President Obama, Pope Francis, and the Rolling Stones have all visited Cuba in the past year, and many US consumer goods companies want to be next.
As Cuba begins to liberalize its economy, the country’s population of 11 million people and GDP of $82 billion are increasingly attractive. The Boston Consulting Group (BCG) analyzed the country’s market for consumer goods and found that it will present a growing opportunity over the next five to ten years.
The results of the analysis are being released today in a report titled Understanding the Evolving Cuban Consumer.
The report summarizes findings from a survey of more than 400 Cuban consumers in Havana (Cuba’s capital) and Santiago (a smaller city in the less developed, eastern part of the country).
In addition to conducting the survey, the authors spoke to experts in the US, Cuba, and Latin America, as well as Cubans who had recently left the island nation for the US. The result is one of the first quantitative and qualitative studies of Cuban consumers, who have relatively little exposure to consumer products and brands. As a result, the country remains one of the last true white-space markets on the planet.
Unilever Plc will return to Cuba after several years of dispute over joint venture terms. The joint venture will build a $35 million soap and toothpaste factory at Cuba’s Mariel Port Special Development Zone.
The Dutch-British company left Cuba in 2012 in a dispute over controlling interest in their joint venture. Unilever NV will have a 60 percent stake compared to 40 percent for the Cuban state company, Intersuchel S.A.
Here is BCG’s evaluation of how to get goods to market in Cuba:
US companies interested in establishing a footprint in Cuba may find that the process is challenging. The usual first step is to secure a license from the US government. Under the terms of the Cuba embargo, which was established in 1962, all domestic companies seeking to do business with Cuba must gain US government approval. Approvals have been most commonly granted in categories such as food and medical supplies, although, lately, the number of categories and the number of licenses issued overall have been rising. The US government stipulates the amount of product a company can sell. This degree of government control will not change as long as the embargo remains in place.
With a license in hand, companies must work with Cuba’s Ministry of Trade, which controls the wholesale and retail sale of goods. (Companies may get permission from the Cuban government first and then approach the US government. That, however, is not the norm.) Companies may also work with a distributor that already has a relationship with the government, but, either way, the Cuban state makes all decisions, particularly regarding the quantity of goods and how they will be distributed. The quantity is frequently lower than what the US government allows, and such decisions are final. If, for example, supply runs out in October, the product will not be restocked until the beginning of the next year.
The government handles distribution. However, payment systems, logistics, and even transportation infrastructure, such as refrigerated trucks, are all very basic in terms of capabilities. The country’s retail network is split into three primary channels:
- Libreta, or ration book, stores are government-owned sites that sell primarily subsidized food—such as rice, beans, oil, and flour—and basic goods under a system that uses Cuban pesos.
- Government-owned chains such as Cimex (Cuban Export-Import Corporation), TRD (Tiendas Recaudadoras de Divisa), and Cadena de Tiendas Caracol operate independently and sell other food and goods that are not included in the ration system. The government allocates products and sets category budgets for each outlet.
- Some very small private retailers—mainly street vendors and home-based shops—also sell a small array of goods. These retailers are very fragmented and highly regulated. For example, people may sell clothing, but only garments that they themselves have made.
President Obama, Pope Francis, and the Rolling Stones have all visited Cuba in the past year, and many US consumer goods companies want to be next.
As Cuba begins to liberalize its economy, the country’s population of 11 million people and GDP of $82 billion are increasingly attractive. The Boston Consulting Group (BCG) analyzed the country’s market for consumer goods and found that it will present a growing opportunity over the next five to ten years.
The results of the analysis are being released today in a report titled Understanding the Evolving Cuban Consumer.
The report summarizes findings from a survey of more than 400 Cuban consumers in Havana (Cuba’s capital) and Santiago (a smaller city in the less developed, eastern part of the country).
In addition to conducting the survey, the authors spoke to experts in the US, Cuba, and Latin America, as well as Cubans who had recently left the island nation for the US. The result is one of the first quantitative and qualitative studies of Cuban consumers, who have relatively little exposure to consumer products and brands. As a result, the country remains one of the last true white-space markets on the planet.
Unilever Plc will return to Cuba after several years of dispute over joint venture terms. The joint venture will build a $35 million soap and toothpaste factory at Cuba’s Mariel Port Special Development Zone.
The Dutch-British company left Cuba in 2012 in a dispute over controlling interest in their joint venture. Unilever NV will have a 60 percent stake compared to 40 percent for the Cuban state company, Intersuchel S.A.
Here is BCG’s evaluation of how to get goods to market in Cuba:
US companies interested in establishing a footprint in Cuba may find that the process is challenging. The usual first step is to secure a license from the US government. Under the terms of the Cuba embargo, which was established in 1962, all domestic companies seeking to do business with Cuba must gain US government approval. Approvals have been most commonly granted in categories such as food and medical supplies, although, lately, the number of categories and the number of licenses issued overall have been rising. The US government stipulates the amount of product a company can sell. This degree of government control will not change as long as the embargo remains in place.
With a license in hand, companies must work with Cuba’s Ministry of Trade, which controls the wholesale and retail sale of goods. (Companies may get permission from the Cuban government first and then approach the US government. That, however, is not the norm.) Companies may also work with a distributor that already has a relationship with the government, but, either way, the Cuban state makes all decisions, particularly regarding the quantity of goods and how they will be distributed. The quantity is frequently lower than what the US government allows, and such decisions are final. If, for example, supply runs out in October, the product will not be restocked until the beginning of the next year.
The government handles distribution. However, payment systems, logistics, and even transportation infrastructure, such as refrigerated trucks, are all very basic in terms of capabilities. The country’s retail network is split into three primary channels: