148       5.83%       31.88%    84,279      5.75%     0.00%       0        0.00%    0.00%        0        0.00%
 4 USA                   98,566        5.17%       -2.12%    100,704     6.87%   -27.93%    139,739     7.98%   -25.27%    186,996     7.98%
 5 COLOMBIA              90,639        4.75%      926.61%     8,829      0.60%    86.23%     4,741      0.27%   -64.76%    13,454      0.57%
 6 CHINA                 50,329        2.64%    18003.96%      278       0.02%   -95.60%     6,325      0.36%    0.00%        0        0.00%
 7 ARGENTINA             45,024        2.36%      -30.72%    64,990      4.43%   -90.39%    676,028    38.60%    4.88%     644,561    27.51%
 8 MEXICO                41,508        2.18%    1850.56%      2,128      0.15%   -96.13%    54,998      3.14%   -87.03%    423,923    18.09%
 9 ECUADOR                7,594        0.40%    8940.48%       84        0.01%     0.00%       0        0.00%    0.00%        0        0.00%
10 HUNGARY                7,322        0.38%       30.10%     5,628      0.38%   -51.90%    11,700      0.67%   61.16%      7,260      0.31%
 - MALAYSIA                 0          0.00%     -100.00%    34,307      2.34%    -0.66%    34,536      1.97%    0.00%        0        0.00%
       Others             1,064        0.06%      -51.24%     2,182      0.15%   -97.22%    78,519      4.48%   51.44%     51,848      2.21%
      SubTotal          1,907,073      100%        30.08%   1,466,055    100%    -16.30%   1,751,568    100%    -25.25%   2,343,084    100%
Source: Lexis Nexis Chile




                                                                        13
9.0         Import Duty

      9.1      The standard import tariffs for most products entering into Chile are 6%
               on CIF value. The VAT or IVA stands at 19%.


10.0        Trade Fairs


            Name of trade fair           : Expoalimenta 2006
            Organizer                    : Expotrade Chile S.A.
            Tel                          : 56-2- 378 5999/ Ext. 15
            Fax                          : 56-2- 426-4071
            Website                      : www.expotrade.cl
            E-mail                       : mptoral@expotrade.cl     OR
                                           expoalimenta@expotrade.cl
            Contact                      : Ms Maria Paz Toral De La Cuadra
            Venue                        : Casa Piedra, Santiago, Chile
            Date                         : 2-5 November 2006
            Opening hours                : 12.00 hrs. to 20.00 hrs.
            Type                         : Specialized (Food & Beverage, Agriculture
                        and Agri-
                                           food industries, Hotel & restaurant equipment)
            Products                     : Food, beverages and gastronomy related
                                         products and equipments
            Number of visitors           : 9,135 (estimated)
            Number of exhibitors         : 185


11.0        Analysis and Opportunities

            11.1   The Chilean market for confectionery is dominated by local players
                   and multinationals which manufacture the bulk of the confectionery
                   products. Chile‟s imports of confectionery in 2005 were US$40
                   million in 2005 representing only 7% of the total annual sales
                   generated. Ironically, the country has a fairly sufficient
                   confectionery production to meet its local consumption. Apart from
                   that, major players have established manufacturing and packaging
                   plants in key markets of South America, namely, in Argentina,
                   Brazil and Chile, where confectionery is elaborated and packaged.
                   However, these companies do import confectionery either to cope
                   the demand stimulated during peak seasons or to fulfill the needs of
                   certain market segments.

            11.2   The presence of leading manufacturing companies in Chile has
                   posed keen market competition. In the pursuit to gain market


                                              14
       shares, medium and small sized manufacturing companies such as
       Brunatto, has stepped up efforts to fill up the demand gap for
       “premium” and new types of confectionery with unique flavors and
       aroma as well as design special packaging or presentations.

