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Customized report service – Powdered milk in Mexico

January 2019

Summary

Canada is the third largest import source of powdered skim milk for Mexico, after the United States (U.S.) and the European Union (EU). Imports of powdered skim milk from Canada have grown 62.8% annually over the past five years (2013-2017), mainly due to favourable prices and exchange rates.

For the same period, there has been a 3.1% annual increase in the retail sales of powdered skim milk in Mexico. Nestle and Ganaderos are the market leaders with their brands targeting mainly low-income households, which make up the country's largest and fastest growing social class. However, Mexico's middle class is increasingly driving consumer spending in the country.

Mexican consumers are accustomed to doing quick, daily shopping in small, local grocery and convenience stores, which make up the largest distribution channel for milk products in Mexico. These are most common in low-income neighbourhoods and offer products in small, affordable package sizes. It is common for retailers and households to give preference to products that do not require refrigeration, such as powdered milk to save on energy consumption.

Lower international prices for powdered milk have encouraged imports into the country and have resulted in Mexico being a net importer of powdered milk. Between 2013 and 2017, Canadian exports grew at a compound annual growth rate of 63%, partly due to favourable prices and exchange rates. Between 2016 and 2017, Canadian exports increased 117%, due to Mexican industry efforts to diversify source countries for powdered skim milk.

Ports of entry most commonly used by importers of Canadian powdered skim milk are the Veracruz seaport on the gulf coast, followed by land ports at Juarez and Nuevo Laredo on the northern border.

Consumer profile

Low-income households make up the country's largest and fastest growing social class, which is expected to continue to grow through to 2030. Income inequality in Mexico is the second highest among Organisation for Economic Co-operation and Development (OECD) countries, with the World Bank estimating more than 40% of the population lives in poverty. Low-income households are dependent on the informal job market and earnings remitted by workers in foreign countries (primarily the U.S.).

Mexico's middle class accounted for 25% of all households in 2016 and are increasingly driving consumer spending in the country. Middle class disposable income reached MXN286,826 (~Can$18,500) in 2016. In comparison, the average disposable income for urban Canadian households is US$ 67,382. Middle-class consumers in Mexico are particularly numerous in the industrialized north of the country.

Consumers in the poorer south typically go online to secure products that are not locally available. Relatively few of these consumers possess financial cards, and paying in cash for online purchases at a nearby convenience store is an attractive alternative.

Companies and brands

Nestle and Ganaderos are the market leaders in powdered milk with 52.6% and 21.1% in market share. Nestlé México is the most important international company in drinking milk products thanks to its dominance in powdered milk. Ganaderos has a long tradition in Mexico and their brands enjoy a strong reputation. Liconsa is a state-owned company that serves disadvantaged members of Mexican society by processing and distributing high-quality milk at subsidized prices.

Segmentation based on price has been a successful strategy for the leading brands. Most have a standard and an economy brand in order to attract consumers from different income levels. Examples include Nido powder milk (standard) and Nutri Rindes (economy) from Nestlé, or Alpura (standard), Lac Del (standard low) and Forti Leche (economy) from Ganaderos.

Leading national brands by market share (%)
Brand Name Company Name 2013 2014 2015 2016 2017
Nido Nestlé México SA de CV 35.4 35.5 34.9 35.4 34.6
Svelty Nestlé México SA de CV 18.8 18.9 18.5 18.3 18.0
Leche Liconsa Liconsa SA de CV 14.3 13.9 15.9 13.9 13.9
Alpura Ganaderos Productores de Leche Pura SA de CV 11.4 11.5 11.3 11.6 11.4
Forti Leche Ganaderos Productores de Leche Pura SA de CV 8.9 8.9 9.0 9.4 9.7
Source: Euromonitor International, 2017

Retail sales and distribution

Retail sales of powdered milk in Mexico grew at a compound annual growth rate of 3.1% between 2013 and 2017 and is expected to continue growing by 4.2% between 2018 and 2022.

Sales of powdered milk (US$ millions)
2013 2014 2015 2016 2017 CAGR* % 2013-2017 2018 2019 2020 2021 2022 CAGR* % 2018-2022
401.7 412.2 415.1 433.7 454.7 3.1% 479.4 502.7 524.8 545.8 565.5 4.2%

Source: Euromonitor International, 2017

*CAGR: Compound annual growth rate

Mexican consumers are accustomed to doing quick, daily shopping in small, local tienditas. These types of independent/traditional grocers make up the largest distribution channel for milk products, at 52.0% of all grocery retailers.

