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Retailing - Mexico

Euromonitor International : Country Market Insight February 2011

Retailing

Mexico

List of Contents and Tables
Executive Summary ................................................................................................................................................ 1 A Slower Than Expected Recovery Puts Pressure on Retailing ................................................................................ 1 Chedraui Goes Public and Expands in the North of the Country.............................................................................. 1 Grocery Sales Grow Faster Than Non-grocery Sales ............................................................................................... 1 Price-based Competition Remains the Norm in 2010 ............................................................................................... 1 Real Economic Recovery Expected To Be Delayed Until 2011................................................................................. 1 Key Trends and Developments .............................................................................................................................. 1 Adverse Economic Climate Permeates Retailing in Mexico ..................................................................................... 1 Slow Economic Recovery Affects Newly Created Retailer-owned Banks .................................................................. 3 Internet Retailing Is the Preserve of the Young, Educated and Affluent ................................................................... 4 Chedraui’s Ipo To Shape Chained Grocery Retailing .............................................................................................. 6 Large Chained Grocers Expand Into Smaller Cities................................................................................................. 7 Market Indicators ................................................................................................................................................... 8 Table 1 Employment in Retailing 2005-2010................................................................................. 8 Market Data ............................................................................................................................................................ 9 Table 2 Sales in Retailing by Category: Value 2005-2010 ............................................................. 9 Table 3 Sales in Retailing by Category: % Value Growth 2005-2010 ........................................... 9 Table 4 Sales in Retailing by Grocery vs Non-Grocery 2005-2010 ............................................... 9 Table 5 Sales in Store-Based Retailing by Category: Value 2005-2010......................................... 9 Table 6 Sales in Store-Based Retailing by Category: % Value Growth 2005-2010 ....................... 9 Table 7 Sales in Non-Grocery Retailing by Category: Value 2005-2010 ......................................10 Table 8 Sales in Non-Grocery Retailing by Category: % Value Growth 2005-2010.....................10 Table 9 Sales in Non-store Retailing by Category: Value 2005-2010 ...........................................10 Table 10 Sales in Non-store Retailing by Category: % Value Growth 2005-2010 ..........................11 Table 11 Retailing Company Shares: % Value 2006-2010..............................................................11 Table 12 Retailing Brand Shares: % Value 2007-2010 ...................................................................11 Table 13 Store-Based Retailing Company Shares: % Value 2006-2010 .........................................12 Table 14 Store-Based Retailing Brand Shares: % Value 2007-2010 ...............................................13 Table 15 Non-Grocery Retailers Company Shares: % Value 2006-2010 ........................................13 Table 16 Non-Grocery Retailers Brand Shares: % Value 2007-2010..............................................14 Table 17 Non-store Retailing Company Shares: % Value 2006-2010 .............................................15 Table 18 Non-store Retailing Brand Shares: % Value 2007-2010 ..................................................15 Table 19 Forecast Sales in Retailing by Category: Value 2010-2015 .............................................16 Table 20 Forecast Sales in Retailing by Category: % Value Growth 2010-2015 ............................16 Table 21 Forecast Sales in Store-Based Retailing by Category: Value 2010-2015 .........................16 Table 22 Forecast Sales in Store-Based Retailing by Category: % Value Growth 20102015 ..................................................................................................................................16 Table 23 Forecast Sales in Non-Grocery Retailing by Category: Value 2010-2015 .......................17 Table 24 Forecast Sales in Non-Grocery Retailing by Category: % Value Growth 2010-2015.........................................................................................................................17 Table 25 Forecast Sales in Non-store Retailing by Category: Value 2010-2015 .............................17 Table 26 Forecast Sales in Non-store Retailing by Category: % Value Growth 20102015 ..................................................................................................................................18 Appendix .................................................................................................................................................................18 Operating Environment............................................................................................................................................18 Cash-and-carry ........................................................................................................................................................20 Definitions ...............................................................................................................................................................20

 Euromonitor International

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........................21  Euromonitor International Page ii ...Retailing Mexico Summary 1 Research Sources ....................................................................................

competition based on price remained the norm during 2010. consumer confidence. Real Economic Recovery Expected To Be Delayed Until 2011 A strong economic recovery that stimulates a pre-crisis level retailing performance will have to wait until 2011. KEY TRENDS AND DEVELOPMENTS Adverse Economic Climate Permeates Retailing in Mexico After a disastrous performance in 2009. and manufacturing data and sizeable inflation rates made it very difficult for retailing as a whole to recoup the decline experienced in 2009. In 2009 GDP registered its biggest drop in nearly 80 years. grocery sales grew while non-grocery sales decreased in 2009. Price-based Competition Remains the Norm in 2010 As in 2009. the heavily indebted Controladora Comercial Mexicana SA de CV . In 2010 retail value sales have been relatively slow as consumers continue to postpone the purchase of durable goods and sometimes inexpensive non-grocery items such as clothing or personal care products are passed over in about the economic climate. making highly probable a real recovery until 2011. employment levels have not yet recovered to pre-crisis levels and people are still too concerned about job security to purchase costly durable goods. This is a recurrent practice among grocers and non-grocers alike. another leading grocery retailer in Mexico.Retailing Mexico RETAILING IN MEXICO EXECUTIVE SUMMARY A Slower Than Expected Recovery Puts Pressure on Retailing After a disastrous year for the economy in 2009. Chedraui plans to expand in the northern states of the country. where the so-called organized formats are outperforming the traditional small stores. as GDP grew. Such a poor performance had an immediate effect on nearly every economic parameter and adversely affected consumption at all levels and for all products. Armed with ample financial resources. the Mexican economy forced retailers to redefine their strategies. Grocery Sales Grow Faster Than Non-grocery Sales According to ANTAD (National Chamber of Retailers which affiliates major retailers) retail value sales of groceries grew at double the rate of non-grocery products in 2009. Many economists and analysts hoped for a notable  Euromonitor International Page 1 . if a double-dip recession does not occur.CCM. decreasing by 7%. In contrast. Chedraui Goes Public and Expands in the North of the Country The formerly private-owned Chedraui (Grupo Comercial Chedraui SA de CV) chain. an area in which the player had no significant presence. Consumers are still too cautious about their spending to stimulate sales. recorded just 2% of current growth in 2010. and industry experts concur on a weak and slow economic recovery and the need to avoid a double-dip recession. successfully entered the Mexican stock market through an Official Public Offering (IPO) at the end of April 2010. retailers continue to try to encourage consumers by offering continuous sales and other price promotions in an attempt to fuel spending. As a result. expectations for a quick recovery hit a wall by the first half of 2010. During 2009 the Mexican economy registered the largest drop in GDP in almost eight decades. This represented a bigger slide than the one registered during the Tequila Effect in 1995. However. credit scores. However. adverse economic indicators in terms of employment. High expectations resurfaced during 2010. Euromonitor International estimates that within the entire retailing sector that includes independent small stores. This suggests a substitution amongst formats in the retailing sector. but lost retail value share in 2010. a top five grocery retailer in the country. Moreover.

such as 2-3% for cash deposits in bank accounts that exceed Mx$15. During 2009. high economic uncertainty remains. given that the pre-crisis unemployment rate in 2007 and 2008 reached 3% and 4%. but this figure is still far from pre-crisis levels: in 2007 FDI reached an outstanding US$27 billion. looked to grow their discount (bodegas) businesses. which did not previously serve small urban areas. albeit slow.5% was not sufficient to recoup the economic losses of 2009. There are many reasons for the weaker than expected economic recovery: safety issues have adversely affected the inflow of FDI (Foreign Direct Investment). and even lower the 104. Likewise. with a double-dip recession threatening the country. This figure does not take into consideration underemployment or informal employment. During 2010 only 15% of consumers thought luxury was an important factor in their purchasing decisions.000 jobs were created in the formal economy in January-October 2010. Unemployment is also having a major effect on the economy. While the plethora of promotions that permeated the whole retailing industry slowed down. leaving behind frivolous consumption. in the second half of 2009. the recent increase in taxes has weakened the purchasing power of consumers and there is a reasonable possibility that the federal government will continue to raise taxes. Pemex. The Ministry of Labour reports that 552. although underemployment and informal employment remain high. a real recovery requires higher formal employment figures. but many analysts and even government institutions such as INEGI or the IMSS question the Ministry of Labour’s figures.000 per month or a new tax for telecommunication services. alongside other minor tax increases. FDI fell by around 47% compared to 2008 registering only US$12. This indicator recorded important growth to reach around US$17 billion in 2010. consider pricing more important than luxury.5 billion. compared to 23% in 2008.Retailing Mexico “rebound” of the economy during 2010. In 2010. These factors will have an impact on GDP and on improving conditions in most industries. In mid-2010 the federal government announced that 500.3 mark registered in the first half of 2008. consumers continued to delay the purchase of durable goods in favour of basic groceries. This was perhaps the most significant event in 2009-2010. such as the. Finally. Current Impact These economic indicators and other important factors such as growing safety concerns (especially on the northern border) combine to influence the consumer confidence index and consequently their retail behaviour. The federal government decided. moving Mexico out of the 20 nations that received the highest level of FDI. including retailing.2 recorded in the second half of 2007. Because of the slower than expected economic recovery. The still depressed domestic economy had similar implications for retailing in Mexico in 2009 and 2010. This is leaving the government  Euromonitor International Page 2 . FDI improved during 2010 and it is expected to reach over US$20 billion in 2011.8. which is estimated to account for around a 30% share of the total workforce. 5% is high.000 jobs had been created in the first half of the year. since large chained grocery retailers. mostly below 80 from a 100 base. respectively. 72% of the Mexican consumers considered themselves to be cautious spenders due to the still high degree of economic uncertainty. For example. the average during the first half of 2009 was 83. Outlook There is little reason to expect anything more than a modest economic recovery in the short-to-medium term. However. is quickly running out of oil. retailers still engaged in frequent price-based promotions to lure consumers into the stores. a basic factor in stimulating the economy. Furthermore. recovery of the US economy (which accounts for around 90% of Mexico’s exports) and a small rise in employment. There are some signs of improvement. The level of unemployment in 2009 and 2010 did not drop below 5%. well below the 98. to raise income tax from 28% to 30% and VAT (value-added tax) from 15% to 16%. As many analysts point out. however GDP growth of 4. led by Walmart (Wal-Mart de México SA de CV). This indicator did not register a notable recovery in 2010. Throughout 2009 the consumer confidence index registered very low numbers. In addition. hitting a low of 77 in October 2009. most large chained grocery retailers continued to aim their expansion efforts at inexpensive formats. higher taxes place a high burden on economic recovery by undermining the purchasing power of most of the population. 54%. immediately before the onset of the economic crisis. which contributes up to 40% of the government’s budget. Nonetheless. The state oil company.

