Mexican Retail Market Distribution System

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The Mexican Food Market -NAFTA -Domestic
-Distribution Channels
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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

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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

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Other Mexicos 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 (Asociación Europea de Libre
  Comercio) Free-Trade Agreement (2001)
• Uruguay Free-Trade Agreement (2004)
• Japan Free-Trade Agreement (2005)
• Mercosur Free-Trade Agreement (ratification
  pending)

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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.

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Top U.S. Bulk Product Markets
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Top Markets Total Agricultural Forestry and
Fishery Products
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Top U.S. Bulk Product Markets
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Top U.S. Intermediate Product Markets
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Top U.S. Consumer Product Markets
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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

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Food Distribution in Mexico
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Domestic Food Distribution
Producers
National Product
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Domestic Food Distribution
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Domestic Food Distribution
Producers
National Product
Wholesale
Central Market
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Central Market Mexico City

• 30 of total produce is marketed through this
  channel
• 1881 warehouses for fruits and vegetables
• 338 warehouses for groceries
• Warehousing 122000 MT
• The average monthly trade
• 700000 MT of fruits
• 500000 MT of vegetables
• 170000 MT of groceries
• 8000 MT of fresh flowers

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Central Market in Mexico City

• Area of 300 hectares
• 8 billion dollars yearly turnover
• On a daily basis
• 6000 trucks
• 70000 direct employees
• 300000 visitants
• 50000 vehicles

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Food Distribution Flow Chart
Producers
National Product
Distributors
Wholesale
Food Service
Central Market
Supermarkets
Food Manufacturing
Fixed Markets
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Fixed Markets (Mercados)

• Popular markets located in older
• neighborhoods
• Housewives would purchase produce
• fruits groceries deli dairy non food
• groceries etc.

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Food Distribution flow Chart
Producers
National Product
Distributors
Wholesale
Food Service
Central Market
Supermarets
Food Manufacturing
Fixed Markets
Moving Markets
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Moving Markets (Mercados Sobre Ruedas or Tianguis)

• Over 2000 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

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Food Distribution flow Chart
Producers
National Product
Distributors
Wholesale
Food Service
Central Market
Supermarkets
Food Manufacturing
Fixed Markets
Moving Markets
Moms Pops
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Moms and Pops (Tiendas)

• Around 400000 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

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Food Distribution flow Chart
Producers
National Product
Distributors
Wholesale
Food Service
Central Market
Supermarets
Food Manufacturing
Fixed Markets
Moving Markets
Moms Pops
CONSUMER
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Food Distribution flow Chart
Producers
National Product
Distributors
Wholesale
Food Service
Central Market
Supermarets
Food Manufacturing
Fixed Markets
Moving Markets
Moms Pops
Convenience Stores
CONSUMER
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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

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Distribution Channels for Imported Foods
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Imported Food Distribution Flow
Food Exporters
Forwarder
Custom Broker
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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)
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Imported Food Distribution Flow
Food Exporters
Forwarder
Custom Broker
Transported by air sea ground trailer or train
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Transportation of Goods
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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 BORDER FOB 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 Delivere
d 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.c
fm
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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
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Imported Food Distribution Flow
Food Exporters
Forwarder
Custom Broker
Transported by air sea ground trailer or train
Importers / Distributors
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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

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

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Imported Food Distribution Flow
Food Exporters
Forwarder
Custom Broker
Transported by air sea ground trailer or train
Importers / Distributors
Importer
Warehousing Distribution
Retailers
Distribution Centers
CONSUMER
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Review of Supermarket Segment
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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
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Quickview of the Retail Segment

• 12695 Retail Outlets in Mexico (ANTAD 2008)
• Jan-April 2008 8.5 sales increase vs. 2007 same
  number of stores
• Market Share
• Wal-Mart OXXO Soriana Comercial Mexicana and
  Liverpool control 19.6 in 2007

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Retail Segment
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WALMART Mexico

• 1033 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
• 158000
• Suppliers 12000
• Sales floor capacity
• 22499860 sq ft.
• Seating Capacity 59437

 
 
 
 
 
 
