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Mexico Food and Drink Report Q2 2010
Market |
Food and Drink |
Report Type |
Market Research |
Country |
Mexico |
Published |
3 March 2010 |
Number of Pages |
90 |
Download |
|
Immediate |
|
Publisher |
Business Monitor International |
The most important development in Mexico’s food and drink sector over the last quarter was the news that Netherlands-based brewing giant Heineken is to buy the beer business of Mexico-based drinks producer FEMSA in an all-share transaction worth EUR3.8bn (US$5.44bn). The terms of the deal will see FEMSA gain a 20% stake in Heineken and have the right to appoint two non-executive board members. The announcement comes shortly after SABMiller dropped out of the running, indicating that, as previously suggested , Heineken had a greater desire to acquire the unit due to its current under-representation in emerging markets.
FEMSA’s decision to offload its beer division to Heineken leaves the firm in a strong position to expand in its favoured sectors – its soft drinks division Coca-Cola FEMSA and convenience store chain OXXO. In the retail sector FEMSA is likely to continue its policy of organic expansion, although the speed at which it opens new stores may be stepped up now that it has more funds to invest. However, in the soft drinks sector, it is likely to consider strategic acquisitions with the chance to expand its reach in existing markets or even launch in a new market.
Heineken’s victory in the race for FEMSA’s beer unit can be attributed to its previous failure to build an emerging market business able to compete with its multinational rivals, with the firm still reliant on the mature markets of Western Europe and North America for around 65% of its volumes. This disparity has seen it record slower sales growth both before and during the economic downturn. Heineken will have seen the chance to quickly become a leader in the Mexican market, while also gaining a strong toehold in the extremely attractive Brazilian market, as an opportunity that was too good to miss. Heineken is likely to believe that, as well as piggy backing on these markets’ superior growth rates, its strong portfolio of premium beer brands will prove to be attractive and help it build market share. In addition FEMSA’s beer unit has recorded double-digit volume growth on the export front over the last two years, driven by the growing popularity of Mexican beers in the US and also by the fashionable status of exotic beers in other parts of the world, including Europe and the Middle East, and Heineken should certainly be able to maximise this growth avenue via its global distribution network.
In other major news for the quarter, Swiss food and drink giant Nestlé announced plans in February to invest MXN5bn (US$390mn) in its Mexican production and infrastructure facilities. The majority of the investment will be directed towards the firm's Nescafe instant coffee processing plant in Toaluca near Mexico City. The funds will be used to expand the plant’s capacity by 40%, which will make it the world’s largest coffee processing plant. Nestlé also plans to build on Mexico’s position as a regional export hub for Latin America, with investment in its supply infrastructure. Nestlé revealed that this investment is part of a plan to invest US$1bn in its Mexican facilities between 2008 and 2012, and the move has been welcomed by Mexico’s President Calderón. The president issued a press release attributing the decision to Mexico’s strategic geographical position; direct, tariff-free access to the US market; a young, well-trained, highly skilled labour force; and the country’s economic stability and competitiveness, in terms of manufacturing costs.
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