September 25, 2008

Research and Markets: This 3Q Mexico Food and Drink Report Provides Independent Forecasts and Competitive Intelligence on the Industry

Research and Markets ( has announced the addition of the "Mexico Food and Drink Report Q3 2008" report to their offering.

The Mexico Food Drink Report provides independent forecasts and competitive intelligence on Mexico's food and drink industry.

As Mexico's food and drink firms publish their results for the 2007 financial year it is becoming increasingly clear that many have struggled to pass on rising raw material prices and have consequently seen a significant drop in their margins. As discussed in BMI's newly-published Q308 Mexico Food & Drink Report, political sensitivities in Mexico surrounding food prices have made it particularly difficult for firms here to raise their prices in line with rising costs and many have therefore been forced to take a profit hit. These conditions looks likely to continue in the current financial year and the issue highlights one of the difficulties of doing business in a country where a large proportion of consumers remain very price sensitive.

In January 2007 tens of thousands of Mexicans took to the streets to protest about the rising price of tortillas, a Mexican staple food. This wide-spread action shook the government, who immediately set about agreeing price accords with the country's major tortilla producers to limit the likelihood of further protests. As would be expected these price accords have affected the profits achieved by the country's major tortilla producers in 2007. For example Gruma, which sells tortillas to retail stores and restaurants, reported that their margin had dropped by 0.6 basis points in the 2007 financial year. This meant that despite an 11% rise in net sales the firm's net profits remained virtually unchanged from the previous year.

Gruma's results are perhaps not unexpected given the political sensitivities surrounding the price of tortillas. However, it is now clear that many firms that do not operate in the tortilla industry have also struggled to maintain their margins. For example Alfa Foods, a producer of refrigerated and frozen foods, reported that income at its Sigma food unit tumbled by 9% in 2007, despite an 11% rise in sales. The firm blamed this on increased raw material prices which it failed to pass on to consumers.

There are also indications that some of the country's drink firms are also finding it hard. For example, brewer FEMSA Cerveza reported an 11.7% decreased in income for the year, despite a 4.3% increase in revenues. With the alcohol industry less politically sensitive than the food industry the country's drinks producers should find it easier to raise their prices and many have all ready announced hefty price increases for 2008. However, there is clearly a significant chance that these price increases will affect revenues if they lead to a reduction in consumption.

With the slowdown in the economy of the US having a direct effect on the economy of Mexico, due to reduced remittances and a reduction in trade, consumers are becoming increasingly price sensitive. This makes it a very difficult time for food and drink firms to attempt to restore their margins by raising prices and suggests that the profits of Mexican food and drinks firms may remain underwhelming for some time to come.

 Key Topics Covered:  Executive Summary - Business Environment - Regional Food & Drink Business Environment Ratings - Mexico's Food & Drink Business Environment Rating - SWOT Analysis - Mass Grocery Retail - Macroeconomic Outlook  Food - Industry Forecast Scenario - Industry Developments - Market Overview  Drink - Industry Forecast Scenario - Industry Developments - Market Overview  Agriculture At A Glance - Mass Grocery Retail - Industry Forecast Scenario - Industry Developments - Market Overview - Competitive Landscape  Key Players - Mass Grocery Retail - Company Analysis - Grupo Herdez SA de CV - Grupo Maseca SA de CV - Grupo Bimbo SA - Coca-Cola FEMSA - Mass Grocery Retail - Controladora Comercial Mexicana SA de CV (CCM)  Appendix - Ratings Methodology - Ratings Overview - BMI Food & Drink Industry Glossary - Food & Drink - Mass Grocery Retail - BMI Food & Drink Forecasting & Sourcing - How We Generate Our Industry Forecasts - Sourcing 

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