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Mexico Food and Drink Report Q3 2011
Business Monitor International, May 2011, Pages: 99
The latest results posted by leading Mexican retailers point to a rather sluggish performance within the consumer sector. For example at its Mexican stores the country’s leading retailer Wal-mart de Mexico (Walmex) registered comparable sales growth of just1.7% from January to March, with sales actually slowing as the quarter progressed. We think this relatively weak consumer recovery can be traced to the impact of credit and remittances. The rapid growth in consumer credit, which was seen leading up to the financial downturn, is returning only slowly, with the bulk of new private sector credit still going to corporations rather than consumers. Meanwhile remittances, stemming mainly from around 11 million Mexicans based in the US, remain a long way off historic highs in nominal terms, with key sources of employment such as construction, continuing to underperform.
Headline Industry Data (local currency)
- 2011 per capita food consumption = +6%; forecast to 2015 = +20%
- 2011 alcoholic drink sales = +4%; forecast to 2015 = +16.7%
- 2011 soft drink sales = +5% ; forecast to 2015 = +16.6%
- 2011 mass grocery retail sales = +8%; forecast to 2015 = +26.5%
Key Company Trends
Food Firms Introduce Voluntary Labelling System As Government Steps Up Attack On Unhealthy Products – In March 2011, a group of food and drink producers operating in Mexico teamed up to launch a new labelling system for food and non-alcoholic drinks. The move is designed to make it easier for consumers to choose healthy options and has been organised by industry group Consejo Mexicano de la Industria do Productos de Consumo (ConMexico). The move has the backing of 17 local and international firms, including The Coca-Cola Company, Grupo Bimbo and Unilever, as well as local dairy firm Alpura and local juice company Del Valle. The voluntary system can be seen as an attempt to pre-empt legislative changes, with the country's very high rate of obesity now a major political issue. Modelo Could Deliver Accelerated Growth If It Embraces Relationship With ABI – In March 2011 an interview with the CEO of Mexican brewer Grupo Modelo in The Wall Street Journal pointed to a thaw in the firm's icy relationship with Anheuser-Busch InBev (ABI), which owns a 50.2% non-controlling stake in the business. In the interview, Carlos Fernández said the firm had started to develop its relationship with ABI and that 'going forward it has to be strengthened based on communication'. Fernández also said: 'These are the first stages of getting to know each other and so far it has been very good.' Given the firms' geographic proximity, there is tremendous scope for them to drive through efficiencies by working together and a thawing of this relationship can only be good news for both.
Key Risks To Outlook
Impact from the US – As much of our growth projection is predicated on stronger demand from north of the border, should US consumers and businesses use tax relief to continue shoring up damaged balance sheets rather than boosting purchases of manufactured goods, this would spell bad news for Mexican growth.
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