Competitors target Mexican market - Mexican agricultural and food market

Although the United States supplies about 80 percent of Mexico's food imports, countries from all over the world are knocking on Mexico's trade door and entering the market. The major competitors are Argentina, Australia, Canada, Chile, the European Union (EU), Guatemala and New Zealand.

These countries are vying for a position on Mexico's supermarket shelves and in Mexico's hotels and restaurants, so U.S. agricultural exporters need to stay on their toes.

To help you keep up with the competition, we've compiled the following information about what other countries are doing to get a share of the Mexican market.

Forest Products

Canada, Chile and six other smaller competitors sell Mexico softwood and temperate hardwood products, including logs, lumber, chips, particle board, flooring and wood-building products.

Canada has been promoting timber frame homes in Mexico since 1993 and has held seminars in Mexico for builders and manufacturers there.

The Canadians have also organized and paid for Mexican representatives to visit Canadian saw mills, building sites, prefabricated wood home and log home manufacturers and saw machinery and equipment dealers.

Chile has a producers' union representative based in Mexico City. This individual is in charge of product promotions and negotiations. However, so far Chile's efforts to compete in the Mexican market with a low-priced product have been unsuccessful.

As Mexican consumer purchasing power grows, furniture and housing construction will increase, opening up further opportunities for marketing forest products.

Sunflowerseed Oil

The main competition for this product is Argentina, which neither conducts promotional activities nor offers any credit programs for sunflowerseed oil in Mexico.

Grains and Feeds

Canada and Argentina are the major competitors in this market, spending an estimated $500,000 and $100,000, respectively, each year on market development.

Canada aggressively promotes feed grains and by-products through frequent visits by trading groups and technical and commercial seminars. Argentina, on the other hand, has not been as competitive in the market. However, a commercial agreement between Mexico and Chile has pushed Argentina to increase promotions and build market share in Mexico's corn and grain sorghum market.

Other competitors, such as the EU, use export subsidies to compete.

Activities conducted by competitors include trade servicing, visits by trade teams, seminars and trade promotions, most of which have increased significantly during the past four years. Most promotion activities are generic.

Fruits

Pears and Apples -- Canada, Chile and New Zealand compete against the United States and domestic production with better prices. Chile has worked with Mexican wholesalers to open distribution and storage centers for apples and has held direct negotiations with the wholesalers for pears and apples. Last year, New Zealand conducted a few in-store promotions for apples using point-of-sale materials at an estimated cost of $30,000.

These countries consider Mexico a price market and send their lower quality

and lower priced products to Mexico.

Peaches, Nectarines and Plums -- Although Chile competes in Mexico on the basis of price, it is not a direct competitor of the United States, since its production season is the opposite of that in the United States. However, domestic products compete with the United States on a price basis. Neither Mexico nor Chile conducts market development activities.

Strawberries and Tomatoes -- The only competition for California strawberries and tomatoes is domestic production, which competes on the basis of price. For strawberries, Mexico competes for only 30 percent of California's growing season. Mexican growers haven't conducted any market promotion activities.

Grapes -- Chile and Mexico compete with the United States on price as both countries' growing seasons overlap with California. Neither is conducting market development activities.

Poultry and Egg Products

Mexico gets 3 to 4 percent of all poultry and egg product imports from Canada, France, Guatemala and a few smaller competitors. The remaining 96 percent of import share is met by the United States.

Mexico purchases whole chicken, duck, geese, turkey, duck and geese liver, shell and table eggs and some Spanish-produced deli and canned items from competitors. In 1992, these imports were valued at $2.1 million. Competitors do not promote these products. Mexico purchases them to supplement domestic production and, in the case of certain deli and canned items, to meet demand for products made in Spain.

The United States' main problem in exporting poultry and egg products to Mexico has been market access. Prior to the North American Free Trade Agreement (NAFTA), the Mexican government placed licensing requirements and tariffs on poultry and egg imports. Under NAFTA, the 200-percent tariff will be reduced by 2 percent a year over 10 years.

U.S. sales can be increased, particularly in terms of further processed poultry and egg products. This could be accomplished by educating Mexican consumers and the trade about the benefits of U.S. products, such as safety, quality, versatility and convenience.

Beef, Pork and Lamb

Australia and New Zealand spend the most money in promoting beef to Mexico. Their annual expenditures are estimated at $200,000 and $100,000, respectively. Both countries are expected to increase their spending levels dramatically as growing consumer purchasing power leads to increased meat consumption. Both countries also are expected to begin promoting their products at the supermarket level.