The new banks were convinced that the large low-income population was being starved of credit. direct selling and homeshopping are expected to register good growth in retail value sales over the forecast period. which had earlier opened its own bank to offer financial services to its customers. a large number of consumers started to default on credit payments with large commercial banks and banks owned by large retailers. by a 30% constant value CAGR. retailer-owned banks engaged in a frenzy of credit approvals in 2007-2009. As the economy moves out of recession other formats such as supermarkets and hypermarkets will get more attention from retailers. according to many analysts. if we consider that interest rates charged by retailers’ banks (either though store cards or credit cards) are considerably higher. the rate of unemployment has been underestimated. It would be easy to blame this situation on the economic crisis. labelling them high-risk customers as many individuals lacked even a formal credit score. In fact. Traditional commercial banks were not interested in low-income consumers. yet high uncertainty surrounds this issue. According to Expansion’s article. hitherto the privilege of young and affluent consumers. which reached 6% in 2009. as they were not covered by conventional commercial banks. Coppel SA de CV and Chedraui followed in the footsteps of Grupo Elektra SA de CV. In non-store retailing. However. which target the large low-income population due to their weak purchasing power. the highest rate for decades. while reducing this activity as the economy stabilises.and low-income populations across the country. the typical target for retailer-owned banks.000 formal jobs in 2009. According to press sources. Wal-Mart. BanCoppel issued over 500. while major commercial banks such as Citibank (Banamex) (10% default) or BBVA-Bancomer (13%) experienced lower rates of non-performing loans. most of all. Future Impact The modest economic recovery expected in the short-to-medium could see a gradual improvement in the performance of retailing. the recent notable growth in internet access and usage. The situation is worse still. The reluctance of retailers to expanding in 2009-2010 will remain a key factor. Meanwhile. This places an enormous burden on low-income consumers. In the forecast period. the abovementioned retailer-owned banks witnessed a default on payments of 20-28% on all credit accounts. retailers are expected to continue to rely on price-based promotions. since it does not take into consideration the huge underemployment factor. The first year of operation for banks owned by large retailers seemed promising. Nongrocery retailers are expected to refrain from investing in huge or ambitious expansion plans as long as the economic climate remains depressed. the strong performances of these channels will not have a detrimental impact on the regular performance of traditional store-based retailing. due to the recent expansion of internet access and usage and. these retailers assumed that they could cover a need that had been largely ignored for many years. vending. according to company websites. In the same year. Only Walmart and OXXO (Cadena Comercial OXXO SA de CV) maintained their ambitious expansion plans during the economic crisis. After the loss of an estimated 441. One of the many effects of this economic crisis was an increase in unemployment. Slow Economic Recovery Affects Newly Created Retailer-owned Banks In 2007 the CNBV (Comision Nacional Bancaria y de Valores) authorised large retailers to open their own financial institutions (mostly banks and insurance companies) to help them capture and better serve their target audiences: middle. Thus. reaching 69% for BanCoppel and 66% for Wal-Mart. internet retailing is predicted to grow dynamically.000 credit cards in one  Euromonitor International Page 3 . These companies inaugurated their own banks with understandably high expectations since a large proportion of the population was not served by traditional commercial banks. but Mexico was hit by the worst economic crisis in 80 years and circumstances began to change drastically. will be readily adapted by most brick-and-mortar businesses across the country as a powerful tool to increase sales. due to the very low level of internet retailing in the review period. due to the perceived high potential for discounters in small population areas and convenience stores in largeand medium-sized urban areas. However. Chained grocery retailers are likely to continue to expand the discount format (bodegas). but such problems began as soon as the large retailers opened their banks in 2007. Current Impact According to an article in Expansion.Retailing Mexico with little choice other than to increase taxes or to force large numbers of informal workers to contribute to the treasury.

OXXO is a particular good example of a corresponsal bancario. During 2009 Mexico achieved internet connectivity for 31 million inhabitants (6-years-old-and-over). which owns a private bank. Internet Retailing Is the Preserve of the Young. Outlook The evolution of credit will go hand-in-hand with the performance of the economy. Future Impact Retailer-owned banks will be forced to absorb losses caused by issuing credit. Inbursa. a notable jump from close to 26 million in 2008.000 credit cards in two years. Retailers’ banks are expected to continue issuing credit. In short. Such a high figure causes a significant threat during adverse economic conditions as any consumers fail to make regular repayments. reaching more acceptable levels over time (around 10%). BBVA-Bancomer. A different situation is presented by large grocery retailers such as Walmart or Chedraui. Banorte. etc. mostly issued by the retailer’s own bank. these large retailers are the most affected since the proportion of sales on credit normally stands at 50% in the case of high-end luxury department stores such as El Palacio de Hierro and Liverpool. and even retail chains with their own banking institutions such as Wal-Mart or Chedraui. Coppel and Elektra are made through sales on credit. but in Mexico it remains largely the privilege of young. this time through retailing: At the end of 2009 it was announced that the 10 largest commercial banks (including Banamex. Educated and Affluent Internet access enjoyed notable growth in the 2000s. As part of the Grupo Carso industrial and commercial conglomerate. educated and affluent consumers. It is important to note that this situation has not affected credit issues at traditional large commercial banking institutions. and nonperforming loans failed to reach 15% in most of them. Farmacias Benavides. It is expected that these corrective measures will reduce credit issues in the forecast period and retailers' banks will suffer fewer bad credit scores. large retailers have modified their credit issuing policies: a thorough analysis of the credit prospects of applicants is required. Most of these credit cards were issued without a thorough analysis of the applicant’s credit rating: income statements were not usually required. American Express. as the proportion of sales on credit only represents less than 10% of total sales. In this scenario. including Chedraui.Retailing Mexico year. while Banco Ahorro Famsa issued over 100. collection practices have been reinforced and some retailers. As soon as the economy recovers so will credit and defaulting on payments will be less common. These traditional commercial banks plan to keep expanding. but with sounder policies in place. Similar activity is expected in the short-to-medium term. and HSBC) will offer basic banking services in retail chains such as OXXO convenience stores. The recent economic crisis was so severe that even high-income consumers such as regular customers of high-end department stores such as El Palacio de Hierro experienced poor credit score ratings in terms of defaulting on debt payments. Inbursa is considered the financial arm of Grupo Carso and the Telmex telecommunications company. such as Sanborns (Grupo Sanborns SA de CV) variety stores. These services will be offered under corresponsales bancarios: retailers approved to perform as an extension of banks and financial institutions for some operations like receiving credit card payments and services such as electricity and telephone bills. have totally suspended the issue of new credit cards while others like Famsa have closed some in-store banking outlets. which issue store cards and might be even more affected by credit constraints due to economic difficulties. as long as retailing companies implement such services with sounder financial and lending policies and practices. according to press sources. This development is expected to create a synergy between Sanborns and the Inbursa banking business. with retailer-owned banks considering the payment history of the customer in their stores but not credit scores in other financial institutions. Sanborns plans to follow in the footsteps of retailers by opening 40 Inbursa facilities in the most popular Sanborns stores. The six largest commercial banks accounted for over 95% of all credit cards issued. As a result of the ongoing domestic economic downturn. However. the development of banking services offered in and by retailing institutions is far from over. The seriousness of the situation is reflected by the fact that 80% of all revenues by large variety and department stores such as Famsa. there is a high concentration  Euromonitor International Page 4 . Offering credit to lower-income customers will remain a core practice for a number of retailers which can afford to take calculated risks. despite recent negative experiences.