11.3   Apart from the aggressive local competition, Malaysian exporters
       must be aware of logistics when exporting chocolates to Chile.
       According to the discussions held with some Chilean exporters of
       chocolate, in order to maintain the form or shape of the product –
       meaning to avoid melting-, it must be sent in refrigerated
       containers. Normally, Chilean exporters of chocolate to Europe
       deliver the products by air freight with special freezers. Once it
       arrives at the airport, the products are transported using special
       land freight that maintains a good temperature level. In general,
       chocolates start melting when it is exposed to temperatures
       between 20°C to 30°C (the higher the quality of the chocolate, the
       longer it can delay the melting under the circumstance when the
       temperature rises). Hence, Malaysian exporters of chocolate
       products might incur a high transportation costs when exporting
       chocolate products to Chile which in turn will increase the final price
       to the consumers and become less competitive when compared to
       the local manufacturers.

11.4   Imports of confectionery in Chile are primarily coming from
       countries in South America, USA, the EU and Canada. For
       chocolate confectionery, these are mainly high quality or branded
       products such as the Swiss chocolates. On the other hand, some
       Asian suppliers notably China and Indonesia are making inroads in
       sugar confectionery and chewing gum by focusing on the low end
       at a very competitive price. Malaysian companies which have
       developed the capabilities to produce wide array of chocolates of
       different qualities may target customers who are looking for choices
       within the price range acceptable to Chile. These include sweets of
       tropical fruit flavors, snacks, cookies, candy bars, toffees, toy
       chocolates, boiled sweets, mints, pastilles, bubble gums, jellies and
       chews.

11.5   A cost effective way of penetrating the competitive Chilean market
       is through the appointment of local distributors. Instead of
       competing directly with local players with an unknown brand or
       opening own outlets or stores in Chile, a beginner can establish
       linkages with local distributors such as the supermarkets or directly
       with the local manufacturers. The products offered should be at
       best not conflicting but rather complementing the product lines
       carried so as to fulfill the demand for some market segments or
       niches. The knowledge of the local distributor in terms of consumer



                                  15
                   preferences, market behavior and distribution channels can be to
                   the advantage of making further market inroads into Chile for
                   Malaysian made products.

           11.6    Malaysian exporters may want to tie up with local manufacturing
                   companies in Chile to become a reliable provider of raw
                   materials/ingredients or materials related to packaging for the
                   confectionery products. A case in point is Chile does not have a
                   cocoa plantation industry and therefore all of its requirements are
                   imported. Though Chile still has a low rate of chocolate
                   consumption but this may increase in the coming years, probably
                   reaching an annual consumption of between 5 to 8 kg per capita.
                   This opens a window of opportunity for exporters of cocoa
                   products. In 2005, imports of cocoa 1 amounted to US$ 20.2 million
                   coming mainly from Brazil (54% from total imports), Ecuador (19%),
                   Colombia (9%) and Netherlands (7%). The major cocoa products
                   imported were “cocoa powder not containing added sugar or other
                   sweetening matter” (HS 1805000) which accounted for 20% of total
                   imports or valued at US$ 9.4 million. This was followed by “cocoa
                   butter, fat and oil” (HS 1804000) at US$ 8.4 million or 18% share
                   and “cocoa powder containing added sugar or other sweetening
                   matter” (HS 18061000) at US$2.5 million or 5% share. Malaysia‟s
                   exports of cocoa products to Chile in 2005 reached US$ 123,905
                   and it was the 10th supplier in the market (0.6% market share). In
                   comparison, Malaysia‟s exports in 2004 were US$435,287, the 8th
                   supplier and garnered a 2% market share.

           11.7    One of the major challenges expected to be faced by Malaysian
                   exporters of cocoa to Chile is the competition on logistics against
                   other suppliers. For cocoa imported from neighboring countries
                   such as Brazil or Colombia, its shipment arrives to Chile within 5
                   days while in the case of Netherlands or Belgium, a local
                   representation office has been established in Chile with
                   warehousing facilities to keep stocks. In this respect, Malaysian
                   exporters may consider of setting up a commercial office for the
                   South American region in order to compete on a level playing field
                   with other suppliers and provide a “just in time” service to South
                   American buyers.

           11.8    Malaysian palm oil can be vigorously promoted for the consumption
                   by Chilean confectionery manufacturers. In general, cocoa butter is
                   more expensive than palm oil although both have the required fatty
                   acids, namely, the palmitic acid, stearic acid and oleic acid. Local
                   manufacturers of chocolates have the best option to use palm oil as
                   a substitute for cocoa butter in making low to mid level chocolates.
1
    Products considered in the statistics are: HS 18040000, HS 18061000 and HS 18050000


                                                   16
       Furthermore, it has a higher melting point of 24°C which means
       chocolates using palm oil can be preserved longer without having
       to look bloom (moldy) as a result of the „tempering effect‟. It also
       acts as a good emulsifier to stick chocolate coatings on pastries.

