Agriculture, Food and Beverage Profile - Mexico
The Canadian Trade Commissioner Service
1. Sector Overview
Mexico is the world's 7th largest importer of agri-food products (excluding the European Union)Footnote 2 . The Canada-Mexico bilateral agriculture and food trade has been increasing steadily, reaching approximately $3.5 billion in 2014.Footnote 3 During 2014, Canada maintained its position as the second largest supplier of agri-food products to Mexico with a share of 6.7% on the total Mexican agri-food imports, only behind the United States (U.S.).
During 2014, Canadian exports of bulk commodities to Mexico reported an increase in terms of volume, as compared to the previous year. In addition, exports of Canadian intermediate products and consumer-ready food products to Mexico reported growths in terms of value.
It is important to note that the Canadian dollar maintained a high value vs. the Mexican peso during 2014, which was not precisely favourable for the expansion of exports.
In 2014, bulk commodity exports have made up 58% of the $1.89 billion of total Canadian agri-food exports to Mexico. In 2014, bulk commodities exports reached $1.1 billion (12% lower as compared to the exports reported during 2013), however in terms of volume (metric tonnes), Canadian exports reported a 7% increase. This appears to indicate that Canadian grains were able to be purchased at lower prices in Mexico during 2014. Canada's top three bulk commodity exports in 2014 were canola, wheat and tobacco.
In 2014, intermediate exports accounted for 11% of Canadian agri-food export totals to Mexico, reaching $218 million (13.7% higher than the exports reported during 2013, mainly due to higher exports of refined canola oil, lentils and malt). Canada's top three intermediate exports in 2014 were refined canola oil, lentils and malt.
In 2014, consumer-ready product exports reached a total of $587 million, approximately 31% of the total Canadian agri-food exports to Mexico (20% higher than the exports reported in 2013, mainly explained by higher exports of beef, non-alcoholic beverages, and pork). Canada's top three consumer-ready food exports in 2014 were pork, beef and frozen French fries.
During 2014, Canadian exports of fish and seafood to Mexico reached $9 million (63% higher than the exports reported in 2013). Canada's top three fish and seafood exports in 2014 were fish fats and oils, boneless frozen fish, and live lobsters.
Canada's main foreign competition in the Agri-food market comes from the U.S., which currently controls 72% of the $28 billion agri-food import market. Large U.S. firms such as Wal-Mart and Costco account for half the retail food sales in Mexico. U.S. suppliers also dominate the hotel, restaurant and institutional (HRI) segment and are well established in tourism destinations such as Los Cabos, Puerto Vallarta and Cancun thanks to the proximity to the markets and ease of transportation.
Additional market competition comes from increasingly modern and developing lines of Mexican food products. There are many large Mexican-owned food companies who supply the Mexican market and export to other countries, especially in Latin America. Companies like Sabormex, SuKarne, Herdez, Costeña and Bimbo are local competitors for Canadian exporters but also represent opportunities in terms of imports of ingredients for processing.
Of growing concern to Canadian producers is the influence of other competitors, such as China, the European Union (mainly Ireland and Spain), South America (mainly Chile and Guatemala), Australia and New Zealand. Many of these competitors are gaining ground in Mexico as a result of the various Free Trade Agreements signed by Mexico and others recently signed or under negotiation such as the Pacific Alliance and Trans-Pacific Partnership (TPP).
Some large Canada-based multinational companies have established offices in the Mexican market (such as McCain). The establishment of large Canadian companies in other sectors such as aerospace may encourage Canadian companies to establish production facilities in Mexico.
Main foreign suppliers of agri-food products to Mexico 2014 (Source: Instituto Nacional de Estadística y Geografía - INEGI)
- United States 72.0%
- Chile 1.8%
- Ireland 3.0%
- Guatemala 1.0%
- Spain 1.2%
- Others 13.4%
- Canada 6.7%
1.1 Structure of the Mexican Food Market
Centrales de Abasto were established by Mexico's federal government to improve regional wholesale markets. These are public-private wholesale markets, operated by private companies on sites owned and administered by the government. Centrales de Abastos supply all types of food-related businesses. The idea is to make positive changes in the way that agriculture and food products are being traded, managed and sold, making the Centrales de Abasto a distribution hub rather than just large wholesale markets. Currently there are 64 Centrales de Abasto in the country.