This places another obstacle to the popularisation of internet retailing. at least 3-times higher than retail internet sales. one of the lower-income groups (D). Firstly. and only a 33% share of the 6-year-old-and-over population had access to the internet. Moreover. while lower-income consumers can gain access at work. Finally. Meanwhile. and a 20% increase in 2009-2010 to reach Mx$12. 35-year-old-or-under consumers account for a 77% share of internet users in Mexico. which account for around 20% of the total population compared to close to 40% of all internet users. The economic crisis of 2009. did not register any increase in the number of internet users in 2008-2009. since many affluent consumers hold more than one card. and a banking system that obtains a much higher income via services instead of lending.and low-income consumers to gain internet access. Current Impact Mexico has enjoyed an internet retailing boom in recent years. school. Overall. fraud via cloned credit cards grew by 15%. Indeed. age and education has some negative connotations for internet retailing in Mexico. small internet cafés. hotel nights. Moreover. According to the ABM (Association Mexicana de Bancs) the value of this type of fraud reached over US$60 million in the same year. which saw at least five million middle-class consumers fall into lowincome groups. since 68% of the Mexican economy has a cash base. and Mexico is one of the most representative countries in this regard. etc). it requires a PC and only 37% of Mexican households own a computer. Owning a computer and paying for internet access excludes at least one half of the population from internet usage at home. But perhaps the largest obstacles to the spread of the internet as a retailing tool is the lack of trust in online payment procedures and the necessity of holding a credit card. Another factor that signals the close relationship between higher internet penetration and higher-income consumers is education: three quarters of all net surfers have at least a bachelor’s degree or college education while only 10% of people with basic education accessed the net. Many of the economic and social conditions that have made internet retailing a privilege of mostly higherincome groups are likely to remain in place in Mexico for the foreseeable future: Latin America is known to have the largest inequalities in terms of income than any other region in the world. holiday plans etc) account for a huge portion of internet sales. while one half of users never make purchases on a public computer terminal. internet retailing requires access to credit cards and technologically savvy people. Internet retailing recorded a 31% retail value CAGR over the review period.and medium-sized urban areas. school or via the many internet cafés in the country. the fact that internet access and usage remain so strongly related to an elite defined by income. Outlook The severe economic crisis in 2009 did not help middle. Close to 70% of 12-19year-old consumers enjoyed internet access (at home. Money lending via credit cards is low for a number of reasons: large segments of the population are engaged in informal economic activities. which represents around 37% of the total population. which limits online sales. public libraries. An internet connection is also necessary. but this figure decreases notably as in older age groups: only 38% of 25-34-year-old and 12% of 55-64-year-old consumers had access to the internet in 2009. low penetration of banking services in small. Despite the boom in internet retailing it accounted for less than a 1% share of overall value sales in retailing. etc. Internet retailing requires a number of components that are not accessible to the majority of the population.Retailing Mexico of internet users in high-income groups (A. Credit card membership is still a minority issue in the country: as of 2009 there were only 26 million credit cards. one quarter use only a credit card with a limited balance. and two thirds of internet users’ purchases take place on perceived reputable websites. tourism-related products and services (air tickets. these consumers are relegated to internet access at work or school or via internet cafés. Nonetheless. the availability of a home computer among lower-income groups (D and E) fell by three percentage points in 2008-2009 to reach 12%. During 2009. A high level of social inequality weakens the potential expansion of  Euromonitor International Page 5 . Mexico has a severe problem with credit card cloning. worsened this situation. B and C+).2 billion. the preferred method of payment in three quarters of all internet transactions. Home access to the internet is concentrated among high-income groups. The concentration of internet access and usage is not simply due to economic factors. which covers much less than one quarter of the total population. The concentration of internet access and usage suggests that the boom responds to a relatively new retail format that quickly became popular among a small part of the population but will encounter major difficulties in terms of reaching the bulk of the population. Only slightly more than one half of internet purchasers have high confidence in the online payment system.

00 per share while the closing price on the first day rose to Mx$36.00. finally became effective on 30 April 2010. Super Che. and it has always been in the grocery retailing business. The internet service in the country is a virtual duopoly. Chedraui made headlines by acquiring the 29 supermarkets owned by the giant retailer Carrefour in the country. this will remain highly concentrated among high-income. In short. the central region and home of Mexico City. As a result of the lack of competition. This will be difficult given the high growth in online criminal activity and credit card cloning in the country.2 billion. internet fares are very expensive. with only two large communications companies. on average 5times higher than in the US. a comparative study conducted in 2009 among OECD countries showed that telecommunication providers in Mexico offer the slowest internet connections.  Euromonitor International Page 6 . Telmex and Cablevision. has a low presence in small cities (25. despite the notable growth in internet retailing. Middle. while connections with a speed of over 10mb are not available. The company grew organically in subsequent decades to reach 54 outlets by 2004.5mb). Furthermore. Chedraui’s ambitions do not end there. The company offered over 154 million shares. Mexico had the most expensive low velocity connection (256kbps to 2mb) and the fourth most expensive in terms of mid-range speed (over 2. The issuing price of the stock was Mx$34. Following in Wal-Mart’s footsteps. The IPO of the company. It is well-known that Chedraui had little presence in the northern states of the country. Chedraui plans to compete in small cities with its smallest and most flexible format. computer literate consumers with access to credit cards. This situation changed at the end of April 2010 when the company launched its much awaited IPO and became a public company. However. However. Also. only Grupo Comercial Chedraui SA de CV was a privately-held company and family-run business which did not disclose financial information. Furthermore. which penetrates smaller urban areas through its bodega format. but expansion will allow the company to become a truly nationwide player in a short time. internet services in the country are underdeveloped and this situation shows little sign of improving dramatically in the short term.000 inhabitants). offering nationwide coverage. for internet retailing to spread. representing around 16% of total equity. The domestic institutions handling the IPO were Casa de Bolsa Acciones.000-50. Chedraui’s management has expressed the possibility of managing its expansion plans via the acquisitions of independent small grocers. Current Impact The most immediate impact of Chedraui’s IPO is an increase in market capitalisation. listed on the Mexican Stock Exchange under the CHDRAUI symbol. Future Impact All economic and social factors point to a large expansion of internet access and internet retailing activities in the forecast periods. some minor players such as Nextel and Maxcom provide local services. the reluctance of banking institutions to offer credit and the duopoly that controls internet access.and low-income consumers from engaging in internet retailing. With this single move. Thus internet retailing will continue to account for very small retail value shares in retailing as whole. Chedraui expanded from the south of the country into the most profitable retailing area of the country.and low-income consumers will gain access to internet retailing once computer prices and internet and credit access become more competitive. it is expected that internet sales will remain the privilege of a small proportion of the population in the forecast period. which will allow the company to continue expanding through the country. a lower rate than in many Latin American countries. The grocery retailer. Valores Banamex and Casa de Bolsa BBVA Bancomer.Retailing Mexico the internet and Mexico’s slow economic recovery hinders middle. In 2005. it is also important that people have higher confidence in presenting their personal and credit card details online. The company realises the need to expand its distribution and improve logistics capabilities to accomplish its scheme. like its main competitors. However. with the sole exception of Tamaulipas. for a combined value of Mx$5. while the international underwriters were Citigroup and Credit Suisse. Chedraui’s Ipo To Shape Chained Grocery Retailing Of the four major chained grocery retailers. Meanwhile. which had been delayed for years. Mexico has only 7.2 broadband subscribers per 100 inhabitants. Grupo Comercial Chedraui SA de CV was founded in 1920 in the southern state of Veracruz by the Chedraui family. this is likely to develop only in the longer term given the slow recovery of the economy.

