Puerto Rico`s food industry is writing a recipe for a big slice of the estimated $25 billion U.S. food market for Hispanics.
The government-coordinated export effort initially will help 10 companies distribute 100 products in five U.S. cities.
The food project, a key effort for Puerto Rico`s Fomexport export-enhancement program, will involve about $1.2 million in state support this year, said Alfredo Salazar, administrator of the island`s Economic Development Administration.
”We`re doubling our budget to help small and midsize (domestically owned) companies in the food industry to export through a major U.S. distributor,” said Salazar, who decided last year to target foods as the first in a series of sector-specific export-enhancement programs.
The Puerto Rican food project initially will be launched in New York, where most of the estimated 3 million people of Puerto Rican descent live in the U.S. The Northeast distributor, selected in January, is Lebanon, N.J.-based Latino Food Imports Inc. But the Puerto Rican project also will target sales in the bodega and supermarket aisles of Atlanta, Chicago, Miami and Philadelphia, said Salazar.
The food export project likely will be followed by similar projects in the apparel and textile sectors as part of a strategy to expand the manufacturing capacity of Puerto Rican-owned businesses that export.
”There are two ways to create jobs; either you attract new investors or you expand (existing domestically controlled) production,” said Salazar, whose agency follows a mandate to do both.
By targeting the Hispanic food market in the U.S., Puerto Rico will be following the successful path of sector-leader Goya Foods Inc. of Secaucus, N.J., which had sales of about $375 million last year on a 750-product portfolio, up from $300 million in 1990.
The Puerto Rican companies also will be rubbing shoulders with major U.S.-owned food conglomerates such as Campbell Soup Co., CPC International, Kraft General Foods and Quaker Oats, which also have greatly expanded startup sales in Hispanic foods to U.S. consumers.
”Hispanic food companies and Hispanic lines of conglomerates are doing very nicely,” said James Fehr, operations director for Packaged Facts Inc., a New York-based food-sector analyst.
The expanding market for Hispanic foods makes Puerto Rico`s move strategically well-selected. As an example of the market potential, Packaged Facts noted that salsa sales in the U.S. in 1991, worth about $600 million, exceeded ketchup sales for the first time.
Despite its market leadership, the attempt to serve all U.S. geographic markets has not been easy for Goya. In the late 1980s, the company tried to tap the Southwestern U.S. region with Mexican-produced foods but failed for reasons of poor quality control and distribution, said Packaged Facts.
The Puerto Rican food industry, which has borrowed quality-control practices and equipment from the large U.S. pharmaceutical manufacturing base on the island, will market its products at the top end, a Fomexport official said.
Though Puerto Rico will process all the foods exported to the U.S. under the project, raw materials will be collected from a number of other Caribbean nations with which Puerto Rico trades.
This flow will help establish Puerto Rico as a regional food-processing center expected to compete with similar Mexican-processed products made with Central American raw foods. With the added advantage of Puerto Rico`s so-called section 936 Internal Revenue Service tax-shelter program, though, U.S. investments in the island`s food sector may be more advantageous than a comparable investment in Mexico.
”Mexico is a cost center, and Puerto Rico is a profit center,” said Salazar, summarizing the benefits of the island`s tax status for mainland U.S. investors.
