An Update on PMMI s Mexico Packaging and Processing Market Research

Transcription

1 An Update on PMMI s Mexico Packaging and Processing Market Research Are you connect to the audio portion? Please dial: Mexico: Access code: # Webinar Presentation May 5,

2 Events and Services at EXPO PACK Mexico Brunch: Packaging Operations and End User Panel Wednesday, May 18 from 10:30 AM 12:30 PM EXPO BANCOMER, Room B4 EXPO PACK Mexico Agent Directory Complimentary Services available at PMMI s Pavilion (Booth #2000): PMMI Member Happy Hour (daily from 5-7pm) Export counseling and market information Interpreters (on-site only) Private meeting rooms Internet stations Business Lounge Area 1

3 MEXICO S PACKAGING MACHIENRY MARKET OPPORTUNITIES AND TRENDS Luis Doménech M. Managing Director Market Intelligence Latin America, S.C. May, 2016

4 Introduction Historical high packaging machinery imports in 2015 = US$678.1 million. U.S. recovered the leading supplier position after 12 years ranking in 2 nd or 3 rd place. Imports from Germany and Italy saw declines in value and share. Spain and ROW, distant from the leading suppliers but slowly continue wining share. The Mexican economy has mixed indicators. While the overall GDP shows moderate growth and inflation is its lowest historical values, The Mexican peso has suffered a 33% devaluation since January

5 Introduction Packaging Machinery Imports USA Italy Germany Spain Rest of World Source: MILA with information from the Secretariat of Economy,

6 Introduction PMMI commissioned an update to the 2015 market research report on Mexico s packaging machinery market 32 Interviews with end users who have purchasing plans. Interviews with PM distributors, associations, PROMEXICO, etc. Trade statistics analysis. Comparison with previous research reports. Key goals: Identify what led to the 15% increase in PM imports in Identify reasons behind U.S. return to the leading supplier position. Identify market trends and customer preferences. Are those shifting? What can PMMI members expect from the Mexican market under uncertain economic conditions? 5

7 6 Challenge..

8 Agenda Macro Environment Mexico s Packaging Machinery Market Size, Trends and Shares Future Outlook Recommendations / Strategies for Success 7

9 Macro Environment 123 million people, neighbors to the U.S. Open Economy - free trade with: 46 countries Recently signed Trans-Pacific Partnership (TPP). One billion customers and 60% of global GDP. Most packaging machinery imports come from free-trade countries, thus do not pay import duties. Structural Reforms Key reforms: energy, telecommunications, fiscal, financial, education and political. Faster growing and more competitive country. Lower energy (power and fuels) and telecommunications costs. Wider foreign direct investment attraction Jobs creation. Favorable Demographics Working age population will outpace the number of dependents in coming years. 37% of the population younger than 20 y.o. = 45 million people 56% of the population younger than 30 y.o. = 69 million people. Migration from rural to urban areas estimates = 20% rura vs 80% urban. 8

10 Slightly higher GDP growth for Mexico, GDP QoQ growth rate 1Q13-4Q15 Slightly higher GDP growth expectations SCHP % Banxico % IMF 2.6% Mexico, Inflation rate, May 2013 Dec 2015 Despite of the peso depreciation in front of the US$, the inflation index has maintained lowest historical values. 9 Source: INEGI & BANXICO, May 2016

11 Billion US$ Mexico attractive for FDI FDI Source: Secretariat of Economy,

12 Mediocre consumer confidence Customer Confidence Index Q2016 Index (2003=100) Seasonally Adjusted Cycle - Trend Source: BANXICO and INEGI, May,

13 Retail stores continue with strong sales growth ANTAD, Monthly Total General Sales Q16 (YoY nominal growth %) Same Stores % Total Stores % Q16* Same Stores Total Stores Source: ANTAD, Press Release, April 2016

14 Macro Environment 22 Exchange Rate Comparison Q % 16 36% MXN/EUR MXN/USD Jan 11 June 11 Jan 12 June 12 Jan 13 June 13 Jan 14 June 14 Jan 15 June 15 Jan 16 may-16 Source: Mila with data from Mexico s Central Bank,

15 Political Environment President Peña Approval/ Disapproval Index Presidents job qualification from 0 to 10 Apr 13 jul-13 Dec 13 Apr 14 Aug 14 Dec 14 mar-15 jul-15 Dec 15 Apr 16 Citizens Leaders

16 Let s take a break.. DRIVERS GDP growth Low inflation 2.13% Increasing FDI Strong internal demand Young population Formal jobs growth INHIBITORS 33% Currency devaluation in 24 months. Presidential approval. NEUTRAL Stable consumer confidence. 15

17 Need more data % inflation = lowest since this indicator is tracked. Telecom reform Local telephony cost = - 4.2% Cellular telephony cost = - 6.8% National long distance cost= -100% International long distance % Telecom reform Energy Reform Electric power cost = - 3.7% Industrial electric power - 6.4% Natural gas % 30 new private players enter the O&G sector. No new Taxes and no tax increases for 2016