it will have much less of an impact on Wal-Mart. However. Moreover.000 or fewer inhabitants. increasing its number of outlets from 96 in 2008 to 167 by 2010. Comercial Mexicana.200 grocery outlets in 2010. This retailer entered deep financial trouble in the last quarter of 2008. In 2009. the most flexible format (smaller. the emergence of Chedraui as a stronger player in grocery retailing and the potential bankruptcy of Comercial Mexicana will not pose a major threat to Wal-Mart’s leading position or its role as a trend setter. chained grocers such as Supermercados Internacionales HEB SA de CV. slightly higher than the combined total of these three competitors. which are approaching saturation in terms of retailing. Wal-Mart had 1. moved from four outlets in 2007 to 67 in 2008 and 247 in 2009 and 433 outlets in 2010. In fact.5 billion by 2018. another leading chained grocery retailer. large chained grocers started to turn towards small urban populations of up to 50. The retail value sales of Wal-Mart are around 30% higher than those of Organización Soriana. when bad investments in derivatives and a huge slump in the financial markets left it with huge debts. these developments will mostly cause other chained grocery retailers to make adjustments. perhaps longer. and more focused on groceries). Comercial Mexicana wants to avoid US creditors suing the company in the US. while increasing the number of its outlets from 189 to 191 in 2008-2010. estimated at close to US$2 billion. the fierce rivalry amongst large chained retailers combined with strong competition from independent small grocers and convenience stores have become constant in large. in  Euromonitor International Page 7 . Companies understandably made their best efforts to cover first more densely populated cities. Due to huge indebtedness levels and its compromising of profits to pay-off the debt. By comparison. mostly ignoring small towns of 50. Comercial Mexicana recorded slower retail value sales growth. the company has already been declared bankrupt in the US. Future Impact The emergence of Chedraui as the fourth largest grocery chain in Mexico will have a significant impact on Organización Soriana SA de CV and also in Comercial Mexicana. Rather. These populations are served mainly by independent small grocers. where people typically have larger disposable income. This trend started to gain momentum around 2007 with the creation of new discount “bodega” formats by Wal-Mart. large grocery retailers have placed their outlets in large. During 2008 and 2009 the growth of these discounters was dynamic: Bodega Aurrera Express. However. These players are a long way from launching IPOs that might interest investors in the country. and the possibility of a bankruptcy is a constant threat. Comercial Mexicana and Chedraui combined. sometimes only 1-2 states. according to CONAPO. Outlook It is almost guaranteed that the huge indebtedness levels being supported by Comercial Mexicana will condemn the company to zero growth for much of the forecast period. As a result.000. and 2010 continued the trend. Chedraui’s potential competitors. Current Impact The expansion of large chained grocers into small urban areas is a relatively recent phenomenon. Wal-Mart opened around 300 new outlets in 2010 alone. Thus. discounters accounted for around an 80% share of all new retailing outlets opened by Wal-Mart.Retailing Mexico While Chedraui prepares to embark on an ambitious expansion plan. These figures clearly indicate the superiority of Wal-Mart in terms of profits and sales per outlet. Mi Bodega Express also recorded notable growth. struggled to avoid bankruptcy in 2009-2010. Large Chained Grocers Expand Into Smaller Cities Traditionally. Mi Bodega Express and Bodega Aurrera Express joined the company’s more established Bodega Aurrera discounter operation. which account for more than 17 million people in Mexico. In mid-July 2010 Comercial Mexicana was forced to file for bankruptcy in the US under Chapter 15 of the bankruptcy Code (cross border insolvency or foreign companies with debts within the US). have very limited operations that do not cover a whole region. This situation is important since there is huge speculation that a coincidence of events (Chedraui expanding and Comercial Mexicana failing) could easily result in the acquisition of a number of Comercial Mexicana’s assets by Chedraui. the leading company in grocery retailing in the country.and medium-sized cities. More importantly.and medium-sized urban areas. respectively. Casa Ley SA de CV or Almacenes Zaragoza SA de CV. Comercial Mexicana’s difficulties and Chedraui’s ambitious expansion plans paid-off in 2010 to see the companies change places as the third and fourth largest grocery retailers. therefore it plans to settle debts of US$1.

000 or lower. virtually guarantees that most people in these smaller areas will remain in the lowincome bracket. low FDI.500 sq m at the beginning of 2010. The new express discounters are mostly located in small cities and they are much smaller in size. opening a small. Chedraui announced that it would join this trend by adapting Super Che discounters to the requirements of small populations.569.1 8.7 18. trade interviews  Euromonitor International Page 8 .000. trade press.458. mostly located in large. which has 34 stores.2 19. in which the company had no presence.000. These small and flexible hard discounters have a very basic product range and they are likely to proliferate due to ongoing economic difficulties in the forecast period.5 Euromonitor International from official statistics. Organización Soriana created this new format to openly compete with Wal-Mart’s Bodega Aurrera Express. trade associations. which have been serving these populations for many years. Organización Soriana reported that it had identified 100 small cities in which to open its newly created Soriana Express format. Comercial Mexicana will not profit from this trend.000 sq of selling space were located in low-income areas in large cities.615.3 8. and Super Che.6 20.876. since its severe financial problems seriously weakened its performance in 2009 and 2010.9 2009 45.2 19. Not being used to facing tough competition from large.4 42. This trend has a strong growth potential. many independent small grocers will suffer and be driven out of the market.000-50. this trend will put a lot of pressure on traditional independent small grocers.2 8.597. and slow GDP growth. In mid-2009.Retailing Mexico 2009 Wal-Mart initiated operations in 41 urban locations. the company is expected to experience zero growth in the short-to-medium term. Importantly. these figures do not take into account the 167 Mi Bodega Express outlets. At the end of 2009.695. once this trend gains full force in the medium-to-long term. mostly with populations of no more than 50.655.333.3 8. With 433 Bodega Aurrera Express stores in 2010. adaptable store with only 7.000 SKUs in 1.2 8.000-50. which it did much to initiate. The slower than expected economic recovery. Future Impact Wal-Mart is expected to be the winner as a result of this trend. many of which are populated by low-income consumers.756. Moreover. company research. However. Clearly.713.704.000 not served by the largest grocery chains.and middle-sized urban areas.4 18.5 2008 45.0 8. reflected in economic indicators such as high unemployment and underemployments levels. On the other hand. it easily outnumbers the newly created Soriana Express (19 stores). The company also targeted populations of 50.9 2010 44. Moreover. these large discounters with over 3. many of which can easily cover small cities with populations of 25. Organización Soriana had managed the Mercado Soriana discounter which used to compete directly with the Bodega Aurrera format.9 2007 44.8 19. and other large retailers are quickly following in its footsteps. MARKET INDICATORS Table 1 Employment in Retailing 2005-2010 2005 Total employment ('000 people) Employment in retailing ('000 people) Employment in retailing (%) (% of total employment) Source: 2006 43.931. Wal-Mart has been a trend setter over many years. Outlook The severe economic downturn in 2009 made small discounters the ideal store format to expand into small urban areas. experienced grocers with ample financial means to match any promotion. since it is estimated that Mexico has over 300 cities with populations of 25.

1 147.3 48.083.100.186.1 Euromonitor International from official statistics.24 8.0 Euromonitor International from official statistics.7 2.6 2.0 2008 52.1 111.348.30 5.1 2005/10 TOTAL 25.5 96.1 2010 1.18 8. trade associations. trade interviews.8 2.4 1.9 2.0 47.043. trade interviews.9 2010 2.08 9.501. trade interviews. trade associations.52 2.5 25.139. trade associations.5 2. company research.0 48. trade press.7 2005/10 TOTAL 30.8 2008 1.3 1. company research.1 1.5 47.0 2007 2.7 78.2 2007 1.043. trade press. company research.1 6.0 4.0 2008 2.162.115.0 Euromonitor International from official statistics.867. trade associations.1 2005-10 CAGR 5.2 2.211.7 86.2 2009 2. trade press.2 2.7 12.9 2. trade sources Table 3 Sales in Retailing by Category: % Value Growth 2005-2010 % current value growth 2009/10 Store-based Retailing Non-Store Retailing Retailing Source: 2005-10 CAGR 4.671.065.2 910.45 6.008.107.360.056.4 6. trade sources Table 6 Sales in Store-Based Retailing by Category: % Value Growth 2005-2010 % current value growth 2009/10 Grocery Retailers Non-Grocery Retailers Store-based Retailing 7.2 21.4 4.342.7  Euromonitor International Page 9 .112.0 100.3 5.21 6.Retailing Mexico MARKET DATA Table 2 MX$ million 2005 Store-based Retailing Non-Store Retailing Retailing Source: Sales in Retailing by Category: Value 2005-2010 2006 2.8 956.55 4.1 4.0 2007 52. company research.7 1.953.211.139.7 2.213.2 1.103.88 8.5 Euromonitor International from official statistics.705.0 2009 53.348.0 2010 - 51.361.0 100.3 48.6 28.251.67 0.867.034.7 100.7 153. trade interviews. trade press.9 1.213. trade sources Table 5 MX$ bn Sales in Store-Based Retailing by Category: Value 2005-2010 2005 Grocery Retailers Non-Grocery Retailers Store-based Retailing Source: 2006 1.216.5 2. trade sources Table 4 Sales in Retailing by Grocery vs Non-Grocery 2005-2010 % retail value rsp excl sales tax 2005 Grocery Non-Grocery Total Source: 2006 51.6 131.6 2009 1.95 4.8 100.139.6 1.7 1.4 6.8 4.5 100.82 6.

