EMIS Insights - Mexico Consumer Goods and Retail Sector Report 2018 - 2019

MEXICO CONSUMER
GOODS & RETAIL

SECTOR 2018/2019
An EMIS Insights Industry Report
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ABBREVIATIONS
AMDA Mexican Association of Automobile Dealers
AMIPCI Mexican Internet Association
AMVO Mexican Association of Online Retail
ANTAD National Association of Supermarkets and Department Stores
BMV Mexican Stock Exchange
COFECE Federal Economic Competition Commission of Mexico
IMSS Mexican Institute of Social Security
INEGI National Institute of Statistics and Geography

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p.5
CONTENTS 01 EXECUTIVE SUMMARY

Sector in Numbers
Sector Overview
Sector Snapshot
Sector Outlook
Driving Forces
Restraining Forces
02 SECTOR IN FOCUS p.14

Main Economic Indicators
Main Sector Indicators
Household Loans
Inflation
Consumer Confidence
Global Positioning
Foreign Direct Investment
Employment and Wages
03 COMPETITIVE LANDSCAPE p.23

Highlights
Market Shares
Supermarkets Competition
Department Stores Competition
Top M&A Deals
M&A Activity
04 COMPANIES IN FOCUS p.30

Wal-Mart de México SAB de CV
Organización Soriana SAB de CV
Grupo Elektra SAB de CV
Grupo Sanborns SAB de CV
Grupo Palacio de Hierro SAB de CV

p.41
CONTENTS 05 REGULATORY ENVIRONMENT

Government Policy
06 SUPERMARKETS
Highlights
p.44
Main Events
Infrastructure
Sales
Focus Point - Number of Supermarket Stores
07 SPECIALISED & DEPARTMENT p.50

STORES
Highlights
Main Events
Department Stores
Specialised Stores
Motor Vehicles Retail
Focus Point - Number of Department Stores
Focus Point - Number of Specialised Stores
08 SHOPPING CENTRES p.60

Highlights
Main Events
Infrastructure
Focus Point - Number of Shopping Centers
09 ONLINE RETAIL p.66

Highlights
Main Events
E-Commerce
M-Commerce

MEXICO CONSUMER GOODS & RETAIL SECTOR 2018/2019
An EMIS Insights Industry Report CONTENTS
01
EXECUTIVE
SUMMARY

Copyright © 2018 EMIS, all rights reserved. 5
Investor Company.
01 EXECUTIVE SUMMARY CONTENTS
Sector in Numbers
MXN 2.3%
16.3% CAGR
Trade GVA
2,174bn
Real Sales in
as % of GDP Retail Supermarkets
Sector Sales 2011-2016
11.9% 7.7%
CAGR CAGR 1.6mn
Real Sales in New Passenger
Real Sales in
Specialised Stores Department Stores Car Sales
2011-2016 2011-2016
USD 7%
3.81mn 440.8mn CAGR
Number of Household
Employees in FDI Inflow in Spending Forecast,
Trade Sector Retail Trade 2016-2021
Note: Data for 2016.

Source: INEGI, ANTAD, Bank of Mexico, BMI Research, AMDA
MEXICO CONSUMER GOODS & RETAIL SECTOR 2018/2019 6

Sector Overview
Mexico is the second-largest economy in Latin America in terms of nominal GDP, and thereby a key
consumer market in the region, with a population of over 122.8mn people, as of December 2016. Over
the period 2011-2016, the trade sector performed well, with its gross value added expanding at a CAGR
of 3.6%, well above the 3% GDP growth in the same period and reaching a share of 16.3% of the
country’s GDP in 2016. The trade activity remains concentrated in supermarkets, which generated 38%
of total retail sales in 2016, followed by specialised and department stores (32.3%), online retail
(15.3%), and shopping centres (14.5%), as per EMIS Insights estimates. In line with global trends, online
retail was the most dynamic channel over 2011-2016, expanding its sales five times in real terms.
Entry Modes
In recent years, foreign players have entered the Mexican retail sector through greenfield
investments. However, many foreign operators preferred partnerships with local players in order to
gain foothold in the market. The most prominent example is the July 2016 agreement between
domestic supermarket operator Grupo Soriana and the Chilean retail giant Falabella, according to
which the latter began to develop its home and garden chain Sodimac in Mexico from scratch, but as
associated stores to Soriana supermarkets, benefiting from the endorsement of the Mexican company.
Similarly, the US online retail giant Amazon, which established its Mexican operations in June 2015,
has partnered with several domestic convenience store chains in order to implement its innovative
cash payment system especially developed for Mexico.
Segment Opportunities
One of the key opportunities for shopping centre developers is the high demand for mixed shopping,
entertainment and service spaces. As online retail grows rapidly, consumers are increasingly looking
for complementary activities to add to the offline shopping experience such as bars, cinemas, music
events, hotels, supermarkets, and even medical centres. Therefore, new mixed shopping-
entertainment centre projects are likely to profit from this change in consumer preferences. There are
also ample opportunities for growth in m-commerce, as there is already a quite developed mobile
internet infrastructure. However, mobile payments security is still a concern for Mexican e-shoppers.
The development of the cash payment option for mobile purchases is likely to yield great results, as it
did for e-commerce.
Government Policy
In recent years, the government policy focused on two major issues - ensuring sufficient competition
inside retail channels and fighting illegal retail trade. An example of the former is the Federal
Economic Competition Commission of Mexico (COFECE)’s January 2016 intervention in the acquisition
of supermarket chain Comercial Mexicana by competitor Grupo Soriana. In September 2017 the federal
government and several private institutions discussed the implementation of a major plan for
reducing illegal/informal alcohol sales.
Source: INEGI, ANTAD, BMV, Bank of Mexico, El Economista

Sector Snapshot
Mexico Retail Sector
SALES: MXN 2,159.7bn

MXN 820.0bn MXN 312.9bn MXN 697.0bn MXN 329.8bn
Supermarket Shopping Specialised & Online Retail
Sales* Centre Sales** Department Sales
Stores*
5,410 151 46,507 MXN 98.9bn

Number of Number of Number of Stores* Travel
Stores* Shopping Centres**
14,739,000 m2 4,545,415 m2 12,664,000 m2 MXN 53.1bn

Sales Area* Gross Leasable Sales Area* Apparel &
Area** Accessories
55,635 68,842 44,923 MXN

MXN/m2 MXN/m2 MXN/m2 30.0bn
Revenue/Sales Revenue/Sales Area Revenue/Sales Area Consumer Electronics,
Area Ratio* Ratio* Ratio* excl. Computers
* Includes only data for ** EMIS Insights estimate based

ANTAD members on top 9 players company data
KEY PLAYERS NET KEY PLAYERS
EVENUES*** NET REVENUES
KEY PLAYERS NET KEY TENANT
REVENUES SALES 1. Coppel 1. Mercado Libre
MXN 114.5bn USD 257.5mn
1. Walmart 1. Liverpool 2. Liverpool 2. Amazon
MXN 433.0bn MXN 39.5bn MXN 100.4bn USD 243.9mn
2. Soriana 2. Gicsa 3. Sansborns
MXN 149.5bn MXN 37.4bn MXN 37.3bn
3. Chedraui 4. Palacio de Hierro
MXN 62.1bn MXN 31.2bn
*** Department Stores Segment
Note: Data for 2016.
Source: ANTAD, Euromonitor International, Company Data

Sector Snapshot: Mexico

Consumer Goods & Retail Sector
In 2016, the retail sales in Mexico reached MXN 2,159.7bn, up by 11.2% in real terms (adjusted for
inflation), according to EMIS Insights estimates based on INEGI, AMIPCI and ANTAD data. Sales across
all segments surged as a result of the expansion of the economy by 3.3% y/y during the year. Retail
sales in 2016 were boosted by the low unemployment, the stable inflation, the growing remittances
from abroad, and the good performance of household credit. Online retail saw the largest sales
increase of 24.1% y/y in 2016, followed by specialised and department stores with 19.8% y/y, and
supermarkets with 4.2%.
During the year, supermarkets were the largest retail channel, with sales value of MXN 820bn or 38%
of the sector’s turnover. In 2016, the number of supermarket stores fell by 5.6%, although all major
players expanded their infrastructure, as smaller companies went through a consolidation process
and closed down stores. However, the sales area in the year inched up by 0.8% y/y, as the average
store size increased by 6.8% y/y, due to the opening of new stores by several hypermarket chains.
Finally, sales efficiency, measured as the ratio between revenue and sales area, jumped by 6.9% y/y,
indicating positive performance in terms of same store sales.
In 2016, specialised and department stores ranked second in terms of sales, with a 32.3% share in the
turnover of the retail sector. During the year, the number of specialised and department stores grew
by 6.8%, as both department stores and convenience stores invested heavily in the expansion of
infrastructure. As a result, the sales area increased by 8.1% y/y and the average store size was up by
1.2% y/y, reversing the downward trend in the two previous years. Sales efficiency, measured as the
ratio between revenue and sales area, rose by 11.2% y/y. Furthermore, new vehicle retail sales also had
a very positive year, with heavy commercial vehicle sales surging by 15.1% y/y and new passenger car
sales rising by 18.6% y/y, thanks to stable new vehicle prices, car purchase loans expansion, and a
reduction of the imports of used vehicles from the US.
In 2016, shopping centres were the third-largest traditional retail channel in terms of sales, as the top
nine chains in the segment surveyed by EMIS had an estimated 14.5% share in the sector’s turnover.
Online retail continued to be the most dynamic segment of the retail sector, with real sales expanding
fivefold between 2011 and 2016, reaching a 15.3% share in the turnover of the retail sector in 2016.
During the year, sales growth was supported by a rapid improvement in the mobile internet
infrastructure, with an impressive 21.25% y/y increase in the number of smartphone subscribers.
Moreover, there was a significant surge in international online retail trade, as Mexicans more often
turned to foreign marketplaces in a search of better prices.
Source: ANTAD, AMVO, INEGI, EMIS Insights, Company Data

Sector Outlook
Household Spending Indicators Forecast
2017f 2018f 2019f 2020f 2021f
Total Household Spending,

7.33 6.69 5.85 7.01 7.56
y/y change, %
Food and Non-Alcoholic Drinks

7.45 6.46 7.74 8.47 8.26
Spending, y/y change, %
Alcoholic Drinks and Tobacco

7.06 6.15 7.37 8.08 7.90
Clothing and Footwear Spending,

5.53 4.90 5.86 6.46 6.40
y/y change, %
Household Goods Spending, y/y

7.46 6.47 7.75 8.47 8.26
change, %
Personal Care and Effects

-0.37 7.97 1.81 1.77 4.62
Comments
According to consultancy BMI Research, total household spending in Mexico in nominal values is
expected to rise at a CAGR of 7% in 2017-2021. Yet, in real terms, in 2017 the growth is likely to be very
moderate at 2.09% y/y, compared to 4.5% y/y in 2016. Higher inflationary pressure, heightened political
uncertainty regarding trade relations between Mexico and the US, and weak consumer confidence are
set to be the main factors for this weak growth.
Moreover, real growth in consumer spending will average a modest 2.9% CAGR over 2017-2021. Due to a
weakened economy, high inflation and high interest rates, essential spending that includes food and
non-alcoholic drinks, transport, housing and utilities, and communications, will expand at a 7.1% CAGR
in nominal terms over the forecast period, slightly outperforming non-essential spending, which will
grow at a 6.9% CAGR. Although unemployment is expected to remain subdued, the labour market is
projected to adjust to the new conditions by cutting down on real wages, which will hurt non-
essential spending the most.
Source: BMI Research

Sector Outlook (cont’d)
Comments
In terms of segments, food & non alcoholic drinks is expected to be one of the best performers,
expanding at a 7.7% CAGR in 2017-2021, whereas alcoholic drink and tobacco will grow at a 7.4% CAGR
in the same period. Both segments will benefit from the rising young population with better income,
in search of higher value brands, particularly in the case of alcoholic drinks. On the other hand,
clothing and footwear is projected to be one of the worst performing retail subsectors, with sales
growing on average by 5.9% per year over the 2017-2021 period. According to BMI Research, the
underperformance of the segment will result from its high concentration that leaves little room for
new entrants and also from the aggressive competition between existing players, particularly in large
urban areas such as Mexico City. At the same time, as the local currency is likely to further depreciate
against the USD in the following years, prices of imported apparel and footwear products will
continue to rise. On the positive side, household goods spending will rise at a strong 7.7% CAGR over
2017-2021 as the segment is not yet saturated and new entrants appear on the scene. The fastest
growing niche in the segments will be digital products, including audio-visual, cameras and
computers.
Household Spending by Segment, Household Spending by Segment,

2017f, % 2021f, %
Alcoholic Alcoholic Others

Drinks and Others Drinks and 60.0%
Tobacco 60.3% Tobacco
Spending Spending
0.6% 0.6%
Personal
Personal
Care and
Care and
Effects
Effects
Spending
Spending
3.2%
2.9%
Clothing and
Footwear
Spending Clothing and
3.6% Footwear
Spending
Household Food and Non- 3.5% Household Food and Non-
Goods Alcoholic Drinks Goods Alcoholic Drinks
Spending Spending 28.3% Spending Spending 29.1%
3.9% 4.0%
Source: BMI Research

