Sector Trend Analysis – Baby food in Mexico

Contents

• Introduction
• Retail sales
  • Health and wellness
• Company and brand shares
  • Nestlé Mexico’s strategy
• Distribution channels
• Product launch analysis
• Example of products launched in 2017 in Mexico
• Key considerations
• Regulatory requirements
• Conclusion
• For more information
• Resources

Introduction

In 2017, there were an estimated 6.1 million babies and toddlers aged between 0 and 2 years old in Mexico. Numbers for this cohort have been slowly decreasing in recent years due to declining trends in birth rates. By 2030, the number of babies and infants is projected to fall to 5.8 million, accounting for 4.2% of the population (down from 5% of the total population in 2016).

Despite falling birth rates, however, the baby food market in Mexico has been growing at good pace in recent years and is expected to achieve similar performance up to 2022. This is largely due to the increasing number of women joining the workforce who tend to replace breastfeeding with milk formula at the end of a relatively short maternity leave, and to start purchasing prepared and dried baby food in order to save time.

In Mexico, breastfeeding rates are lower than those recommended by the World Health Organization. According to a national survey (Encuesta Nacional de Salud y Nutrición 2012, cited by Euromonitor International, 2017), a mere 14% of the babies aged six months or less are fed with breast milk only (down from 22% in 2006), one of the lowest rates in Latin America. After their first year of life, only 36% of babies continue to consume breast milk. These low rates can partly be explained by the relatively short maternity leave, which is 12 weeks in Mexico. Women are also often embarrassed to breastfeed in public^{Footnote 1}. This is a concern for the government who has taken several measures to promote breastfeeding, such as prohibiting hospitals, clinics, and baby food companies from promoting milk formula, unless strictly necessary and endorsed with a medical prescription.

At the same time, Mexico is one of the countries making the fastest progress against child malnutrition (Save the Children, 2012). Mexicans have become especially aware of the importance of feeding their babies with foods that can meet their nutrient requirements. As a consequence, 95% of the total baby food retail sales are in the health and wellness category.

Retail sales

Mexico is one of the largest markets in Latin America for baby food, worth US$980 millions, only second after Brazil. However, it is well ahead of Brazil for health and wellness baby food retail sales, valued at US$871 millions in 2016.

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Country	Total baby food	Health and wellness baby food
Mexico	915.1	871.6
Brazil	1,163.5	626.0
Peru	264.8	253.1
Ecuador	193.5	168.6
Colombia	211.9	150.1
Chile	182.9	137.5

Source: Euromonitor International, 2017.

From 2013 to 2017, baby food posted a compound annual growth rate (CAGR) of 6%. Milk formula is the most popular category among Mexican consumers. Despite all of the efforts by the authorities to promote breastfeeding, consumer demand for milk formula is still on the rise, as reflected by an important increase in retail sales from 2013 and 2017.

Special milk formula has outperformed within that category, growing at an estimated CAGR of 17% from 2013 to 2017. Special baby milk formula is designed to nourish babies with allergies, that cannot digest standard milk formula, or to address specific conditions such as reflux or diarrhea. The growth of this subcategory is being supported by an increasing number of paediatricians who prescribe it, not only as a treatment, but also to prevent certain conditions (Euromonitor International, 2017).

Retail sales of milk formula are almost exclusively in powder formats, since only two companies offer liquid milk formula in Mexico, according to Euromonitor International (2017).

Concerning legislation, advertisements for milk formula must expressly communicate that the product is recommended only if the baby is intolerant to breast milk or if the mother is unable to breastfeed (Reglamento de la Ley General de Salud en Materia de Publicidad). Companies must avoid promoting standard and follow-on milk formula, which can only be recommended by pediatricians. However, growing-up milk formula (for children aged over 12 months) can be advertised freely (Euromonitor International, 2017).

Health and wellness

The health and wellness baby food market has been expanding steadily from 2013 to 2017 in Mexico, and now accounts for 95% of the total baby food retail sales. When it comes to baby food, parents are especially concerned about its safety and nutritional value. Thus, many brands are enhancing the nutritional content of their products by adding functional ingredients such as vitamins or minerals. These functional/fortified products make up most of the sales in the health and wellness baby food category.

In terms of growth, organic baby food, and particularly organic prepared baby food, recorded the strongest performance during that period at compound annual growth rates of 23% and 34% respectively, although organic is still a niche segment due to its high unit prices. Other types of health and wellness products that have been developing at compound annual growth rates of over 15% during the review period are free from lactose milk and hypo-allergenic milk formula, which are all bigger markets than organic. For all the types of food mentioned above, it is expected that retail sales will keep increasing between 2018 and 2022, although at slightly lower rates.

The only health and wellness subcategory that posted a negative compound annual growth rate during the review period was “other baby food”, which includes any other products marketed for babies such as baby rusks or teething biscuits.

