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José Antonio Galilea, Agriculture Minister and Ricardo García, AmCham

The average American worker these days takes 19 minutes for lunch. But it’s not just fast food that busy U.S. consumers are craving; they want healthy food from a respected brand that arrives on their table without harming the environment or emptying their wallets.

That was the conclusion reached by food consultants and exporters at AmCham’s Seminar on Opportunities in the U.S. Food Market held in July at Santiago’s Sheraton Hotel. The seminar is part of AmCham’s food export training program for small and mid-size enterprises, which is funded by CORFO Innova.

“There is no doubt that Chile could become a food power and we are taking giant steps in this direction,” said AmCham’s president, Ricardo García.

The sheer size of the U.S. market, which is expected to grow by 30 million consumers in the next decade, and its free trade agreement with Chile makes it an attractive market for Chilean food exporters.

“The United States is comprised of 50 separate markets, each the size of a country, which is a great opportunity for exporters,” said García.

Chile’s exports of forestry and agricultural products to the United States rose 45% in the last decade to US$2.5 billion in 2009, of which more than half corresponds to agri-food exports.

Chile’s natural advantages include its temperate climate and geographical isolation surrounded as it is by the Andes Mountains, the Pacific Ocean, and the Atacama Desert.

“These protect Chile from diseases, which is a huge advantage,” said Juan Pablo Matte, general secretary of Chile’s national agriculture association (SNA).

Chile’s strict food safety regulations are also an important advantage since the high quality of Chilean products is globally recognized, said Matte.

But Chile is not the only country vying to supply the U.S. market and competition is heating up. Peru, which recently signed a trade agreement with the U.S., and Brazil are also exporting more value-added food products to the U.S.

“There are great opportunities for Chilean exporters but also important challenges,” noted Agriculture Minister, José Antonio Galilea.

Chile’s trade relationship with the U.S. is better than ever, especially in the agriculture area, “but now is the time to think about deepening this relationship,” said the minister.

In order to remain competitive, exporters need to produce a greater variety of products and be savvy about how they market them to sophisticated U.S. consumers.

But many family-run businesses in Chile have limited access to international markets. Helping them form associations and become incorporated into production chains can boost exports while improving rural well-being, said Galilea.

“Making Chile into a food power also implies a moral obligation of defeating rural poverty,” he said.

The government is working with the United States through measures like the Plan Chile-California to improve access to new technologies that will help farmers modernize their production processes, said the minister.

Value-added products

Chile is one of the world’s top exporters of fruit, seafood and wine, and its free trade agreement allows more products to enter the U.S. market each year, but the most potential for Chilean exports is in value-added, or gourmet products.

Gourmet products such as honey, merkén, olive oil and seafood have already made inroads into U.S. supermarkets and wholefood stores, appealing to consumers looking for exotic, healthy and organic products.

But small family-run businesses need help to access the U.S. market. An important challenge for these producers is how to produce sufficient volumes to meet the demand both nationally and internationally, said Ricardo Ariztía, national director of the Agriculture Ministry’s rural development institute INDAP.

“If we want to sell mérken in the North American market we face the same problem we do here, which is how to supply the market with enough quantity,” said Ariztía.

Part of the solution, suggests Ariztía, is forming business associations of small producers. Of Chile’s 290,000 farmers, some 3,000 own 50 or more hectares, 17,000 farm between 12 and 50 hectares and 270,000 survive on 12 hectares or less.

Helping this last group, more than half of whom also live below the poverty line, to improve their productivity should be the goal of Chile’s agricultural institutions, said Ariztía.

For example, INDAP’s Sabores del Campo program, which operates a retail store in Santiago, is helping its members reach local and international consumers with gourmet products made from natural ingredients.

Small companies can also obtain information and export coaching from ProChile which has set up a special “Fono Export” for small companies, said Pilar Yrarrázaval, Food Products Manager at ProChile.

But making small producers more competitive means incorporating them into the production chains of larger companies that can handle larger volumes and negotiate better conditions, said Ariztía.