 
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WALMART Mexico
Club Store Business-Family 84 STORES 27 SALES
Discount -Basic Low Income CD 324 STORES 33
SALES
Supercenters ABCD Classes 141 STORES 28 SALES
High End Targets AB 44 STORES 6 SALES
Dept. Store Targets BCD 52 STORES 5 SALES
Family Restaurant TargetsABC 268 Restaur. 4
SALES
http//www.walmartmexico.com.mx
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• Membership wholesale outlets targeting businesses
  and consumers buying large volumes.
• 84 Sams Club Stores.
• Highlights
• Sales  (millions)   US 6000
• Average sales area per store  (sq. ft.)   94600
• Customers served (millions)  64
• SKUs  4100 (without perishables)
• Food ( of sales)  48
• No Slotting fees

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• Semi wholesale and austere discount stores
  offering a limited assortment of basic
  merchandise mainly food and housewares.
• There are 324 Bodega stores.
• Highlights
• Sales (millions) US 7.3
• Average sales area per store (sq. ft.)  53500
• Customers served (millions)  183
• SKUs  49000
• Food ( of sales)  48
• Slotting fees

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• Supercenters providing the widest merchandise
  assortment from groceries and fresh to apparel
  and general merchandise.
• 141 Wal-Mart Supercenters
• Highlights
• Sales (millions)  US 6.2
• Average sales area per stores   (sq. ft.) 97000
• Customers served (millions)  153
• SKUs  90000
• Food ( of sales)  45

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• Supermarkets located in residential areas of
  Mexico City and its surroundings with a focus on
  quality and convenience.
• 64 Superama supermarkets.
• Highlights
• Sales (millions)  US 11.5
• Average sales area per store  (sq. ft.) 17300
• Customers served (millions)  54
• SKUs 25000
• Food ( of sales)  70

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• Holding Company for Comercial Mexicana
• 4th Retailer in sales in the Mexican market
• Partners at 50 for the COSTCO clubs in Mexico
• 64.9 of sales are food products
• 285 Stores in different formats nationwide
  presence
• For more information
• http//www.comerci.com.mx/comerci/jsp/Comerci.jsp
  id1

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includes administrative employees 100
except sales
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Comercial Mexicana Formats

• Mega 69 hypermarkets ABCD clients. 36.3 of
  sales
• Comercial Mexicana 53 stores AB clients 23.8
  of sales
• Bodega 39 discount stores CD clients 12.9 of
  sales
• Costco 30 club stores AB clients 21.7 of their
  sales
• Sumesa supermarkets in residential areas AB
  clients 14 stores 1.7 of their sales
• California Restaurants family restaurant chain
  71 stores 1.6 of their sales
• Al Precio 8 small discount outlets located in
  low income areas
• City Market 1 high end gourmet supermarket
  organic section fine foods type of store

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• 2007 numbers
• Sales US65191 million
• Stores 257 (198 Gigante stores for 2008)
• Formats
• 163 Hypermarkets
• 71 Soriana Mercado (discount)
• 23 City Club (club stores)
• 130 Super City (convenience stores franchised)
• Sales Space 1.8 million m2
• Employees 63500
• Clients 345.5 million

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In 2007 Gigante sold rented a total of
200 stores to Grupo Soriana. After this
transaction Soriana became the second largest
retailer after Wal-mart. Gigante kept control
of their other companies Toks Restaurants
Office Depot and Radio Shack
Gigante owners continue to own the real
estate and they are renting the stores to
Soriana.
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• 2007 figures
• Hypermarkets 29
• Supermarkets 70
• Super Che (discount stores) 16
• El Super (in California USA) 8
• Employees 25000
• Sales 1000 US Million
• Region Nationwide since 2006

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• Carrefour retired from the Mexican market in
  2005. Its 29 stores were sold to Grupo Chedraui.
  Chedraui became then the 8th retailer in Mexico
  and gained nationwide presence with this purchase.

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H-E-B

• HEB represents 300 stores in Texas and Mexico
• Stores in Mexico
• Hypermarkets 8
• Supermarkets 11
• Recognized in Northern Mexico as an upscaled
  Supermarket.
• Corporate offices located in Monterrey Mexico

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THANK YOU
Marketing Solutions Firm Rep. Food Export Midwest
and Northeast Raul Caballero CEO
President Violeta Picazzo VicePresident Tel.
(5255) 5362-7407 Fax. [phone] raul_at_marketingsol
utionsfirm.com violeta_at_marketingsolutionsfirm.com
www.marketingsolutionsfirm.com