The Mexican Food Market: -NAFTA -Domestic -Distribution Channels
NAFTA • Mexico, Canada and USA signed a Free Trade Agreement that went in effect in 1994 Some agricultural products became duty free immediately and others under a 5, 10 and 15 year phase out under a quota administration. • Both US and Mexico Agricultural Exports increased as a result of NAFTA 2
NAFTA • Each country has increased its export trading in different segments • Some industries have gain growth and others have been hurt by NAFTA • In the three countries, there has been mixed opinions of NAFTA. The numbers have shown results to each of the countries in different segments 3
Other Mexico’s FTAs n Mexico is currently the country with most free-trade agreements in the world. The free -trade agreements in force are (ordered by date): n North American Free Trade Agreement (NAFTA)) (1994): Canada and the United States. Colombia and Venezuela, also called G-3 Free-Trade Agreement (1995) Costa Rica Free-Trade Agreement (1995) Bolivia Free-Trade Agreement (1995) Nicaragua Free-Trade Agreement (1998) Chile Free-Trade Agreement (1999) EU (European Union) Free-Trade Agreement (2000) Israel Free-Trade Agreement (2000) Mexico, Guatemala, El Salvador and Honduras, also called TN Free Trade Agreement (2001) Iceland, Norway, Liechtenstein, and Switzerland, also called AELC (Asociación Europea de Libre Comercio) Free-Trade Agreement (2001) Uruguay Free-Trade Agreement (2004) Japan Free-Trade Agreement (2005) Mercosur Free-Trade Agreement (ratification pending) n n n
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U. S. Agricultural Export Trends & Highlights ¨ Mexico is the second largest market for U. S. agriculture. ¨ In 2007 U. S. agricultural, forest and fish exports totaled $13. 3 billion.
Top U. S. Bulk Product Markets
Top Markets: Total Agricultural, Forestry and Fishery Products
Top U. S. Bulk Product Markets
Top U. S. Intermediate Product Markets
Top U. S. Consumer Product Markets 12
Why the U. S. Market In Mexico Will Continue to Grow Economic Growth – higher per capita incomes ¨ (middle class growing and poverty being reduced) ¨ Demographics - growth in middle class ¨ Growing urban centers = increase buyers ¨ Improvements in transportation= distribution ¨ Changing eating habits = convenient oriented ¨ Growth in supermarkets = increase points of sale ¨ Growth tourism and restaurants = + consumers ¨ Growth in processed food industry = more intermediate product needs ¨ NAFTA = more efficiency in production ¨
Food Distribution in Mexico
Domestic Food Distribution Producers National Product
Domestic Food Distribution
Domestic Food Distribution Producers National Product Wholesale Central Market
Central Market Mexico City • • 30% of total produce, is marketed through this channel 1, 881 warehouses for fruits and vegetables 338 warehouses for groceries Warehousing: 122, 000 MT The average monthly trade: 700, 000 MT of fruits 500, 000 MT of vegetables 170, 000 MT of groceries 8, 000 MT of fresh flowers
Central Market in Mexico City n n n n Area of 300 hectares 8 billion dollars yearly turnover On a daily basis 6, 000 trucks 70, 000 direct employees 300, 000 visitants 50, 000 vehicles
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Food Distribution Flow Chart Producers National Product Distributors Supermarkets Fixed Markets Wholesale Central Market Food Service Food Manufacturing
Fixed Markets (Mercados) • Popular markets located in older neighborhoods • Housewives would purchase produce, fruits, groceries, deli, dairy non food groceries etc.
