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Mexico Food and Drink Report Q4 2011
Business Monitor International, Sep 2011, Pages: 119
Business Monitor International's Mexico Food and Drink Report provides industry professionals and strategists, corporate analysts, food and drink associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Mexico's food and drink industry.
Over the longer term, the Mexican consumer story is expected to continue lagging behind some emerging markets, such as Brazil and Peru. Rapid growth in consumer credit leading up to the financial downturn has since reversed and shows little sign of returning, with lenders instead turning their attention to the mortgage and commercial sectors. Meanwhile, the monopolistic nature of many parts of the consumer economy keeps prices high and dampens competition, putting downward pressure on growth.
The figures reported by Mexico’s retail association bear out this view, with comparable store sales at the nation’s supermarkets struggling to register growth above the low single digits. This compares unfavourably with the years leading up to the global economic downturn and ties in with the index of consumer confidence which, although up from the trough seen after the financial crisis, has flatlined since mid-2010.
Headline Industry Data (local currency)
- 2011 per capita food consumption = +9.7%; forecast to 2015 = +29.3%
- 2011 alcoholic drink sales = +5.8%; forecast to 2015 = +23.5%
- 2011 soft drink sales = +5.5% ; forecast to 2015 = +24.7%
- 2011 mass grocery retail sales = +7.5%; forecast to 2015 = +34.7%
Key Company Trends
Slowdown In Soft Drink Sales Growth Driving Consolidation: In July, Mexican soft drink bottler Grupo Embotelladoras Unidas (Geupec) struck a deal with PepsiCo that will see the two firms merge their Mexican bottling and distribution facilities. Geupec will retain a 51% stake in the new company, while PepsiCo will hold 20%. Venezuelan Pepsi bottler Empresas Polar is also involved in the deal and will own 29% of the new company. The move is part of an ongoing trend towards consolidation in the Mexican soft drinks sector, which has shown signs of maturity in recent years.
Walmex Results Point To Weak Mexican Consumer Demand: Mexico’s largest retailer Walmart de Mexico (Walmex) reported a drop in net income for the second quarter of 2011, which it attributed to investment into its store network. Walmex’s net income for the three months to June 30 fell by 3% to MXN4.5bn (US$387mn). Over this period, net sales climbed by 9.1% to MXN8.7bn, which represents something of a slowdown on the previous quarter when sales had climbed by a hefty 18%. In the fiveweek period from May 28 to July 1, comparable stores sales climbed by just 0.3% in Mexico year-on-year (y-o-y) and by 1.5% in Central America. These results confirm that the Mexican consumer sector remains relatively subdued, in line with our core macroeconomic outlook.
Key Risks To Outlook
Impact From The US: The US consumer sector has a strong bearing on the Mexican economy, since headline growth is still heavily wedded to the fortunes of the re-export, or maquila, sector. Our growth projections are partly predicated on gradually improving demand from north of the border; should US consumers continue shoring up damaged balance sheets rather than boosting purchases of manufactured goods, this would spell bad news for Mexican growth. On the other hand, if US demand proves to be more robust than BMI currently expect, GDP growth could be stronger than their current projections, putting upside pressure on BMI forecasts.
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