This channel is dominant in low-income neighbourhoods and offers products in small package sizes that are affordable to price-sensitive consumers. As well, many low-income consumers lack personal transport and prefer outlets situated close to home and work.

Lack of refrigeration, particularly in households, is a constraint on the direct consumption of fluid milk in Mexico. It is common for tienditas and households to give preference to alternative products to fresh products that do not require refrigeration, such as powdered milk, so that they can reserve refrigerator space for products that absolutely require refrigeration and to save on energy consumption.

Mexican consumers are increasingly using modern convenience stores, which are expanding into residential areas and offering a wider range of services. For example, Wal-Mart, through its Bodega Aurrera Express chain, is increasingly focusing on low priced, small package sizes and residential locations. Convenience stores are also offering value-added services that tienditas cannot match, such as receiving bill payments, banking deposits, internet retailing order collection and payment, and the receipt of remittances.

Internet retailing is becoming increasingly popular with 39% of Mexican households having access to broadband internet. The launch of Amazon.com in Mexico in 2015 has boosted the popularity of online shopping. Overall internet retail sales in Mexico were up 294% between 2011 and 2016.

Online shoppers tend to live in larger, wealthier Mexican cities in the northern regions–Ciudad de Mexico, Estado de México, Jalisco–and a majority are male (54%) with full-time jobs.

Powdered milk imports

Lower international prices for powdered milk have encouraged imports into the country and has resulted in Mexico being a net importer of powdered milk. Between 2013 and 2017, Canadian exports grew at a compound annual growth rate of 63%, partly due to favourable prices and exchange rates. Between 2016 and 2017, Canadian exports increased 117%, due to Mexican industry efforts to diversify source countries for powdered skim milk.

Canada (and other countries) has a sanitary protocol agreement with Mexico to export this product to Mexico duty free through the World Trade Organization (WTO) tariff rate quota (TRQ) currently in place. Without the use of this TRQ, import duties of 45% are applicable, which would make it very difficult for Canada to compete based on price.

Top five exporters of powdered skim milk to Mexico (Harmonized system code 040210), Can$
Country 2013 2014 2015 2016 2017 CAGR* % 2013-2017
United States 704,457,497 857,052,165 730,844,307 714,279,121 748,016,136 1.5%
EU28 18,445,376 18,724,385 64,436,400 24,389,792 119,284,672 59.5%
Canada 2,597,781 6,243,333 7,556,207 8,420,098 18,243,477 62.8%
New Zealand 8,083,891 10,053,873 7,447,112 14,884,896 3,380,082 −19.6%
Argentina 0 0 11,063,152 41,562 22,523 NA
Rest of world 1,530,029 1,119,632 16,069,431 802,071 0 NA
Total 735,114,574 893,193,388 837,416,609 762,817,540 888,946,890 4.9%

Source: Global Trade Tracker, 2018

*CAGR: Compound annual growth rate

NA: Not Applicable

Transport, shipping channels

Mexico's federal government has not made significant investments in reliable road infrastructure across the country, which has meant states and municipalities have borne this responsibility and cost. This has resulted in a higher prevalence of paved roads in high income states and urban communities with strong tax bases, while unpaved roads are more commonly found in low income, rural communities. This is especially true in southern states, where low income households are common and collecting taxes is considered challenging as citizens largely live on informal commerce and usually do not own property.

Ports of entry most commonly used by importers of Canadian powdered skim milk are the Veracruz seaport on the gulf coast, followed by land ports at Juarez and Nuevo Laredo on the northern border.

Most common Mexican ports of entry for Canadian imports of powdered skim milk
Port Powdered skim milk imports 2017 (US$)
Veracruz (sea) 6,397,486
Juarez (land) 9,060,400
Nuevo Laredo (land) 1,332,386
Altamira (sea) 46,250
Source: Global Trade Tracker, 2018

For more information

This customized report has been prepared for BÉNÉFIQ 2018 convention, Session 2: Nutrition and Women's Health – Québec City, October 2-4, 2018

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 agri-food market intelligence page, arranged by region.

Resources

Customized report service – Powdered milk in Mexico 2019
Global Analysis Report

Prepared by: Kris Clipsham, International Market Analyst, Global Analysis

© Her Majesty the Queen in Right of Canada, represented by the Minister of Agriculture and Agri-Food (2019).

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