Driving Forces
The economic expansion of Mexico over the 2011-2016 period, coupled with stable macroeconomic
conditions and a rising middle class, allowed the gross value added of the retail sector to expand at a
3.7% CAGR. During the period, retail sales across all channels grew at an accelerated pace in real
terms, led by online retail (38.6% CAGR), specialised and department stores (10% CAGR), shopping
centres (5.4% CAGR) and supermarkets (2.3% CAGR). Instrumental for the growth in this period were
the development of credit facilities aimed towards informal workers, and the adoption of cash
payment schemes by online retailers.
External
Over the 2011-2016 period, one of the main external drivers of the retail sector was the solid state of
the economy, in particular the low unemployment, which declined from 4.9% in 2011 to 3.5% in 2016.
The low unemployment was a key positive factor for all retail segments and in particular for
department stores, as this channel is more dependant on formal credit. The energy reform, which
opened the oil and gas upstream segment for private investment, is set to impact positively the
economic activity in oil dependent states such as Yucatan and Veracruz, and this will drive up
consumption. At the same time, the solid performance of the manufacturing sector boosted sales in
Guanajuato. Another strong external driver was the surge in workers’ remittances from abroad,
particularly in 2016 and 2017, when the depreciation of the peso against the US dollar significantly
increased the local value of those transfers. In addition, the Federal Economic Competition
Commission of Mexico (COFECE) has stepped in several times in support of the competition in a
number of segments such as supermarkets and fuel retail trade.
Internal
Between 2011 and 2016, some channel-specific financing products offered by retailers had high
success in boosting sales, particularly in the cases where the penetration of traditional credit
facilities is low, due to the high level of informality in the Mexican labour market. Among the most
effective credit lines were the durable goods purchase loans (ABCD), which are mostly granted directly
by retailers (usually department stores), with very low requirements, fixed interest rates and medium
term maturities (i.e. 2 years). Similar loans also became popular in the new vehicle retail segment,
particularly since 2015, when multiple car brands started to adopt them. The high degree of
informality in the labour market, and the relatively low development of the banking system, pushed
online retailers to adopt cash payment schemes for e-commerce sales, both by online marketplaces
(i.e. Amazon), and by the online retail divisions of traditional retailers (i.e. Walmex), with very positive
results.
Source: ANTAD, INEGI, El Economista, Milenio

Restraining Forces
The major restraining force affecting the sector has been the economic uncertainty following Donald
Trump’s victory in the US presidential elections, as the value of the Mexican peso plummeted,
consumer confidence eroded, inflation spiked, traditional household credit lines contracted in real
terms, and sector FDI almost came to a halt. Nevertheless, investments by domestic players,
particularly in the shopping centre channel, remained strong, credit facilities toward informal workers
showed resilience, and sales performance in some channels such as supermarkets and online retail is
likely to end 2017 in a positive note.
External
The uncertainty surrounding Mexico’s trade relations with the US is a major restraint for the retail
sector. This uncertainty led to a slump in FDI inflows to the sector, as retail is likely to suffer the most
if the NAFTA treaty is repudiated. In addition, it caused a large depreciation of domestic currency over
the course of several months, which has been particularly harmful for the performance of specialised
stores, as many of the items sold there are imported. Moreover, the significant acceleration of
inflation eroded real wages in 2017, with a negative spillover effect across all retail channels. The
restrictive measures adopted by the Mexican central bank in this context, including a rise of the
monetary policy interest rate to levels above the annual inflation, had a detrimental effect on several
household credit types, in particular those with short term maturity and variable interest rates.
Internal
As regards specialised and department stores channels, one of the key restraining factors has been
the somewhat modest performance in terms of sales efficiency, measured as revenue/sales area ratio.
This implies that sales growth in these channels relied mostly on a rapid increase in infrastructure,
which might be unsustainable the medium term. The shopping centre channel has been suffering
from a similar problem, featuring saturated infrastructure in key regions (e.g. Mexico City, Mexico
state, Quintana Roo state) and underdevelopment in others (i.e. the north-western states). Moreover,
the performance of shopping centres suffered from an increased competition from online retail and
also from the changing consumer preferences, as buyers are demanding new types of centres with a
focus on entertainment, services, and other activities besides shopping. These new types of centres
are yet scarce, although there are multiple projects under construction with such formats expected to
be opened in the 2018-2020 period. Finally, the online retail channel has been plagued by safety
concerns related to mobile payments.
Source: El Economista, ANTAD, AMVO

02
SECTOR
IN FOCUS

Investor Company.
02 SECTOR IN FOCUS CONTENTS
Main Economic Indicators
2011 2012 2013 2014 2015 2016 H1 2017
Total Population, mn, year-end 116.3 117.6 119.0 120.3 121.6 122.8 n.a.
GDP,a current prices, MXN bn 15,735 16,377 16,936 18,088 19,307 21,315 21,725
GDP,a constant prices,

4.1 3.1 1.2 3.5 2.7 3.3 1.9
y/y change, %
GDP per Capita, current prices,

10,070 10,106 10,612 10,783 9,476 8,517 n.a.
USD
Consumer Price Index, year-end,

3.8 3.6 4.0 4.1 2.1 3.4 6.3
y/y change, %
Unemployment Rate, year-end, % 4.9 4.9 4.6 4.4 4.2 3.5 3.5
Monetary Policy Rate, year-end, % 4.5 4.5 3.5 3.0 3.3 5.8 7.0
Exchange Rate USD/MXN, year-

13.8 12.9 13.0 14.5 17.1 20.5 18.1
end
Household Final Consumption

Expenditure, constant prices, y/y 4.5 4.7 2.0 1.9 2.3 2.5 2.8
change, %
Household Final Consumption

77.8 79.1 80.7 80.1 80.7 80.6 79.5
Expenditure, % of GDP
Consumer Loans, year-end, current

513,851 615,679 683,250 723,193 795,969 893,339 893,991
MXN mn
Consumer Confidence Index

Evolution,b year-end 90.6 98.7 89.3 93.1 92.6 85.5 85.5
Total FDI Inflow, USD mn 25,097 21,529 48,405 28,538 34,642 28,964 15,645
FDI Inflow in Retail Trade Sector,

1,648.7 2,105.1 143.4 1,060.5 1,645.1 440.8 240.9
USD mn
FDI Inflow in Retail Trade Sector, %

6.6 9.8 0.3 3.7 4.7 1.5 1.5
of total
a Annualised data
b Jan 2003=100 points, seasonally adjusted
Source: INEGI, Bank of Mexico, Oanda

Main Sector Indicators
2011 2012 2013 2014 2015 2016 H1 2017
Trade GVA, current prices, MXN bn 2,309.0 2,481.1 2,601.0 2,901.9 3,218.8 3,374.3 3,364
Trade GVA, constant prices, y/y

7.2 4.3 1.8 5.4 4.3 2.5 2.6
change, %
Trade GVA, current prices, % of

14.8 15.3 15.5 16.0 16.9 16.3 16.2
GDP
Supermarket Real Sales,a

n.a. 5.1 -1.4 -1.0 4.8 4.2 n.a.
y/y change, %
Department Store Real Sales, a

n.a. 8.5 4.7 3.9 11.4 10.0 n.a.
y/y change, %
Specialised Store Real Sales, a

n.a. 8.4 0.5 4.0 20.7 27.9 n.a.
y/y change, %
Number of Supermarket Stores,

4,592.0 4,937.0 5,183.0 5,428.0 5,733.0 5,410.0 n.a.
year-end
Number of Department Stores,

1,640.0 1,736.0 1,866.0 2,055.0 2,177.0 2,258.0 n.a.
year-end
Number of Specialised Stores,

23,992.0 24,268.0 27,512.0 32,573.0 41,349.0 44,249.0 n.a.
year-end
Gross Leasable Area in

12,912.0 13,500.0 13,744.0 14,378.0 14,620.0 14,739.0 n.a.
Supermarkets, thou m2, year-end
Gross Leasable Area in Deparment

4,595.0 4,700.0 5,157.0 5,661.0 5,959.0 6,044.0 n.a.
Stores, thou m2, year-end
Gross Leasable Area in Specialised

4,604.0 4,700.0 5,726.0 4,827.0 5,751.0 6,620.0 n.a.
Stores, thou m2, year-end
New Passenger Car and Utility

n.a. 9.0 7.7 6.8 19.0 18.6 2.9
Vehicle Sales, units, y/y change, %
New Heavy Commercial Vehicle

n.a. 22.8 -5.8 -3.3 7.8 11.8 1.1
Sales, units, y/y change, %
E-Commerce Real Sales,* y/y

n.a. 51.8 36.5 28.1 55.3 29.6 n.a.
change, %
Number of Employees in Trade

3,188.4 3,349.8 3,440.7 3,543.6 3,663.7 3,811.2 3,821.8
Sector, thou, year-end
Nominal Wage Index in the Retail

142.9 149.0 157.8 164.5 173.1 187.5 152.0
Sector, points, 2008=100, year-end
a EMIS Insights estimates

Source: ANTAD, INEGI, Bank of Mexico, IMSS, AMDA

Household Loans
Comments
In January-October 2016, real credit increased by 9.27% y/y, although the Bank of Mexico gradually
raised the monetary policy rate from 3.25% in January 2016 to 4.75% in October. Despite the rate
increases, both stable inflation and strong consumer confidence helped to sustain solid credit growth
during the period. However, everything changed after the November 2016 presidential elections in the
US. Severe capital outflows forced the Mexican central bank to accelerate the pace of interest rate
increases in order to support the battered Mexican peso. The real consumer loan growth rate took a
major blow, steadily declining ever since, as a result of rising inflation, declining real wages and high
interest rates. In November 2017, the value of outstanding consumer loans in real terms shrunk by
2.62% y/y, the worst figure since October 2010. Credit card loans suffered the most, contracting by 5%
y/y in November 2017, followed by payroll loans (-3.6% y/y) and personal loans (-1.8% y/y). The only
exception to this negative trend were the loans for the purchase of durable goods (ABCD), which
actually expanded by 12.3% y/y. Ernesto Ravilla, economic studies director of Banamex, attributed the
differences in the performance of consumer loans to the higher short-term rates on credit card loans,
which made consumers opt for fix-rate long term credits such as the ABCD.
Outstanding Consumer Loans Real Outstanding Consumer Loans by Type, %,

Evolution, y/y change, % November 2017
25
Personal
20 Loan 20.8%
Payroll Loan
24.3%
15
10 Durable
Goods
Purchase
5 Loan 11.8%
-5 Credit Card Other 3.8%

Loan 39.4%
Jan-11
Jun-11
Nov-11
Apr-12
Sep-12
Feb-13
Jul-13
Dec-13
May-14
Oct-14
Mar-15
Aug-15
Jan-16
Jun-16
Nov-16
Apr-17
Sep-17
Source: Bank of Mexico, Vanguardia, Dinero en Imagen, Radio Formula, El Diario de Coahuila

Inflation
Comments
Mexico’s consumer price index has been rising since the end of 2015 and in November 2017 it reached
a year-on-year growth of 6.63%. The rapid deceleration of the Mexican peso against the USD after the
November 2016 US presidential elections created strong inflationary pressure. Although the peso has
largely recovered, as of November 2017, inflation remains resilient and unlikely to return rapidly to the
3% y/y annual target. According to Bank of Mexico head Alejandro Diaz de Leon, the recent increases
in international gas prices are a major obstacle towards a swift reduction of domestic inflation, as the
rise in gas prices impacts both the domestic natural gas and the LPG prices. Moreover, the Bank of
Mexico is concerned about the potential negative effects on the peso from the ongoing renegotiation
of the NAFTA and the potential increases of the US monetary policy rate in 2018. According to Gabriela
Siller, economic analysis director of Banco Base bank, and Joan Eric Domene, analyst of INVEX, the
Bank of Mexico is likely to adopt a more hawkish stance given the high resilience of inflation and the
macroeconomic risks ahead. On December 14, 2017, the Bank of Mexico raised the monetary policy rate
to 7.25%.
National Consumer Price Index, y/y Monetary Policy Rate, period-end, %

change, %
7.5
7.0
7.0
6.5
6.5
6.0
5.5 6.0
5.0 5.5
4.5 5.0
4.0
4.5
3.5
4.0
3.0
3.5
2.5
2.0 3.0
Jan-11
Jun-11
Nov-11
Apr-12
Sep-12
Feb-13
Jul-13
Dec-13
May-14
Oct-14
Mar-15
Aug-15
Jan-16
Jun-16
Nov-16
Apr-17
Sep-17
Jan-11
Jun-11
Nov-11
Apr-12
Sep-12
Feb-13
Jul-13
Dec-13
May-14
Oct-14
Mar-15
Aug-15
Jan-16
Jun-16
Nov-16
Apr-17
Sep-17
Source: INEGI, Bank of Mexico, Expansion

Consumer Confidence
Comments
In January 2016-October 2017, consumer confidence in Mexico was extremely volatile. In February 2016,
consumer confidence started to erode steadily, as domestic consumers began to worry about the
potential implications of the November 2016 presidential elections in the US for Mexico’s trade with
its northern neighbour and for the Mexican economy as a whole. Domestic factors, such as the
sluggish GDP growth, the rising inflation and the rising cost of credit, also had a negative impact on
consumer confidence. On top of this, a brief panic following the significant slump of the Mexican peso
in January 2017, sent consumer confidence plummeting to levels not seen since 2009. As of March
2017, consumer confidence had returned to its H1 2016 level, as it became clear that the NAFTA was
not in immediate jeopardy of unilateral termination by the US. Interestingly, the recovery of the
consumer confidence was mainly supported by the home appliances purchase index (HMPI), which
rose in November 2017 to its highest level since April 2008. The HMPI index, which includes furniture,
TVs, washing machines and other electric appliances, posted an impressive recovery on the back of
the strong growth of the ABCD loans during 2017. Those are medium term fixed rate loans, granted by
banks or directly by retailers (i.e. department store chains), specifically targeting home appliances.
Consumer Confidence Index* Home Appliances Purchases Index*

105 95
100 90
95
85
90
80
85
75
80
70
75
70 65
65 60
Jan-11
Jun-11
Nov-11
Apr-12
Sep-12
Feb-13
Jul-13
Dec-13
May-14
Oct-14
Mar-15
Aug-15
Jan-16
Jun-16
Nov-16
Apr-17
Sep-17
Jan-11
Jun-11
Nov-11
Apr-12
Sep-12
Feb-13
Jul-13
Dec-13
May-14
Oct-14
Mar-15
Aug-15
Jan-16
Jun-16
Nov-16
Apr-17
Sep-17
* Jan 2003=100 points, seasonally adjusted.

