Mexican Food and Drink Sector Set to Grow After Country is Shaken to the Core

The majority of sectors suffered in 2009, with the exception of tea (+20% in volume sales), coffee (+8%), powdered chocolate drinks (+3.6%) and yoghurts (+1.5%), which all saw growth.

1 Jun 2010 --- In the last year, Mexico has been hit by an apocalyptic mix of swine flu, earthquakes, spiralling drug violence and the global recession. Latest research from Leatherhead's Global Food Markets database indicates that this has had an impact on all areas of industry, with food and drink being no exception. The majority of sectors suffered in 2009, with the exception of tea (+20% in volume sales), coffee (+8%), powdered chocolate drinks (+3.6%) and yoghurts (+1.5%), which all saw growth.

Both tea and coffee have benefited from current fashions, especially amongst the younger, more affluent consumer. Coffee drinking is a rising trend, particularly owing to the growing fashion to socialise in coffee shops. In 2009, coffee outlets and cafes in Mexico doubled, to a total of 70,000.

An increase in the number of health-conscious consumers, particularly women, has also had a positive impact on sales of tea, particularly green teas (which now accounts for 35% of the tea market). This trend has also been driving yoghurt sales: drinking varieties have performed particularly well, with functional yoghurt drinks (e.g. probiotics) being an area of robust growth. Fruit juices and drinks experienced growth for the same reasons up until the recession hit.

Carbonates have been performing well, with Mexican consumers having the highest per capita consumption of the Coke brand in the world (Coca Cola's total market share is 65%). However, consumers have expressed rising concerns over diabetes and other sugar-related illnesses which has caused an increase in demand for a greater range of healthier drinks.

Dispensable products such as pet food, branded bottled water, biscuits and pasta were hit the hardest, with many consumers returning to more traditional, cheaper cooking methods. Volume sales of pasta in particular fell dramatically by 15% in 2009 (from 317,000 tonnes in 2008 to 269,000 tonnes). Mexican consumers have long had a preference for other staples such as rice, bread and beans and therefore pasta consumption is expected to remain relatively low overall (2.6kg per capita vs. an average of 6.3kg in other Latin American countries).

Ice cream, chocolate and confectionery sales have also been affected due to many consumers cutting back on purchasing treats and occasional snacks. In 2009, the chocolate market shrunk by an estimated 5% in volume terms. Innovation within these markets has presented itself in the form of sugar-free chocolates to cater for the rising number of diabetic consumers.

In addition to the economic squeeze in households, the country is also undergoing major demographic changes. An increasing number of women are working and younger consumers are aspiring to and being influenced by western culture. These trends are linked to the rise in sales of ready meals and fast foods as consumers demand more convenience over traditional cooking methods.

As a result, innovation remains especially high in convenience foods such as soups and refrigerated and frozen ready meals. Soups, in particular, are readily available in a number of formats (instant, dried, canned) and are being consumed not only as meals but as snacks on the go (instant cup soups accounted for 65% of the market in 2008). Mexican consumers are becoming increasingly more experimental with international flavours, which is driving innovation in these sectors, and are so far showing a liking towards spicy foods in particular. 

Following the need for convenience, less traditional foods such as cheese and tomato ketchup are benefiting from the growing demand for fast food. The demand for ketchup has resulted in it being one of the biggest growth markets in the last decade. Companies had hoped to repeat this success with mayonnaise; even introducing a low-fat version for more health-concerned consumers, yet this market was one of the worst-performing during the recession.

Time-poor, cash-rich young families have been a key driving factor behind increasing sales of baby foods and formulas, although these products are still considered too expensive by the poorer consumers. The market is growing, however, and consumers are buying into the message that processed baby foods still hold nutritional value. Coupled with the growth in births (4% total increase during the past five years) and thus an increase in the number of young children, this market is set to recover gradually after 2010 - particularly aided by innovations aimed at the 1-3 year old segment (already constituting 40% of the total market) which will be largely focussed on child development and health.

The most successful multinational in the Mexican market is Nestlé, with major shares within the following markets: coffee (60%), hot chocolate and malted drinks (45%), yoghurts and chilled desserts (21%), baby foods (53%), ice cream (29%) and chocolate confectionery (24%). Pepsico dominates the savoury snacks market with 70% market share, whilst Cadburys retains a stronghold upon the sugar confectionery and chewing gum markets (26.5% and 75% respectively).

Markets such as bottled water, cooking oils, and cheese remain fragmented, with a large number of local suppliers retaining market share. The key players in the majority of sectors tend to focus on one specific market such as Grupo Bimbo (with an 80% market share in the bakery sector), Grupo LaLa (which dominates the dairy market, producing 40% of the countries milk and cream and 25% of butter) and Kellogg's (with a 51% share of the cereals market).

Overall, most markets are forecast to see growth from 2010 onwards as the economy recovers from its recent shocks. Future growth is forecast to be highest amongst sectors which have either experienced the most difficulty in the recession (pasta, milk and cream) or those which have been driven by strong trends such as fashion (tea and coffee) and convenience (ready meals and savoury snacks).