1 -3.7 216. trade press.1 2010 95.0 182.7 82. trade associations.2 2010 128. trade interviews.3 12.4 6.4 208.9 2.8 1. trade sources Table 7 MX$ bn Sales in Non-Grocery Retailing by Category: Value 2005-2010 2005 Clothing and Footwear Specialist Retailers Electronics and Appliance Specialist Retailers Health and Beauty Specialist Retailers Home and Garden Specialist Retailers Leisure and Personal Goods Specialist Retailers Mixed Retailers Other Non-Grocery Retailers Non-Grocery Retailers Source: 2006 90.7 75.0 4.5 87.2 20.9 60.5 1.8 140. trade interviews.6 258.5 86. company research.1 66. trade press.5 8.3 86.1 67. company research.9 3.1 2.0 200.2 4.083. trade associations.2 3. trade associations.4 8.8 147.5 21.2 1.7 3.1 Euromonitor International from official statistics.8 0.0 1.0 68.1 1.4 Euromonitor International from official statistics.0 3.5 2008 97.2 7.5 213.8 221.112. trade interviews.0 9.5 1.4 2008 109.9 8.1 85.5 127.2 4. trade sources  Euromonitor International Page 10 .3 59.8 21.3 3.034.Retailing Mexico Source: Euromonitor International from official statistics.2 136.4 237.9 -0.2 111.5 67. trade press.107.3 217.7 2007 93.9 7.9 86. trade sources Table 8 Sales in Non-Grocery Retailing by Category: % Value Growth 2005-2010 % current value growth 2009/10 Clothing and Footwear Specialist Retailers Electronics and Appliance Specialist Retailers Health and Beauty Specialist Retailers Home and Garden Specialist Retailers Leisure and Personal Goods Specialist Retailers Mixed Retailers Other Non-Grocery Retailers Non-Grocery Retailers Source: 2005-10 CAGR 1.162.0 214.5 225.0 3.3 4.7 153.7 248.6 141.1 2007 94.0 146. trade associations.9 12.5 2009 92.2 Euromonitor International from official statistics.1 2009 124.1 83.8 2.9 956.4 3.0 2005/10 TOTAL 9.0 237.2 255.3 10.6 88.7 268. trade sources Table 9 MX$ bn Sales in Non-store Retailing by Category: Value 2005-2010 2005 Direct Selling Homeshopping Internet Retailing Vending Non-Store Retailing Source: 2006 82.7 9. trade press.7 131.7 4.5 241. trade interviews.8 209.8 3.9 290. company research.1 153.1 66. company research.1 5.5 3.8 6.9 96.5 8.2 2.

4 0.4 3.7 1.5 0.4 0.4 0.4 0.9 0.5 0.4 0.6 0. trade press.4 0.8 6.7 19.5 0.5 0.3 1.8 0.Fabricantes Muebleros SA de CV Farmacias Similares SA de CV 7-Eleven México SA de CV Farmacias Benavides SA de CV Avon Cosmetics SA de CV Others Total Source: 2006 9. Grupo Controladora Comercial Mexicana SA de CV .5 31.6 1.8 1.4 74.2 0.5 1.8 1. trade interviews.0 2010 12.6 0.5 0.5 0.2 3.9 0.3 12.1 78.Retailing Mexico Table 10 Sales in Non-store Retailing by Category: % Value Growth 2005-2010 % current value growth 2009/10 Direct Selling Homeshopping Internet Retailing Vending Non-Store Retailing Source: 2005-10 CAGR 11.3 1.5 0.5 0. trade associations.8 4.4 66.0 2007 9.9 100. Grupo Home Depot México S de RL de CV Costco de México SA de CV Famsa .2 0.8 0.6 0.5 0.3 1.8 1. trade sources Table 12 Retailing Brand Shares: % Value 2007-2010 % retail value rsp excl sales tax Brand Company Walmart Wal-Mart de México SA de CV 2007 2.5 0.3 100.6 1.4 70.7 1.8 1.4  Euromonitor International Page 11 .6 2.6 0.2 3.5 0.8 2.4 10.5 0.4 0.3 0.8 2008 2.9 2009 3.0 2.9 6. Grupo Casa Ley SA de CV Elektra SA de CV. trade associations.CCM Sanborns SA de CV. trade sources Table 11 Retailing Company Shares: % Value 2006-2010 % retail value rsp excl sales tax Company Wal-Mart de México SA de CV Organización Soriana SA de CV Cadena Comercial OXXO SA de CV El Puerto de Liverpool SA de CV Coppel SA de CV Comercial Chedraui SA de CV.6 2.6 0. trade interviews.7 1.1 0.2 64. Grupo Corporativo Fragua SA de CV Tiendas 3B SA de CV Palacio de Hierro SA de CV.4 1.6 0.4 67. trade press.4 0.3 0. company research. company research.0 0.4 0.8 0.9 1.7 1.7 0.0 1.3 0.4 0.5 291.5 0.0 Euromonitor International from official statistics.4 0.6 1.0 1.0 0.6 1.8 0.8 0.4 0.8 1.2 1.7 1.4 1.9 2.2 100.7 1.3 2005/10 TOTAL 71.8 0.0 100.4 0.7 1.5 0.7 1.0 2008 10.0 100.3 1.5 0.5 0.9 1.6 0.4 72.4 10.9 0.0 2009 11.7 2.8 0.3 0.2 2010 3.2 63.4 Euromonitor International from official statistics.

7 1.7 0.9 0.3 1.2 0.5 0.8 1.3 100. Grupo Controladora Comercial Mexicana SA de CV .6 0.9 0.8 1.6 2010 13.1 1.5 1.1 0.8 0.8 0.7 0.CCM Casa Ley SA de CV Corporativo Fragua SA de CV Wal-Mart de México SA de CV Organización Soriana SA de CV Sanborns SA de CV.8 0.9 2.5 2. Grupo El Puerto de Liverpool SA de CV Wal-Mart de México SA de CV Controladora Comercial Mexicana SA de CV .3 1.2 3.9 0.4 0.8 1.7 3.5 0.8 0.9 0.5 0.5 72. trade interviews. company research.8 0.2 3.9 1.7 1.7 2.3 0.3 0.9 1.5 2008 10.7 0.3 1.9 0.5 0.0 2.5 0.4 1.2 1.9 0.5 2007 10.4 2.9 4.8 4.9 0.1 0.5 74.5 1.3 1.CCM Sanborns SA de CV.2 2.6 0.6 0.9 1.8 0.4 1.3 1.6  Euromonitor International Page 12 . trade associations.7 0.6 0.6 1.6 0.2 1.1 0.8 2.8 0.4 0.6 0.5 1.9 0.8 1.0 Euromonitor International from official statistics.7 0.8 0.8 0.0 2.8 2.3 1.7 1.2 0.5 0.0 1. Grupo 2.0 2.9 0.2 2.9 0.7 1.0 3.3 100.3 2.0 3.Retailing Mexico Sam's Club Bodega Aurrera OXXO Hipermercado Soriana Coppel Chedraui Liverpool Mi Bodega Express Mega Comercial Mexicana Casa Ley Farmacias Guadalajara Bodega Aurrera Express Mercado Soriana Sears Elektra Tiendas 3B Superama Home Depot Costco Gigante Others Total Source: Wal-Mart de México SA de CV Wal-Mart de México SA de CV Cadena Comercial OXXO SA de CV Organización Soriana SA de CV Coppel SA de CV Comercial Chedraui SA de CV.5 75.4 1.7 1.6 2009 11.8 0.7 0.9 0.8 1.0 2.3 0.8 0.5 0. Grupo Casa Ley SA de CV Elektra SA de CV. Grupo Tiendas 3B SA de CV Wal-Mart de México SA de CV Home Depot México S de RL de CV Costco de México SA de CV Gigante SA de CV. trade press.7 0.8 1.9 0.0 2.0 1.7 0.7 0.0 1.5 2.5 1.5 0.0 100.4 1. trade sources Table 13 Store-Based Retailing Company Shares: % Value 2006-2010 % retail value rsp excl sales tax Company Wal-Mart de México SA de CV Organización Soriana SA de CV Cadena Comercial OXXO SA de CV El Puerto de Liverpool SA de CV Coppel SA de CV Comercial Chedraui SA de CV.0 0.8 1.4 1.9 100.3 1.5 2.6 0.8 0.6 77.7 0.8 0.1 0.3 1.8 0.8 1.0 0.2 0.4 1. Grupo Elektra SA de CV. Grupo Corporativo Fragua SA de CV Tiendas 3B SA de CV Home Depot México S de RL de CV 2006 9.8 1.9 2.7 0.