Source: INEGI, El Economista, El Financiero

Global Positioning
Comments
As of May 2017, Mexico ranked 4th among the 19 Latin American countries included in the Michigan
State University’s Market Potential Index. This relatively high ranking was due above all to the market
size and market receptivity categories where Mexico ranked second. Furthermore, Mexico had a
relatively good ranking in terms of commercial infrastructure (6th), country risk (6th) and economic
freedom (8th), given the high development of the retail sector and transportation infrastructure, and
slightly below average levels of political risk and economic risk compared to the region. However,
Mexico ranks around the middle of the pack in terms of market consumption capacity (10th) and
market intensity (10th), mostly as a result of a relatively low per capita income (USD 8,517 in 2016),
compared to countries such as Chile (USD 13,460 in 2016) or Argentina (USD 12,439 in 2016). Finally,
Mexico ranked poorly (15th) in terms of market growth rate, as it was one of the slowest growing Latin
American economies in terms of GDP in 2010-2015.
Market Potential Index,* Top 10 Latin Retail Presence by Country as % of Global

American Countries, 2017, % Brands Active in the Country, 2016
Panama 25% United Kingdom 57.5%
Brazil 25%
United States 51.5%
Chile 24%
Mexico 39.5%
Mexico 23%
Uruguay 23% Chile 21.0%
Peru 23% Brazil 20.7%

Costa Rica 20%
Argentina 11.7%
El Salvador 19%
Venezuela 10.2%
Argentina 17%
Colombia 17% Peru 9.9%
* Country score as percentage of best individual country score, with China=100

Source: Michigan State University.

Foreign Direct Investment
Comments
Over the 2011-2016 period, FDI inflow in retail trade was highly volatile. In 2016 and in the first half of
2017, FDI inflow was low compared to historic standards, reaching a mere 1.5% of total FDI against a
4.2% average in 2010-2015. According to the Economic Secretary of Mexico, the supermarket and
department store channels were hit particularly hard, as their combined FDI inflow dropped from USD
1.38bn in 2015 to just USD 47.2mn in 2016. On the other hand, a few other retail segments registered
solid FDI inflows in 2016, among them new vehicle retail (USD 193mn, up 23.6% y/y) and specialised
apparel stores (USD 42.4mn, up 90.9% y/y). Miguel Gonzalez Ibarra, economics professor in the
National Autonomous University of Mexico (UNAM), said in a February 2017 interview for the El
Financiero newspaper that the retail sector was highly vulnerable to a potential disruption in trade
relations between the US and Mexico and therefore FDI inflows might be diverted to less vulnerable
sectors such as manufacturing. Manufacturing is likely to be more resilient to a potential increase of
import tariffs on behalf of the US, as the negative impact of the increase will be partially offset by the
MXN depreciation. At the same time, a MXN depreciation would have a strong negative effect on
retail trade, as it will trigger high inflation, reduce real wages and increase significantly the price of
imported consumer goods.
FDI in Retail Trade, USD mn FDI in Retail Trade, % of total
2,105.1
9.8%
1,648.7 1,645.1
6.6%
1,060.5
4.7%
3.7%
440.8
240.9
143.4 1.5% 1.5%
0.3%
2011 2012 2013 2104 2015 2016 H1 2017 2011 2012 2013 2014 2015 2016 H1 2017
Source: CEIC, INEGI, EMIS DealWatch, El Financiero, E-Consulta

Employment and Wages
Comments
Over the 2011-2016 period, the number of employees in the trade sector increased at a CAGR of 3.6%
and the real wage index in the trade sector rose at a CAGR of 2.2%. The solid performance of both
indicators during the period was consistent with the sustained growth in terms of retail channel
infrastructure and sales. Notably, between 2011 and 2016, the sales area of specialised stores grew at
a 7.7% CAGR, that of department stores rose by 5.6%, and the one of supermarkets increased by 2.7%,
being one of the key factors for employment growth in the key sector. However, according to the
Monthly Survey of Trade Companies (EMEC), conducted by INEGI, the growth of real wages in the
sector over 2011-2016 can be only partially explained by the increase in the labour productivity (1.7%
CAGR), implying that a tighter labour market and reduced unemployment also contributed to higher
sector wages. However, in the January-October 2017 period, both employment and real wages were
significantly affected by the economic and political uncertainty following Donald Trump’s election for
US president. On the one hand, average trade sector employment rose by 3.5% y/y in the period,
considerably slower than the 4.4% average growth of total employment. On the other hand, the
average growth in real wages slowed down to just 1.2% y/y, bellow the sector’s 1.6% labour
productivity growth accumulated since January to October 2017.
Number of Employees in Trade Sector Nominal Wage Index in Retail Sector
3,663.7 173.1 187.5

3,543.6 3,811.2 3,917.0 164.5
3,349.8 3,440.7 149.0
157.8 151.5
3,188.4 142.9 4.8%
3.0%
20.8% 20.9% 20.8%

20.6% 2.1%
20.5% 20.5% 1.8%
20.0%
0.7%
0.2% 0.1%
2011 2012 2013 2014 2015 2016 Oct-17 2011 2012 2013 2014 2015 2016 Oct-17
Number of Employees in the Trade Sector, thou, year-end Nominal Wage Index in the Retail Sector, points, 2008=100, year-
end
Share of Total Employment, %, year-end Real Wage Index in the Retail Sector, y/y change, %, year-end
Source: INEGI, IMSS, Bank of Mexico

03
COMPETITIVE
LANDSCAPE

Investor Company.
03 COMPETITIVE LANDSCAPE CONTENTS
Highlights
Overview
Mexico’s retail trade sector is moderately competitive. In 2016, the top ten companies by sales
accounted for 52.5% of the sector’s revenues. However, there are significant differences across
segments. In the supermarket channel, the three largest chains had a combined 78.6% share of total
sales in 2016, whereas in the department store segment, the four largest retailers had a combined
97.4% share, indicating a low degree of competition in both cases. In the shopping centre segment,
the three largest players had only a 13.4% share in the channel gross leasable area at the end-2016,
which points to a fragmented and competitive market.
Market Structure
Retail sector’s main segment by sales – the supermarket channel, features significant foreign
presence with 52.8% of the segment net revenues for 2016 being dominated by Walmex, the domestic
subsidiary of US retail giant Wal-Mart. The other retail segment with elevated presence of foreign
companies is online retail, where the two top players in 2016 were Amazon and Argentinean Mercado
Libre, with a combined 28.4% share in channel sales. At the same time, in the department store
channel, all four largest players are domestic companies and in the shopping centre segment, all top
nine operators are also of Mexican origin.
Main Players
The two largest domestic supermarket operators in 2016 were Organizacion Soriana SAB de CV with an
18.2% share of sales value and Grupo Comercial Chedraui SA de CV with a 7.6% share.
The four largest players in the department store channel were all domestic companies - Coppel SA de
CV with a 39.3% share in channel sales, El Puerto de Liverpool SAB de CV with a 34.5% share, Grupo
Sanborns SAB de CV with 12.8%, and Grupo Palacio de Hierro SAB de CV with 10.7%.
Market Entries
A major recent entry in Mexico’s retail market was that of Chilean major Falabella, which signed an
agreement with Mexican supermarket chain operator Soriana in July 2016. Under the agreement,
Falabella will launch 20 home and garden Sodimac stores adjacent to Soriana supermarkets. Another
key entry was that of Spanish apparel retailer Inditex, which opened its first Stradivarius store in
Mexico in 2014 and in 2015 launched the first store under the Lefties brand, taking advantage of the
rapid growth of the fast fashion segment in recent years.
Source: El Mexicano, SPD Noticias, Company Data, EMIS Insights

Top 10 Companies in Mexico Retail

Sector
1. Wal-Mart de México
SAB de CV
2. Organizacion Soriana MXN 532,384mn
SAB de CV
MXN 149,522mn
3. Coppel SA de CV
MXN 114,465mn
4. Grupo Comercial 5. Grupo Elektra

Chedraui SA de CV SAB de CV
MXN 88,529mn MXN 81,242mn
7. Corporativo Fragua
6. Grupo Sanborns SAB de CV
SAB de CV
MXN 40,572mn
MXN 47,594mn
8. El Puerto de
Liverpool 9. Grupo Palacio de
SAB de CV Hierro SAB de CV
MXN 31,161mn MXN 31,160mn
10. Grupo FAMSA SAB de CV

MXN 18,039mn
Source: EMIS Company Database

Supermarket Competition
Domestic Sales by Chain, MXN mn Comments

Over the 2011-2016 period, the combined sales
900,000
revenues of the three largest supermarket chains
in Mexico expanded at a CAGR of 6.5% in nominal
800,000 terms, outpacing the overall performance of the
segment sales, which grew by an average 5.8%
175,354 per year. As a result, at the end of 2016, the three
700,000 largest chains had a combined 78.6% share of the
183,563
market, compared to 76.1% in 2011, suggesting a
166,083
175,849 62,099 high degree of concentration. During 2016, Wal-
600,000 156,451
Mart de Mexico SAB de CV, a subsidiary of the US
147,667 57,808 retailer Walmart Inc, ranked as the market leader,
500,000 50,149 51,158 54,544 149,522 responsible for 52.8% of the channel revenues,
109,380 with three brands in the conventional
45,237
101,829 supermarket segment (Walmart, Bodega Aurrera,
104,611 105,028
400,000 Superama) and one in the wholesale food store
96,197
segment (Sam’s Club).
300,000 Mexico’s Organizacion Soriana ranked second,

with a 18.2% market share in 2016. The company
433,025 operates in the conventional supermarket
200,000 410,249
361,789 367,731 378,778 segment under the Soriana, Comercial Mexicana,
328,899
City Club and Alprecio brands, and in the
100,000 convenience store segment under the Super City
brand.
Another Mexican company, Grupo Comercial

0
2011 2012 2013 2014 2015 2016 Chedraui, ranked third with a market share of 7.6%
in 2016, operating supermarkets and hypermarkets
under the brands Tiendas Chedraui, Super
Others
Chedraui and Super Che.
Grupo Comercial Chedraui SA de CV
Organizacion Soriana SAB de CV
Wal-Mart de Mexico SAB de CV
Source: BMV, Euromonitor International, Company Data

Department Store Competition
Sales by Chain Evolution, MXN mn Comments

In 2011-2016 the combined sales revenues of the
350,000
four largest department store chains in Mexico
expanded at a CAGR of 11.9% in nominal terms,
above the 11.3% average annual growth rate of
300,000
the total channel sales. In 2016, the four main
7,658
players had a combined 97.4% share of the
31,160 market, up from 94.8% in 2011, signalling a very
250,000 5,134 high degree of concentration.
26,107 37,276
3,872 Coppel SA de CV, a subsidiary of domestic
7,220
22,702 35,443 business conglomerate Copper, was the market
200,000
21,402 leader in 2016 with a 39.3% of the segment
7,961
34,019 revenues. El Puerto de Liverpool SAB de CV,
20,303
8,833 33,693 100,442 controlled by a consortium of domestic banks,
150,000 17,564 was the second largest player in 2016, with a
32,918 91,293
30,612
34.5% market share. El Puerto de Liverpool targets
81,214
high and middle income households through the
74,105
100,000 Liverpool brand and low income households
66,247
58,657 through the Fabrica de Francia brand.
Grupo Sanborns SAB de CV, a unit of the Mexican

114,465
50,000 98,023 business conglomerate Grupo Carso, had a market
83,194
63,571 71,580 share of 12.8% in 2016. Its Sears brand is oriented
54,334
to middle income households and also the Saks
0 Fifth Avenue brand targeting high income
2011 2012 2013 2014 2015 2016 consumers.
Grupo Palacio de Hierro SAB de CV, a subsidiary of

Others
the Mexican Grupo Bal, was the fourth-largest
Grupo Palacio de Hierro SAB de CV
channel player, with a 10.7% share in 2016. It
Grupo Sanborns SAB de CV
operates the Palacio de Hierro, Casa Palacio and
El Puerto de Liverpool SAB de CV
Boutique Palacio store brands.
Coppel SA de CV
Source: BMV, Euromonitor, Company Data

