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The Mexican Food Market: -NAFTA -Domestic -Distribution Channels

The Mexican Food Market: -NAFTA -Domestic -Distribution Channels. NAFTA.

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The Mexican Food Market: -NAFTA -Domestic -Distribution Channels

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  1. The Mexican Food Market: -NAFTA -Domestic -Distribution Channels

  2. NAFTA • Mexico, Canada and USA signed a Free Trade Agreement that went in effect in 1994 Some agricultural products became duty free immediately and others under a 5, 10 and 15 year phase out under a quota administration. • Both US and Mexico Agricultural Exports increased as a result of NAFTA

  3. NAFTA • Each country has increased its export trading in different segments • Some industries have gain growth and others have been hurt by NAFTA • In the three countries, there has been mixed opinions of NAFTA. The numbers have shown results to each of the countries in different segments

  4. Other Mexico’s FTAs • Mexico is currently the country with most free-trade agreements in the world. The free-trade agreements in force are (ordered by date): • North American Free Trade Agreement (NAFTA)) (1994): Canada and the United States. • Colombia and Venezuela, also called G-3 Free-Trade Agreement (1995) • Costa Rica Free-Trade Agreement (1995) • Bolivia Free-Trade Agreement (1995) • Nicaragua Free-Trade Agreement (1998) • Chile Free-Trade Agreement (1999) • EU (European Union) Free-Trade Agreement (2000) • Israel Free-Trade Agreement (2000) • Mexico, Guatemala, El Salvador and Honduras, also called TN Free Trade Agreement (2001) • Iceland, Norway, Liechtenstein, and Switzerland, also called AELC (AsociaciónEuropea de LibreComercio) Free-Trade Agreement (2001) • Uruguay Free-Trade Agreement (2004) • Japan Free-Trade Agreement (2005) • Mercosur Free-Trade Agreement (ratification pending)

  5. U.S. Agricultural Export Trends & Highlights • Mexico is the second largest market for U.S. agriculture. • In 2007 U.S. agricultural, forest and fish exports totaled $13.3 billion.

  6. Top U.S. Bulk Product Markets

  7. Top Markets: Total Agricultural, Forestry and Fishery Products

  8. Top U.S. Bulk Product Markets

  9. Top U.S. Intermediate Product Markets

  10. Top U.S. Consumer Product Markets

  11. Why the U.S. Market In Mexico Will Continue to Grow • Economic Growth – higher per capita incomes • (middle class growing and poverty being reduced) • Demographics - growth in middle class • Growing urban centers = increase buyers • Improvements in transportation= distribution • Changing eating habits = convenient oriented • Growth in supermarkets = increase points of sale • Growth tourism and restaurants = + consumers • Growth in processed food industry = more intermediate product needs • NAFTA = more efficiency in production

  12. Food Distribution in Mexico

  13. DomesticFoodDistribution Producers National Product

  14. Domestic Food Distribution

  15. Domestic Food Distribution Producers National Product Wholesale Central Market

  16. Central Market Mexico City • 30% of total produce, is marketed through this channel • 1,881 warehouses for fruits and vegetables • 338 warehouses for groceries • Warehousing: 122,000 MT The average monthly trade: 700,000 MT of fruits 500,000 MT of vegetables 170,000 MT of groceries 8,000 MT of fresh flowers

  17. Area of 300 hectares 8 billion dollars yearly turnover On a daily basis 6,000 trucks 70,000 direct employees 300,000 visitants 50,000 vehicles Central Market in Mexico City

  18. FoodDistributionFlow Chart Producers National Product Distributors Wholesale Central Market Food Service Supermarkets Food Manufacturing Fixed Markets

  19. Fixed Markets (Mercados) • Popular markets located in older • neighborhoods • Housewives would purchase produce, • fruits, groceries, deli, dairy non food • groceries etc.

  20. Food Distribution flow Chart Producers National Product Distributors Wholesale Central Market Food Service Supermarets Food Manufacturing Fixed Markets Moving Markets

  21. Moving Markets (Mercados Sobre Ruedas or Tianguis) • Over 2,000 moving markets around the country • Housewives from all income levels like to shop there for • the freshest produce, imported fruits and other groceries • You are able to find fish, meats, deli-meats, dairy • They serve Mexican fast food as well • They appear in specific streets certain day of the week • in a periodic basis

  22. Food Distribution flow Chart Producers National Product Distributors Wholesale Central Market Food Service Supermarkets Food Manufacturing Fixed Markets Moving Markets Mom’s & Pop’s

  23. Mom’s and Pop’s (Tiendas) • Around 400,000 in Mexico • The “old convenience store” in the distribution chain • All income classes have a store around the corner and they will purchase many things from these stores when they are running out of supplies

  24. Food Distribution flow Chart Producers National Product Distributors Wholesale Central Market Food Service Supermarets Food Manufacturing Fixed Markets Moving Markets Mom’s & Pop’s CONSUMER

  25. Food Distribution flow Chart Producers National Product Distributors Wholesale Central Market Food Service Supermarets Food Manufacturing Fixed Markets Moving Markets Mom’s & Pop’s Convenience Stores CONSUMER

  26. Convenience Stores • Fastest Growing retail segment • OXXO, Extra, Soriana, 7 Eleven • Distribution still a problem for suppliers • Little imported food products • Only the ones distributed by an importer

