Health and wellness series – Organic packaged food trends in Mexico

June 2018

Executive summary

  • With a value of US$23.6 million, the Mexican organic packaged food market was one of the fastest growing in the world, with a compound annual growth rate (CAGR) of 11.3% between 2012 and 2016.
  • Mexico’s organic packaged food market is highly segmented: the leading companies in terms of new products between 2016 and 2020 were Supermercados Internacionales, Aires de Campo and Vaserco, while the leading companies in terms of market share were Aires de Campo, Marzetti and Agrocultivos de Valle de Bravo.
  • Organic spreads were the top selling organic packaged food subcategory with US$11.4 million in retail sales in 2016.
  • Supermarkets and hypermarkets led the way with 68% market share in organic packaged food sales, followed by an independent small grocers with 12.9% market share, and internet retailing with 6.7% market share in 2016.

Contents

Introduction

According to Euromonitor International, Mexico is the second most populous country in Latin America. The total population grew by 1.4% over the past five years, reaching 127 million in 2016. Real GDP should grow by 2.3% in 2017 – the same rate as in 2016.

In recent years, health and wellness products gained popularity as awareness on nutrition increased. According to the World Health Organization’s 2015 data, over 30% of Mexico’s adult population is obese, this percentage is retrieved based on the Body Mass Index (BMI) of 30 kg/m2 or higher. To counteract the country’s hight obesity rate, the government started an anti-obesity campaign which is implemented by taxing a rate of 8% on products containing more than 275 calories per 100 grams. The intention is to encourage citizens to consume fresher and healthier products. Furthermore, growth in the middle and upper class consumer base have also contributed to the increasing demand for healthy and high quality value-added products.

More opportunities can be sough in Mexican hotels, restaurants and in other caterying institutions. Mexico is one of the most visited countries in the world and the growing number of tourists has pushed the foodservice industry in a favourable direction where the focus is on improving quality of food and extending the range of products including certified organic foods. As indicated by the Canadian trade commissioners in Mexico, Canadian companies may leverage promising opportunities among high-end restaurants, European-plan hotels and boutique hotels in Mexico’s major cities such as Mexico City, Guadalajara, Monterrey, León and Aguascalientes as well as touristic destinations such as the Mayan Riviera, Acapulco, Los Cabos, Puerto and Nuevo Vallarta.

Market environment

The Mexican government is in the process of reducing the country’s dependency on imports, despite locals’ perception on imported goods being of higher quality than domestic processed foods.

Competition

Canada’s main competitor in the Mexican food market is the United States. Large U.S. companies such as Walmart and Costco have dominated the retail food market with a combined market share of over 50%. Additional competition comes from local food companies such as Herdez. Mexico is a price sensitive market with long established businesses in the food sector. In addition, Mexican consumers are very loyal to their brand. As a result, Canadian companies must carefully prepare their market penetration strategies if they are to compete successfully with influential local food companies. Nevertheless, exploring collaborative opportunities with local firms or exporting food ingredients may prove to be ideal strategies to consider in the future.

Distribution

Modern retailers such as supermarkets and convenience stores continue to win over consumers, as they increasingly expand to smaller and second tier cities, while targeting localized and high-tier segments. High-end supermarkets, in particular, are always seeking to form strategic alliances with importing companies in order to gain access to a wider range of new and innovative products.

Imported products are usually sold through supermarkets and warehouses, but are entered into Mexico through the company’s corresponding local office, brokers, distributors or processors. Trade commissioners recommend that Canadian exporters enter the market through distributors, since local distributors can provide useful information on the established distribution networks. In addition, it may be difficult for exporters to build and maintain brand identity if they choose to collaborate with brokers to enter the market. Exporters also need to be aware of the mark-up prices when dealing with different stakeholder. Respective brokers and distributors typically add 20% to 30% mark-up on goods; wholesalers usually add 30%, while supermarkets will add up to 35% mark-up.

The Mexican government established public-private supply centres, or “Centrales de Abastos” in Spanish, to improve the regional distribution markets. The centres were initially operated by private companies, but are now administered by officials.