The most important Central de Abasto is located in Mexico City and is comprised of more than 6,000 wholesalers, which sell more than 30,000 tonnes of agri-food products with a value of $9 billion per year. It is in fact the largest of its kind in the world with 304 acres of commercial area and around 4,000 warehouses. Fresh local produce and imported bulk food items are sold there. The Central de Abasto handles products coming from 28 states in the country and from more than 10 countries in the world including Canada. It is estimated that 70% of the total sales of special crops in Mexico are negotiated through this distribution centre as well as 30% of the total national horticulture production. National prices for horticulture products are determined and fixed here. About 90% of Mexican bean importers are located in the Central de Abastos. More than 350,000 people visit the Central de Abasto every day.Footnote 4
1.2 Mexico's Retail Food Sector - Distribution and sales channels
Mexico's Retail Food Sector reported sales for $39.1 billion in 2014.Footnote 5 Distribution of imported products was traditionally concentrated in and around Mexico City, Monterrey, Guadalajara, and the border cities. Over the past few years, expansion has taken place in other secondary cities and there has been a dramatic change in the food distribution practices in the country. Modern retailing is set to progressively expand from the big capitals into second tier cities, as infrastructures and logistics improve and retailers expand from the already very competitive big cities into smaller towns.
The retailing sector in Mexico is a highly fragmented one, where small independent businesses play an important role, mostly in non-urban locations and smaller cities. However, small corner grocery stores or open air markets are being slowly replaced by large grocery stores and chain supermarkets. There has been a recent explosion of discount and convenience stores as well as a more discreet expansion of supermarkets and hypermarkets. Traditional retailing has the strength of being an important part of the Mexican economy, but lacks the strong organisation and financial resources of modern chained retailers. Today, 55% of all food products are purchased through supermarket chainsFootnote 6 and the market is dominated by the top five food retailers: Wal Mart de México y Centroamérica, Organización Soriana, Fomento Económico Mexicano (FEMSA) Comercio, Grupo Comercial Chedraui and Controladora Mexicana.Footnote 7 FEMSA Comercio operates OXXO, the largest and most profitable convenience store chain in Latin America with 13,000 stores.
Very modern distribution systems exist in Mexico, and elaborate logistics allow direct deliveries from major producers and warehouses, to large-surface department stores. Nevertheless a more traditional distribution system also exists, consisting of a long chain of distributors, wholesalers, retailers, and small corner stores. Retail distribution of food in Mexico varies across income levels. This situation has led some of the largest modern retailer chains to develop differentiated store formats. Superstores generally cater to the wealthy who have access to transportation. Convenience stores cater to the middle and upper classes, as they tend to charge higher prices, but can provide specialty goods and are located in proximity to customers. Discounter stores with a more limited assortment in comparison with hypermarkets or supermarkets, attract large numbers of low-income families by focusing on providing low prices. Grocery stores cater to the lower income population who tend to buy fewer, fresher items on a frequent basis. Higher income earners tend to buy more processed and packaged foods on a frequent basis.
Wholesalers: There are marked differences in size between wholesalers in Mexico, and they usually have limited regional or local coverage. Not all wholesalers have the same logistical capacities to ensure that the products reach retailers and/or consumers on time and in good condition.
Distributors: traditionally ensure that they have good reach and sufficient capacity to ensure continuous delivery to retailers (staff, logistics, warehouse space etc.).
Key Retailers: There is a wide spectrum of retailers in the Mexican market, ranging from small convenience stores to large-scale locally-owned and foreign-owned retail chains. Walmart Mexico (Walmex), the largest retailer in the country and OXXO, the largest convenience store chain in Latin America are the most important players in this sector.
Imported products are typically sold through supermarket chains and warehouse clubs. Imported food products enter Mexico either directly, through a company-owned office in Mexico, or indirectly through a broker, distributor or processor. Although brokers are the simplest export option, exporters risk losing control over their products, making it difficult to build and preserve brand identity. Moreover, final prices to the consumer can be quite inflated, as a result of brokers and distributors typically adding a 20% to 30% mark-up. Supermarkets usually work on a 35% mark-up, while wholesalers usually add a 30% mark-up. Distributors represent a safer option, because they typically have an established distribution network. Distribution agreements with Mexican food processors are another potential channel for Canadian exporters to distribute their products.
2. Market and Sector Strengths, Weaknesses, Opportunities and Threats (SWOT) Analysis
Canada is well positioned to seize opportunities in the Mexican market as a world leader in food safety with vigorous inspection and regulatory control, and as a champion of environmentally sustainable production methods. Canada boasts world-class grains, pork, beef and wheat genetics and a capacity to produce innovative value-added products. Exports of value-added food products to Mexico have been increasing over the past years.
Canada has a highly competitive food processing sector with streamlined corporate taxes and regulations, internationally-respected inspection systems and an integrated transportation network that assures rapid distribution across the continent and around the globe. Given Canada's geographic location, it allows for rapid delivery of goods to and from Mexico using road, air and/or sea transportation.