Top M&A Deals

Top 10 M&A Deals in Mexico’s Retail Sector,* 2016-Q3 2017
Deal Value, Stake,

Date Target Company Deal Type Buyer Country of Buyer
USD mn %
Oct 2016 MercadoLibre Inc SPO Buyer(s) unknown n.a. 1,192.8 (Official) 16.1
El Puerto de Liverpool
Aug 2016 Suburbia Acquisition Mexico 951.2 (Official) 100.0
SAB de CV
Businesses of
foodpanda in Brazil
and Mexico;
Feb 2016 Acquisition Just Eat plc United Kingdom 139.3 (Official) n.a.
Businesses of Rocket
Internet in Spain and
Italy
Sears Operadora
Mexico SA; Grupo Sanborns SAB
July 2016 Acquisition Mexico 106.0 (Official) 14.0
Inmuebles SROM SA de CV
de CV
Portfolio of six
properties in Estado
FIBRA HD Servicios
Aug 2017 de Mexico, Ciudad de Acquisition Mexico 76.5 (Official) 100.0
SC
Mexico and Baja
California Sur
Controladora Tiendas Soriana SA

June 2016 Comercial Mexicana Minority stake de CV; Organizacion Mexico 70.2 (Official) 3.7
SAB de CV Soriana SAB de CV
AGC Controladora
SAPI de CV;
Northgate Capital
Mexico; United
Sep 2016 Linio Minority stake Group LLC; 55.0 (Official) n.a.
States; Sweden
Administradora Latin
Idea SAPI de CV (LIV
Capital); Kinnevik AB
Combustibles
Prana Gas SAPI de
Sep 2017 Ecologicos Acquisition Mexico 26.6 (Official) 100.0
CV
Mexicanos, SA de CV
Northgate Capital
NatGas Queretaro SA
May 2017 Minority stake Mexico; Northgate Mexico; United States 13.6 (Official) n.a.
de CV
Capital Group LLC
Mountain Nazca;
Nov 2016 Kavak Minority stake Chile 3.0 (Official) n.a.
Buyer(s) unknown
* NAICS codes: 44
Source: EMIS DealWatch

M&A Activity, 2016-Q3 2017
Number and Value of Deals in Mexico’s Number of Deals by Deal Value, USD
Retail Sector 0-50mn
7 17.6%
6 6
5 50.1-100mn
8.8%
4
3 3
1,196 100.1-500mn
1,112
5.9%
141 70 15 103 Undisclosed 500.1-1000

61.8% 2.9%
Q1 Q2 Q3 Q4 Q1 Q2 Q3
2016 2017 > 1000mn
2.9%
Value of Deals, USD mn Number of Deals
* NAICS codes: 44
Number of Deals by Deal Type, % Number of Deals by Region

of Investors, %
Acquisition
44.1% Undisclosed
11.8%
EMEA 8.8%
International
23.5%
North
America
5.9%
Joint Venture
5.9% South
America
5.9%
Mexico
Minority stake SPO 2.9% 38.2%
purchase 47.1% Asia 5.9%
Source: EMIS DealWatch

04
COMPANIES
IN FOCUS

Investor Company.
04 COMPANIES IN FOCUS CONTENTS
Wal-Mart de Mexico
SAB de CV
Highlights Income Statement, Consolidated, MXN mn

Wal-Mart de Mexico, the Mexican subsidiary of
the US retail group Walmart Stores Inc, was the
9.8% 9.3% 9.4%
largest retailer in Mexico in terms of sales
revenues in 2016. The US company entered the
country in 1991 through a 50/50 joint venture with
the then largest Mexican retailer, Grupo Cifra, to
532,384
operate retail stores under the Sam’s Club brand.
485,864
437,659
In 2000, Wal-Mart acquired a majority stake in
50,149
44,993
Grupo Cifra and changed its name to Wal-Mart de
42,854
33,352
30,426
26,376
Mexico (Walmex). In 2006, the company received a
licence to operate a bank in the country, and in
2010 it consolidated its units in Central America 2014 2015 2016
under its Mexican operation. In 2013, Walmex Net Revenues EBITDA

Net Profit EBITDA Margin
launched e-commerce operations in Mexico.
Walmex operates stores from every format of the

grocery retail segment with the exception of Balance Sheet, Consolidated, MXN mn
convenience stores.
At the end of 2016, Walmex operated 3,022 stores

in 608 cities across six countries: Mexico, Costa
167,026
Rica, El Salvador, Guatemala, Honduras and

151,821
150,246
Nicaragua.
287,930
253,650
246,081
The total workforce of the company reached

192,434 people based in Mexico and 36,420 based
throughout Central America at the end of 2016. Of
those based in Mexico, 2,622 were executives,
156,294 were full time permanent employees,
-11,841
-12,681
-14,786
32,189 were part time permanent employees, and 2014 2015 2016
3,951 were temporary employees.
Total Assets Shareholders' Equity Net Debt
Source: Company Data, BMV

Wal-Mart de México
SAB de CV (cont’d)
Highlights Sales Area Evolution

At the end of 2016, the company had 2,291 stores
6,247.0 6,353.6
in 471 cities in Mexico under the brands of 6,030.5 6,002.7
5,623.8
Walmart Supercentres, Sam’s Club, Bodega 5,207.2
Aurrera, Mi Bodega Aurrera, Bodega Aurrera
Express, Superama, and Farmacia Medimart, in 8.0%
7.2%
addition to 13 distribution centres. The majority of
retail stores were Bodega Aurrera (1,763), followed 3.6%
1.7%
by Walmart Supercentres (262), Sam’s Club (160),
Superama (96) and Farmacias Medimart (10). In
Central America, also at the end of 2016, the
-5.5%
company had a total of 731 stores under multiple
brands, varying from country to country. Of these, 2011 2012 2013 2014 2015 2016
612 corresponded to convenience stores, 92 to
Sales Area in Mexico, thou m2 y/y change, %
supermarkets and 27 to hypermarkets (the latter
under the Walmart brand).
In 2016, Walmex invested MXN 14.3bn (up 14.4%

Number of Stores Evolution
y/y), in the upgrade of existing and the
2,357
construction of new physical stores, as well as in
2,347
the development of the company’s e-commerce
2,289
2,291
channel. In April 2017, Walmex sold the Suburbia
department store chain, comprised of 119 stores,
to domestic department stores operator El Puerto 2,199
de Liverpool SAB de CV in a MXN 15.7bn deal. The

operation is part of a business strategy shift for 2,084 12.6%
Walmex, which has also sold other operations in
Mexico, including Banco Wal-Mart de Mexico in 4.1% 3.0%
2015 and Vips restaurant chain in 2014, in order to
-2.8%
focus exclusively on the supermarkets channel. -6.3%
Walmex’s shares are traded on the Mexican Stock 2011 2012 2013 2014 2015 2016
Exchange. Its market capitalisation stood at MXN
Number of Stores in Mexico y/y change, %
771bn at the end of November 2017.

Organizacion Soriana
SAB de CV
Highlights Income Statement, Consolidated, MXN

mn
Organizacion Soriana was founded in 1968 in the
7.9%
northern city of Torreon, Coahuila state, as a 6.5% 6.8%
supermarket chain operator. Its operations were
focused on the northern area of the country until
1994, when the company started to expand into
other regions of Mexico. In 2015, Soriana opened
149,522
its first outlet in Mexico City.
109,380
101,829
In 2007, Soriana acquired the grocery retail
11,840
division of Grupo Gigante, one of the largest
7,461
6,662
4,208
3,726
3,704
grocery retailers in the country, adding to its

operations 197 supermarkets with a total sales
area of 851,000 m2 and 13 distribution centres 2014 2015 2016
across the country. Net Revenues EBITDA

In January 2015, Soriana announced the
acquisition of grocery retailer Controladora
Comercial Mexicana (CCM), operating across Balance Sheet, Consolidated, MXN mn
Mexico under the brands of Comercial Mexicana,
Mega, Bodega Comercial Mexicana and Alprecio,
for MXN 39.2bn. In January 2016, Soriana
completed a tender offer for the acquisition of a
96.3% stake in CCM for MXN 34.11bn (USD 1.96bn),
and took control of 143 stores operated by
129,077
Comercial Mexicana at that time.

101,845
23,238
80,720
At the end of December 2016, the company

54,298
50,129
46,400
employed 103,513 people.
Organizacion Soriana’s shares are traded on the

-1,542
Mexican Stock Exchange. Its market capitalisation

-4,693
stood at MXN 72.9bn at the end of November 2017. 2014 2015 2016

Organizacion Soriana
Highlights Sales Area Evolution

As of December 2016, Soriana owned 827 stores
from all retail formats: supermarkets, discount 4,324.3
stores, hypermarkets, club prices and
30.7%
convenience stores, with a combined sales area 3,220.6 3,285.6 3,309.4
3,034.9 3,135.0
of 4.32mn m2. The largest company chain in terms
of number of store was Soriana Hiper, with 274
stores, followed by Soriana Super (129 stores),
Soriana Mercado (141 stores), Soriana Express (105
stores), Mega (64 stores), Comercial Mexicana (42
stores), City Club (35 stores), Bodega Comercial
3.3% 2.7%
(34 stores), and Alprecio (3 stores). 2.0%
0.7%
2011 2012 2013 2014 2015 2016
In 2016, the company invested MXN 2.58bn (up
37.67% y/y), in the opening of four new stores Sales Area in Mexico, thou m2 y/y change, %
(two under the brand Soriana Hiper, one under
the brand Soriana Super, and one under the brand
City Club), the upgrading of two existing stores,
Number of Supermarket Stores Evolution
the integration of CCM, the improvement of the
logistics infrastructure, and the development of 827
its e-commerce platform. 674
682
659
In July 2016, Soriana established a partnership 606
558
with the Chilean retailer Falabella SACI, for the
joint development of a home and garden chain in 21.3%
Mexico under the brand Sodimac (owned by

Falabella), with the majority of these new stores
8.6% 8.7%
to be located next to Soriana supermarket stores.
As part of the agreement, Soriana pledged to 2.3% 1.2%
introduce the CRM credit card issued by Falabella
2011 2012 2013 2014 2015 2016
in Soriana supermarket stores, with the first
cards being delivered in July 2017. Number of Stores in Mexico y/y change, %

Grupo Elektra
SAB de CV

Grupo Elektra was founded in 1950 as a 18.1%
manufacturer of radio equipment. In 1957, it
inaugurated its first store under the Elektra brand 12.0%
10.7%
and entered the electronic equipment and home
appliances retail segment.
81,242
74,360
71,774
According to Grupo Elektra’s 2016 Annual Report,
14,691
it ranked among the largest specialised retailers
8,623
7,950
7,558
5,334
in Latin America, with a network of over 7,000
points of sale, as well as the largest provider of
non-banking consumer loans in the US, through
-5,114
its financial division Advance America.
2014 2015 2016
Grupo Elektra is the commercial division of Grupo
Net Revenues EBITDA
Salinas, a Mexican conglomerate operating a Net Profit EBITDA Margin
media company (TV Azteca), a bank (Banco
Azteca), a financial division in the United States
(Advance America), department stores (Elektra Balance Sheet, Consolidated, MXN mn
and Salinas y Rocha), and a motor vehicle retail
chain (Italika).
12.60
At the end of 2016, Grupo Elektra operated 7,396
commercial outlets (stores, banks) in seven
countries - Mexico, Guatemala, the US, Honduras, 7.04
103,491
100,146
Peru, Panama and El Salvador. 5.24

219,229
198,637
195,828

45,202
employed 64,937 people, of which only 3% were

unionised. Of that total, 50,152 were based in
59,076
54,888
51,786
Mexico, 8,832 in Central and South America, and

5,947 in the US.
2014 2015 2016
Total Assets Shareholders' Equity
Net Debt Net Debt/EBITDA

Grupo Elektra
Highlights Number of Elektra Stores Evolution

The main chain of the company in Mexico is 995
Elektra, a department store chain focused on
990
electronic household equipment. As of December
2016, there were a total of 1,162 Elektra stores,
with an average sales surface of 805 m2, of which 977
970
995 were based in Mexico, and 167 in Central and
967
South America. Outside Mexico, Elektra operates
in Guatemala, Honduras, Panama and Peru. In
Mexico, each Elektra store has a branch of Azteca 1.0% 1.3% 2.6%
bank next to it, in compliance with the synergies -2.0%
between the two companies of the Salinas group. 2012 2013 2014 2015 2016
In addition, the company has a total of 50 stores Number of Elektra Retail Stores in Mexico
of the Salinas & Rocha department stores chain, y/y change, %
all located in Mexico. Elektra acquired them in
1999, when it absorbed the S & R Group. Salinas &
Rocha had an average store size of 1,060 m2 at
Number of Salinas & Rocha Stores
the end of 2016 and is mostly focused on selling Evolution
furniture to middle class households.
55 55 55
Finally, the group manufactures and distributes

motorcycles under its own brand Italika. As of
December 2016, the brand is present in five
countries – Mexico, Guatemala, Honduras, 51
Panama and Peru – with over 3,000 sales points 50
and 810 maintenance and repair centres.
Grupo Elektra’s shares are traded on the Mexican 0.0% 0.0%

-2.0%
Stock Exchange. Its market capitalisation stood at -7.3%
MXN 187.7bn at the end of November 2017.
2012 2013 2014 2015 2016
Number of Salinas & Rocha Retail Stores in Mexico
y/y change, %

Grupo Sanborns
SAB de CV

Grupo Sanborns was founded in 1928 as a
manufacturer of paper products and cellulose. As
12.8% 13.6%
of 2016, Grupo Sanborns is one of the leading 12.2%
department store operators in Mexico with a
concept that combines restaurants and general
stores under the same roof.
47,594
44,413
41,203
Grupo Sanborns is the commercial division of

Grupo Carso, a Mexican conglomerate operating
6,474
5,707
5,028
communication companies (Telmex, America
4,734
3,458
3,205
Movil), department stores (Sanborns, Sears,

iShops, MixUp), a bank (Inbursa), and industrial
and construction businesses, all controlled by 2014 2015 2016
Mexican mogul Carlos Slim. Net Revenues EBITDA

At the end of 2016, Grupo Sanborns operated 438
retail outlets and restaurants covering the 65
largest cities in Mexico. Moreover, the company Balance Sheet, Consolidated, MXN mn
had a small international division: three stores in
El Salvador and one store in Panama, with a
combined sales area for the three countries
reaching 1,186,229 m2.