11.9   There are niche opportunities for Malaysian exporters to tap the
       growing confectionery industry in Chile. One of this could be
       supplying mixed raw materials or special ingredients to enhance or
       improve the flavor and aroma of the confectionery products.
       Products with potential are cocoa mixed with spices (such as
       pepper) or nutritious ingredients or medicaments that can promote
       differentiation among the local manufacturers especially the small
       and medium sized companies.

11.10 Malaysian exporters related to the confectionery industry should
      also look into meeting the demand of specific niches in Chile. A
      potential niche is confectionery for the elderly people where in Chile
      there are 350,000 persons older than 60 years of age (represent
      2.2% of the 15.8 million population) belonging to the social class of
      ABC1C2, whose average yearly income is more than US$ 21,429.
      Some of these consumers cannot consume chocolate due to
      intolerance to lactose or due to diabetes. Chocolates not containing
      sucrose but fructose can be targeted. In addition, Malaysian
      companies should devote more R&D work on developing more
      chocolate friendly products for such senior citizens. This could be
      an attractive product offering to local manufacturers in Chile for
      importation or representation in the market.

11.11 Another niche is confectionery products focused on teeth and smell
      care. Santiago is full of heavy smokers. In fact, according to the
      Pan-American Health Organization, Chile has the highest rate of
      smokers in Latin America being that 52% of male adults and 54%
      of women adults are considered smokers. Products such as
      chewing gums and pastilles to combat teeth decay, whitening teeth
      (cigarette turns teeth into yellow color) and bad smell due to
      cigarette smoking have a good potential in the Chilean market.




                                 17
12.0   Useful business contacts

       Confectionery Manufacturers in Chile:

       1. EMPRESAS CAROZZI S.A
       Address: Camino Longitudinal Sur 5201, San Bernardo
       Santiago – Chile
       Phone: 56-2-377-6400 / 377-6610
       Fax: 56-2-377-6655
       Website: www.carozzi.cl
       Email: smalandre@carozzi.cl
       Contact: Mr. Sergio Malandre, Manager

       2. INDUSTRIA DE ALIMENTOS ARCOR - DOS EN UNO S.A.
       Address: Placer 1324
       Santiago-Chile
       Phone: 56-2-520-8700
       Fax: 56-2-556-6765 / 520-8895
       Email: plopez@dosenuno.cl
       Contact: Mr. Marcelo Siano, General Manager

       3. NESTLE CHILE S.A.
       Address: Roger de Flor 2800, Las Condes.
       Santiago-Chile
       Phone: 56-2-338-4102
       Fax: 56-2-231-6953
       Website: www.nestle.cl
       Contact: Mr. Fernando del Solar Concha, Director.

       Major Supermarkets in Chile:

       1. DISTRIBUCIÓN Y SERVICIO D & S S.A.
       Address:Av. Presidente Eduardo Frei Montalva 8301, Quilicura,
       Santiago-Chile
       Phone: 56-2-200-5000 / 200-5206
       Fax: 56-2-624-2401
       Website: www.dys.cl
       E-mail: info@dys.cl
       Contact: Mr. Rodrigo Cruz (General Manager)

       2.    CENCOSUD S.A. (JUMBO)
       Address: Av. Presidente Kennedy 9001, piso 4-5 y 7
       Santiago-Chile
       Phone: 56-2-959-000 / 959-0408
       Fax: 56-2-212-1469
       Website: www.cencosud.cl



                                      18
Email: uperl@jumbo.cl / contactenos_cl@cencosud.cl
Contact: Mr. Claudio Haase (Supermarkets Division General Manager)
             Mr. Uwe Perl (Import Food Manager)

3. SUPERMERCADOS ECONOMAX
Address: Santa Rosa 2055
Santiago-Chile
Phone: 56-2-393-7000
Fax: 56-2-393-7103
Website: www.economax.cl
Contact: Mr. Carlos Montrone Pla (General Manager)

