Mexico and Central America

June 1, 2007
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Mexico and Central America

By SARAH THEODORE

RTD teas, sports and energy drinks are gaining ground

Health and wellness products are taking hold around the world, and the countries south of the U.S. border are no exception.
“Consumers in Latin America are increasingly looking for better-for-you drink options,” says Mary Tabion, research manager at Euromonitor International, Chicago. “The fastest-growing products in volume terms are [ready-to-drink] teas, RTD coffees and functional drinks. All three products are relatively new concepts in Latin America so volume sales are lower compared to well-established products, such as carbonates or beer.”
New product counts from Mintel International illustrate the trend. The top claim among new products was vitamin/mineral-fortified, followed by all-natural, reduced-calorie, and no additives/ preservatives.
Carbonated soft drinks are the top non-alcohol beverage sold in Latin America as a whole, with 46 million liters sold last year, Euromonitor reports. Mexico consumes the most carbonated soft drink products, however, bottled water is the top seller in the country, with almost 21 million liters sold in 2006. In its report on the region, Euromonitor says the trend “illustrates a robust trend for wellbeing, driven by the lack of reliably safe tap water, changes in lifestyles and higher costs of fuel to boil water for drinking.”
In addition, ready-to-drink teas have become some of the top performing products in the region, with growth rates outperforming the rest of the market. As they have in the United States, sports and energy drinks also have a solid presence, with a number of local companies vying to compete with international players such as Red Bull and Gatorade.
“Functional drinks demand has grown considerably over the past five years, fueled by their popularity among teens and young adults,” Tabion says. “The leading brands in the region are Gatorade, Red Bull and Powerade. Sports drinks like Gatorade and Powerade target athletes, but also are considered to be a substitute for other non-alcoholic drinks, like carbonates, bottled water or juices. Energy drinks are generally consumed as a mixer for alcohol drinks such as vodka or other spirits. Domestic players are also starting to develop functional drinks to tap into this growing category.”
Pepsi Bottling Group, which distributes Pepsi brands, such as Gatorade, in Mexico reported that 2006 was its best performing year since it began operating in the region in 2002. While the Pepsi brand remains its biggest seller, the company says its non-carbonated lineup also has become popular in the area.
Last year, PBG acquired Bebidas Purifacadas SA de CV, which gives PBG Mexico 70 percent of all Pepsi sales in the country.
Market size
Total volume, millions of liters
Category2006% change 2001-06
Latin America
Alcohol drinks31,311.319.2
Beer26,413.721.6
Cider/perry175.424.0
RTDs/High-strength premixes175.121.1
Wine2,090.01.8
Spirits2,457.111.8
Soft drinks88,016.029.1
Carbonates46,121.715.8
Fruit/vegetable juice5,181.632.1
Bottled water34,976.049.5
Functional drinks769.296.4
Concentrates641.018.7
RTD tea312.2190.8
RTD coffee14.4N/A
Mexico
Alcohol drinks6,463.019.7
Beer6,103.919.7
Cider/perry18.033.8
RTDs/High-strength premixes95.822.9
Wine41.057.1
Spirits204.310.6
Soft drinks39,298.643.2
Carbonates15,177.819.4
Fruit/vegetable juice2,611.418.7
Bottled water20,739.971.2
Functional drinks310.093.8
Concentrates276.114.9
RTD tea169.04,042.6
RTD coffee14.4N/A
Source: Euromonitor International
The Coca-Cola Co. reports that Mexico is its second-largest market behind the United States in volume sales, and says the company is expanding its beverage lineup to include “more water, juice and juice drinks and sports drinks,” in Latin America. “This includes many functional beverages, which provide additional nutrients, hydration and health benefits,” the company said in its annual report.
In December, the company signed an agreement to boost its presence in the non-carb market with the purchase of Mexico’s Jugos del Valle in conjunction with Coca-Cola Femsa. But the companies have run into regulatory anti-trust concerns over the purchase and the issue is still pending. Jugos del Valle is the second-largest producer of juice and fruit-flavored beverages in Mexico.
Coca-Cola Femsa is Coca-Cola’s largest bottler in Latin America, covering most of Mexico, portions of Guatemala, and all of Nicaragua, Costa Rica and Panama, as well as South America. In Mexico, the company’s carbonated soft drink sales account for nearly 80 percent of its business. In Central America CSDs total 91 percent of the product mix. However, the company reports it more than doubled its volume of non-carbonated beverages in Central America last year thanks in part to the rollout of Hi-C juice drinks.
 Top exports
Mexico and the countries of Central America are some of the most important exporters of alcohol beverages for the U.S. beverage industry. Mexico, for instance, exports more than 14 million 31-gallon barrels of beer to the United States, making Mexican beers the largest group of import beers in the United States, according to the Beer Institute, Washington, D.C.