Company and brand shares

In Mexico, the baby food sector is led by international companies, while domestic brands do not have a significant presence (Euromonitor International, 2017). Nestlé is clearly dominating the market with an estimated 57.2% retail sales share in 2017, outperforming its competitors in all categories, and controlling over 90% of the dried baby food, prepared baby food and other baby food categories.

Between 2013 and 2017, the top three leading brands in Mexico were also from Nestlé.

Nestlé Mexico’s strategy

The multinational Nestlé began its operations in Mexico in 1930 and enjoys today nationwide coverage through its subsidiary, with more than 40 distribution centres located throughout the country. In 2016, Nestlé opened its biggest manufacturing facility in the State of Jalisco, which will produce baby milk formula for domestic and international markets (Euromonitor International, 2016).

As the leading player in baby food, Nestlé México follows a strategy based on strong umbrella brands. The company also significantly invests into product innovation, for example, by pioneering chilled baby food in Mexico, and by building brand awareness, including the promotion of its products to the medical profession. According to Euromonitor International (2016), the acquisition of Pfizer Nutrition in 2012 was also part of a plan, at the global level, to strengthen Nestlé’s milk formula portfolio.

It is worth noting that since April 2017 Nestlé claims to launch products in Mexico based on the analysis of what Mexican mothers actively are searching for on Google (Mintel, 2017).

Distribution channels

Modern grocery retail outlets are the main distribution channel for baby food, accounting for a value share of 65% in 2017. Health and beauty specialist retailers still held an important value share of 32%, thanks to the relevance of milk formula in pharmacies and parapharmacies (Euromonitor International, 2017). In addition to that, the presence of baby stores and organic stores is also key in the market.

Internet retailing for baby food has slowly started getting more popular in 2014, and baby food is in the top ten of the packaged food sold online in Mexico (see the Global Analysis report “E-commerce in Mexico”). Even though figures are still very low, these could increase substantially over the coming years.

Product launch analysis

Between January 2016 and December 2017, a total of 408 baby food products were launched in Latin America, and over one-third (160) of these launches occurred in Mexico. Out of the 160 products launched in Mexico, 74 were either new products or range extensions, 34 products had an import status, and the vast majority of products were branded, with only twelve products from a private label. The most popular packaging type was the jar, and 72% of products had a safety button as a cap, which uses a vacuum when sealed and pops up when the pack is opened.

Unsurprisingly, the company that led the retail sales in the country, Nestlé, was also responsible for the largest proportion of product launches (112) during the two-year review period. By contrast, all other players, such as Wal Mart and Tiendas Soriana, launched fewer than 10 products.

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Launch type	Number of products
New packaging	60
New variety/range extension	50
New product	24
Relaunch	23
New formulation	3

Source: Mintel, 2017.

Note: Data for 2017 available until mid-December only.

The top products subcategories were baby fruit products, desserts and yogurts; baby juices and drinks; and growing up milk. The popularity of claims such as no additives/preservatives and vitamin/mineral fortified is in line with the preference of Mexican consumers for products that are perceived as being good for the health of the little ones. Other top claims such as ease of use and microwaveable also respond to the inclination of consumers for products that offer a high level of convenience. Kosher food is another top growing claim in Mexico, and this is also reflected in baby food product claims.

In terms of flavor, over 80% of the baby food products launched in 2016-2017 had a fruity flavour, such as apple, pear, banana and mango (135 products). Plain, vanilla and vegetable flavours were also frequently associated with products launched during the review period.

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Sub-category	Number of launches
Baby fruit products, desserts & yogurts	56
Baby juices & drinks	32
Growing up milk (1-4 years)	18
Baby savoury meals & dishes	15
Baby cereals	15
Baby snacks	7
Baby biscuits & rusks	7
Baby formula (0-6 months)	4
Baby formula (6-12 months)	4
Growing up milk (4+ years)	1

Source: Mintel, 2017.

Note: Data for 2017 available until mid-December only.

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Claim	Number of products
Social media	17
Other (functional)	20
Organic	24
Kosher	31
Microwaveable	49
Low/no/reduced Sugar	51
Ease of use	85
Vitamin/mineral fortified	98
No additives/preservatives	115

Source: Mintel, 2017.

Note: Data for 2017 available until mid-December only.

Examples of products launched in 2017 in Mexico

Apple and Strawberry Flavored Cereal

Repackaged with an updated design, this product is enriched with six vitamins and minerals, and is made with wholegrain cereals. It is claimed to be easy to swallow and supports learning how to grab food. The stage four snack is suitable for babies over 12 months of age.

Company	Nestlé
Importer	Nestlé
Brand	Gerber Junior Puffs
Sub-Category	Baby Snacks
Country	Mexico
Country of Manufacture	USA
Date Published	Nov 2017
Price	US$ 2.20

Apple Blueberry Baby Food

This product is said to be made from fresh fruits harvested in a farm whenever possible. It is USDA organic certified, suitable for babies over six months of age.

