Proximity to US Broadens Brand Choice

But income disparity limits access

Mexican consumers are resilient, cautious, interested in brands and intent on getting the most for their money.

And for good reason: Relative to some of the other major economies of Latin America, personal income is rising relatively slowly. Of the total population of over 113 million, almost half lives in poverty, according to the World Bank.

Mexico's GDP per capita, which reached $9,133 in 2010, places the country at around the same level as Kazakhstan in the World Bank ranking.

Like other nations, Mexico is attempting to increase its wealth and distribute it more equitably. Geography differentiates Mexico, however. It borders the US, one of the world's richest nations, which buys 80 percent of Mexico's exports. Mexico is the third largest trading partner of the US, after Canada and China.

Mexico's close relationship with its northern neighbor influences its economic development, often for good but sometimes for bad. Soon after Mexico joined the North American Free Trade Agreement (NAFTA), in 1994, the government devalued the peso to slow its appreciation. The currency soon plummeted to 50 percent of its value, setting off a severe recession.

Change in leadership stirs hope

With US loan support and Mexican economic reforms the economy rapidly recovered. And political leadership changed dramatically in 2000, when National Action Party (PAN) presidential candidate Vicente Fox dislodged the Institutional Revolutionary Party (PRI), which had ruled Mexico without interruption for 71 years, since 1929.

Mexico's current president, Felipe Calderón, also of PAN, succeeded Fox in 2006. His government faced many economic and social policy challenges. In 2009, when much of Latin America remained relatively unaffected by the global financial crisis that battered North America and Europe, Mexico's economy contracted 6.5 percent, because of its economic link with the US, according to Bloomberg.

The Calderón government has attempted to reform systemic corruption and control drug-related violence that threaten the security of Mexico's inhabitants and severely impact the tourist industry. An important source of foreign currency, tourism contributed almost $12 billion to Mexico's economy in 2010, according to the US State Department. But these problems are not easily solved.

Although the government introduced higher standards of transparency for business transactions, corruption has proved difficult to eradicate, as suggested by allegations that surfaced in April 2012 about Walmart's market entry practices. The Calderon government aggressively battled the drug cartels, but drug-related deaths total almost 50,000 since the administration took office.

Consumers enjoy wide brand choice

These economic and social dynamics impact the lives of the Mexican people, how they shop and their attitudes toward brands. Because of NAFTA and physical proximity to the US, Mexicans have access to a wider selection of international brands than residents in most other Latin American countries. And many local brand options are available, too.

Four of the BrandZ™ Top 15 Mexican brands are communication providers, reflecting the centralized, almost monopolistic state of this industry. Both the country's most valuable brand, the cellular network Telcel, and Telmex, which offers fixed-line and Internet services, are owned by América Móvil, an organization headed by Carlos Slim Helú, the Mexican entrepreneur who Forbes ranks as the world's richest man.

The ranking also includes five popular retail brands. Bodega Aurrera, a chain of discount stores, was established in 1958 and acquired by Walmart in 1997, after several years as a joint venture partner. The diversified retailer Sanborns operates department stores and other outlets as well as restaurants. It's owned by Grupo Carso, which is a holding of Carlos Slim Helú. Ricardo Salinas Pliego, one of Mexico's wealthiest individuals, owns Electra, which sells household appliances on credit. Liverpool operates department stores. Soriana is a multichannel retailer.

Income disparity limits choice for some

Three local beers—Corona, Modelo and Tecate—are among the Mexico's Top 15 most valuable brands. Corona and Modelo are produced by Group Modelo in cooperation with AB-InBev, the world's largest brewer. The brewer of Tecate is a subsidiary of Heineken International.

Mexican consumers also prefer local brands for certain fresh foods. Similarly, in dairy products the Mexican brand Lala dominates the fresh milk category and Bimbo, an international distributor of baked goods, is a preferred brand.

Not all consumers have the income to afford the extensive brand choice. Credit is becoming more available, but at higher rates. Recently, more micro credit has helped finance entrepreneurship. And pawnshops have proliferated, enabling people to obtain small loans secured with their personal possessions.

Marketing generally starts with TV, which has enormous penetration, perhaps 92 percent. But two companies, Televisa and Azteca, control the airwaves and brands increasingly are attempting to find other media options, including mobile, although digital is just beginning to become a factor. Marketers now focus more attention on communication at the point of sale. As price promotion increases in economic hard times, they struggle to cultivate the emotional bond, too.

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Fundamentals for brand building in Mexico

  1. Respect the market
    First consider what Mexico is not. It's not South America. It's not the US. It’s a unique and large country—in land area and in population size and diversity. It’s the world’s largest Spanish-speaking country.
  2. Start in the cities
    With about 22 million inhabitants, Mexico City is the most populous city in the Western Hemisphere and a good entrance point. But other cities, such as Guadalajara and Monterrey, can enable brands to establish a regional presence.
  3. Know the customers
    Mexico is a series of local markets and in each instance the customers are somewhat different and usually respond best when the brand proposition is customized to their needs and incudes both rational and emotional components.
  4. Understand the complexity
    Doing business in Mexico can be complex. Distribution is a good example. Develop a strong understanding of the distribution channels for your brands and assemble the appropriate responses, which can include a dedicated sales force or distribution partners.
  5. Be patient
    Mexican consumers have experience with brands and like them. But success can take time. And while there are no shortcuts, you can maximize efficiency by doing the homework, defining your customer base and marketing creatively.

BrandZ LATAM Top 50 2012

BrandZ LATAM 2012 Report Top 50 Report

Top 50 Chart

2012 BrandZ LATAM Top 50 Infographic

BrandZ 2012 Infographic

Methodology and valuation by Kantar Millward Brown

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