Guarded outlook for Mexican retail in 2019

The Mexican retail sector registered a sluggish year in 2018, posting same-store sales growth of just 0.1% and all-stores growth of 3.5% for the year, according to the National Retailers Association (ANTAD).  Retail performance showed deceleration at year-end, posting the slowest fourth quarter expansion since 2014.  On the plus side, sales during Mexico’s four-day “Buen Fin “ (Black Friday) promotion in 2018 grew 8% with respect to the previous year, the national chambers of commerce, services and tourism (Concanaco Servytur) reported.  On-line sales during the promotion jumped 50% for the same period, demonstrating ongoing advances in consumers’ shift to shopping on line.

ANTAD is adopting a cautious outlook for 2019, projecting a 2.2% increase in all-stores sales but a contraction of 1% in same-store sales for the current year.  The growth of electronic commerce remains a leading trend for the industry, with Mexico striving to exceed US$20 billion in on-line sales for the year with the hope of surpassing Brazil as Latin America’s top e-commerce market.  Industry analysts project that policies proposed by the new Mexican administration could provide a boost to retail.   These include monthly stipend programs for qualifying members of segments such as youth, elderly and the disabled, as well as a 16% increase in the minimum wage.  Bodega Aurrerá is expected to benefit in particular from these measures across its formats.  Also, the new government reduced the VAT tax in the northern zone along the U.S. border to 8% from 16%, which is expected to provide a sales bump to store chains well established in the area such as Soriana, Walmart, Casa Ley, HEB and Super Norte.

Recent and upcoming investment in Mexico

Information collected from media reports over the last month:

  • Cement: Swiss building materials multinational Holcim is projecting Mexico investment this year of up to US$50 million to extend its distribution network around the country, the company reported. Plans also include increasing production capacity at its cement and concrete plants, reducing emissions and improving operating efficiency. (El Economista, January 27, 2019)
  • Pharmaceutical: U.S. drug maker Pfizer plans to invest approximately US$26 million in Mexico operations this year to speed the launch of new products, the company reported. Resources will support upgrades to Pfizer’s Toluca manufacturing plant, expansion of clinical research and implementation of social and educational programs in the country. (El Financiero, January 28, 2019)
  • Pet supplies: U.S. pet products specialty retailer Petco reported plans to invest US$20 million this year to support Mexico operations. Projects include opening 20 new sales locations, remodeling existing stores and upgrading the chain’s e-commerce platform. (El Financiero, January 28, 2019)
  • Fuel transport: Mexican energy company Avant Energy is projecting investment of approximately US$90 million this year to boost supply of gasoline to central Mexico. Plans include installing infrastructure for the transport of fuel by rail to the state of Querétaro for transfer to tanker trucks, as well as upgrading capability for the transfer of gasoline from ships to rail tankers at Gulf port facilities. (El Financiero, January 21, 2019) Continue reading Recent and upcoming investment in Mexico

CPTPP opens trade opportunities for Mexico

A major new trade agreement involving Mexico is raising hopes for juicy new export opportunities in some sectors, although others are wringing their hands.  The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), previously called the Trans-Pacific Partnership or TPP and designated the TIPAT in Mexico, entered into effect December 30, 2018 for Mexico and five other of the 11 signatory countries.  The initial group of six was joined by Vietnam on January 14.  The remaining four continue to pursue parliamentary approval of the deal and are expected to join officially in the near to medium term.  The pact updates trade rules and most importantly will reduce import tariffs between four countries in the Americas and seven countries in Asia, including Australia and New Zealand.  Importantly, China and the United States are not participating in the CPTPP. Continue reading CPTPP opens trade opportunities for Mexico