There are currently 64 large supply centres around the country. The main one is located in Mexico City, with 304 acres of commercial area, around 4,000 warehouses, over 6,000 wholesalers, and more than 30,000 tonnes of annual agri-food trade. Fresh local produce and imported bulk food products come from 28 states in Mexico and from more than 10 countries including Canada are sold there. According to the Centrales de Abastos’ website, national prices for horticulture products are determined and fixed in the centres, from which about 90% of the Mexican bean importers are located in these 64 Centrales de Abastos.

Labelling

According to Euromonitor International, Mexico is the fourth-largest private label industry in Latin America after Chile, Colombia, and Argentina. In 2016, private label brands represented 2.1% market share in the Mexican packaged food market, and 6.9% market share in the organic packaged food market.

The private label industry is extremely competitive in Mexico which is why Mexican retailers are always seeking new ways to provide premium food items to differentiate organic products. Premium private label items provide an opportunity for Canadian suppliers to introduce premium and innovative imported goods to the Mexican food market.

For labelling requirements, the Mexican Official Standard NOM-051-SCFI/SSA1-2010 requires labels for certain products to provide information in the Spanish language. In an effort to increase citizens’ health awareness, the Mexican government announced new labelling regulations in 2015 that requires manufacturers to include content levels of fat, sugar and sodium on the front of the package.

Products of organic origins being sold in Mexico must bear valid certification and label claims with respect to Mexico’s regulations. For instance, Canadian organic products are currently undergoing an organic certification equivalency agreement with Mexican competent authorities in order to recognize each other’s organic certification system and facilitate bilateral trade of organic products. Until this arrangement is completed, the Mexican authorities have indicated they would continue to accept Canadian organic products as long as they are certified by a CFIA-accredited organic certification body, according to Canadian organic standards.

E-commerce

Cornershop logo

In all sectors, e-commerce sales increased by 232% and mobile commerce sales increased by 1,224% from 2011 to 2015. This growth was driven mostly by tech-savvy young consumers, and is expected to continue to grow in the future as 46% of Mexico’s current population is under 25 years old.

According to Euromonitor Internatinoal, 18.4% of households owned smartphones in 2015, a 41% increase from 2010. The penetration of smartphones in Mexico has been growing rapidly, however, there is a paltry amount of e-commerce or m-commerce in Mexico.

An iOS or Android app based start-up, “Cornershop”, founded in June 2015, seized this market opportunity to provide on-demand grocery delivery service in Mexico City. Through its website, the company claims that consumers can order from several stores inducing local supermarkets or specialty shops such as Chedraui Selecto, Walmart, City Market, Costco, The Green Corner and Superama, etc. The shoppers who will be in charge of shopping and delivery will deliver the order within 90 minutes if the goods are available.

Key organic packaged food subsectors

Retail sales

Historical retail sales of organic packaged food in Mexico by segment, in $US millions Current prices – Fixed 2017 exchange rate
Category 2012 2013 2014 2015 2016 CAGR* 2012-2016
Organic spreads 8.7 10.1 12.1 10.4 11.4 7.0%
Organic ready meals 2.4 2.8 3.1 3.5 3.9 12.9%
Organic sauces, dressings and condiments 1.7 2.0 2.2 2.5 2.8 13.3%
Organic baby food 0.6 1.5 2.0 1.4 2.4 41.4%
Organic edible oil 0.5 0.6 0.7 0.8 0.9 15.8%
Organic rice, pasta and noodles 0.2 0.2 0.2 0.3 0.3 10.7%
Organic packaged food 15.4 18.6 22.0 20.6 23.6 11.3%

Source: Euromonitor International, 2017.

*CAGR: Compound Annual Growth Rate.

Forecast retail sales of organic packaged food in Mexico by segment, in $US millions Current prices – Fixed 2017 exchange rate
Category 2017 2018 2019 2020 2021 CAGR* 2017-2021
Organic spreads 12.4 13.8 15.4 17.2 19.2 11.6%
Organic ready meals 3.4 4.2 5.2 6.3 7.6 22.3%
Organic sauces, dressings and condiments 4.2 4.7 5.2 5.8 6.4 11.1%
Organic baby food 3.1 3.4 3.8 4.3 4.7 11.0%
Organic edible oil 0.9 1.0 1.1 1.2 1.3 9.6%
Organic rice, pasta and noodles 0.3 0.4 0.4 0.5 0.6 18.9%
Organic packaged food 26.6 30.0 33.9 38.3 43.2 12.9%

Source: Euromonitor International, 2017.