Canadian advances in science, technology and government policy have spearheaded advanced food processing, organics, health and wellness, innovations in nanotechnology, genetic engineering, and the development of environmentally friendly, industrial products. It all starts with Canada's vast agricultural land base that provides ready access to a rich supply of raw materials and fresh ingredients, abundant energy, water and natural resources. Some areas of agri-excellence include healthy products, where Canadian companies are developing and implementing cutting-edge technologies to produce nutrient-rich natural health products, innovative functional foods and trustworthy health ingredients. Other Canadian strengths are healthy alternatives, where Canada figures as a world leader in grain and oilseed production, Canada's bio-industrial sector is at the forefront of mining new bio-materials and fuels, and converting agriculture bio-waste into viable, alternative industrial and consumer products.
Canadian exporters should take advantage of the North American Free Trade Agreement (NAFTA) treaty with Mexico allowing preferential access, making exportation of agri-food products to Mexico a smoother process.
Mexican buyers and consumers have very positive perceptions of Canadians and Canadian products in general, which could act only in favor of Canadian companies when doing business in the market.
2.2 Challenges / Weaknesses
Mexico is a price-sensitive market. Mexico's policy reforms aimed at building domestic capacity to achieve self-sufficiency in staple foods and reduce dependence on imports could create challenges for Canadian exports. This is based on Food and Agriculture Organization of the United Nations (FAO)'s recommendation that countries should produce 75% of basic foods. Mexico currently imports 43% of this total. Post is closely monitoring new policies that may affect access for Canadian products.
On October 31, 2013, the Mexican Congress approved the Tax Reform. This reform had a direct effect on imports of foreign and domestic foods and beverages specifically in the following items: 16% tax for imports of chewing gum and pet food; 8% tax on top of sale price for non-basic foods (e.g. snacks, chocolates, ice cream, desserts, confectionery, among others) that contain over 275 calories per 100 grams (the purpose of this tax is to discourage consumption of what the Mexican government considers as non-healthy products and create more awareness about healthy eating to fight obesity/diabetes problems in Mexico); $1 peso / per litre on the sale price on imports of flavoured beverages with added sugar (soft drinks, powders, syrups, etc.); 26.5% import tax on beer with up to 14° G.L. and 53% import tax on beer with 20° G.L.; and a 30.4% import tax on cigars and tobacco manufactured by hand.
One of the main challenges in the agri-food sector in Mexico is the complex regulatory system. In order to ensure smooth border clearance, exporters need to keep abreast of ever-changing regulations and document requirements. The border clearance requirements are applied to all shipments coming into Mexico, including samples, which makes essential for exporters to work closely with their Mexican importers to ensure all requirements for their products are properly fulfilled. The existing online module for accessing import requirements of meat products has facilitated this process and a similar online module for plant and fish/seafood products has been implemented. The implementation in 2012 of a digital single window program “Ventanilla Unica” for customs clearance procedures has facilitated the import process of goods into Mexico, especially because after the Mexican authorities (Servicio Nacional de Sanidad, Inocuidad y Calidad Agroalimentaria - SENASICA) review the paperwork of the shipment, the system allows users to receive a one-time notification from SENASICA identifying any mistakes or missing documents, so that they can be corrected prior to presenting the load for physical inspection to avoid rejections.
Mexico also has a complex distribution system which is much more fragmented than the supply chains common in the U.S or Canada. Exporters need to gather first-hand market intelligence and develop personal relationships in order to succeed in the market.
Transportation to Mexico is another challenge. Exporters to Mexico have the option of shipping by land, air, or water. Canadian trucking companies are allowed to cross into Mexico, provided they have a contract with a Mexican trucking company for the use of the latter's installations within 20 kilometres of the Northern border to load, unload or exchange semi-trailers. High transportation costs, especially for exporters of temperature controlled products and those sending less than truckload shipments; affect the competitiveness of Canadian products, especially against the US products. A freight forwarder can assist Canadian companies when deciding which method of shipment would work best.
For exporters accustomed to shipping to the U.S., exporting to Mexico often requires adapting products and procedures. Labeling requirements are an example. Products that legally require labels should have the information in Spanish as required by the Mexican Official Standard NOM-051-SCFI/SSA1-2010. The information required includes product name, list of ingredients, quantity, manufacturer's name and address, country of origin, lot number, the expiration date, storage conditions, nutritional information, and the importer's name and registry number. As part of the efforts to create awareness about healthy eating, Mexico has also announced new labelling rules with a compliance deadline by June 30, 2015, under which the content of energy, fats, sugar and sodium will be required to appear on the front of the package of pre-packaged foods and non-alcoholic beverages. Exporters must ensure that the labels match with the information in the paperwork, given that information discrepancies are a common cause of rejection of shipments.