4. CADESUR S.A.
Address: Calle Barros Arana 492, of. 126.
Concepción-Chile
Phone: 56-41-254430
Fax: 56-41-255696
Email: davidfierro@cadesur.cl
Contact: Mr. David Fierro, General Manager

Chocolate Confectionery (“premium” products):

1. BRUNATTO S.A.
Address: Manquehue Sur 1403, Las Condes
Santiago, Chile
Phone: 56-2-952-0364
Fax: 56-2-952-0452
Website: www.brunatto.cl
E-mail: sbrunatto@manquehue.net
Contact: Ms. Samantha Brunatto, Social Director

2. BOMBONES VARSOVIENNE S.A.
Address: Av. Einstein 787, Recoleta.
Santiago-Chile
Phone: 56-2-621-0960
Fax: 56-2-621-3721
Website: www.varsovienne.cl
E-mail: ventasvarsovienne@entelchile.net
Contact: Mr. Felipe Cisternas Perez, General Manager.




                               19
Annex I

                                                        Detailed Import Statistics by Product 2002 - 2005

                           2005                                  2004                                 2003                         2002
                US$ CIF    % share       % growth    US$ CIF     % share    % growth     US$ CIF      % share   % growth    US$ CIF     % share
CHOCOLATE CONFECTIONARY
  18063100     3,379,943    8.39%         -7.16%     3,640,555    9.59%     87.00%       1,946,808     4.89%    -10.62%     2,178,084     5.43%
  18063200     5,014,553   12.45%         -7.07%     5,395,903   14.21%      7.55%       5,017,269    12.60%     -8.72%     5,496,720    13.71%
  18069000    12,192,023   30.27%         5.68%     11,536,671   30.38%     -29.28%     16,312,876    40.98%    14.16%     14,289,369    35.65%
  Sub Total   20,586,519   51.11%          0.07%    20,573,129   54.17%     -11.62%     23,276,953    58.47%      5.98%    21,964,173    54.80%
SUGAR CONFECTIONARY
  17049020         165,922 0.41%         -76.13%       695,011    1.83%      11.47%         623,504    1.57%     54.52%       403,520     1.01%
  17049030     12,964,512 32.18%          22.69%    10,566,604   27.82%      -3.62%      10,963,005   27.54%      5.02%    10,439,056    26.05%
  17049041          33,045 0.08%         208.77%        10,702    0.03%     -79.94%          53,343    0.13%    491.58%         9,017     0.02%
  17049049         386,227 0.96%         446.31%        70,698    0.19%     118.59%          32,343    0.08%    -68.31%       102,053     0.25%
  17049050         398,281 0.99%         -11.09%       447,953    1.18%     -22.87%         580,770    1.46%     -5.21%       612,687     1.53%
  17049060       1,249,912 3.10%           1.94%     1,226,160    3.23%      10.43%       1,110,331    2.79%      6.03%     1,047,137     2.61%
  17049070         285,994 0.71%          22.33%       233,785    0.62%      24.92%         187,152    0.47%    -59.10%       457,562     1.14%
  17049090       2,304,570 5.72%         -14.21%     2,686,429    7.07%     118.51%       1,229,432    3.09%    -54.48%     2,700,952     6.74%
  Sub Total   17,788,463   44.16%         11.61%    15,937,342   41.97%       7.83%     14,779,880    37.13%     -6.29%    15,771,984    39.35%
CHEWING GUM
  17041010       1,580,387 3.92%         72.42%        916,598    2.41%     -35.23%       1,415,206    3.56%    -18.52%      1,736,780   4.33%
  17041090         326,690 0.81%         -40.54%       549,456    1.45%     63.35%          336,361    0.84%    -44.52%        606,304   1.51%
  Sub Total    1,907,077    4.73%         30.08%    1,466,054     3.86%     -16.30%      1,751,567     4.40%    -25.25%    2,343,084     5.85%

GRAND TOTAL       40,282,059   100.00%    6.07%     37,976,525   100.00%     -4.60%     39,808,400    100.00%    -0.68%    40,079,241    100.00%

Source: Lexis Nexis Chile




                                                                      20

				
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