0 0. Grupo Corporativo Fragua SA de CV Tiendas 3B SA de CV Home Depot México S de RL de CV Costco de México SA de CV Palacio de Hierro SA de CV.2 0.5 0.0 1.6 0.9 0.5 0. company research.9 1.0 2.5 0.4 100.5 69.5 69.3 66.0 2010 13.5 0.9 0. trade sources Table 15 Non-Grocery Retailers Company Shares: % Value 2006-2010 % retail value rsp excl sales tax Company Wal-Mart de México SA de CV El Puerto de Liverpool SA de CV Coppel SA de CV Sanborns SA de CV.1 0.6 0.4 2.5 1.8 1.8 3. Grupo Famsa . trade interviews.5 0.5 0.5 0.5 0.4 1.2 3.9 0.4 0.Retailing Mexico Costco de México SA de CV Palacio de Hierro SA de CV.0 0.4 0.6 0.9 0. trade sources Table 14 Store-Based Retailing Brand Shares: % Value 2007-2010 % retail value rsp excl sales tax Company Wal-Mart de México SA de CV Organización Soriana SA de CV Cadena Comercial OXXO SA de CV El Puerto de Liverpool SA de CV Coppel SA de CV Comercial Chedraui SA de CV.0 0. trade press.5 0.2 0.8 1.3 64.6 0. Grupo Famsa .5 2. Grupo Controladora Comercial Mexicana SA de CV .4 0.6 0.5 0.6 0.2 3.6 0. Grupo Corporativo Fragua SA 2006 6.5 0.4 1.4 100.0 Euromonitor International from official statistics.0 Euromonitor International from official statistics. trade press.Fabricantes Muebleros SA de CV Farmacias Similares SA de CV 7-Eleven México SA de CV Farmacias Benavides SA de CV Gigante SA de CV.9 1.2 1.7 1.5 0.3 64.4 0.4 1. Grupo Others Total Source: 0.4 0.8 1. trade interviews.8 0.2 3.7 3.4 0.5 0.8 0.4 0.5 0.4 3.6 0.8 1.7 0.0 0.5 0.8 3.5 0.1 0.4 1.2 2.6 0.5 0.5 0.4 71.4 2. Grupo Casa Ley SA de CV Elektra SA de CV.8 100.9 0.3 68.9 1.0 2.8 1.6 3.8 1.8 1.3 0.6 0.5 0.9 0.4 1.5 0.3 66.0 1.0 2008 10.5 0.2 100. Grupo Others Total Source: 2007 10.6 0.8 100. company research.Fabricantes Muebleros SA de CV Farmacias Similares SA de CV 7-Eleven México SA de CV Farmacias Benavides SA de CV Gigante SA de CV.8 4.3 1.9 0.3 68.0 0.5 0.8  Euromonitor International Page 13 .0 2.8 1.5 1.8 1.8 100.0 100.5 0.6 0.7 2010 7.3 2008 6. trade associations.7 3. Grupo Elektra SA de CV.2 3.7 1.5 0.6 0.0 2009 11.8 1.3 0. trade associations.8 1.CCM Sanborns SA de CV.4 1.8 1.5 2009 7.5 2.7 1.7 1.0 100.4 0.8 1.8 2.8 1.4 0.2 100.6 0.4 0.8 3.7 2.8 1.2 0.4 0.7 0.9 4.3 0.4 0.5 0.8 1.1 2007 6.6 0.

4 0.2 0.7 0.5 1.0 100.5 100.4 1.9 0. trade sources Table 16 Non-Grocery Retailers Brand Shares: % Value 2007-2010 % retail value rsp excl sales tax Brand Company Sam's Club Coppel Liverpool Farmacias Guadalajara Sears Elektra Home Depot Costco El Palacio de Hierro Fabricas de Francia Famsa Farmacias de Similares Farmacias Benavides Sanborns Suburbia Farmacias del Ahorro Wal-Mart de México SA de CV Coppel SA de CV El Puerto de Liverpool SA de CV Corporativo Fragua SA de CV Sanborns SA de CV.7 1.8 0.3 0.3 0. trade interviews.9 0.6 2009 6.4 0.8 0. Grupo Wal-Mart de México SA de CV Comercializadora Farmaceútica de Chiapas SA de CV Organización Soriana SA de CV 2007 5.0 3.8 0.6 1. Grupo Home Depot México S de RL de CV Costco de México SA de CV Palacio de Hierro SA de CV.5 1. Grupo El Puerto de Liverpool SA de CV Famsa .4 0.2 1.6 0.9 0.1 1.5 0.7 100.7 100.6 0.8 0.1 1.6 City Club 0. Grupo Elektra SA de CV.4 3.2 69.0 1.0 0.0 1.1 1.8 1.2 1. trade associations.4 1.3 1.6 0.6 0.5 0.6 0.9 0.1 0.6 1.4 0.3 100.5 0.Fabricantes Muebleros SA de CV Farmacias Similares SA de CV Farmacias Benavides SA de CV Sanborns SA de CV.4 1.8 0.5 0.4 2.1 1.2 1.0 1.3 0.4 0.4 1.2 0.0 0.9 0.9 0.8 1.2 1. company research.6 0.5 0.5 1.0 0.2 1.6 0.0 2.0 Euromonitor International from official statistics.6  Euromonitor International Page 14 .5 1.3 0.7 1.9 0.9 0.9 0.8 0.9 3.0 0.6 1.Retailing Mexico de CV Home Depot México S de RL de CV Costco de México SA de CV Palacio de Hierro SA de CV.8 0.0 1.1 1.5 1.2 74.9 0.0 1.0 0.7 2.2 1. Grupo Famsa .0 0.6 2010 6.0 0.0 0.1 1.2 72.2 1.8 0.Fabricantes Muebleros SA de CV Farmacias Similares SA de CV Farmacias Benavides SA de CV Comercializadora Farmaceútica de Chiapas SA de CV Organización Soriana SA de CV Gigante SA de CV.0 0.9 0.9 0.6 0.0 0.1 1.5 0.9 1.2 1.4 0.2 71.5 2008 6.0 0.6 0.6 0.1 1.9 0. trade press. Grupo Controladora Milano SA de CV C&A México S de RL de CV Casa Ley SA de CV Farmacias GI SA de CV Waldo's Mart SA de CV Others Total Source: 1.9 0.6 1.9 0.1 1.9 0.5 2.7 2.7 1.5 1.2 1.4 0.2 1.3 0.3 0.3 0.0 0.5 1.2 1.1 1.2 1.2 68.0 0.1 1.

2 0.3 0.5 0.5 4.3 0.5 2. trade sources Table 18 Non-store Retailing Brand Shares: % Value 2007-2010 % retail value rsp excl sales tax Brand Company Avon Jafra Herbalife House of Fuller Mary Kay Omnilife TELMEX Avon Cosmetics SA de CV Jafra Cosmetics International SA de CV Herbalife Internacional de México SA de CV House of Fuller SA de CV Mary Kay Cosméticos de México SA de CV Omnilife SA de CV.9 2010 6.2 100.8 0.2 0.0 2.9 4. Grupo Oriflame de México SA Amway de México SA de CV Pepsi-Cola Mexicana SA de CV CV Directo SA de CV USANA México SA de CV Others Total Source: 2006 8.7 0.5 0.4 0.7 0. company research.8 2.9 3.2 0.4 70.8 2.5 72.5 0.4 71.3 4.0 100.5 5.5 0. trade press.2 67.3 0.9 1.0 2009 6.0 1.4 0.8 2. trade interviews.3 0.8 2.4 2.3 100.9 100.2 0.6 5.4 1.4 3.9 2009 6.8 0.3 0.4 2.6 1.5 73.4 0.8 1.7 1.4 0.0 100.3 0.5 0.4 0.8 2.0  Euromonitor International Page 15 .4 0.6 5.3 0.5 0.9 2.3 3.7 1.8 2. trade associations.4 0.4 0.7 6.5 2.9 1.9 1. trade associations. Grupo Teléfonos de México SAB 2007 7.4 0.5 4.5 0.0 0.4 0.9 100.0 5.6 1.6 0.8 0. company research.0 Euromonitor International from official statistics.9 2.3 0.2 0.2 0.7 100.0 2.0 1.6 0.3 2.1 1.0 2007 7.6 0.3 2.9 2.5 2.3 2.2 3.0 Euromonitor International from official statistics.8 2008 7.9 4.6 0.3 2.4 0.3 0. trade interviews.7 0.0 2010 6.3 62.2 100.8 0.4 1.5 5. Grupo Controladora Milano SA de CV C&A México S de RL de CV 0.4 0.8 1.0 2008 7.5 2.5 2.7 5.2 68.5 0.3 0. Grupo Teléfonos de México SAB de CV Arabela SA de CV Coca-Cola FEMSA SA de CV Transbel SA de CV Zermat Internacional SA de CV Grupo Bimbo SAB de CV Dart SA de CV El Puerto de Liverpool SA de CV Palacio de Hierro SA de CV.0 0.9 3.5 2.9 1.4 3.6 0.4 0.3 0.4 2.Retailing Mexico Office Depot Milano C&A Others Total Source: Gigante SA de CV.3 100.0 5.9 0.6 0.8 2.7 0.3 4.2 0.2 60.0 0.2 64.3 0.7 0.3 3.5 4.4 0.4 0.3 0. trade press.4 0.5 2. trade sources Table 17 Non-store Retailing Company Shares: % Value 2006-2010 % retail value rsp excl sales tax Company Avon Cosmetics SA de CV Jafra Cosmetics International SA de CV Herbalife Internacional de México SA de CV House of Fuller SA de CV Mary Kay Cosméticos de México SA de CV Omnilife SA de CV.4 0.6 0.4 0.5 4.