Another key challenge that is faced by Canadian exporters is the low awareness of Canadian products and capabilities among Mexican buyers and consumers. In fact, in a market research conducted in 2010, it was found that the majority of the Canadian agri-food products exported to Mexico (86%) is not clearly identified as Canadian to the final Mexican consumers. The U.S. presence is very strong and fuelled by restaurants and supermarkets promotional campaigns. These promotions are often supported by government funding. The research also indicates how it is key to position Canada as an agri-food supplier of choice in Mexican buyers' and consumers' minds, and the urgent need for implementing a branding campaign for Canadian agricultural and agri-food products in Mexico. The perception challenge exists on the Canadian side as well. Canadian exporters often overlook Mexico as a potential market because of a perception of risk and low awareness of the opportunities that exist in this growing middle class population. The majority (70%) of Canadian agri-food exports to Mexico are ultimately purchased by consumers at the retail level, while the rest are sold through the hotel, restaurant and institutions (HRI) sector. Properly indicating that a product is of Canadian origin could better position and/or help sell the product.
Although the Canada Mexico bilateral trade relation is a mature one, market access issues remain. Canada's beef and livestock sectors were greatly affected by the closing of borders due to the detection of Bovine spongiform encephalopathy (BSE). While market access has resumed for most beef and Canadian livestock, some trade irritants need to be resolved such as access for over thirty month beef (OTM). Efforts continue between governments to obtain a resolution. Other active market access issues include; access for uncooked Canadian poultry (duck); as well as access for live sheep and goats. Some of these issues are close to resolution and there are also work plans in place for Canadian exports of seed potatoes and apples that require close monitoring.
Other current challenges for Canadian agri-food exporters are: an increased scrutiny for the presence of soil during border inspections, which has caused difficulties for some shipments of pulses and other commodities; quarantine weed seeds in canary seed; the increased competition from lower-cost producers such as China; and the erosion of preferential advantages enjoyed under NAFTA with Mexico's new Free Trade Agreement (FTA)'s.
2.3 Opportunities by Sub-Sector
Significant opportunities exist for Canadian exporters in the agri-food sector in Mexico. This is partly explained by a growing population, young demographics, a growing middle and upper class and an increased demand for high-quality value-added products. According to the national statistics office, the middle class presently makes up 39% of the population (around 47 million people).Footnote 8 Mexico is considered to have the highest rate of obesity in the world, particularly in their children and diseases related to weight, such as type two diabetes, are increasing rapidly. The Government started a few years ago an anti-obesity campaign so there will be opportunities to build on the growing health and wellness trends related to fresh and processed products that interest consumers in this market.
The proliferation of modern supermarkets, especially in northern Mexico, has transformed the structure of the Mexican market and many Mexican importers and distributors are diversifying from traditional supply sources. Modern retailers continue to win consumers from the half a million traditional independent small grocers. Led by supermarkets/hypermarkets, discounters and convenience stores, modern retail continues to expand, increasingly targeting smaller urban areas. The tendency is to penetrate smaller cities throughout the country and also to target specific, localized, high-end segments. High-end supermarkets are looking for imported/innovative products.
Mexico also has an increasing number of high-end tourist hotels, resorts and restaurants in tourism regions, including the Mayan Riviera, Los Cabos, Punta Mita and Puerto Vallarta.
Mexico is an open market with Canada enjoying preferential access under the NAFTA. This represents potential not only for trade but also for strategic alliances, foreign direct investment (FDI), technology and innovation with major food processing and food production companies.
Opportunities exist in a wide range of segments from the mass market to the high-end niche market as well as for strategic alliances and investment. Significant and immediate opportunities have been identified in the following sub-sectors:
2.3.1 Processed, ready-to-eat and frozen foods
In 2014, sales in the packaged food market in Mexico reached $57 billion.Footnote 9 The latest information available indicates that the frozen foods sector value in 2014 reached approximately $777 million and the Mexican ready meals market value for 2014 reached approximately $330 million.Footnote 10 According to Euromonitor, the packaged food market in Mexico will continue to grow steadily, expecting to reach a value of $62 billion by 2019. High growth categories in the forecast include meal replacement, sweet and savoury snacks, confectionery, chilled processed food, sauces, dressings and condiments, ready meals and dried processed food.
Processed, ready-to-eat and frozen food products are gaining popularity in Mexico as a result of changing lifestyles, a growing middle class, and increased awareness of higher quality and healthier products among Mexican consumers. Furthermore, rising levels of wealth and education mean a growing audience for imported foods. Imported processed food is viewed as being of a higher quality than domestically produced products. As purchasing power gradually increases, convenience foods become seen as a time-saving alternative to traditional meals. Popular frozen foods include potatoes, other vegetables, pizzas, chicken nuggets, fish sticks, hamburgers, snacks (onion rings, stuffed jalapeños), waffles and desserts. The Mexican market for frozen ready-made meals is growing at an average rate of 10% per annum. Mexico is a price sensitive market with long established businesses in this particular sector. Companies should be ready to compete with strong Mexican companies that supply ready-to-eat processed foods with comparable costs.
