Mexican soft drink consumption has risen sharply over the last decade, but there are no signs that that the growth is set to slow, according to a new report from Canadean.
Mexico benefits from a strong soft drinks culture, year-long warm weather, a young population and a healthy tourism industry - factors which combine to create the perfect conditions for continuing growth in the soft drinks industry.
Over half of Mexico's 100 million inhabitants are aged under 20 and the number of 10-24 year olds, who are traditionally heavy consumers of soft drinks, is growing rapidly, according to the report. Mexico is also the world's seventh most popular tourist destination and this strong tourist industry not only helps support the country's economy but also contributes to soft drinks growth.
The soft drinks market grew by a little over 4 per cent in 2002, Canadean said, with consumption increasing in each of the four leading sectors. Bulk/HOD water remains the largest volume sector, a position it has held since dethroning carbonates in 1995.
Bulk/HOD water is huge in Mexico, accounting for almost half of the total soft drinks volume. With most houses lacking potable water, home consumption is very strong. The large, national brands and their key regional counterparts have continued to penetrate the market at the expense of the smaller regional players. Nonetheless, the market remains highly fragmented and opportunities for consolidation are considerable.
Carbonates is easily the second largest sector, over eight times larger than its nearest rival, packaged water. Cola has led the sector with a constant share of almost 70 per cent and Mexico has recently overtaken the US as the largest per capita consumer of Coca-Cola.
However, the performance of carbonates has been somewhat sluggish for several years, suggesting that the market may have peaked. The recent success of new products does indicate that there is still room for competitively positioned 'b brands', the report suggests. However, Canadean warns that innovative marketing and new packaging must continue to be used heavily if carbonates are to withstand the increasing pressure from other sectors which are developing aggressively.
Of the four leading sectors, packaged water grew fastest in 2002, increasing by over 5 per cent. With an estimated 600 registered brands, the market is crowded and one that is dominated by numerous regional players. But packaged water is not the only sector showing good growth. Fruit powders have grown by a staggering 250 per cent over the last decade and with low prices, strong backing by supermarkets and hypermarkets and growing shelf space, further gains are expected.
But although many of Mexico's cultural and demographic characteristics are conducive to a healthy soft drinks market, the picture is far from perfect, the report adds. The country has poor economic growth and is highly dependent on its largest trading partner, the US. Unemployment is rising and wages are generally low. Despite this, Canadean predicts that the market will expand in 2003, albeit by a modest 2.5 per cent.
For details of Canadean's range of drinks industry reports, click here.