45,185
41,364
40,684
employed 49,652 people.

30,952
29,395
28,943
The company has a limited real estate operation,

owning two shopping centres in Mexico City,
Plaza Loreto and Plaza Inbursa, with a total
leasable area of 71,225 m2. As of December 2016,
-1,714
6.4% of this total leasable area is occupied by

-3,573
-3,905
Grupo Sanborns stores. 2014 2015 2016

Grupo Sanborns
Highlights Number of Stores Evolution

The main division of the company corresponds to 438
the Sears department store chain, which had a
51.6% share of total company revenues in 2016. In
Mexico, Sears operates under two formats: 427
426
traditional stores and boutiques, with the latter
focused on a single brand (i.e. Pier 1, Philosophy, 422
and Palacio de Los Perfumes). As of December 417

2016, there were a total of 93 traditional stores
and 5 boutiques in Mexico, plus one traditional
store in El Salvador. The combined sales area of
all Sears stores reached 816,905 m2. 2.6%
1.2% 0.9% 0.2%
2012 2013 2014 2015 2016
The second largest division in terms of revenues
was the Sanborns department store chain, which Number of Stores in Mexico y/y change, %
had a 26.7% share in total revenues for 2016. As of
December 2016, there were a total of 176 Sanborns
stores in Mexico, with a total sales area of
Sales Area Evolution
268,446 m2, and 56,500 restaurant seats.
Moreover, there were three Sanborns stores in
1,172
Central America, with a total sales area of 5,344
1,093
m2, and 1,033 restaurant seats.
996 1,018
964
The third retail division by revenues was the
music store line, which includes the Mixup, Mx
Mixup, Discolandia, Tower Records, iShop and
eduMac chains, with a 15.2% share in total
revenues for 2016. As of December 2016, this
division had 112 stores in Mexico with a total
sales area of 37,821 m2. 7.3% 7.2%
3.4%
The remaining 6.5% share in total revenues 2.2%
corresponded to the convenience store chain 2012 2013 2014 2015 2016
DAX, the restaurant chain Sanborns Café and the
Sales Area in Mexico, thou m2 y/y change, %
department store chain Saks Fifth Avenue.

Grupo Palacio de Hierro

SAB de CV

Grupo Palacio de Hierro, founded in 1891 in
Mexico City, is an upscale chain of department 8.3% 8.5%
7.1%
stores. In 1964, the company was floated on the
Mexican Stock Exchange.
At the end of 2016, the company operated 13

department stores for apparel, footwear,
31,160
cosmetics and jewellery, two apparel outlets, two
26,017
22,702
home furnishing stores, 130 boutiques, fifteen

restaurants, four travel agencies and one beauty
2,636
2,156
1,609
clinic. Palacio de Hierro is also active in the
926
772
476
catalogue and e-commerce retail. The company

provides sales financing to its clients. 2014 2015 2016
Net Revenues EBITDA
Its operations are mainly focused on large cities, Net Profit EBITDA Margin
targeting the high-income population. In Mexico
City, Palacio de Hierro operates a network of
eight department stores, two home furnishing Balance Sheet, Consolidated, MXN mn
stores, 63 boutiques and ten restaurants. The
remaining retail units of Grupo Palacio de Hierro
are located in a few large cities such as
2.05
Monterrey and Guadalajara and in important
tourist areas such as Acapulco and Cancun. 1.70
Its main store brands are Palacio de Hierro, Casa

34,230
32,104
28,463
Palacio and Boutique Palacio. 0.90

17,039
3,674
15,325
3,303

2,374
18,175
employed 12,461 people, of which 26.4% were

unionised.
2014 2015 2016
Total Assets Shareholders' Equity
Net Debt Net Debt/EBITDA

Grupo Palacio de Hierro

Highlights Number of Stores Evolution

The company has a real state division, which
179
controls a shopping centre in Mexico City, and is 170 157
160
also a co-owner of four other shopping centres -
Perisur and Santa Fe in Mexico City, Angelopolis 134
in Puebla state, and Paseo San Pedro in Nuevo 19.4%
Leon state.
6.3% 5.3%
In 2016, general merchandise sales corresponded
to 48.3% of the company’s revenues, footwear
and apparel sales accounted for 41.5%, home
-12.3%
appliances had a 4.7% share, 3.6% came from
interest payment from loans to clients, and the
2012 2013 2014 2015 2016
remaining 1.9% came from rentals. Regarding the
geographical segmentation of the revenues, in Number of Stores in Mexico y/y change, %
2016 Mexico City had a 69.9% share of sales, down
from 74.6% in 2014, while the rest of the country
accounted for 30.1% in 2016, compared to 25.4% in
Investment in Fixed Assets Evolution
2014.
In May 2017, El Palacio de Hierro announced that 3,109

several global cosmetic firms, including Channel,
Lancome, Estee Lauder, Nars, La Mer, Jo Malone, 2,318
Bobbi Brown and Giorgio Armani Beauty &
102.9%
Cosmetics, will open their corners on Palacio de
Hierro stores, as part of the Mexican retailer’s 1,581
1,358
strategy to focus on the high end cosmetics 1,143
34.1%
16.4%
segment. 932
-27.7%
Grupo Palacio de Hierro’s shares are traded on
the Mexican Stock Exchange. Its market -70.0%
capitalisation stood at MXN 21.54bn at the end of

2011 2012 2013 2014 2015 2016
November 2017.
Investment in Fixed Assets, MXN mn y/y change, %

05
REGULATORY
ENVIRONMENT

Investor Company.
05 REGULATORY ENVIROMENT CONTENTS
Government Policy
Government Efforts against Market Concentration

In January 2016, Grupo Soriana, one of the largest players in the supermarket segment, acquired
fellow chain Comercial Mexicana with all their 143 stores. The acquisition cemented the position of
Grupo Soriana as the second-largest player in the segment in terms of sales in 2016. Yet, the deal
provoked an intervention by the Federal Economic Competition Commission of Mexico (COFECE).
Worried about the increasing market concentration in the supermarket channel, COFECE obliged
Soriana to sell 12 of the newly acquired 143 stores to another company. Although no specific
timeframe to comply with the ruling was set, in January 2017, COFECE imposed a fine of MXN 2.4mn to
Soriana for failing to disclose information on the sale of these 12 stores. In March 2017, COFECE
rejected Soriana’s proposal to lease six stores with a buy option to Grupo Comercial Chedraui, the
third-largest player in the channel in terms of sales in 2016. According to COFECE, the proposed
arrangement between Soriana and Chedraui allowed for eventual business information exchange
between two of the main players in the channel, which is forbidden by the Federal Law of Economic
Competition. In August 2017, according to the El Economista newspaper, COFECE started an internal
debate on transferring the 12 stores to Chilean retailer Falabella. As of December 2017, there has been
no final resolution on the case and the 12 stores are still under Soriana’s control.
New Regulations in the Fuel Retail Channel

In 2013, the Mexican government began a gradual reform of its energy policy, with the goal of ending
the monopoly of state-run oil company Pemex over the production, distribution and retailing of fuel;
opening the market to private competitors; deregulating domestic prices; and reducing government
subsidies to energy consumers in Mexico. Before the launch of the reform, Pemex used a franchise
model for fuel distribution, in which the private managers of filling stations received a sales
commission for their operation but had no control over supply, logistics or fuel prices. Since 2014,
many fuel stations previously controlled by Pemex began to be transferred to large private operators.
On the other hand, several independent fuel retailers, particularly small ones, began to prepare to the
potential arrival of large foreign fuel retail chains such as Chevron, Shell and ExxonMobile following
the end of Pemex’ monopoly, the El Economista reported in May 2017. In March 2017, COFECE reached
an agreement with a consortium of 54 independent Mexican fuel retailers (called G500), according to
which the consortium can purchase gasoline and diesel in the open market in order to supply their
filling stations, but its members are not allowed to engage in sales collusion of any kind.
Source: COFECE, El Economista, El Financiero

05 REGULATORY ENVIROMENT CONTENTS
Government Policy
(cont’d)
Joint Public-Private Agreement to Curtail Illegal Alcoholic Beverages Retail

In September 2017, representatives of the alcoholic beverages manufacturing industry, retailers and
the federal government signed a pact in which all parties agreed to coordinate efforts to combat
illegal alcoholic beverage sales. According to the latest available data, cited by Erik White, president
of the Mexican Wine and Liquors Industry Association (CIVyL), in 2015, the illegal alcoholic beverages
market accounted for 36% of all retail alcoholic sales, much above the share of illegal sales in other
countries in the region and the world. The pact obliges alcoholic beverage manufactures to change
the labelling of their products as of March 26, 2018 to include warnings about the effects of excessive
consumption. Retailers, on the other hand, will have to establish mechanisms to ensure that the
beverages are supplied from authorised domestic manufacturers or importers, restrict the sales to
minors, and register all buy/sales operations with electronic invoices. Erik White remarked that the
short-term goal of the agreement is to reduce the share of illegal alcoholic beverage sales in total
alcoholic beverages sales to 30% or lower in 2018. Several private trade institutions participate in this
agreement, including the National Association of Supermarket and Department Stores (ANTAD) and
the National Association of Wholesalers (ANAM).
New Policies Targeting Informal Street Vendors in Merida City, Yucatan State
In August 2017, Guibaldo Vargas Madrazo, Director of the Government of Merida, capital and largest
city of the state of Yucatan, announced that his administration was aiming to stamp out informal
street trade. Merida, which is an important tourist destination in Mexico, is plagued by informal
retailers, mostly belonging to the Chiapanacas native aboriginal communities, who work on the
streets selling flowers, sweets, handicrafts and other products. The issue is highly sensitive, as a joint
investigation conducted in 2016 by the Human Rights Yucatan Commission and the Public Bodies
Supervision Centre revealed that oftentimes these street vendors are victims of a network of
organisations dedicated to labour exploitation and human trafficking. In addition, Merida’s
Subdirectory of Markets has also established that informal retailers usually work ten or more hours
per day, and in case of female retailers, they are usually accompanied by children. The authorities will
take the necessary precautions not to infringe the basic human rights of these workers. The proposed
steps of the plan include a notification to workers, informing them that they are conducting illegal
activities. In case street vendors do not voluntarily cease sales activities, their goods will be
confiscated.
Source: Radio Formula, Milenio, Diario de Yucatan

06
SUPERMARKETS

Investor Company.
06 SUPERMARKETS CONTENTS
Highlights
Overview
In 2016, the sales of the supermarket channel, which includes only traditional supermarket and
hypermarket chains, according to ANTAD definition, reached MXN 820bn, equivalent to 38% of the
total turnover of the domestic retail sector. Over 2011-2016, the sales of the channel expanded by an
average of 2.3% per year in real terms, supported by a stable economic environment and aggressive
competition between key players. In terms of infrastructure, the number of stores operating in the
segment increased at a CAGR of 3.3% in 2011-2016, to a total of 5,410 stores by the end of 2016. The
total supermarket sales area expanded at a much slower CAGR of 2.7%, reaching 14.73mn m2 at the end
of 2016. The average store size decreased slightly from 2,811 m2 in 2011 to 2,724 m2 in 2016.
Supermarket sales efficiency increased significantly in 2011-2016 (3.1% CAGR), signalling that same
store sales performed well in the period.
Drivers and Constraints

Over the 2011-2016 period, the main growth driver for the supermarket segment was the favourable
macroeconomic context, with moderate but stable GDP growth, low unemployment and cheap
household credit. Moreover, several underdeveloped but relatively rich in oil resources states have
experienced solid growth in the period thanks to the energy reform adopted by the Mexican
government in 2013. As the reform progressively deregulated the oil and gas market, with energy price
increases benefiting the oil producing states, supermarket chains invested in developing further sales
infrastructure in those regions. Since late 2016, a significant restraint has been the rise of inflation,
following the large depreciation of the Mexican peso against US dollar in the November 2016-January
2017 period.
Outlook
According to a January 2018 report by Mexican consultancy Bursametrica, the outlook for the
supermarket segment for 2018 is favourable as the rise of inflation is expected to ease and domestic
consumption to recover in H2 2018. According to a market consensus forecast elaborated by
Bloomberg in December 2017, the chain with best perspectives for 2018 is Chedraui, as the plans
announced by the company for growth in sales infrastructure and its significant presence in oil
producing states is expected to boost its share in total supermarket sales. Soriana is also likely to
report a positive performance in 2018 due to the ongoing rapid process of debt reduction, and the
integration of Comercial Mexicana stores inside the business plan of the group. Walmex’s sales are
forecast to remain stable, as the company is overbought, but nevertheless its sales performance in
2018 will be solid, fuelled by own label product sales.
Source: ANTAD