6 3.6 2015 2.2 3.3 100.016.3 1.5 0.2 0.4 0. trade interviews.1 2.5 20.8 48.7 0.7 2.9 2.352.3 0.2 0.8 0.7 1.7 2014 1.3 62.4 0.162.8 2.8 2. trade press.0 100.2 Euromonitor International from trade associations.3 2.6 0. trade press.6 0.429.6 0.348. trade sources Table 22 Forecast Sales in Store-Based Retailing by Category: % Value Growth 2010-2015 % constant value growth  Euromonitor International Page 16 .4 0.2 0. trade sources Table 19 MX$ bn Forecast Sales in Retailing by Category: Value 2010-2015 2010 Store-based Retailing Non-Store Retailing Retailing Source: 2011 2.291.7 0.3 0.2 67.0 100.788.515.3 0.3 0.345.5 8.903.9 Euromonitor International from trade associations.501. trade press. trade interviews.5 0.2 0.6 2.3 206.232. trade associations.9 100.9 2013 2.2 2.6 0.8 2014 2.515.Retailing Mexico Arabela Coca-Cola L'Bel Zermat Autovend Dart Liverpool Palacio de Hierro Oriflame Amway Pepsi CV Directo USANA Others Total Source: de CV Arabela SA de CV Coca-Cola FEMSA SA de CV Transbel SA de CV Zermat Internacional SA de CV Grupo Bimbo SAB de CV Dart SA de CV El Puerto de Liverpool SA de CV Palacio de Hierro SA de CV.1 1.2 153.5 2012 2.7 0.3 0.4 0.608.0 1.5 2013 1.0 1.274.5 0.197.7 1. trade interviews.788.2 68.3 0.8 0.186.0 Euromonitor International from official statistics.608.9 1.5 0.7 163.3 1. trade sources Table 20 Forecast Sales in Retailing by Category: % Value Growth 2010-2015 % constant value growth 2010-15 CAGR Store-based Retailing Non-Store Retailing Retailing Source: 2010/15 TOTAL 18.3 0.2 2.2 3.697. company research. company research. trade interviews.3 2015 1.4 0.5 0. trade sources Table 21 MX$ bn Forecast Sales in Store-Based Retailing by Category: Value 2010-2015 2010 Grocery Retailers Non-Grocery Retailers Store-based Retailing Source: 2011 1.3 0.697.5 175. company research.241.6 0.0 2. Grupo Oriflame de México SA Amway de México SA de CV Pepsi-Cola Mexicana SA de CV CV Directo SA de CV USANA México SA de CV 2.4 0.4 0.3 0.4 0. trade press.4 2.429.7 1.8 0.690.3 0.4 0.316.3 0.0 1.405.2 64.593.0 1.4 0.0 1.7 2012 1. company research.9 1.348.7 0.7 228.383.7 2.6 0.797.7 189.1 1.2 0.8 Euromonitor International from trade associations.

2 4.3 45.4 228.8 215.405.1 83. trade sources Table 23 MX$ bn Forecast Sales in Non-Grocery Retailing by Category: Value 2010-2015 2010 Clothing and Footwear Specialist Retailers Electronics and Appliance Specialist Retailers Health and Beauty Specialist Retailers Home and Garden Specialist Retailers Leisure and Personal Goods Specialist Retailers Mixed Retailers Other Non-Grocery Retailers Non-Grocery Retailers Source: 2011 97.9 12.1 4. trade press.3 2015 162.8 387. trade associations.7 Euromonitor International from trade associations.2 282.8 3.8 2013 103.0 72.9 86.9 3. trade sources Table 24 Forecast Sales in Non-Grocery Retailing by Category: % Value Growth 2010-2015 % constant value growth 2010-15 CAGR Clothing and Footwear Specialist Retailers Electronics and Appliance Specialist Retailers Health and Beauty Specialist Retailers Home and Garden Specialist Retailers Leisure and Personal Goods Specialist Retailers Mixed Retailers Other Non-Grocery Retailers Non-Grocery Retailers Source: 2010/15 TOTAL 17.1 71.9 172.9 218.5 268.8 9.9 153.5 Euromonitor International from trade associations.1 8.4 2015 111.2 189.6 20.4 10.2 1.3 1.1 153.6 275.9 12.162.7 1.6 1. trade sources Table 25 MX$ bn Forecast Sales in Non-store Retailing by Category: Value 2010-2015 2010 Direct Selling Homeshopping Internet Retailing Vending Non-Store Retailing Source: 2011 134.8 2012 99. trade interviews.291.6 15.6 20.Retailing Mexico 2010-15 CAGR Grocery Retailers Non-Grocery Retailers Store-based Retailing Source: 2010/15 TOTAL 16.0 214.8 3. trade interviews.2 44. trade interviews.9 4. trade press.0 7.7 5.9 1.4 163.5 290.1 262.9 222.5 2.2 2014 154.7 3.0 10.2 68.6 258.9 Euromonitor International from official statistics.5 84. company research.9 186.1 3.6 1.197.7 32.9 232.9 5. trade interviews.1 1.7 333.6 88.7 179.9 18.8 165.6 Euromonitor International from official statistics.0 159. company research. trade press.1 359. company research.0 417.2 128.9 2.8 227.1 21.6 91.0 2014 107.1 9.241.2 310.4 14.1 67.8 2012 141.9 3.5 8. trade sources  Euromonitor International Page 17 .5 1.8 11.9 69.1 95.4 2013 147.5 24.1 6. trade press. trade associations.7 175.7 206.3 13.9 83.4 291. company research.3 74.345.4 18.

3 60.4 57. consists of 39 articles and the most recent amendment was made in mid-2001.4 8.Retailing Mexico Table 26 Forecast Sales in Non-store Retailing by Category: % Value Growth 2010-2015 % constant value growth 2010-15 CAGR Direct Selling Homeshopping Internet Retailing Vending Non-Store Retailing Source: 2010/15 TOTAL 26. Geography and Informatics) estimated that an all-time high of around 13 million people (or 29% of the total workforce of 45 million) worked in the informal economy. 14 and 15 allow foreigners to trade in Mexico. since there are no definitive statistics on the informal economy due by to very nature of these businesses. International retailers are welcomed by the Mexican authorities as long as they comply with Mexican law. these numbers do not include open unemployment (people with no job at all) which INEGI estimated at 5% of the workforce in mid-2010.0 29. while some believe the figure is even higher. However.500 articles. The value of goods and services related to the informal labour market is also not accurately determined. Retailing is not among the prohibited industries. illegal immigration to the US. the need for large initial investment. Codigo de Comercio. Furthermore. Moreover. This law.5 4. trade sources APPENDIX Operating Environment Foreign Direct Investment in Retail • In Mexico. which estimate that there are 20 million informal workers.000 people per year at its peak.7 270. forcing most retailers to make substantial investments to prevent crime in large cities and in the north of the country. suddenly lost steam due to the lack of jobs and anti-illegal immigration measures in the US in 2009-2010. The Codigo de Comercio (Law of Commerce) regulates all retailing activities and articles 13. Best Buy.0 48. which came into force at the end of 1993. it is logical to assume that the informal economy grew at higher rates than any formal division of the economy. INEGI (National Institute of Statistics. estimated at 400. This trend is reflected by Wal-Mart becoming by far the most powerful retailer in the country (after its association with. foreign direct investment (FDI) is regulated by the Ley de Inversión Extranjera (Law of Foreign Investment). trade press. •  Euromonitor International Page 18 . The law clearly states which industrial areas are prohibited from FDI. company research. which dates back to 1889. As in 2009 a large number of jobs were lost and new entrants to the workforce found no openings. This official estimation is believed to be underestimated by many analysts.8 10. and later acquisition of Grupo Cifra in 1991). • • • Informal Retailing • As of August 2010. such as the oil and energy industries. trade interviews. Radio Shack and Office Max. the main general barriers are: powerful and well-established competitors. The most visible unofficial challenge is safety. and an understanding of the domestic culture and local consumers’ preferences. Estimations of the retail value of the informal economy are estimated at between 13% and 35% of GDP. It should be noted that not all of the people involved in the informal economy are active in retailing. has around 1. Entry barriers largely depend on the retailing category in which the new player is entering. The notorious failure of some international retailers such as Carrefour SA is attributed mainly to consumer preferences.2 Euromonitor International from trade associations. A large number of international retailers have successfully established strong brands in Mexico. Informal retailing has a relationship with unemployment and underemployment levels in the country.9 9. for example Home Depot.