*CAGR: Compound Annual Growth Rate.

According to Euromonitor International 2017, the six segments of organic packaged food listed above currently have noticeable presence in the Mexican food market. Opportunities exist for packaged organic products that are not domestically produced in Mexico, such as organic baked goods, dairy products, organic bakery cereals, and organic biscuits and snack bars.

Furthermore, it is suggested that the number of Canadian export products with health and wellness focus are limited in Mexico because of the lack of awareness in health benefits of such products. Mexican consumers with high levels of education are the ones who most choose to purchase organic produce. Whereas, many low income consumers and low level of eduaction are not only unfamiliar with the agricultural process of organic food, but they cannot afford to buy premium goods.

Organic beverages

The organic beverage category recorded a substantial compound annual growth rate of 10.1% from 2012 to 2016 and a retail sales value of US$15.4 million in 2016. By 2021, the retail sales value is expected to increase to US$28 million with a compound annual growth rate of 12% between 2017 and 2021. Organic coffee and organic soft drinks are the most popular subcategories in Mexico.

Organic beverages remain a niche, yet a fast growing market in Mexico. According to Mintel, a total of 129 new organic beverage products were launched between 2012 and 2016. Moreover, 97 products were launched as new variety or a range extension. This shows a 17% compound annual growth rate for new product introductions as well as a substantial 50% compound annual growth rate for new variety organic beverage products.

Retail sales of organic beverage subcategories in Mexico in $US millions
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Description of above image
Year Organic coffee Organic soft drinks
2012 9.2 1.3
2013 10.4 1.4
2014 11.1 1.6
2015 12.2 1.7
2016 13.5 1.9

Source: Euromonitor International, 2017.

Top drink subcategories for organic beverage products launched in Mexico from 2012 to 2016
Description of this image follows.
Description of above image
Category Total Sample
Hot Beverages 143
Juice Drinks 60
Ready-to-drinks (RTDs) 41
Other Beverages 9
Alcoholic Beverages 6
Sports & Energy Drinks 5
Water 2
Carbonated Soft Drinks 1

Source: Mintel GNPD, 2017.

Distribution channels

Grocery market retailers continued to be the leading distribution channel for organic products in 2016 with a 95.7% market share. Supermarkets and hypermarkets led the way with a 68% market share, followed by traditional grocery retailers with a 14.1% market share, and internet retailing with a 1.4% market share.

Top organic companies and their retail sales in Mexico, from 2012 to 2016 - % breakdown
Company 2012 2013 2014 2015 2016
Aires de Campo SA de CV 33.1 32.9 33.2 40.2 42.7
Marzetti T Co 4.7 4.4 4.3 5.2 5.7
Agrocultivos de Valle de Bravo SA de CV 3.1 2.6 2.3 2.8 3.0
Healthy Times - 0.9 1 1.3 1.6
Desarrollo Agropecuario Bravo SA de CV 0.7 0.7 0.6 0.8 0.8
Heinz México SA de CV 0.5 0.5 0.4 0.5 0.6
Distribución Orgánica Campo Vivo, S de RL de CV 0.3 0.3 0.3 0.4 0.4
Organicville Inc 0.4 0.3 0.3 0.4 0.4
Smucker de México SA de CV, JM 19.8 19.7 19.8 7.5 N/A
Campbell de México SA de CV N/A 7.9 8.8 5.8 N/A
Agricola Valle Grande Ltda 3.1 2.9 1.6 0.7 N/A
Plum Organics Inc 4.2 N/A N/A N/A N/A
Agroindustrias Covadonga SA de CV N/A N/A N/A N/A N/A
Private Label 5.9 5.6 5.6 6.9 7.4
Others 24.4 21.2 21.6 27.5 37.4
Total 100 100 100 100 100

Source: Euromonitor International, 2017.

N/A: Not Available.