  27. Distribution Channels for Imported Foods

  28. Imported Food Distribution Flow Food Exporters Forwarder Custom Broker

  29. Food Distribution – Imported Transport to Border Production Plant Warehouse or DC U.S. Agent (Forwarder) Inspection and Paperwork compliance at customs Product will go across the border to Mexico Mexican Agent (Custom Broker)

  30. Imported Food Distribution Flow Food Exporters Forwarder Custom Broker Transported, by air, sea, ground: trailer or train

  31. Transportation of Goods

  32. Internationa Commerce Terms (Incoterms) COUNTRY EXPORTS EXW Exworks Delivery Plant DEPARTURE PORT FCA Free Carrier Delivery to Carrier FAS Free Along Ship Deliv. Dep. Port- Ship BORDERFOB Free on Board Delivery on Board CFR Cost and Freight Freight Costs included ARRIVAL PORT DES Deliver Ex Ship Delivered on Ship COUNTRY IMPORTS CIF Cost Insurance Freight Self-explained DAF Delivered at Frontier Self – explained DEQ Deliver Ex Quay (Duty Paid) CPT Carriage Paid To Vendor pays transp. CIP Carriage and Insurance Paid To http://www.foreign-trade.com/reference/incoterms.cfm

  33. Documents to import products • BASIC PAPERWORK AND COMPLIANCE FOR FOOD EXPORTS • COMMERCIAL INVOICE • CERTIFICATE OF ORIGIN (NAFTA IF IT APPLIES) • CERTIFICATE OF FREE SALE • RETAIL, NOM-51 PRODUCT LABELING REGULATION • PAPERWORK FOR PERISHABLES • ANIMAL USDA INSPECTION CERTIFICATE • VEGETABLE USDA PHITOSANITARY • PAPERWORK FOR SPECIFIC PRODUCTS (i.e. dairy, fish) • PHYSICAL AND CHEMICAL ANALYSIS • MICROBIOLOGICAL • MEXICAN OFFICIAL NORM ( NOMS) EACH SPECIFIC PRODUCT WILL VARY AND YOU WILL BE ABLE TO FIND OUT WHAT PAPERWORK IS NEEDED WHEN THE CUSTOM BROKERS CLASSIFIES THE PRODUCT THROUGH THE TARIFF

  34. Imported Food Distribution Flow Food Exporters Forwarder Custom Broker Transported, by air, sea, ground: trailer or train Importers / Distributors

  35. Imported Food Distribution Flow • Importers / Distributors • Import – Warehouse – Distribute • Take ownership of the product • Have their own trucks to distribute • Direct relationship with retailers • Promote in partnership with exporters • Own Sales & Merchandising force

  36. Imported Food Distribution Flow Food Exporters Forwarder Custom Broker Transported, by air, sea, ground: trailer or train Importers / Distributors Importer Warehousing & Distribution Retailers

  37. Importers with small infrastructure • Importers / No infrastructure • Import – Negotiate with retailers • Take ownership of the product • Have small sales force • Will contract public warehousing • Will contract product distribution • Promote in partnership with exporters

  38. Imported Food Distribution Flow Food Exporters Forwarder Custom Broker Transported, by air, sea, ground: trailer or train Importers / Distributors Importer Warehousing & Distribution Distribution Centers Retailers CONSUMER

  39. Review of Supermarket Segment

  40. Top 10 Retail Chains in Mexico No. Stores *Sales 2007 1 Walmart Mexico 223.4 659 2 Soriana 67.1 357 3 OXXO / Femsa 40.1 5441 4 Comercial Mexicana 38.9 184 5 Liverpool 38.9 64 6 Sanborns 33.8 354 7 Gigante 23.9 287 8 Chedraui 21.0 134 9 Home Depot 20.6 64 10 COSTCO 20.3 30 *Billion pesos Source: MVI Economic Consultants

  41. Quickview of theRetailSegment • 12,695 RetailOutlets in Mexico(ANTAD 2008) • Jan-April 2008, 8.5% sales increase vs. 2007 samenumber of stores • Market Share: • Wal-Mart, OXXO, Soriana, Comercial Mexicana and Liverpool control 19.6% in 2007

  42. Retail Segment

  43. WAL*MART Mexico • 1,033 units in 176 cities including all formats: hypermarkets, supermarkets, apparel stores and restaurants • Market Capitalization Value 20.2 billion dollars • Sales 2007 22.8 billion dollars • Employees: 158,000 Suppliers: 12,000 • Sales floor capacity 22,499,860 sq ft. • Seating Capacity: 59,437

  44. WAL*MART Mexico Club Store Business-Family 84 STORES 27% SALES Discount -Basic Low Income C,D 324 STORES 33% SALES Supercenters ABCD Classes 141 STORES 28% SALES High End Targets AB 44 STORES 6% SALES Dept. Store Targets B,C,D 52 STORES 5% SALES Family Restaurant Targets:ABC 268 Restaur. 4% SALES http://www.walmartmexico.com.mx

  45. Membership wholesale outlets targeting businesses and consumers buying large volumes. • 84 Sam's Club Stores. • Highlights • Sales  (millions):   US $ 6,000 • Average sales area per store  (sq. ft.):   94,600 • Customers served (millions):  64 • SKUs:  4,100(without perishables) • Food (% of sales) :  48% • No Slotting fees

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