It's important to note that in Mexico, products found in the frozen foods section are still mainly high calorie and high fat foods and remain considerably more expensive than fresh food. The trends that we see in Canada with healthy frozen prepared meal options such as Loblaw's Blue Menu meals have not emerged in Mexico yet. Frozen foods are still associated with junk food in Mexico. Opportunities exist for Canadian companies offering convenient, semi-prepared and prepared foods, particularly if there remains an element of fresh. Leading supermarkets Wal-Mart and Soriana see opportunity to change that perception and introduce “healthy” frozen foods but the change in consumer's minds will take some time.
Another interesting note is the current demand for ethnic type products. Canada is well positioned to supply this category of products given the multi-cultural influence on our food offering. However, Canada's taste profiles and awareness of ethnic dishes are sometimes overwhelming to Mexican buyers and consumers. Spanish ethnic food is well positioned in the Mexican market. Demands for ethnic foods in Mexico are still limited to European type and basic Asian-type items such as eggrolls, noodles, soya and teriyaki although the population is becoming increasingly accepting of foreign foods.
2.3.2 Private Label
Mexico is the 4th largest private label industry in Latin America after Chile, Colombia and ArgentinaFootnote 11 and is growing rapidly. Approximately 70% of all supermarket private label items are food items. Private label products are mainly available in canned/preserved and frozen processed food.Footnote 12 The private label market has grown approximately 21% among the major retail chains since 2008.Footnote 13 Club stores are estimated to have even higher sales growth.
Private label in Mexico has a reasonably strong presence in sauces, dressings, condiments, canned/preserved food, dessert mixes, frozen processed vegetables, dairy, noodles, pasta, breakfast cereals and spreads.
The majority of the major supermarket chains' private label brands are produced in Mexico (80%), as are those of convenience stores. Club stores are an exception in that at least half of their brand merchandise is imported. Imports vary by chain and by format. In the case of the club stores, imported private label products tend to come mostly from the United States.
The Mexican private label market is expected to grow and mature over time as Mexican consumers begin to believe that store brands are quality products that offer them the added advantage of a lower price. Prices for private label products are generally 5-30% lower than the category leader. Club stores report savings in the 20-50% range.
The Private label industry is extremely competitive. As a consequence, Mexican retailers are looking for ways to differentiate themselves from their competitors; some are segmenting by Premium, Intermediate and Economic category options that appeal to a wide array of shoppers, while others are also looking for new and innovative products. Premium level Private Label is an area of opportunity for Canadian suppliers. A good example are Walmart's World Table and Extra Special Brands, sold mainly in Superama stores and now being introduced into Supercenters, which are positioned as premium/high-end lines of innovative imported products. A local large population and sensitive response to price (privileging low prices), provides private label firms significant prospects for successful business. As a result of past buyers' missions to Canada, Canadian companies have succeeded in penetrating the Mexican private label market.
2.3.3 Food Ingredients:
Opportunities exist in value-added products and ingredients for further processing, (including functional ingredients).The food ingredients portion of the total processed food sector accounts for 57%.Footnote 14 Grains, powders, syrups, flavor essences, sugars and sweets, meat-related, bakery, dairy and snacks are the commodities that experienced the largest increase. Ingredients are being imported because they include specialized content that is difficult to source in the domestic market.
In 2014 the food ingredients market in Mexico was valued at approximately $175 billion. According to Mexican official stats, there are over 100,000 medium-large food processors in Mexico. Mexico is a large importer of food ingredients, given that domestic production is not sufficient to meet the demand from the Mexican food processing industry. There is a growing commodity market for ingredients where Canada is established as a world class provider of high quality products such as wheat and oat-based products, pulses, barley, oilseed oils, soy concentrates, organic and sugar-free ingredients, baking and multigrain mixes and wild rice.Footnote 15 Opportunities for Canadian suppliers may also be found in the sale of value-added food products and food ingredients for use in ready-made meals and for further processing such as: cranberry powder and functional ingredients. Notable successes have been reached by some Canadian exporters, but the growing market for these products needs to be furthered explored.
Promotional efforts must be made to educate importers and consumers in order to increase market presence. The most important Mexican ingredients imports include: oilseeds, wheat, barley, flax seeds, oats, sunflower seeds and mustard seeds.
2.3.4 Animal Feed Ingredients:
The pet food market in Mexico reached sales for $2.3 billion in 2014.Footnote 16 Much of the pet food in Mexico is imported from the United States, and Mexican-owned production generally focuses on the lower end of the market. Given the growing demand for high quality pet foods, a segment dominated by dog food sales, (comprising over 80% of consumption), there may be opportunities for further imports from Canadian producers. Private label product sales are particularly strong in the segment of economy brands. Mexicans are price-sensitive, but also pet-conscious, and are seeking the best affordable options to feed their pets. Most premium pet food is imported and could represent an opportunity for Canadian companies.