Main Events
Comments
§ In July 2017, domestic supermarket chain operator Organizacion Soriana began issuing CRM credit
cards to its customers, as part of an agreement with Chilean retailer Falabella. Initially, this offer
will be restricted to seven stores in Mexico. Soriana and Fallabella teamed up in July 2016, as the
latter sought a partner to introduce both its CRM credit card and the Sodimac home and garden
chain in Mexico. For Soriana, the issuing of CRM cards in its supermarket stores is expected to
boost sales. The company also expects to profit from the construction of Sodimac stores, as these
will be located next to Soriana supermarkets. The partnership between the two large Latin
American retailers in Mexico may expand further, as in August 2017 the El Economista informed
that Falabella was pondering the acquisition of 12 supermarket stores, part of the portfolio of 143
stores of Comercial Mexicana chain, a subsidiary of Soriana, that Soriana was obliged to sale
following a January 2017 COFECE ruling.
§ In December 2017, Wal-Mart de Mexico (Walmex) announced several investment plans for 2018. The
supermarket chain operator pledged to incorporate free Wi-Fi internet service in all of the company
stores in Mexico, except for the Bodega Aurrera Express chain, by the end of June 2018. According
to Guilherme Loureiro, CEO of Walmex, this initiative will attract more clients to the stores, as they
will appreciate the possibility of using internet while shopping, but more importantly it will help
Walmex to better know the shopping preferences of its customers. Walmex outlined it will use this
data to tailor its promotions and discounts more adequately to the needs of local buyers. In
addition, Walmex unveiled plans for the construction of two new stores in the state of Oaxaca
during 2018, both under the Wal-Mart brand, with an estimated total investment of MXN 120mn.
The two stores are expected to generate 140 direct and 280 indirect jobs. As of December 2017,
Walmex already operates a total of 30 stores in the state. According to Gabriela Buenrostro, deputy
director of Walmex, the company plans to continue expanding its operations in Oaxaca state, as
the state is registering solid economic growth in recent years. Another recent strategic initiative
for Walmex is the expansion of wholesale food chain Sam’s Club. In 2017, Walmex opened a total of
three new Sam’s Club stores in Mexico, after zero openings in 2016. According to Cristina Morales,
analyst of domestic consultancy Signum Mexico, over the period 2014-2017 the chain significantly
altered its product portfolio, focusing on fast-moving food products, which yielded great results in
terms of sales. This, in turn, encouraged Walmex to expand the number of stores of the chain.
Source: Forbers, FashionNetwork, Expansion, El Financiero, El Universal, El Economista

Infrastructure
Comments
Over the 2011-2016 period, the number of supermarket stores in Mexico expanded at a CAGR of 3.3%,
while the sales area of the segment grew at an average annual rate of 2.7%, according to ANTAD. The
sharp reduction in the number of stores registered in 2016 is explained by a consolidation process of
smaller companies, as all large players actually expanded their number of stores in operation during
the year. Notably, Walmex, the largest company in the segment, increased the number of supermarket
stores by 2.3% y/y to a total of 2,281 by the end of 2016. The expansion was attributed above all to the
Bodega Aurrera chain, which opened a total of 44 stores during the year, mostly in the central and
north-eastern regions of the country. The number of supermarkets operated by Grupo Soriana
increased by 21.26% y/y to 827 stores by the end of 2016, following the acquisition of Grupo Comercial
Mexicana’s supermarket chains (Mega, Comercial Mexicana, Bodega Comercial, Alprecio) in January
2016. The number of supermarket stores under the three brands operated by Grupo Chedraui
(Chedraui, Super Chedraui, Super Che), increased by 4.5% y/y, reaching a total of 232 stores by the end
of 2016.
Supermarket Sales Area Evolution* Number of Supermarket Stores

Evolution*
14,620 14,739
14,378 5,733
5,428
5,410
5,183
4,937
13,744 4,592
13,500
7.5%
5.0% 5.6%
12,912 4.7%
4.6% 4.6%
1.8% 1.7% -5.6%

0.8%
2011 2012 2013 2014 2015 2016 2011 2012 2013 2014 2015 2016
Supermarket Sales Area, thou m2 y/y change, % Number of Supermarket Stores y/y change, %
* Include only the member companies of ANTAD.
Source: ANTAD

Sales
Comments
Over the 2011-2016 period, real supermarket sales expanded at a CAGR of 2.3%. At the same time, the
supermarket channel sales efficiency, measured as the real revenue/sales area ratio, improved at a
solid 3.1% CAGR. According to a May 2017 report by US-based investment bank JP Morgan, supermarket
chains operating in Mexico are increasingly focusing on own brand products as a way to compensate
the eroding consumer purchasing power resulting from accelerating inflation. According to JP Morgan,
some of the most renowned own brands in Mexico include Great Value (Walmex), Golden Hills (La
Comer), and Alternative (Chedraui) , which offer discounts ranging from 20% to 50%. Nevertheless, the
penetration of own brands in domestic supermarkets its still low compared to that in other countries
in the region, reaching 2% of total sales. In Chile, for example, they reached 7% of total sales in 2016.
In 2017, despite the inflationary spike, supermarket sales performed reasonably well, with real sales
rising by 2.5% y/y in September 2017. According to Marisol Huerta, analyst at domestic consultancy
Bursametrica, the September 2017 strong earthquake in Mexico City significantly increased the
demand for food and personal care products, boosting channel sales during the month.
Supermarket Sales Evolution* Revenue/Sales Area Ratio Evolution*
761 820
711 55,635
673 690
618 52,052
5.1% 49,852 50,204 49,451

4.8% 6.9%
4.2%
47,862 5.3%
4.2%
0.7%
-1.0% -1.5%
-1.4%
2011 2012 2013 2014 2015 2016 2011 2012 2013 2014 2015 2016
Supermarket Sales, MXN bn, current prices Revenue/Sales Area Ratio in Supermarkets, MXN/m2
y/y change, %, MXN, constant 2010 prices y/y change, %
* Data for the member companies of ANTAD

Source: ANTAD, INEGI, Expansion, El Financiero

FOCUS POINT
Number of Supermarkets Stores, December 2016
Baja California,
Baja California Sur,
865
Nayarit, Sinaloa,
Sonora 16%
Chihuahua,
450 Durango,
Coahuila,
8.3% Zacatecas
589 Tamaulipas,
Nuevo Leon
10.9%
Veracruz,
946 Tabasco,
Campeche,
17.5% Yucatan,
Quintana Roo
Jalisco, Colima,
Michoacan,
Mexico State,
Morelos, Puebla, 1,421
Tlaxcala, Hidalgo,
Queretaro, San 26.3%
Luis Potosi,
Guanajuato,
Aguascalientes
860
Mexico DF
15.9%
279 Guerrero,
Oaxaca,
5.2% Chiapas
Source: ANTAD

07
SPECIALISED &
DEPARTMENT STORES

Investor Company.
07 SPECIALISED & DEPARTMENT STORES CONTENTS
Highlights
Overview
In 2016, the sales of specialised and department store channel, which includes also convenience
stores according to ANTAD’s definition, reached MXN 697bn or 32.3% of the turnover of the domestic
retail sector. Over 2011-2016, the sales of the channel rose by an average of 10% a year, supported by a
stable economic environment, household credit growth and increased remittances from abroad. The
number of stores operating in the segment increased by a 12.7% CAGR over 2011-2016, reaching a total
of 46,507 by the end of 2016. Meanwhile, the total channel’s sales area expanded at a much slower
6.6% CAGR, reaching 12.66mn m2 at the end of the period. The average store size decreased
significantly from 358 m2 in 2011 to 272 m2 in 2016, due to the rapid growth of convenience store
chains. On the other hand, the channel’s sales efficiency expanded at a 3.2% CAGR in 2011-2016.

One of the most significant driving factors for the segment was the proliferation of credit line
facilities targeting informal workers, particularly in the durable goods and new vehicle segments.
These credits have very low requirements, fixed interest rates and medium-term maturities and have
become popular among Mexican households with low and middle income. The channel sales were also
supported by a strong labour market and by an increase in the value of foreign remittances, resulting
from the progressive depreciation of the Mexican peso over the 2011-2016 period. In 2017 the high
interest rates established by the Bank of Mexico affected formal credit lines and in particular credit
card loans, presenting a major constraint for the subsector development. Another constraint was the
temporary closure of hundreds of stores in Mexico City after the September 2017 earthquake.
Outlook
According to a January 2018 report by the Mexican Association of Automobile Dealers (AMDA), new
vehicle car sales in 2017 are estimated at 1,530mn units, down 4.6% y/y. AMDA expects that sales will
start to gradually recover in 2018 and rise by 1% y/y to 1,545mn. According to AMDA director Guillermo
Rosales, the 2018 forecast is contingent on several factors, including inflation, the evolution of the
NAFTA negotiations, and more importantly, the imports of used vehicles from neighbouring countries.
He added that used vehicle imports from Canada and the US shrunk by 18.4% y/y in January-November
2017, reaching 112,226 units. Rosales pointed out that in 2018 used vehicle imports may return to
growth, especially in the northern states of the country, as the local governors are preparing plans to
facilitate and simplify vehicle imports in an attempt to attract voters in a year of elections.
Source: ANTAD

Main Events
Comments
§ In April 2017, department store operator El Puerto de Liverpool SAB de CV (Liverpool), announced
the completion of the acquisition of the Suburbia department store chain, until then controlled by
Wal-Mart de Mexico. As part of the agreement, Liverpool paid MXN 15.7bn for the 119 stores
operated by Suburbia in Mexico. The operation is part of a business strategy shift for Walmex,
which has also sold its bank and restaurant chain operations in Mexico in order to focus
exclusively on the supermarket segment. For Liverpool, the acquisition of Suburbia will almost
surely allow it to become the largest department store operator in 2017 in Mexico by revenues,
after ranking second behind Coppel SA de CV in 2016. However, Liverpool will have to pay a rent to
Walmex in order to operate 34 Suburbia stores, which are located inside Walmex shopping
complexes.
§ Also in April 2017, Carlos Silis, digital marketing manager of Grupo Palacio de Hierro, said during a
marketing event held by the University of Anahuac that his company was not worried by the
acquisition of Suburbia by Liverpool, in spite of the increased market concentration that will result
from the deal. In his opinion, Liverpool had been shifting its target audience towards middle
income households, similarly to Coppel, thus leaving Palacio de Hiero as the only chain exclusively
targeting high-income households. Silis also added that Palacio de Hierro is focusing on customer
experience above anything else.
§ In November 2017, Mexican department store chain Coppel SA de CV announced it acquired a total
of 69,351 handicrafts during the month, from a group of 316 craftsmen from several Mexican states,
including Chiapas, Mexico, Guanajuato, Guerrero, Hidalgo, Jalisco, Oaxaca, Puebla and Tabasco,
among others. According to Rocio Guerrero Lizarraga, marketing manager of Coppel, a total of
49,601 handicrafts were offered as prize in the Millionaire Christmas contest organised by the
company among shoppers. Moreover, a total of 19,750 handicrafts were sold directly to the public
in Coppel stores. The initiative was linked to the existing partnership between Coppel and the
Mexican Fund for Craft Development (FONART), a government body promoting the manufacturing
of handicrafts in Mexico. This partnership began in 2010, and in the whole 2010-2017 period, a total
of 960,000 handicrafts were acquired by Coppel.
Source: El Financiero, Marketing4ecommerce, FashionNetwork, Acento Radio, El Diario de Chihuahua

Department Stores
Comments
Over the 2011-2016 period, the department store sales area expanded at a CAGR of 5.6% and the
number of department stores rose by 6.6%. The segment enjoyed sustained growth in terms of
infrastructure over the 2011-2016 period, although this growth has been decelerating since 2014.
In 2016, Puerto de Liverpool opened 10 new department stores, expanding their total number by 8.9%
y/y. In April 2017, the company acquired Suburbia, a department store chain previously operated by
Walmex, adding a total of 119 stores to its portfolio, as part of an aggressive expansion plan to
dethrone Coppel as the leader in the department store subsegment.
On the other hand, multichannel retailers Grupo Sanborns and El Palacio de Hierro adopted a more
cautious approach. Grupo Sanborns opened six Sears department stores and six Sanborns stores in
2016, while El Palacio de Hierro actually decreased the number of its stores by 13.3% y/y, closing down
22 stores of the Boutique Palacio chain. Instead, the company invested in the upgrade of 13
department stores of the El Palacio de Hierro chain.
Department Stores Sales Area* Number of Department Stores*
5,959 2,177 2,258

5,661 6,044 2,055
5,157 1,866
4,595 4,700 1,736
9.7% 9.8% 1,640
10.1%
7.5%
5.3% 5.9% 5.9%
2.3% 3.7%
1.4%
2011 2012 2013 2014 2015 2016

2011 2012 2013 2014 2015 2016
Sales Area in Department Stores, thou m2
y/y change, % Number of Department Stores y/y change, %
* Include data only for member companies of ANTAD.