Food Distribution flow Chart Producers National Product Distributors Wholesale Supermarets Central Market Fixed Markets Moving Markets Food Service Food Manufacturing
Moving Markets (Mercados Sobre Ruedas or Tianguis) • Over 2, 000 moving markets around the country • Housewives from all income levels like to shop there for the freshest produce, imported fruits and other groceries • You are able to find fish, meats, deli-meats, dairy • They serve Mexican fast food as well • They appear in specific streets certain day of the week • in a periodic basis
Food Distribution flow Chart Producers National Product Distributors Supermarkets Fixed Markets Wholesale Central Market Food Service Moving Markets Mom’s & Pop’s Food Manufacturing
Mom’s and Pop’s (Tiendas) n n n Around 400, 000 in Mexico The “old convenience store” in the distribution chain All income classes have a store around the corner and they will purchase many things from these stores when they are running out of supplies 28
Food Distribution flow Chart Producers National Product Distributors Wholesale Supermarets Central Market Fixed Markets Moving Markets CONSUMER Food Service Mom’s & Pop’s Food Manufacturing
Food Distribution flow Chart Producers National Product Distributors Wholesale Supermarets Central Market Fixed Markets Moving Markets CONSUMER Food Service Mom’s & Pop’s Food Manufacturing Convenience Stores
Convenience Stores n n n Fastest Growing retail segment OXXO, Extra, Soriana, 7 Eleven Distribution still a problem for suppliers Little imported food products Only the ones distributed by an importer
Distribution Channels for Imported Foods
Imported Food Distribution Flow Food Exporters Forwarder Custom Broker
Food Distribution – Imported
Imported Food Distribution Flow Food Exporters Forwarder Custom Broker Transported, by air, sea, ground: trailer or train
Transportation of Goods
Internationa Commerce Terms (Incoterms) COUNTRY EXPORTS EXW Exworks Delivery Plant DEPARTURE PORT FCA Free Carrier Delivery to Carrier FAS Free Along Ship Deliv. Dep. Port- Ship FOB Free on Board Delivery on Board CFR Cost and Freight Costs included ARRIVAL PORT DES Deliver Ex Ship Delivered on Ship COUNTRY IMPORTS CIF Cost Insurance Freight Self-explained DAF Delivered at Frontier Self – explained DEQ Deliver Ex Quay (Duty Paid) CPT Carriage Paid To Vendor pays transp. CIP Carriage and Insurance Paid To BORDER http: //www. foreign-trade. com/reference/incoterms. cfm
Documents to import products BASIC PAPERWORK AND COMPLIANCE FOR FOOD EXPORTS • COMMERCIAL INVOICE • CERTIFICATE OF ORIGIN (NAFTA IF IT APPLIES) • CERTIFICATE OF FREE SALE • RETAIL, NOM-51 PRODUCT LABELING REGULATION PAPERWORK FOR PERISHABLES • ANIMAL USDA INSPECTION CERTIFICATE • VEGETABLE USDA PHITOSANITARY PAPERWORK FOR SPECIFIC PRODUCTS (i. e. dairy, fish) • PHYSICAL AND CHEMICAL ANALYSIS • MICROBIOLOGICAL • MEXICAN OFFICIAL NORM ( NOMS) EACH SPECIFIC PRODUCT WILL VARY AND YOU WILL BE ABLE TO FIND OUT WHAT PAPERWORK IS NEEDED WHEN THE CUSTOM BROKERS 38 CLASSIFIES THE PRODUCT THROUGH THE TARIFF
Imported Food Distribution Flow Food Exporters Forwarder Custom Broker Transported, by air, sea, ground: trailer or train Importers / Distributors
Imported Food Distribution Flow Importers / Distributors • Import – Warehouse – Distribute • Take ownership of the product • Have their own trucks to distribute • Direct relationship with retailers • Promote in partnership with exporters • Own Sales & Merchandising force
Imported Food Distribution Flow Food Exporters Forwarder Custom Broker Transported, by air, sea, ground: trailer or train Importers / Distributors Importer Retailers Warehousing & Distribution
Importers with small infrastructure Importers / No infrastructure • Import – Negotiate with retailers • Take ownership of the product • Have small sales force • Will contract public warehousing • Will contract product distribution • Promote in partnership with exporters
Imported Food Distribution Flow Food Exporters Forwarder Custom Broker Transported, by air, sea, ground: trailer or train Importers / Distributors Distribution Centers Importer Retailers CONSUMER Warehousing & Distribution
Review of Supermarket Segment 44
Top 10 Retail Chains in Mexico No. Stores *Sales 2007 1 Walmart Mexico 223. 4 2 Soriana 67. 1 3 OXXO / Femsa 40. 1 4 Comercial Mexicana 38. 9 5 Liverpool 38. 9 6 Sanborns 33. 8 7 Gigante 23. 9 8 Chedraui 21. 0 9 Home Depot 20. 6 10 COSTCO 20. 3 *Billion pesos Source: MVI Economic Consultants 659 357 5441 184 64 354 287 134 64 30
Quickview of the Retail Segment n n 12, 695 Retail Outlets in Mexico (ANTAD 2008) Jan-April 2008, 8. 5% sales increase vs. 2007 same number of stores Market Share: Wal-Mart, OXXO, Soriana, Comercial Mexicana and Liverpool control 19. 6% in 2007
Retail Segment 47
WAL*MART Mexico 1, 033 units in 176 cities including all formats: hypermarkets, supermarkets, apparel stores and restaurants n Market Capitalization Value 20. 2 billion dollars n Sales 2007 22. 8 billion dollars n Employees: 158, 000 Suppliers: 12, 000 n Sales floor capacity 22, 499, 860 sq ft. n Seating Capacity: 59, 437 n 48