Distribution of organic packaged food in Mexico by format: % value 2012-2016
% Retail value rsp 2012 2013 2014 2015 2016
Store-based retailing 99.0 98.9 98.8 98.7 98.6
Grocery retailers 96.1 96 95.9 95.8 95.7
Modern grocery retailers 81.8 81.7 81.7 81.7 81.6
Hypermarkets 36.1 36.2 36.4 36.6 36.8
Supermarkets 45.7 45.5 45.3 45.1 44.8
Traditional grocery retailers 14.4 14.3 14.2 14.2 14.1
Other grocery retailers 14.4 14.3 14.2 14.2 14.1
Non-grocery specialists 2.9 2.9 2.9 2.9 2.9
Non-store retailing 1.0 1.1 1.2 1.3 1.4
Internet retailing 1.0 1.1 1.2 1.3 1.4

Source: Euromonitor International, 2017.

New product examples

Organic Root Beer

Blue Sky Refresco Orgánico Sabor a Root Beer (Organic Root Beer) has a USDA Organic certified and kosher certified.

Company NexStep Beverages
Brand Blue Sky
Category Carbonated soft drinks
Date Published November 2017
Price US$ 1.14
Pack size 355 ml

Source: Mintel GNPD, 2017.

Organic Original Pita Chips with Sea Salt

Stacy's Orgánico Botana de Trigo Sazonada con Sal de Mar Original (Organic Original Pita Chips with Sea Salt) are baked and contain no MSG, artificial colorings or flavorings.

Company Stacy’s Pita Chips Company
Brand Stacy’s Organico
Category Snacks
Date Published November 2017
Price US$ 7.72
Pack size 80 g

Source: Mintel GNPD, 2017.

Organic Garlic Powder

Utopia Organics Ajo Orgánico en Polvo (Organic Garlic Powder) is free from genetically modified organisms and has the Orgánico Sagarpa México logo.

Company Organic Brands
Brand Utopia Organics
Category Sauces and seasonings
Date Published November 2017
Price US$ 4.57
Pack size 80 g

Source: Mintel GNPD, 2017.

Challenges and opportunities

Strength

  • Positive perception by Mexican consumers about Canadian products on food safety and environmentally sustainable production methods.
  • Canada’s capacity to produce innovative value-added products.
  • Mexico allows preferential access for Canadian exporters with the North America Free Trade Agreement (NAFTA) treaty.

Weakness/challenges

  • Mexico has a complex and ever-changing regulatory system towards exporters.
  • Mexico has a relatively fragmented distribution system, including high transportation costs.
  • Low awareness among Mexican buyers and consumers about Canadian products and capabilities (86% of the exports are not clearly identified as Canadian).

Source: Trade Commissioner Services , 2017.

Opportunity

  • High obesity rates and government anti-obesity campaigns will build opportunities for health and wellness products.
  • Frozen foods in Mexico are still associated with junk food. Canadian companies can offer healthy frozen foods.
  • Growing commodity market for value added ingredients and intermediate products since Mexico’s domestic production is not sufficient to meet the demand.

Threat

  • Free trade agreements signed between Mexico and Canada’s main competitors will increase competition in the Mexican market.
  • The recent announcement by Mexico of gradual unilateral tariff reductions on agri-food products from all WTO countries will erode preferential advantages Canada enjoyed under NAFTA.
  • New government of Mexico’s priority of reducing dependence on imports may lead to new non-tariff barriers.

Source: Trade Commissioner Services, 2017.

Suggested solutions to challenges by trade commissioners
Weakness/challenges Suggested solutions
A complex and ever-changing regulatory system towards exporters. Reach Mexican authorities through a single digital window "Ventanilla Unica" to identify mistakes or missing documents before physical inspection to avoid rejections.
A relatively fragmented distribution system, including high transportation costs. Develop personal relationships and consult freight forwarders to decide which method of shipment would work best.
Low awareness among Mexican buyers and consumes about Canadian products and capabilities. Implement a branding campaign for products to increase awareness and properly indicate products of Canadian origin.

Source: Trade Commissioner Services, 2017.

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.

For more information

International Trade Commissioners can provide Canadian industry with on-the-ground expertise regarding market potential, current conditions and local business contacts, and are an excellent point of contact for export advice.

For additional intelligence on this and other markets, the complete library of Global Analysis reports can be found on the International Market Intelligence page, arranged by region.

Resources

Health and wellness series – Organic packaged food trends in Mexico
Global Analysis Report

Prepared by: Mengchao Chen, Hadi el Zein and Sora Abdul Saheb, Market Analysts (Co-op students).

© Her Majesty the Queen in Right of Canada, represented by the Minister of Agriculture and Agri-Food (2018).

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