Mexico's high dependency on imported feed ingredients (60% of the overall content of feed products is imported), offers significant opportunities for Canadian feed suppliers (canola meal, feed barley, wheat, oats and peas). Multinational animal feed and pet food producers that have established in Mexico are in need of feed ingredient suppliers. There is a strong market demand for livestock genetics; cattle, sheep/goats, poultry, grains and oilseeds. It is important to note that any pet food to be sold in Mexico has to be registered in advance with the Mexican authorities and the ingredients must come from an establishment approved by Mexico's Animal and Plant Health Food Safety and Food Quality National Service (SENASICA).
2.3.5 Health and wellness products:
Over the last few years, obesity has become a huge health problem in Mexico, which is Latin America's biggest consumer per capita of sweet and savoury snacks, and the world's top consumer of pastries. Mexico is considered to have the highest rates of obesity in the world, particularly in their children and diseases related to weight, such as type two diabetes are increasing rapidly. Seven of 10 adults in Mexico, and a third of children, are either overweight or obese. Mexicans have now surpassed Americans for the title of the fattest country in the Organisation for Economic Co-operation and Development (OECD), according to the organization. All that fat has contributed to an alarming rise in chronic illnesses like adult-onset Type 2 diabetes, which afflicts an estimated 15% of Mexicans over the age of 20. The Mexican government has implemented several measures to overcome this problem, including campaigns to promote the consumption of healthy food products and measures to improve diets via tax disincentives. In October 2013, the Mexican Congress approved changes to the legislation for the imposition of taxes on high-calorie food products, including a tax of $ 1 peso per liter on the sale price of flavoured beverages with added sugar (soft drinks, powders, syrups, etc.), and a tax of 8% on the sale price of certain non-basic food with high caloric values (275 calories per 100 grams), such as: snacks, chocolates, ice creams, custards, puddings, fried food, pastry, milk sweets, and cereal based food, among others. These measures open business opportunities for healthy food products in Mexico, such as those that Canada can offer. Conscientious consumption is beginning to be embraced by Mexicans, particularly among a sub-set of internationally oriented middle class consumers along with the wealthy.
The health and wellness industry continued its remarkable growth trend during 2014 by reaching $23.6.Footnote 17 The Mexican better-for-you market's retail sales amounted to $4.8 billion in 2014.Footnote 18 Reduced carbohydrates, reduced fat, reduced salt and reduced sugar packaged food all experienced growth in this category. Reduced-fat and reduced-sugar became the most sought-after products by consumers concerned with their weight, and supermarkets are now picking up on this trend. Since Mexico is the second country most affected by obesity and type-2 diabetes, the Mexican government is increasingly keen to encourage consumption of healthier products. This has resulted in an increased interest in ingredients that offer health benefits such as fibre, omega 3, healthy oils, etc. There is also an increasing demand for food intolerance products such as lactose-free and gluten-free products, however strong competition exists from the United States (US) and the European Union (EU).
The Mexican fortified/functional retail market sales totalled $12.6 billion in 2014.Footnote 19 Mexican consumers are attracted to the value-added that comes from fortified/functional packaged food. The most popular sub-categories in this sector are the products offering health claims, such as digestive benefits like cold cereals, drinkable yogurts, and snacks/cereal/energy bars. The power of brands and brand loyalty in Mexico has been historically strong. Companies looking to increase or maintain their market share could benefit by offering new, healthier formats of existing products, such as “reduced fat”, “low calorie” or “reduced sugar” versions.
There is, however, much room for branching into functional ingredients for more specific health benefits (omega-3s for heart health, for example) rather than basic vitamins and minerals to boost general wellbeing. Opportunities exist for functional products targeting upper-income and health conscious Mexicans.
The market value for organic packaged food and organic beverages is reflecting this interest, projecting to reach $400 million by 2019.Footnote 20 The Organic market recorded annual average sales of $265 million in 2014.Footnote 21 Organics are increasingly present on the shelves in Mexico and its demand is expected to continue growing in the future, as a result of health concerns in Mexico. These trends should ultimately represent good opportunities for Canadian exporters of organics. Opportunities exist for processed organic foods that are not domestically produced such as: bakery products, beverages, dairy products, desserts, dietary supplements, general grocery items (cereals, sauces oils, tofu, seasoning, etc.), baby foods categories, desserts and sweet products, and ready-to-eat pulses and seeds (flax, rice, beans, etc.). The organic food sector is still a niche market in Mexico, representing between 1% and 3% of the total food sector in the country. In a Market Research conducted in 2009, it was found that at least 50% of the demand for organics in Mexico is covered by imports. However, according to Mexico's National Agriculture Council (CNA), Mexico is fast increasing organic production and has announced a new organic label. Most of the imported organic foods available in the market are found in organic specialized stores, health/natural food stores and high-end supermarket stores These specialty stores represent an excellent venue for the sale of Canadian organic food.