and car components. • • • Opening Hours • Retail opening hours depend on the region and location of stores. There are no legal restrictions in terms of the opening of stores throughout the year.00hrs and outlets located in large shopping malls may close at 20. to stop the increase in illegal imports and the expansion of street markets and pirated products.00hrs. Illegal products that are visibly low in quality (clothing.and low-income population in the country. The scale of the informal channel and low resources provided by the government hinder definitive action by the authorities to stop informal retailing. new malls are being located in areas populated by these consumers. especially media and software goods (CDs. However. Since 2007. such as medicines (estimated 5% of informal activity). although not to the same extent as the abovementioned ones. The problem is so prevalent in the Mexican economy that up to 25% of the population buys such products frequently. DVDs. The problem is not limited to lower-income consumers.Retailing Mexico • It has been noted for some years that the product types least affected by pirate. the federal government encouraged informal retailers in large cities to vacate the streets (especially away from historical areas and city centres) and move into improvised “plazas” or public spaces. but small independent grocers usually close for business on that day to allow owners and employees to observe religious practices.00-21. In some cases. Sunday closing is really an independent choice since there is no law prohibiting working a 7-day week. jewellery. new developments are helping to meet the needs of middle. since middle-income consumers also engage in this practice quite regularly. 15 September (Independence Day) and 25 December (Christmas Day) and 1 January (New Year’s Day). all retailers except chemists/pharmacies and parapharmacies/drugstores close on special dates that are mandated by law: 1 May (Labour Day). spend time with the family or simply take a break from work. semi-fixed to the ground. 24-hour retailing exists only in the convenience store. and fragrances. All large retailers open on Sundays. This practice is common on political election days and it is known as “ley seca” or dry law. footwear. CDs and video games. This initiative produced mixed results. In large resort areas. let alone eradicate it. Other key product types in the informal economy. books (25%). illegal or counterfeit items are ones that are ingested or act in the body. Middle-income consumers are known to regularly engage in the purchase of illegal products. together with retailing associations (especially ANTAD) and chambers of commerce. using discounters. fragrances. Rising unemployment levels and lack of job creation make it even more difficult to fight this institutionalised problem.00hrs. the standard working hours for most retailers are 9. the section of the store where alcoholic drinks are sold close. stores may close at 23. In smaller cities and towns.00hrs. include clothing and footwear (50% of all products are illegal). • • • Retail Landscape • A remarkable shift in retailing is taking place in the country. supermarkets and  Euromonitor International Page 19 . There is no sign that this practice is to change in the foreseeable future.00-21. some large supermarkets and hypermarkets in the big cities may offer 24-hour opening to allow parents to purchase toys for their children. It will take substantial government intervention and drastic measures to halt the growth of the informal market. food specialists and small independent grocers close in the middle of the day for 1-2 hours. albeit to a lesser degree. medicines etc) attract almost exclusively lower-income consumers. since it takes place mostly via small street stalls. allowing store owners to have a meal at home. tobacco (around 8%) and alcoholic drinks (less than 10%). The Mexican authorities. While the first shopping malls were built to meet the needs of high. such as Cancun and Acapulco. Outlets selling alcoholic beverages must follow regulatory issues on the sale of such drinks.and low-income groups. Informal retailing does not affect of the established retail channels. video games). In large cities. Other vendors prefer mobility and they travel around metro stations and on other public transportation offering their products.and middle-income consumers. Department stores typically open from 11. many of which are simple metallic stalls. DVDs. software. the level of illegal copies for these product types ranges from 75-90%. have taken joint actions. High-income segments also purchase pirate copies of media products. Given the large middle. forecourt retailing and parapharmacy formats. such as in the evening prior to Día de los Reyes Magos (Wise Men’s Day) on 6 January. On limited occasions. These tend to be acceptable quality products which cost about 10% of the original price. albeit insufficient. although the outlet remains open for the purchase of other items. The product types most affected are ones that are quick and easy to copy such as software.

and medium-sized cities since rural areas still attract few chained retailers. • Mexico has notable potential for shopping mall expansion. The retail format closest to cash-and-carry is warehouse clubs. these stores are also located within the city. The shopping malls that were built during 2009 were mostly smaller in size than is usual and situated in medium-sized cities. gourmet supermarkets and upscale department stores. are located in areas populated by lowincome consumers.2 sq ft per capita. follow these consumers. and Costco and many other chained retailers are usually placed in suburban zones where land is more affordable. Sam’s Club. usually in large. given the high demand in large urban areas.Retailing Mexico hypermarkets as anchor stores. instead of high-end department stores. It is expected that the construction of shopping malls will return to a pre-crisis level by the second half of 2011. such as designer boutiques. • • Cash-and-carry • Cash-and-carry does not exist in Mexico. Large stand-alone warehouse brands such as Office Depot. Home Depot. at only 1. in big cities. and luxury retailers. most notably Mexico City. Many of these new shopping malls are situated in medium-sized cities where malls were previously lacking. lower than other similarly development countries. DEFINITIONS This report analyses the market for Retailing in Mexico. the economic crisis of 2009 placed a high burden on shopping malls in Mexico. cutting the construction of such sites by around 50% and limiting the opening of some known chains that prefer this type of retail location. Office Max. the market has been defined as follows: Store-based retailing • • • • • Grocery retailers Hypermarkets Supermarkets Discounters Small grocery retailers • Convenience stores • Forecourt retailers • Chained forecourt retailers • Independent forecourt retailers • Independent small grocers Food/drink/tobacco specialists Other grocery retailers Non-grocery retailers Mixed retailers • Department stores • Variety stores • Mass merchandisers • Warehouse clubs Health and beauty specialist retailers • Chemists/pharmacies • Parapharmacies/drugstores • Beauty specialist retailers • Other healthcare specialist retailers • • • • •  Euromonitor International Page 20 . Affluent consumers are concentrated mainly in the largest cities in Mexico and the main tourist destinations. However. Discounters. however. However. For the purposes of the study.

Asociación Mexicana de Mercadotecnia Directa AMVD .Retailing Mexico • • Clothing and footwear specialist retailers Home and garden specialist retailers • Furniture and furnishings stores • DIY.Asociación Mexicana de Internet AMMD .Asociacion Nacional de Tiendas de Autoservicio y Departamentales AC Asoc Nal de Tiendas de Autoservicio y Departamentales. home improvement and garden centres Electronics and appliance specialist retailers Leisure and personal goods specialist retailers • Booksellers and stationers • Audio-visual stores • Toys and games stores • Sports goods stores • Pet shops and superstores • Other leisure and personal goods specialist retailers Other non-grocery retailers • • • Non-store retailing • • • • Vending Homeshopping Internet retailing Direct selling Sources used during research include the following: Summary 1 Official Sources Research Sources AMF .Asociacion Mexicana de Franquicias Bolsa Mexicana de Valores INEGI PROFECO . AC Asociacion Mexicana de Internet (AMIPCI) Asociacion Mexicana de Ventas Directas (AMVD) Asociación Nacional de Farmacias de México (Anafarmex) Cámara Nacional de la Industria de Perfumería.Foreign Agricultural Service Mexico Trade Associations AMIPCI . Cosmética & Artículos de Tocador e Higiene (Canipec) Canadian Agri-Food Trade Commission  Euromonitor International Page 21 .Procuraduría Federal del Consumidor US Commercial Service USDA .Asociacion Nacional de Tiendas de Autoservicio y Departamentales ANTAD .Asociacion Mexicana de Ventas Directas ANTAD .

SA de CV Wall Street Journal Source: Euromonitor International Official annual reports from the largest retailing companies: • • • • • • • • • • • Wal-Mart de México SA de CV Controladora Comercial Mexicana SA de CV .CCM Organización Soriana SA de CV Grupo Comercial Chedraui SA de CV Farmacias Benavides SA de CV Cadena Comercial OXXO SA de CV Corporativo Fragua SA de CV Grupo Gigante SA de CV Grupo Carso SA de CV Grupo Palacio de Hierro SA de CV El Puerto de Liverpool SA de CV  Euromonitor International Page 22 .Centro de Información de Mercadotecnia Mexicana International Council of Shopping Centers ONEXPO .0 Mkt-Up Mundo Ejecutivo Numerous Observatec Reforma Revista Expansion.Retailing Mexico CIMM .Organización Nacional de Expendedores de Petróleo Trade Press Advertising Age Mexico Alto Nivel CNN Expansión Crain's de México Cronica de Hoy El Economista El Financiero El Semanario El Universal Entrepreneur eSemanal Etceter Expansion Marketing-Up Merca2.

which is the ultimate owner of a brand. The NBO may be a subsidiary of a GBO or it may be a completely separate company. but not limited to.Retailing Mexico Trade press from a number of publications. Reference to shares in the report analysis is at NBO level. most notably: • • • • • • Reforma CNN-Expansión El Semanario El Universal El Economista La Jornada Trade interviews with: • • • El Palacio de Hierro Tiendas 3B AMVD (Asociación Mexicana de Tiendas Directas) Official sources such as: • • • • ANTAD (Asociación Nacional de Autoservicio y Departamentales) INEGI (Instituto Nacional de Estadística. NBO refers to National Brand Owner. which is the company licensed to distribute a brand on behalf of a GBO. alcoholic drinks Totillerias: small stores specialising in selling tortillas. a flat and circular corn base food Dia de Muertos: or “Day of the Dead” which is the traditional celebration of the deceased taking place on 2 November each year Ley seca: specific days where the sale of alcohol is prohibited in retail and foodservice establishments Other terminology: • • GBO refers to Global Brand Owner. Geografía e Informática) CONAPO (Consejo Nacional de Población) AMIPCI (Asociación Mexicana de Internet) Explanations of words and/or terminology used in this report are as follows: • • • • Vinaterias: stores specialising in.  Euromonitor International Page 23 . Share tables at both GBO and at NBO level are provided in the report.