Company	Tiendas Soriana
Importer	Tiendas Soriana
Brand	Yummy Organics
Sub-Category	Baby Fruit Products, Desserts & Yogurts
Country	Mexico
Country of Manufacture	USA
Date Published	Oct 2017
Price	US$ 0.84

Organic Vanilla Biscuits for Teethers

This is a kosher and USDA organic certified product fortified with calcium for growing bones. It is developed to promote comfortable growth of baby's teeth and provides exercise for gums and jaws with hard surface whilst satisfying the natural urge to bite. The product is said to be easy to hold and retails in a recyclable pack containing 12 units.

Company	Healthy Times
Importer	Distribuidora Promesa
Brand	Healthy Times
Sub-Category	Baby Biscuits & Rusks
Country	Mexico
Country of Manufacture	USA
Date Published	Oct 2017
Price	US$ 5.09

Sodium Free Purified Water for Babies

This ready to use product has a balanced content of minerals, such as calcium and magnesium, and is delicate on baby's tummy. The kosher certified water can be used to prepare baby formulas, does not require boiling and is free from colourings, flavourings and preservatives. It retails in a 4L pack featuring the Ecoce logo.

Company	Nestlé
Sub-Category	Baby Juices & Drinks
Country	Mexico
Country of Manufacture	Mexico
Import Status	Not imported
Date Published	Apr 2017
Price	US$ 1.26

Key considerations

• Even though milk formula is a growing market, there is already a wide range of product offerings available, so it might prove more difficult for Canadian companies to enter that specific market.
• Middle- to upper- class consumers are looking for products introducing babies to solids, sugar-free, no additives and clean labels. Innovative products, such as semi-solid foods to train kids to swallow and chew, are a good example.
• Imported products tend to be significantly more expensive than regular products. For instance, a regular purée can cost 10 Mexican pesos, while organic purée will be priced around 18 Mexican pesos, and an imported purée could reach as much as 40 Mexican pesos.
• Wealthier, educated families are the ones who have the capacity to pay for imported products, follow trends on social media, and discriminate over ingredients. They also can afford help at home and they are looking for healthy grab-and-go products.

Source for this section: Trade Commissioners based in Mexico.

Regulatory requirements

According to Mexican regulations, any product intended for retail sale must comply with the food labelling specifications established under the Mexican Official Standard: NOM-051-SCFI/SSA1-2010.

According to Mexican import regulations, baby food containing more than 10% of a dry weight basis of milk solids classified under HS Code: 1901.10.01, requires a sanitary import permit from Mexico’s Federal Commission for the Protection against Sanitary Risks (COFEPRIS). The process for obtaining this sanitary import permit must be carried out by the Mexican importer. This process usually takes a few days, so it is important to complete the process before sending shipments to Mexico.

In the case of baby food with less than 10% of a dry weight basis of milk solids or other baby food, classified under HS Code: 1901.10.99, Mexican regulations state that no sanitary import permit from COFEPRIS is required, and only compliance of Mexican Official Standard: NOM-051 is required, if the product is intended for retail sale. NAFTA’s tariff schedule also indicates that Canadian baby food has duty free access to Mexico under the agreement.

Conclusion

Despite declining birth patterns, baby food is a growing market in Mexico, with mothers increasingly adopting busier lifestyles. Mexicans are especially concerned about feeding their babies with products that enhance their development throughout the early stages of life: 95% of the total baby food retail sales in the health and wellness category, most of which are foods that have been fortified with functional ingredients such as minerals and vitamins.

When choosing baby food products, Mexican consumers value both nutrition and convenience, with are two major purchasing trends when it comes to agri-food products in Mexico. With most of the baby food sector in Mexico currently dominated by foreign brands, there may be an opportunity for Canadian companies to enter the market through niche products. . However, the market is very competitive, so Canadian companies will need to promote their brands very effectively if they want to succeed.

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.

• Overview of Trade Commissioner Services in Mexico
• Find a Trade Commissioner

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.

For additional information on ANTAD-Alimentaria 2018, please contact:

Diana de la Huerta
Trade Commissioner Assistant
Embassy of Canada in Mexico
diana.delahuerta@international.gc.ca

Resources

• Euromonitor International, August 2017. Baby Food in Mexico.
• Euromonitor International, July 2017. Consumer Lifestyles in Mexico.
• Euromonitor International, December 2016. Nestlé México SA de CV in Packaged Food (Mexico).
• Euromonitor International, January 2016. Mexico in 2030: the Future Demographic.
• Mintel Global New Products Database, 2017.
• Save the Children, 2012. Nutrition in the First 1,000 Days. State of the World’s Mothers.

Sector Trend Analysis - Baby food in Mexico
Global Analysis Report

Prepared by: Josique Lorenzo, Market Analyst

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