WAL*MART Mexico Club Store Business-Family 84 STORES 27% SALES High End Targets AB 44 STORES 6% SALES Discount -Basic Low Income C, D 324 STORES 33% SALES Dept. Store Targets B, C, D 52 STORES 5% SALES Supercenters ABCD Classes 141 STORES 28% SALES Family Restaurant Targets: ABC 268 Restaur. 4% SALES http: //www. walmartmexico. com. mx
n Membership wholesale outlets targeting businesses and consumers buying large volumes. n 84 Sam's Club Stores. n Highlights n n n Sales (millions): US $ 6, 000 Average sales area per store (sq. ft. ): 94, 600 Customers served (millions): 64 SKUs: 4, 100 (without perishables) Food (% of sales) : 48% No Slotting fees
Semi wholesale and austere discount stores offering a limited assortment of basic merchandise, mainly food and housewares. n There are 324 Bodega stores. n Highlights n n n Sales (millions): US $ 7. 3 Average sales area per store (sq. ft. ): 53, 500 Customers served (millions): 183 SKUs: 49, 000 Food (% of sales) : 48% Slotting fees 51
n Supercenters providing the widest merchandise assortment, from groceries and fresh to apparel and general merchandise. n 141 Wal-Mart Supercenters n Highlights n n n Sales (millions): US $ 6. 2 Average sales area per stores (sq. ft. ): 97, 000 Customers served (millions): 153 SKUs: 90, 000 Food (% of sales) : 45%
n n n Supermarkets located in residential areas of Mexico City and its surroundings with a focus on quality and convenience. 64 Superama supermarkets. Highlights Sales (millions): US $11. 5 Average sales area per store (sq. ft. ): 17, 300 Customers served (millions) : 54 SKUs: 25, 000 Food (% of sales) : 70%
Holding Company for Comercial Mexicana n 4 th Retailer in sales in the Mexican market n Partners at 50% for the COSTCO clubs in Mexico n 64. 9% of sales are food products n 285 Stores in different formats, nationwide presence n For more information: http: //www. comerci. com. mx/comerci/jsp/Comerci. j sp? id=1 n 54
General Information CCM Sales (thousands of Ps. ) Units Comercial Mexicana 12, 526, 754 53 322, 305 3, 469, 254 8, 112 82, 055 55, 000 6, 519, 998 39 207, 185 1, 969, 621 4, 290 45, 204 30, 000 18, 289, 526 69 627, 115 6, 750, 200 12, 868 89, 337 60, 000 Sumesa 861, 070 14 11, 931 128, 424 963 12, 928 8, 000 Costco *** 10, 918, 141 30 329, 277 3, 544, 305 9, 179 37, 989 3, 500 798, 675 71 16, 001* 3, 484 10, 062 495, 002 9 13, 997 150, 663 1828 1, 716 14, 400 50, 409, 166 285 1, 123, 924 12, 097, 806 32, 993 ** 223, 628 Bodega C. M. Mega California Restauran ts Others + Al Precio & City Market Total Sales Area (m 2) Sales Area (sq. ft. ) Emplo yees Customers (thousands) Number of products *seats **includes administrative employees ***100% except sales 55
Comercial Mexicana Formats n n n n Mega: 69 hypermarkets, ABCD clients. 36. 3% of sales Comercial Mexicana: 53 stores, AB clients, 23. 8% of sales Bodega: 39 discount stores, CD clients, 12. 9% of sales Costco: 30 club stores, AB clients, 21. 7 of their sales Sumesa: supermarkets in residential areas, AB clients, 14 stores, 1. 7% of their sales California Restaurants: family restaurant chain, 71 stores, 1. 6% of their sales Al Precio: 8 small discount outlets, located in low income areas City Market: 1 high end gourmet supermarket, organic section, fine foods type of store
n n n 2007 numbers: Sales : US$65, 191 million Stores: 257 (+198 Gigante stores for 2008) Formats: 163 Hypermarkets 71 Soriana Mercado (discount) 23 City Club (club stores) 130+ Super City (convenience stores franchised) Sales Space: 1. 8 million m 2 Employees: 63, 500 Clients: 345. 5 million 57
In 2007, Gigante sold rented a total of 200 stores to Grupo Soriana. After this transaction, Soriana became the second largest retailer after Wal-mart. Gigante kept control of their other companies: Toks Restaurants, Office Depot and Radio Shack Gigante owners continue to own the real estate and they are renting the stores to Soriana.
n n n n 2007 figures: Hypermarkets : 29 Supermarkets : 70 Super Che (discount stores): 16 El Super (in California USA): 8 Employees: 25, 000 Sales : 1, 000 US$ Million Region: Nationwide since 2006
n Carrefour retired from the Mexican market in 2005. Its 29 stores were sold to Grupo Chedraui became then the 8 th retailer in Mexico and gained nationwide presence with this purchase.
H-E-B n n n HEB represents 300 stores in Texas and Mexico Stores in Mexico Hypermarkets : 8 Supermarkets : 11 Recognized in Northern Mexico as an upscaled Supermarket. Corporate offices located in Monterrey Mexico
THANK YOU Marketing Solutions Firm Rep. Food Export Midwest and Northeast Raul Caballero, CEO President Violeta Picazzo, Vice. President Tel. (52+55) 5362 -7407 Fax. 5362 -6724 raul@marketingsolutionsfirm. com violeta@marketingsolutionsfirm. com www. marketingsolutionsfirm. com
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