2009-07-23 15:27:01 -
Mexico Food and Drink Report Q3 2009 - a new market research report on companiesandmarkets.com
www.companiesandmarkets.com/Summary-Market-Report/mexico-food-an ..
Mexico’s beer market is forecast to stagnate in 2009 before declining slightly in 2010 due to the impact of the swine flu pandemic and global recession. Over the last quarter, the onset of swine flu has changed the dynamics of the Mexican business environment. It is now believed that Mexico´s economy will suffer more in 2009 than in the aftermath of the 1994-1995 Tequila Crisis, with little chance of positive growth until 2011 at the earliest. The fallout from the swine-flu outbreak is indeed bad news for the country’s economy and, combined with downward pressure to private consumption levels, has led the report to lower our already below-consensus real GDP growth forecast for this year from -5.5% to -7.1%.
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Mexico, the outbreak of swine flu has been linked to around 150 deaths and led to thousands of people becoming ill. The authorities have taken a number of measures to limit the spread of the virus and many of these could have a direct impact on beer (and soft drinks) consumption. As well as forcing the closure of bars and clubs, the government has also placed a restriction on large gatherings, which has meant, for example, that football matches are being played without spectators. Beer consumption is also likely to be impacted by changes in public behaviour, with anecdotal evidence suggesting that Mexicans are socialising less and choosing to spend more time indoors. A decline in tourist numbers during the usually busy spring-break period could cause further damage to the drinks and fast food/restaurant sector. The report therefore expects the beer market to more or less stagnate this year before declining slightly in 2010. The historical strength of the sector means that a return to growth is predicted in 2011, but we envisage a difficult two years, which could be made substantially worse if the flu epidemic really takes hold.
At the beginning of April 2009, Mexican brewer Grupo Modelo, which markets Corona beer, announced plans to cut 1,200 jobs and has attributed the move to the global economic downturn. The firm, which is 50%-owned by the world´s largest brewer, Anheuser Busch InBev (ABI), blamed lacklustre sales figures in 2008 on the global financial crisis. Full-year net sales rose by just 3.4% to MXN75.36bn (US$7bn), while consolidated net income fell by 3% to MXN14.81bn (US$1.13bn).
The country’s retailers are also feeling the impact. At the end of April 2009, Mexico´s second-largest retailer, Soriana, disclosed details of a cost-cutting plan to save MXN2bn (US$152mn) in the hope of countering the adverse impact of ongoing economic slowdown. The company is planning to cut down on energy and maintenance expenses, improve store logistics and revise its distribution routes as part of the cost-cutting initiatives, which were implemented from the second half of March 2009. Over the quarter, the country’s third-largest retailer, Comercial Mexicana (Comerci), gained further breathing space for its restructuring plan from its key four US creditors. However, the National Retailers Association of Mexico (ANTAD) has forecast that same-store sales at its members´ stores, which include supermarkets, department stores and speciality stores, will decline by 4% in 2009. Therefore even if Comerci manages to come to an arrangement with its creditors and stave off liquidation, its lack of market share along with declining consumer sentiment is likely to mean it faces a torrid 18 months, while the lack of global credit means that a foreign buyer is unlikely to materialise.