For the moment, it appears as though focusing on the “health and wellness” category is a better approach for the Mexican market. In the Mexican consumer's mind, the category encompasses a wide variety of products: organic, functional, low calorie, low fat, high fibre, natural, etc. The Mexican consumer is not aware of the differences between these different claims, however this is slowly changing. Usually, only Mexican consumers with a high level of education know what the term “organic food” means and the benefits of consuming these products. Many low-income, Mexican consumers are not familiar with the benefits of healthier foods or broader nutritional information and, for the most part, cannot afford to pay premiums on products in this sector. A combination of healthy ingredients, convenience, and competitive price points will give Canadian suppliers and manufacturers a strong competitive advantage in the Mexican marketplace.
2.3.6 Innovation/Science and Technology:
As competition and corporate social responsibility has increased in the Mexican market, importers, distributors, retailers and food processors are looking for innovative and environmentally sustainable products and ways, to differentiate from the competition and serve more demanding consumers. This provides opportunities for companies and food research development centres offering innovative products, technologies and services. Opportunities exist for Canadian companies trying to enter the market and capture small market niches with innovative products that have a good opportunity to create new trends.
Mexican investment flow into Canada –through acquisitions- has been mainly fueled by their interest to gain market access, enhance market share in a developed economy, secure supply of food and food ingredients, offset market volatility and secure a qualified workforce.
Opportunities exist for Mexican companies in Canada, from west to east, in: Meat production and processing; Greenhouse production; Fish and seafood; Pulses, grains and oilseeds; Dairy (genetics, technology, and production); Soybeans, wheat and corn; Bakery (including bread, tortillas, etc.); Sugar and confectionery products.
There are several examples of Mexican companies that illustrate this:
Grupo Bimbo undertook a $1.8-billion takeover of Canada Bread Co. from Maple Leaf Foods in early 2014, as a means to get market access, increased market share with reputable brands and highly skilled management know-how in a mature, yet stable market. Later in 2014, Bimbo's Canada Bread acquired Montreal-based Saputo Inc.'s bakery division for $120 millions.
Furthermore, Grupo Vida, based in Guadalajara, Mexico's largest and one of the world's leading oats processor with plants in Chile, Peru, Mexico and now in Canada acquired in 2012 formerly Alberta Oats Limited now Canadian Oats Milling with the objective of securing alternative oats supply sources and target additional markets from Canada.
2.3.8 Hotel and restaurant / Food service Industry:
The Mexican hotel, restaurant and institutional (HRI) foodservice industry is expanding alongside a rising middle-class population, and is forecasted to reach total value sales of $50 billion by 2016.Footnote 22 It is estimated that of all food products consumed in hotels and restaurants, approximately 15% are imported. The Hotel Restaurant Institutional (HRI) sector is served mostly through independent distributors. Large local food processors like Bimbo and Herdez have the greatest market penetration, dominate the foodservice sector, and have an advanced distribution system. Most restaurant operators purchase seafood and fish locally; however, some up-scale restaurants look for varieties of fish and other seafood that cannot be found in Mexico.
On average, Mexican consumers eat out 1.2 times per week, primarily for occasions related to work and for socializing with friends and families. According to Cámara Nacional de la Industria Restaurantera y Alimentos Condimentados (CANIRAC), 80% of the population needs to eat outside home for various reasons, work primarily. The consumer foodservice industry in Mexico continues to see growth, especially in home delivery, driven mainly by heavy traffic and fast pace lifestyle in big cities. In the northern cities of the country, growth in home delivery is linked to insecurity and violence. Mexican consumers are increasingly demanding gourmet and foreign/International-type foods and are focusing more on factors such as quality and convenience when choosing food products. The total population is expected to increase over the coming years, to reach 82 million people between the ages 15 and 61, which is the working population, and this segment is the one which will push the lifestyle trends of rushing, practicality and demand for convenience.Footnote 23
Tourists in Mexico are also major consumers of foodservice products. Mexico is one of the most visited countries in the world with over 23 million tourists each year,Footnote 24 and the arrival of more visitors from countries other than the U.S. has forced the industry to innovate and improve the quality and range of their services offering more sophisticated services in order to please a wider variety of customers. In general, tourist centres typically offer four types of foodservice products: gourmet, fresh, seafood and fast food.
The leading venues for foodservice sales in 2014 were stalls/kiosks followed by full service restaurants, and fast food categories, cafés-bars, institutions, hotels and lodgings. This situation is not expected to change significantly in the future, due to street stalls/kiosks offering an easy and low-cost form of self-employment. While the fast food category only represents 14% of total foodservice sales, it is expected to have the largest growth rate in the near future.
