Increasing Security Unleashes Growth
Multi-national and local brands expand
Ten years ago Colombians felt like prisoners, confined to the cities where they lived, frightened by an epidemic of drug-related and political violence.
The violence was a symptom of the drug wars and the battle between the government and the Revolutionary Armed Forces of Colombia (FARC), which lasted about 40 years.
Violence, the wide disparity between rich and poor and unemployment—declining but still over 10 percent in 2011—remain the country's most serious problems. But they're being addressed and Colombia is changing dramatically.
Between 2000 and 2010, GDP almost tripled from $100.4 billion to $288.9 billion, according to the World Bank. GDP per capita increased to $6,240 in 2010, from $2,524 in 2000, during a period of moderate inflation.
Credit is more widely available. One of the major utility companies, aligned with a bank, issues a credit card and coordinates payments due with monthly utility bills. The international community recognized the changed Colombia in April 2012, when the heads of state from 32 Western Hemisphere nations met in Cartagena for the Summit of the Americas.
And, of course, Colombia is the first letter in CIVETS, the acronym for the next group of fast growing markets to follow the BRICs: Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa.
Local brands appear
Like in most fast growing markets, major financial institutions and telecoms, some formally stateowned, dominate the BrandZ™ ranking of most valuable Colombian brands. With the reduction of violence, latent entrepreneurship is beginning to resurge in this nation with a tradition of democratic institutions and small shop owners.
The changes began in 2002, because of an unremitting effort to restore security and rebuild the economy led by President Alvaro Uribe and Defense Minister Juan Manuel Santos, who succeeded Uribe and now serves as Colombia's president.
Until then Colombia received little foreign investment and few international brands were present. Fear created a mentality of inconspicuous consumption to avoid attention that might attract trouble.
The Free Trade agreement signed with the US in 2006 accelerated Foreign Direct Investment (FDI). Today, the US comprises about one-third of foreign investment. Mining and petroleum account for about 61 percent of all FDI. Mexican entrepreneur Carlos Slim Helú has increased his investment in Colombia.
FDI almost doubled in 2011, with a 92 percent year-over-year gain to $13.2 billion, according to the United Nations Economic Commission for Latin America and the Caribbean (ECLAC). In 2012, Colombia's Foreign Trade Ministry expects FDI to exceed $15 billion, compared with $2.1 billion in 2002. A wide disparity still separates the rich and poor. But the middle class is expanding. And consumption has increased among all economic groups, although in varying ways.
Commodity products add value
Colombians increasingly spend money on cable TV and international vacations. Car sales exploded to almost 325,000 units in 2011, based in part on increased affordability because of a strong peso. While ultra luxury may still be the province only of the wealthy, poorer people are shifting to better quality products when possible, perhaps buying a brand shampoo, for example.
Coffee is a good example of the shift in local consumption to more up-scale products among some consumers. Ironically, since Colombia is known internationally for the quality of its coffee beans, producers had reserved the best crop for export. Until recently, Colombians considered coffee a commodity and drank the most inexpensive variety.
Dairy is another example of a category that was considered a commodity but today offers products that range from low price to premium. Alpina is a strong regional dairy brand based in Colombia. Local fashion entrepreneurial brands include Auturo Calle, an apparel marketer for men, Mario Hernandez, a designer of apparel and accessories for men and women and Faride Clothing.
Consumers often shop in modern retail stores. The hypermarkets Carrefour and Casino operate in Colombia. US retailer Office Depot recently entered the market. Chile's Falabella department store is represented as is Falabella's home improvement brand, Sodimac, which indicates demand for home decoration products. Éxito operates hypermarkets and supermarkets throughout Colombia and is one of the country's BrandZ™ Top 10 most valuable brands.
Of the other brands in Colombia's BrandZ™ Most Valuable Top 10, five are financial institutions, three are communications providers and one is an energy company, the state-owned Ecopetrol. Colombia's most valuable brand, telecom Comcel, is part owned by Mexico's América Móvil, the largest telecom in Latin America.
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Fundamentals for brand building in Colombia
- Revise assumptions
The Colombia under siege from political and drug violence is not the Colombia making rapid economic and social progress today.
- Show respect
Don't look down or patronize Colombians as third-world citizens. Colombians appreciate brands and understand real value.
- Offer quality
Colombians are not looking for cheaper or oldfashioned brands. They're searching for quality. Major fashion brands from all over the world have found unexpected success in Colombia during the past few years.
- Expect competition
Do not underestimate local brands. Understand the emotional bonds and market insights that connect these brands with consumers.
- Anticipate diversity
Prepare for the differences among regions in Colombia. The country consists of at least four psychographic profiles: Caribbean, Pacific, Antioquia, and Andean.