“We have to evolve from being a protective state to an entrepreneurial state,” concluded Ariztía.

Serving the U.S. consumer

The U.S. population is expected to grow by 30 million in the next 10 years, making a big, sophisticated market for Chilean products even bigger.

But Americans want much more from their food than just nourishment. According to Steffen Weck of the U.S. firm Food Business Consulting, U.S. consumers have four priorities when it comes to food: health, convenience, value and “real” food.

Busy U.S. workers have little time to eat, which explains the sudden rise of lunch trucks parked outside office buildings at lunch hour in many U.S. cities. But these trucks sell salads and healthy snacks, not just hot dogs and hamburgers, noted Weck.

And Americans are increasingly concerned about their health. Some 25% of the U.S. population is 55 or older and the population is aging, which creates opportunities for exporters in supplying specialty food products for the elderly, said Weck.

Finally, it is in the growing market for “real” food where there is the most potential for exports. U.S. consumers want their food to have a short list of ingredients without additives or artificial flavoring and they tend to value brand credibility over price.

The natural food market in the U.S. is worth some US$66 billion a year but competition is also strong so exporters must build a wholesome brand image to be competitive, said Weck.

Exporters must also comply with U.S. food safety regulations. “The U.S. is a market that rewards countries that are serious, reliable and adhere to regulations,” noted Matte.

And there is currently strong bipartisan support for stricter regulations in the U.S. government, which means those countries that repeatedly infringe food safety norms will lose market share, warned Allen Johnson of the U.S. consulting firm Allen F. Johnson & Associates.

“But for those that do comply it puts them in a very competitive position and I believe Chile can get there,” he said.

Environmental protection is another challenge for Chilean exporters given the distance to market in the U.S. Possible climate change legislation in the U.S. could discriminate against imports based on their carbon footprint, which would favor food produced closer to home.

 “Some Chilean food companies see niche opportunities in the environmental movement while others need to look at their emissions,” said Johnson.

The fast-growing “local” food movement is another challenge for Chilean companies since some popular U.S. restaurants, like the Washington-based Silver Diner, serve only locally grown produce even if that means higher prices, said Johnson.

One solution is for companies to set up operations in the U.S. to be closer to consumers, but given Chile’s opposite growing season from North America exporters can ensure a steady supply of products throughout the year.

Unearthing Chile

Some Chilean companies are already taking advantage of Chile’s free trade agreement with the U.S. to export gourmet products.

By working together rather than individually exporters can obtain better conditions from U.S. importers and distributors, said Paulina Peñaloza, general manager of Chilean Gourmet.

“The U.S. is by far our most important market… once you get into that market there are huge opportunities,” she said.

Chilean Gourmet, which exports over 40 products including merkén, honey and olive oil, sources natural products from 500 family businesses throughout the country.

But controlling costs is a challenge because the price of a jar of honey can more than triple by the time it reaches the U.S. consumer including fees charged by importers, distributors, brokers and retailers, said Peñaloza.

“For a single Chilean company alone it’s very difficult to be competitive,” she said.

Fortunately, Chile’s association of gourmet food producers and exporters, AsoGourmet, which groups around 70 small producers, was able to negotiate better conditions with the biggest distributor of specialty food products in the U.S., KeHe Distributors.

KeHe also advises Chilean companies on how to package their products more attractively and meet U.S. regulations regarding labeling and bar codes.

Marketing is a major expense for Chilean exporters but in-store marketing is a must to make products stand out from the pack. “You have to invest in in-store demos because if your product doesn’t sell it is removed from the shelves for good,” said Peñaloza.

The “Unearth Chile” program, created by AsoGourment, ProChile, KeHe and the Chicago importing Company, promotes gourmet products offered by Chilean companies in the U.S.

With the slogan “Unearth Flavor, Explore Taste,” the campaign organized stands at June’s New York Fancy Food show and KeHe’s holiday food show in Chicago.

Overall, the seminar’s participants agreed the event was very successful, offering an overview of the great potential and diverse challenges facing exporters in the U.S. market.

Julian Dowling is editor of bUSiness CHILE