The best opportunities for Canadian companies are to supply higher-end restaurants, European-plan hotels and boutique hotels in Mexico's major cities (Mexico City, Guadalajara, Monterrey, León and Aguascalientes) as well as tourist regions (the Mayan Riviera, Acapulco, Los Cabos, Puerto and Nuevo Vallarta). Opportunities exist for products such as fruits and vegetables, pork, beef, lamb, deli-style meats, sauces, condiments and spices, ready-made meals, specialty grains, canned goods, alcoholic beverages, carbonated beverages, and bottled water and juices.
2.3.9 Mexico's agriculture and farm equipment and related technologies market
Mexico's agriculture and farm equipment and machinery remains underdeveloped and under-mechanized, water scarcity, and a shift towards intensive production agriculture offers potential for smaller scale and specialized production and sustainable technologies and equipment. Currently the Mexican government assistance programs may cover up to 50% of the total equipment.
There are strong challenges for Canadian farm machinery and equipment exporters as the Canadian capability is not well known in Mexico and most of the machinery made in Canada over sizes the production performance of the Mexican market (average tractor horse power in Mexico is 90 while in Canada is over 200). However, there are existing opportunities for livestock handling and management systems, agriculture and farm smaller scale equipment and machinery, grain handling equipment, green house structures and high-end technology that may be adapted to Mexico's production levels and boost its production efficiency.
Canada's main foreign competition in the Agri-food market comes from the U.S., which currently controls 71.8% of the agri-food import market. Additional market competition comes from increasingly modern and developing lines of Mexican food products. Of growing concern to Canadian producers is the influence of other competitors, such as China, the European Union (mainly Ireland and Spain), South America (mainly Chile), Australia and New Zealand. Many of these competitors are gaining ground in Mexico as a result of the various Free Trade Agreements signed by Mexico, resulting in erosion of preferential tariffs enjoyed under NAFTA. Mexico has currently 10 Free Trade Agreements in place covering a total of 45 countries in the world.Footnote 25 Furthermore, the recent announcement by Mexico of gradual unilateral tariff reductions (over a five year period – until 2017) on agri-food products from all World Trade Organization (WTO) countries (including wheat, millet, barley, malt, day-old chickens, animal feed, canary seed, oats, rye, beans, bacon, fish/seafood, etc.), and the implementation of the Trans-Pacific Partnership (TPP), will reduce Canada's NAFTA preferential treatment and increase competition from other countries.
In addition, the new Government's priority to reduce dependence on imports may lead to new non-tariff barriers which would need to be monitored and addressed.
4. Canadian Government Contacts
- Embassy of Canada in Mexico
Kim O'Neil, Counsellor (Agri-food) / Market Access
Calle Schiller No 529
Col. Rincón del Bosque Polanco
11580, México D.F.
Tel: (52-55) 5724-7900
- Embassy of Canada in Mexico
Marie-Michelle Poulin, First Secretary and Trade Commissioner (Agri-food) / Market Development
Calle Schiller No 529
Col. Rincón del Bosque Polanco
11580, México D.F.
Tel: (52-55) 5724-7900
- Consulate General of Canada in Monterrey
José Antonio Rivas
Torre Gómez Morín 955
Ave. Gómez Morín No. 955, Suite 404
66279 San Pedro Garza García, N.L. – México
Tel: (52-81) 8378-0240 ext. 3350
- Agriculture and Agri-Food Canada
Agriculture and Agri-Food Canada
Consumer and Market Analysis
174 Stone Road West
Guelph, Ontario N1G 4S9
Tel: (613) 226-217-8044
Fax: (613) 226-217-8187
E-mail : firstname.lastname@example.org
- Foreign Affairs, Trade and Development Canada
Marie-Pier Bouchard-Valade - Trade Commissioner - North America (Agriculture/Mining)
125 Sussex Drive
Ottawa, Ontario K1A 0G2
- Consulate of Canada in Guadalajara
World Trade Center
Torre Pacifico, Piso 8
Av. Mariano Otero No. 1249, Col. Rinconada del Bosque C.P. 44530, Guadalajara, Jalisco
Tel: (52-33) 3671-4740 extension 3351
- Export Development Canada (EDC)
151 O'Connor Street
Ottawa, Ontario K1A 1K3
Tel: (800) 850-9626 or (613) 598-2500
- Export Development Canada (EDC) / Embassy of Canada in
Associate Regional Manager
Calle Schiller #529. Col. Polanco. C.P. 11560, México, D.F.
Tel: (52-55) 5387-9318
Fax: (52-55) 5387-9317
E-mail: email@example.com ; firstname.lastname@example.org
Useful Internet Sites:
- Trade Commissioner Service: www.tradecommissioner.gc.ca
- Agri-Food Trade Service: www.ats.agr.gc.ca
- Canadian Food Inspection Agency: www.inspection.gc.ca
- Asociación Nacional de Tiendas de Autoservicio y Departamentales: www.antad.net
- Expo ANTAD: www.expoantad.net
- Expo Alimentaria México: www.alimentaria-mexico.com
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