Source: ANTAD

Department Stores (cont’d)
Comments
In 2011-2016, real department stores sales expanded at a robust 7.7% CAGR, while the efficiency of the
segment, measured as the real revenue/sales area ratio, improved at a more modest 1.9%. This implies
that sales growth was due to infrastructure expansion rather than to an improvement in same store
sales. The positive performance of department store sales over the period was supported by a stable
economic environment, with moderate but robust growth, relatively low inflation, and a strong labour
market. In September 2016, Ariel Vileda, research analyst at Mexican broker Multiva, said that
household credit growth and increased remittances from abroad were also helping the growth of
department store sales. However, this positive trend did not continue in 2017, as sales were severely
affected by the depreciation of the Mexican peso against the US dollar, and the following increase in
inflation, which peaked at 6.66% in August 2017 and remained close to this level until November 2017.
As a result, real sales in department stores suffered a 4.9% y/y contraction in September 2017, as per
ANTAD’s estimates. According to Carlos Hermosillo, research analyst at Mexican broker Actinver, the
September 2017 earthquake in Mexico City was a disaster for the department store segment, as
multiple shopping centres had to remain closed down for weeks.
Department Store Sales* Department Store Revenue/Sales Area

Ratio*
39,299
291
256 37,893
225 36,244
208 36,171
191 35,728 8.4%
170 11.4%
6.1% 5.8%
10.0% 34,246
8.5%
4.7%
3.9% -4.5% -5.3%
2011 2012 2013 2014 2015 2016 2011 2012 2013 2014 2015 2016
Department Store Sales, MXN bn, current prices Revenue/Sales Area Ratio in Department Stores, MXN/m2
* Includes only data for the member companies of ANTAD.

Source: ANTAD, INEGI, El Financiero, Proceso, Milenio

Specialised Stores
Comments
Over the 2011-2016 period, the sales area of specialised stores expanded at a CAGR of 7.5% and the
number of stores increased at a CAGR of 13%. As of December 2016, there were a total of 59 chains
classified as specialised stores in Mexico, according to ANTAD. The largest company active in the
channel is Oxxo, a convenience store chain operated by domestic business group Femsa, which at the
end of December 2016 had 15,160 stores in Mexico. The remaining 58 chains include 13 apparel store
chains, nine pharmacy chains and six convenience store chains. In 2016, the number of specialised
stores expanded by 7% y/y nationwide. The two regions which registered the fastest increase in terms
of number of stores were Mexico City, with a 16.6% y/y growth to 4,053 stores, and the Chihuahua,
Durango, Coahuila, and Zacatecas states in the south-western region with a 15.3% y/y growth to 5,591
stores. On the other hand, infrastructure growth in 2016 has been relatively slow for both the north-
eastern and north-western regions, with a 4.3% and 4.2% y/y increase, respectively. These differences
in infrastructure growth are mostly explained by the relative underperformance of the agriculture and
export oriented manufacturing sectors of northern Mexico in 2016.
Specialised Store Sales Area* Number of Specialised Stores*
6,620
5,751 41,349 44,249
5,726
4,827
4,700 32,573
4,604
26.9%
21.8% 27,512
19.1% 23,992 24,268
15.1%
18.4%
2.1% 13.4%
7.0%
-15.7%
1.2%
2011 2012 2013 2014 2015 2016 2011 2012 2013 2014 2015 2016
Specialised Store Sales Area, thou m2 y/y change, % Number of Specialised Stores y/y change, %
* Include only data for the member companies of ANTAD.

Source: ANTAD, Bank of Mexico

Specialised Stores (cont’d)
Comments
In 2011-2016, the real sales of specialised stores expanded at a robust CAGR of 11.9%, while store
efficiency improved at a more modest 4%. Similar to the department store channel, sales growth in
specialised stores was due more to the expansion of infrastructure than to an improvement in same
store sales. In 2017, the performance of specialised stores deteriorated significantly, impaired by a rise
in inflation and the depreciation of the peso against the US dollar. In September 2017, real sales
contracted by 3.9% y/y, according to ANTAD, as an already negative trend was worsened by the strong
earthquake, which caused the closure of a number of stores for several days.
As regards apparel stores, in 2011-2016 foreign fast fashion chains such as Spanish Zara grew rapidly
and stole market share from traditional domestic players. Notably, in 2007, the turnover of domestic
Milano brand was 90% higher than that of Zara, whereas in 2016 it was just 35% higher. According to
Luis Guillermo Aceves, marketing director of Milano, his company is focusing on inexpensive products
for low-income households, in order to avoid competing with the fast fashion chains that usually
target middle-income households in Mexico.
Specialised Store Sales* Specialised Store Revenue/Sales Area

Ratio*
406
45,036 50,059
44,447
307 43,646
41,112
249 27.9% 36,022 23.4%
220 230
196 20.7% 11.2%
6.2%
1.3%
8.4%
-17.5%
4.0%
0.5%
2011 2012 2013 2014 2015 2016 2011 2012 2013 2014 2015 2016
Specialised Store Sales, MXN bn, current prices Revenue/Sales Area Ratio in Specialised Stores, MXN/m2
* Include only data for the member companies of ANTAD.

Source: ANTAD, INEGI, El Financiero

Motor Vehicle Retail
Comments
In 2011-2016, the sales volume of new passenger cars and utility vehicles rose at an impressive CAGR
of 12.1% and new heavy commercial vehicle sales increased by 6.2%. In 2015-2016, new passenger car
sales were very strong, rising by double digits in both years. According to Guillermo Rosales, general
director of the Mexican Association of Automobile Dealers (AMDA), sales over the 2015-2016 period
were supported by the stable prices of new vehicles, the growing number of vehicle financing loans,
and the drop in used vehicle imports from the US. In 2015, some car manufacturers, among which
Japanese Nissan, started to offer new vehicle purchase loans to informal workers, a step that made
such loans more affordable and also intensified competition between car manufacturers and retailers.
In 2017, however, new passenger car sales experienced a moderate decline, shrinking by 2.8% y/y in
the January-November 2017 period. In December 2017, Rosales noted that the high inflation and the
elevated interest rates on car purchase loans had a negative impact on sales, especially in the sub-
compact segment, which is most popular among the middle class. The sales of most passenger car
types declined in 2017, led by sports cars (-14.5% y/y), sub-compact cars (-6.5% y/y) and luxury cars (-
4.8% y/y). The only exception were SUVs, whose sales rose by 7.8% y/y, due to changing consumers
preferences.
New Passenger Car and Utility Vehicle New Heavy Commercial Vehicle Sales
Sales Evolution
42,181
36,647
37,259 37,394
32,949
31,207
28,482
19.0% 18.6% 19.4%
9.0% 15.1%
7.7% 6.8% 11.2%
-2.8%
0.4% -0.3%
1,063,363
1,135,409
1,351,648
1,603,672
1,371,600
905,886
987,747
-11.9%
2011 2012 2013 2014 2015 2016 Jan-Nov 2011 2012 2013 2014 2015 2016 Jan-Oct
2017 2017
New Passenger Car and Utility Vehicle Sales, units New Heavy Commercial Vehicle Sales, units y/y change, %
y/y change, %
Source: AMDA, El Financiero, Vanguardia, El Economista

FOCUS POINT
Number of Department Stores, December 2016
Baja California,
273
Nayarit, Sinaloa,
Sonora 12.1%
Chihuahua,
167 Durango,
Coahuila,
7.4% Zacatecas
209 Tamaulipas,
Nuevo Leon
9.3%
Veracruz,
301 Tabasco,
Campeche,
13.3% Yucatan,
Quintana Roo
Jalisco, Colima,
Michoacan,
Mexico State,
Morelos, Puebla, 730
Tlaxcala, Hidalgo,
Queretaro, San 32.3%
Luis Potosi,
Guanajuato,
Aguascalientes
444
Mexico DF
19.7%
134 Guerrero,
Oaxaca,
5.9% Chiapas
Source: ANTAD

FOCUS POINT
Number of Specialised Stores, December 2016
Baja California,
8,191
Chihuahua,
Nayarit, Sinaloa,
Sonora 18.5%
5,591 Durango,
Coahuila,
12.6% Zacatecas
6,071 Tamaulipas,
Nuevo Leon
13.7%
Veracruz,
6,773 Tabasco,
Campeche,
15.3% Yucatan,
Quintana Roo
Jalisco, Colima,
Michoacan,
Mexico State,
Morelos, Puebla, 11,492
Tlaxcala, Hidalgo,
Queretaro, San 26%
Luis Potosi,
Guanajuato,
Aguascalientes
4,053
Mexico DF
9.2%
2,078 Guerrero,
Oaxaca,
4.7% Chiapas
Source: ANTAD

08
SHOPPING
CENTRES

Investor Company.
08 SHOPPING CENTRES CONTENTS
Highlights
Overview
In 2016, the sales of the top nine players in the shopping centre segment, which had a combined gross
leasable area of 4.5mn m2 and 151 centres, stood at MXN 312.9bn or 14.5% of the turnover of the
domestic retail sector. In the 2011-2016 period, sales expanded by 5.4% per year in real terms, driven
by increased household spending on apparel and demand for entertainment spaces. Three districts
accounted for a 65.7% share of the combined leasable area of the top nine players - Mexico City
(26.6%), Mexico state (25.6%) and Quintana Roo state (13.4%) - indicating a large degree of
concentration and relative underdevelopment of the channel in most regions. At the end of 2017, there
were a total of 738 shopping centres in Mexico with a gross leasable area of 22mn m2, according to a
December 2017 report by real estate consultancy CBRE Mexico.

One of the main driving forces of the shopping centre channel is the relatively low degree of market
concentration, with multiple medium-sized companies fiercely competing against each other through
the development of new infrastructure, and the constant modernisation of the existing one. In
addition, the solid performance of the tourism sector, particularly in the coastal areas of the Quintana
Roo state, has promoted the development of several high-end shopping centres specialised in luxury
brands there. At the same time, the shopping centre infrastructure outside of the main domestic
touristic and industrial centres remains scarce. The development of the segment is also feeling the
negative effect from the rising popularity of online retail and the rapidly growing consumer
preferences towards entertainment-based malls.
Outlook
In 2018, the sales of the channel are expected to growth significantly, as 29 shopping centres are
scheduled for opening over the course of the year. Of these, five are considered mega malls, requiring
an average investment of MXN 1.83bn and with an average gross leasable area (GLA) of 79,025 m2. The
largest ones in terms of GLA will be Explanada Puebla in the Puebla state, developed by Grupo Gicsa,
with 87,340 m2, followed by Sentura Tlalnepantla in the Mexico state, developed by Zona Inteligencia
Urbana, with a leasable area of 87,000 m2, and Parque Las Antenas in Mexico City, developed by
Dahnos Group and GLA of 86,500 m2.
Source: Company Data, BMV, FashionNetwork

Main Events
§ In September 2016, shopping centre operator Grupo Frisa completed a refurbishment of the Mundo
E shopping centre, one of the largest in Mexico City in terms of gross leasable area. With a total
investment of MXN 1.2bn, Mundo E’s outlets increased from 161 to 330, and the number of brands
present in the centre also expanded from 140 to 250. According to Mauricio Rivera Torres, Grupo
Frisa’s general manager of shopping centres, the decision to enlarge the shopping centre was
driven by the recent arrival of several international apparel brands such as H&M and Pull & Bear to
Mexico. Rivera added that the shopping centre may be expanded further in the coming years, up to
a maximum of 180,000 m2 of gross leasable area.
§ In August 2016, shopping centre builder, developer and operator Grupo Gicsa announced that it will
invest MXN 7bn in the construction of five new shopping centres in Mexico under a new concept
called malltertainment. Abrahman Cababie, CEO of Grupo Gicsa, confirmed that all five shopping
centres will be operated under the Explanada brand and none of them would be located in Mexico
City, due to the unavailability of adequate terrain for the construction of such facilities. The five
Explanada centres will be located in the cities of Puebla, Leon, Queretaro, Pachuca and Cancun,
and should all be inaugurated in the 2018-2019 period. According to Cababie, all Explanada centres
will focus heavily on entertainment, including bars and discotheques, cinemas, music events, and
even aerostatic balloon flights. They will also feature hotels, supermarkets, and medical centres. In
November 2016, Gicsa started the construction of the first Explanada centre in Puebla, with an
estimated cost of MXN 1.4bn and a total of 175 shops. In June 2017, Gicsa began construction works
on the second Explanada centre in Queretaro, requiring an investment of MXN 3bn and with a total
area of 89,654 m2. Finally, in December 2017, Gicsa began the construction of Explanada Culiacan,
with an estimated cost of MXN 1.5bn, and a total area of 200,000 m2.
§ In June 2017, Gicsa announced a MXN 1.6bn investment in the expansion of the Paseo Interlomas
centre, located in Huixquilucan city, Mexico state. Together with the increase of the sales area,
Paseo Interlomas is projected to become a mixed-usage complex, featuring a hotel and an office-
space. Moreover, Gicsa expects to inaugurate the La Isla Merida shopping centre in the Yucatan
state by the end of the first half of 2018, a Dubai style mall that required a total investment of
MXN 2.5bn.
Source: M-Brain, SABI, El Economista

Infrastructure
Comment
Total gross shopping centre leasable area increased from 16.5mn m2 in 2011 to 20.7mn m2 in 2016 - a
cumulative 25.4% growth. During the same period, the real sales of tenants in the top nine chains
surveyed by EMIS Insights - E-Group, Grupo Frisa, Grupo Sordo Madaleno, Grupo Gicsa, Liverpool,
Grupo Dahnos, Grupo Caabsa, Grupo DMI, and Thor Urbana - expanded at a 5.4% CAGR to MXN 312.9bn
in 2016.
According to a December 2016 estimate by Luis Mendez, CEO of the local subsidiary of US-based real
estate firm Coldwell Banker Commercial Mexico, the shopping centre segment in Mexico still has a
significant growth potential as Mexican shoppers are demanding hybrid centres offering cinemas,
fitness centres, restaurants and other entertainment activities, together with the traditional shopping
areas. As of Q3 2016, the gross leasable area of shopping centres per inhabitant in Mexico reached 210
m2, a figure still below the one in developed markets in the region. US-based real estate consultancy
CBRE remarked in a Q3 2016 report that the channel will continue to grow, propelled by rising
consumption, with the latter being driven by growth in household credit, increased remittances from
abroad and low unemployment.
Top 9 Shopping Centre Players by Gross Leasable Area by Player, Top 9