On a smaller scale, Central American countries exported nearly 59,000 barrels to the United States. El Salvador was by far the leading beer exporter, with more 38,000 barrels, more than than three times as many barrels coming into the United States as Guatemala. Costa Rica and Nicaragua exported 4,800 and 3,800 barrels, respectively.
In their home country, Mexican beer sales are shifting to premium products, according to Euromonitor. The country’s per capita consumption ranks second in the region, but its per capita expenditure ranks first, which Euromonitor says, “reflects the relative sophistication of this market, as well as a tendency toward trading up to premium and imported lagers, especially amongst younger drinkers, a tendency that gained momentum in 2005.”
Euromonitor also indicates that improvements in distribution in Mexico have led to beer sales through supermarkets, hypermarkets and convenience stores, helping boost volumes.
Mexico holds the top import brand in the United States, with Corona Extra, and Corona brewer Grupo Modelo reports its export sales were up almost 16 percent in 2006. In the United States, Grupo Modelo teamed with Barton Beers to consolidate its distribution into one company, Crown Imports, based in Chicago. The company opened its doors in January and will represent Modelo products throughout the United States.
Heineken also strengthened a partnership with a Mexican company that will keep highly rated Mexican imports coming into the United States. The company extended its partnership with Femsa Cerveza for an additional 10 years, with Heineken USA acting as the exclusive importer of Dos Equis, Tecate, Tecate Light, Sol, Bohemia and Carta Blanca brands in the United States.
Within its business in Mexico, Grupo Modelo launched a number of new products last year, including Modelo Light in a new blue bottle, and Corona, Montejo, Leon and Estrella beers in cans. In addition, Grupo Modelo is the exclusive importer of Anheuser-Busch brands into Mexico, which are the leading import brands in that country.
New Product Launches Mexico
Carbonated soft drinks64
Water56
Beverage mixes52
Spirits and liqueurs45
Coffee44
Fruit/flavored still drinks42
Sports drinks37
Nectars32
Tea30
Malt, other hot beverages29
Source: Mintel International, Global New Product Database; new product introductions during the past year.
InBev, based in Belgium, has a relatively small presence in the region, with operations in Guatemala, where it distributes Brazil’s Brahva and Argentina’s Quilmes brands. Also in the market, SABMiller has operations in El Salvador and Honduras, and is involved in both the beer and soft drink markets.
On the spirits side, Mexico is responsible for nearly all of the tequila imported into the United States, with more than 21 million proof gallons in 2006, according to the Distilled Spirits Council of the United States (DISCUS). That’s an increase of 21 percent over the prior year, and represents nearly $529 million in dollar sales. Mexico also is the third-largest exporter of cordials to the United States, with 100,000 proof gallons. In addition, it exports about 3 million proof gallons of rum to the United States, while Nicaragua exports about 124,000 proof gallons of rum.
In regard to the United States’ native spirit, bourbon whiskey, Mexico was on the receiving end of about 445,000 proof gallons in 2006, DISCUS reports.
Unlike the United States, where spirits have enjoyed increased sales for a number of years, the growing health consciousness among Latin American consumers created a shift toward lower-alcohol products such as wine and beer, Euromonitor reports. However, economic growth in some countries, combined with efforts among the large spirits companies, such as Diageo and Pernod Ricard, to promote premium products has spurred growth on the higher-priced end of the market.
“These campaigns were successful with consumers, particularly adults under 30 years old, who tend to associate these brands strongly with refinement, style and good taste. Consequently, premium and super-premium brands have become popular in on-trade outlets,” Euromonitor reports.
Diageo reported its sales in Latin America as a whole were up 17 percent in 2006. In Mexico, volume was up 55 percent, and its top products were Johnnie Walker Red Label (up 32 percent) and Buchanan’s Scotch Whisky (up 51 percent) thanks to “strengthened customer relationships, sustained brand-building investment and a particular focus on the on-trade.”
Pernod Ricard reports that is Presidente and Don Pedro brandies have become leaders in the Mexican market after several years of sluggish sales. In addition, the company says its Chivas Regal, Havana Club and Wyborowa grew 11 percent, 27 percent and 9 percent, respectively in Mexico.  
New product claims Mexico
ClaimNo. of new products
Vitamin/mineral fortified100
All-natural57
Low/no/reduced calorie54
No additives/preservatives36
Organic32
Seasonal29
Kosher25
Low/no/reduced sugar16
Premium15
For children14
Source: Mintel International, Global New Product Database; new product introductions during the past year.

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