Canada is aggressively exporting pork to Mexico and is expected to conduct more promotional activities in the coming years. Canada spends an estimated $75,000 a year on these efforts.

Another competitor is the EU, which continues to subsidize exports of beef and pork.

To help Mexican importers become familiar with products and production methods, most competitor countries focus on trade servicing. Trade teams and trade promotions, including brochures and sales catalogues in Spanish, are being used to build market share. Seminars are expected to increase. Most of these activities are conducted in a generic sense, with little branded product promotion.

Dairy Products

New Zealand and Ireland have dairy board representatives in Mexico who conduct seminars and trade servicing.

Yogurt -- Domestic yogurts are the main competition with U.S. products. Domestic brands have been on the market a long time, have gained strong identification among consumers, are priced lower than U.S. products, have better distribution to retail and wholesale outlets and are supported by branded advertising in the mass media and through billboards, special offers and in-store sampling activities.

Ice Cream -- U.S. ice cream competes with the domestic product, which is made from vegetable fat, reducing its cost. Mexican ice cream is distributed throughout the country. As with yogurt, Mexican labels are advertised in the mass media.

Cheese -- Cheeses from the EU and New Zealand along with domestic products are the United States' main competitors. Only domestic brands have been advertised in the mass media. EU cheeses have been promoted through promotions, such as samplings, at supermarkets. New Zealand has run ads in magazines targeted at the hotel-restaurant-institutional trade.

Both the EU and New Zealand compete on price. New Zealand has created an effective import and distribution network that allows Mexican purchasers to get products as easily as if they were domestically produced. EU prices are lower due to export subsidies. Both competitors' brands have strong recognition among consumers.

Processed Food Products

Cling Peaches -- Major competitors of California cling peaches are Greece with a 60-percent market share and Chile with an 18-percent market share. The United States has a 10-percent market share. Greek and Chilean products are canned and labeled in Mexico and have a price advantage of up to 40 percent over U.S. products. This advantage is compounded by the fact that price determines the amount of shelf space received.

Although cling peaches from Greece are subsidized, making them lower priced, the quality is considered low. Neither Chile nor Greece conducts promotional activities in Mexico.

Prunes -- Chile is the main competitor, with an 80.5-percent market share compared to a 17.8-percent market share for California prunes.

Chilean prices are up to 40 percent lower than U.S. prices. This is due in part to Mexico's trade agreement with Chile, which places a tariff of 5 percent on Chilean prunes, while the U.S. faces a tariff of 16 percent on U.S. pitted prunes and 0 percent on U.S. whole prunes. With NAFTA, the tariff on pitted prunes will be reduced by 4 percent over five years.

Chilean prunes are neither identified as such by Mexican wholesalers, rebaggers or retailers nor promoted in Mexico because they compete solely on price.

Consumer-Ready Foods -- Although Mexico has a large food processing industry that manufactures a wide range of products, the Mexican industry still trails the United States in technology and product diversity. While growing rapidly, domestically produced consumer-ready foods currently have limited market potential. Therefore, most consumer-ready products must be imported. Competitors include Argentina, Canada, Chile and the EU.

Imports of consumer-ready food and agricultural products have exploded since 1986 when Mexico liberalized trade and opened its markets. Promotional activities by the United States, such as food shows and in-store promotions, face stiff competition from other exporting countries.

Who's Pushing What: Product Promotion in Mexico by Country

Here's a quick run-down of the countries promoting their products in the Mexican market.

Argentina Corn, grain sorghum and sunflowerseed oil.

Australia Beef and lamb.

Canada Apples, barley, cereals, crab, dry codfish, frozen salmon, lobster, malt, pears, pork, softwood lumber, turkey and wheat.

Chile Apples, cling peaches, grapes, plywood, pears, prunes and wine.

Denmark Bakery products, cheese, confectionery, cookies and pork.

France Canned food, cheese, cognac, confectionery, ducks and goose, duck and geese liver, mineral water and wine.

Greece Cling peaches.

Ireland Beef and dairy products.

Italy Frozen pizza, pasta and tomato paste.

Netherlands Cheese.

Portugal Canned peaches, cherries and fruit cocktail.

Spain Brandy, canned olives, confectionery, dry fruit, sausages, smoked ham and wine.

Guatemala Beef and table eggs.

New Zealand Apples, beef and lamb, cheese, dairy products and pears.

COPYRIGHT 1994 U.S. Department of Agriculture
COPYRIGHT 2004 Gale Group