Number of Malls, December 2016 Players, %, December 2016
Grupo Sordo Gicsa 12.8%

E-Group 51 Madaleno
13.0%
Grupo Frisa 43
Liverpool
Liverpool 24 11.8%
Gicsa 11 Grupo Frisa

19.0% Grupo
Grupo Sordo Madaleno 9 Dahnos 8.8%
Grupo Dahnos 7
Thor Urbana 4
Grupo DMI 1
Others 5.6%
Grupo Caabsa 1
E-Group
29.0%
Source: Company Data, BMV, Expansion, El Financiero

Infrastructure (cont’d)
Comment
According to US-based real estate consultancy CBRE Mexico, as of December 2017 there were a total of
738 shopping centres in Mexico, with a combined gross leasable area of 22mn m2. For 2018, CBRE
expects that a total of 29 new shopping centres will be open, adding 1.2mn m2 of gross leasable area.
According to Yadira Torres Romero, general director of market research in CBRE Mexico, the states
with greater potential in terms of development of new shopping centres over the following years
include Mexico City, Jalisco, Nuevo Leon, Queretaro, Yucatan, Guanajuato and Veracruz. In her opinion,
in Yucatan and Veracruz the appeal arises from the ongoing energy reform in Mexico, and the gradual
increase in oil prices, with both factors boosting the development of the oil industry in those regions.
According to Hector Klerian, CEO of real estate services firm JLL Mexico, the key trend for the next
years will be the development of both entertainment-oriented shopping centres and services-oriented
ones. These new shopping centre formats, in Klerian’s opinion, are the response of the channel to the
fierce competition from online retail.
Top 10 Shopping Centres by Gross Gross Leasable Area by State, Top 9

Leasable Area, m2, December 2016 Players, December 2016, %
Quintana
Antea Lifestyle Center 142,665 Roo 13.4% Queretaro 5.4%
Multiplaza Aragon 138,304 Jalisco 4.9%
Mundo E 128,734 Puebla 4.1%
Centro Santa Fe 128,367

Mexico State
Plaza Satelite 121,150 25.6%
Angelopolis 117,847 Others
19.9%
Las Americas Cancun 109,804
Andares 105,000
Forum Buenavista 94,219
Paseo Arcos Bosques 91,725 Mexico DF

26.6%
Source: Company Data, BMV, Expansion, El Financiero, Milenio

FOCUS POINT
Number of Shopping Centres,* December 2016
6
Nuevo Leon
4%
3
Tamaulipas
2%
4
Yucatan
2.6%
5
Jalisco 5
3.3% Queretaro
3.3%
Mexico
40
State
26.5%
8
Guerrero
5.3% 4
Puebla
2.6%
30 24
Mexico DF Quintana Roo
19.9% 15.9%
* Includes only the top 9 channel players surveyed by EMIS Insights.

Source: Company Data

09
ONLINE
RETAIL

Investor Company.
09 ONLINE RETAIL CONTENTS
Highlights
Overview
In 2016, the value of online retail sales reached MXN 329.8bn, equivalent to 15.3% of the turnover of
the domestic retail sector. Over 2011-2016, the segment sales expanded fivefold in real terms, driven
by the expansion of mobile internet infrastructure and the development of the online retail
operations of traditional retailers. As of 2016, m-commerce in Mexico is relatively underdeveloped,
according to an AMVO report published in October 2016, particularly in terms of frequency of
purchases with only 13% of the population engaging in weekly purchases compared to a global
average of 23%. Meanwhile, also according to the AMVO report, only 31% of surveyed Mexicans have
acquired physical products, compared to global average of 46%.

As a result of the elevated degree of informality in the labour market and the relatively low
penetration of traditional banking accounts, online retailers have developed several cash payment
solutions. In most cases, the entire purchase process is made online, except for the payment, which is
made in cash at the retailer’s store, or some other outlet. This strategy started to be implemented
since 2014-2015, both by online marketplaces and by the online retail divisions of traditional retailers
with very positive results. At the same time, the rapid growth of mobile internet infrastructure and
the fast adoption of smartphones in recent years have been a positive factor for the rise of online
sales. However, the still elevated safety concerns of consumers are a strong limitation factor to m-
commerce purchases.
Outlook
Eric Perez Grovas, president of the Mexican Association of Online Retail (AMVO), remarked in a
January 2018 interview for the Reforma newspaper that nominal online retail sales are expected to
grow by 30% y/y in 2017, and that the expectation for 2018 is to sustain a similar growth rate.
According to Grovas, the strong growth will be supported by the significant investments made in
recent years by large traditional retailers in order to foster their online retail channel. Grovas also
estimated that the cash-in-store payments solutions recently adopted by many retailers for their
online sales in Mexico will successfully attract new customers to the segment.
Source: FashionNetwork, Infobae, AMVO, AMIPCI

Main Events
Comments
§ In December 2017, Mexican department store chain Coppel announced the launch of the Ve al
Punto marketing campaign, aimed to promote the company’s online sales. The campaign will
highlight the key features of Coppel’s e-commerce platform, which features the possibility of using
the same payment methods and credit facilities available in the physical stores, as well as the free
of charge delivery to households and the possibility of returning items to any of Coppel’s physical
stores in Mexico. According to Bernardo Bauza, Coppel’s domestic manager of e-commerce, the
online retail platform will offer exclusive products not available in the physical stores, as the
company wants to accelerate the pace of development of the e-commerce channel. In the January-
October 2017 period, Coppel’s online sales increased by 90% y/y, and the company projects a 100%
y/y increase for 2018.
§ In December 2017, Euromonitor International announced that Amazon is projected to become the
top e-commerce firm in Mexico with sales of USD 505.2mn in 2017, overtaking its Argentinean
competitor Mercado Libre. The latter is also expected to experience a strong growth with sales
rising by 90% y/y to USD 489.2mn in 2017. The online retail division of Walmex will likely rank third
in 2017, with sales reaching USD 258.9mn.
§ In October 2017, Amazon Mexico launched the Amazon Cash payment solution, targeting customers
who do not have credit or debit cards as well as those who are not willing to use their cards for
mobile payments due to security concerns. Amazon Cash allows shoppers to deposit between MXN
100 and MXN 5,000 per transaction in various convenience store outlets across the country. Several
retail companies already agreed to partner with Amazon Mexico for the implementation of this
system, including the convenience store chain Eleven, Circle K and Tiendas Extra, and pharmacy
store chain Farmacias de Ahorro.
§ In December 2017, the Argentinean marketplace Mercado Libre announced it will launch a loan
facility called Mercado Credito in Mexico, following positive results of this initiative in the
Argentinean and Brazilian versions of Mercado Libre’s online platform.
Source: Martketing4Ecommerce, FashionNetwork, Animal Politico, El Universal,

E-Commerce
Comments
Over the 2011-2016 period, real sales in the online retail channel expanded fivefold, reaching MXN
329.8bn. According to Rodrigo Ceron, research analyst of US based media measurement and analytics
firm ComScore, in 2016 around 30% of online sales were performed in marketplaces without direct
operation in Mexico - mostly located in the United States and Asia. Notably, the 11.2% y/y surge of
international air cargo transport at the Mexico City International Airport (AICM) accumulated for the
January-November 2017 period was largely driven by deliveries linked to online retail, according to
December 2017 estimates by Federico Patino, director of the Mexico City Airport Group (GACM).
Moreover, Patino noted that the group is currently constructing a new airport to replace AICM and to
be inaugurated in 2020, which will have six times the cargo handling capacity of the existing one, in
order to meet the expected growth of international online retail sales. However, the development of
online retail in Mexico is not only linked to direct imports by Mexican consumers, but also to exports
from Mexican companies. In that regard, thanks to the agreement between the Chinese online
marketplace Alibaba and a number of Mexican avocado producers, a millon avocados from Mexico
were sold via online retail in the latest black Friday edition in China, which took place on November
11, 2017.
E-Commerce Sales Evolution Online Purchases by Product, May-July

2016, %
329.8
Computers/
55.3% Peripherals/
51.8% Digital PDAs 2.8% Furniture, Appliances
257.1
Downloads & Equipment 2.8%
4.2%
36.5% Consumer General
162.1 Electronics, Services
28.1% excl. 2.8%
121.6 24.1% Computers
9.1%
85.7
54.5
Apparel &
Others
Accesories
32.2%
16.1%
2011 2012 2013 2014 2015 2016
E-Commerce Sales, MXN bn, current prices
y/y change, %, MXN, constant 2010 prices Travel 30.0%
Source: AMIPCI, El Financiero, Milenio, Expansion

M-Commerce
Comments
According to an October 2016 report by AMVO, at the end of 2016 there were 113.1mn cell phone
subscriptions in Mexico, an increase of 5.01% y/y. Smart phone subscriptions were 93.5mn, up by
21.25% y/y. As a result, smartphone subscriptions ended 2016 with a share of 82.7% in total mobile
phone subscriptions in Mexico. Yet, the fast adoption of smartphones in recent years has not resulted
in a significant growth of domestic m-commerce sales. According to the AMVO report, in February-July
2016, just 13% of surveyed Mexicans conducted m-commerce operations on a regular weekly basis,
compared to 14% in Latin America, and 23% on a global level. Moreover, just 31% of surveyed Mexicans
engaged in the purchase of products, compared to a Latin American average of 37%, and a global
average of 46%. These indicators suggest that there is still ample room for growth of m-commerce
operations of traditional retail products in the following years.
Mobile Device Transactions by Type, Limitation Factors to M-Commerce,

February-July 2016, % February-July 2016, %
Mobile Data 46% Unsafety of M-Commerce

28%
Operations
Digital Entertainment Products 42%

Lack of Interest 26%
Mobile Apps and Games 35%

Does Not Want to Share Personal
24%
Data
Physical Products (apparel, food) 31%
Bad Experiences of
22%
Acquaintances
Physical Services (Transportation,
27%
Beauty Treatment)
Slow Mobile Internet Speed 11%

Public Utilities Payments 24%
Food and Beverages in Bars, M-Commerce is Too Complex 11%

23%
Restaurants
Source: AMVO

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EMIS Insights - Mexico Consumer Goods and Retail Sector Report 2018 - 2019

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MEXICO CONSUMER

GOODS & RETAIL

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AMIPCI Mexican Internet Association

AMVO Mexican Association of Online Retail

ANTAD National Association of Supermarkets and Department Stores

BMV Mexican Stock Exchange

COFECE Federal Economic Competition Commission of Mexico

IMSS Mexican Institute of Social Security

INEGI National Institute of Statistics and Geography

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CONTENTS 01 EXECUTIVE SUMMARY

02 SECTOR IN FOCUS p.14

03 COMPETITIVE LANDSCAPE p.23

04 COMPANIES IN FOCUS p.30

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CONTENTS 05 REGULATORY ENVIRONMENT

07 SPECIALISED & DEPARTMENT p.50

08 SHOPPING CENTRES p.60

09 ONLINE RETAIL p.66

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Note: Data for 2016.

MEXICO CONSUMER GOODS & RETAIL SECTOR 2018/2019 6

Source: INEGI, ANTAD, BMV, Bank of Mexico, El Economista

MEXICO CONSUMER GOODS & RETAIL SECTOR 2018/2019 7

SALES: MXN 2,159.7bn

5,410 151 46,507 MXN 98.9bn

14,739,000 m2 4,545,415 m2 12,664,000 m2 MXN 53.1bn

55,635 68,842 44,923 MXN

* Includes only data for ** EMIS Insights estimate based

MEXICO CONSUMER GOODS & RETAIL SECTOR 2018/2019 8

Sector Snapshot: Mexico

Source: ANTAD, AMVO, INEGI, EMIS Insights, Company Data

MEXICO CONSUMER GOODS & RETAIL SECTOR 2018/2019 9

Household Spending Indicators Forecast

2017f 2018f 2019f 2020f 2021f

Total Household Spending,

Food and Non-Alcoholic Drinks

Alcoholic Drinks and Tobacco

Clothing and Footwear Spending,

Household Goods Spending, y/y

Personal Care and Effects

Source: BMI Research

MEXICO CONSUMER GOODS & RETAIL SECTOR 2018/2019 10

Sector Outlook (cont’d)

Household Spending by Segment, Household Spending by Segment,

Alcoholic Alcoholic Others

Source: BMI Research

MEXICO CONSUMER GOODS & RETAIL SECTOR 2018/2019 11

Source: ANTAD, INEGI, El Economista, Milenio

MEXICO CONSUMER GOODS & RETAIL SECTOR 2018/2019 12

Source: El Economista, ANTAD, AMVO

MEXICO CONSUMER GOODS & RETAIL SECTOR 2018/2019 13

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Main Economic Indicators

2011 2012 2013 2014 2015 2016 H1 2017

GDP,a constant prices,

GDP per Capita, current prices,

Consumer Price Index, year-end,

Exchange Rate USD/MXN, year-

Household Final Consumption

Household Final Consumption