18 Need a lot more data imports = US$395.2 billion, 1% lower vs exports = US$380.7 billion, 4% lower vs 2014 Negative trade balance of 14.5 billion. Mexico produced 3.5 million vehicles in 2015, up 5.5%. Vehicle exports increased 4.4% to reach 2.6 million units. According to a KPMG report, Top management perspectives 2016 where 812 business leaders were interviewed, 48% have seen their company profitability improve in the last years, 37% maintained similar levels and 15% had lower profitability. 17

19 Need a lot more data. The oil industry... Everyone talks about oil prices!! 18

20 Oil in the Mexican economy Traditionally oil income has been a large contributor to Mexico s public finances. Despite of industry diversification (automotive, aerospace, mining, food, beverage, etc), oil still represented 1/3 of the public budget in Oil prices decline is only part of the problem, PEMEX s production has been declining for a decade, passing from 3.5 million barrels per day in 2005 to 2.2 mbpd in Lack of refining capacity and lack of investments in natural gas extraction and pipelines has translated into increasing gasoline and gas imports. Nowadays Mexico is a net importer of petroleum products. Petroleum products trade deficit in 1Q16 equals US$9 billion!

21 Oil in the Mexican economy Mexico s Petroleum Products Trade Balance

22 Oil in the Mexican economy 2015 Public deficit = US$35.14 billion = 3.5% of GDP Mexico s external debt has increased to US$160 billion (30% in the last 3 years), and internal debt has increased 45% to reach the equivalent of US$265 billion. Mexico s reserves declined in US$22 billion in 2015 from US$198 billion in January 2015 to US$176 billion in January PEMEX s losses in 2015 = US$28.8 billion. The Mexican Government had to inject US$4.2 billion into PEMEX so it could partially meet its obligations with suppliers. Nowadays, instead of being the governments cash cow, the oil industry represents an additional cost.

23 Summarizing.. DRIVERS GDP growth Low inflation 2.13% Increasing FDI Strong internal demand Young population Formal jobs growth Strong industrial activity No Tax increases NEUTRAL Stable consumer confidence. INHIBITORS 33% Currency devaluation in 24 months. Presidential approval. Strong fiscal deficit Increasing public debt Lower reserves Insufficient budget cuts Negative petroleum trade balance. Increasing country risk Recipe for an economic crisis! 22

24 Agenda Macro Environment Mexico s Packaging Machinery Market Size, Trends and Shares Future Outlook Recommendations / Strategies for Success 23

25 Market Size 2015 estimate market value = US$810 million = historical high value 8% higher than Imports were 15% higher. Five-year average growth rate (CAGR) 7.2% per year. Approximately 80% of the market is supplied by imported machinery imports = US$ 678 million. Tariffs have been lowered or eliminated for most packaging machinery regardless of their origin. Few types of machinery from non FTA countries still pay 5-15% import duties. USA, Italy and Germany (in that order) remain the largest suppliers with 71% share. Top 30 importers represent 49% of the total imports. A single importer (Compañía Cervecera de Coahuila) imported 18% of the total 2015 value

26 Market Size & Trends Packaging Machinery Imports USA Italy Germany Spain Rest of World Source: MILA with information from the Secretariat of Economy,

27 Market Size & Trends Importer US$ 2014 US$2015 Change % COMPAÑIA CERVECERA DE COAHUILA, S.A. DE C.V. 34,771, ,229, % NESTLE MEXICO SA DE CV 10,983,295 26,469, % KRAFT FOODS DE MEXICO SA DE CV 7,615,490 24,992, % PROCTER & GAMBLE MANUFACTURA S DE RL DE CV 26,128,714 22,181,370-15% SABRITAS S DE RL DE CV 5,320,088 19,950, % TETRA PAK SA DE CV 16,254,224 17,233,857 6% TETRA PAK RDC MEXICO S.A. DE C.V. 10,383,968 17,233,857 66% HERSMEX S. DE R.L DE C.V. 5,526,341 10,184,864 84% BRITISH AMERICAN TOBACCO MEXICO SA DE CV 9,321,943 9,483,466 2% TRANSPORTADORA OCCIDENTAL SA DE CV 8,258,575 8,466,868 3% LABORATORIOS PISA SA CV 5,818,988 8,074,105 39% COMERCIALIZADORA DE LACTEOS Y DERIVADOS, S.A. DE C.V. 4,858,333 6,861,405 41% KRONES MEX SA DE CV 7,859,075 6,537,992-17% SERVICIOS CORPORATIVOS PHILIP MORRIS S DE RL DE CV 3,650,227 6,301,334 73% COMPA&IA CERVECERA DE ZACATECAS SA DE CV 3,098,721 5,974,143 93% MULTIVAC MEXICOSA DE CV 9,171,277 5,970,814-35% CIA CERVECERA DEL TROPICO SA DE CV 16,128,334 4,880,349-70% BIMBO SA DE CV 7,592,765 4,371,063-42% MANANTIALES PE&AFIEL SA DE CV 7,194,030 3,923,361-45% QUALAMEXSA DE CV 3,020,300 3,568,593 18% Source: MILA with information from Customs,

28 27 Compañía Cervecera de Coahuila

29 28 Grupo Modelo has two different owners

30 Constellation Brands Investments Constellation brands is increasing the capacity of Cía Cervecera de Coahuila from 10 million hectoliters to 25 million hectoliters by mid 2017 and will continue expanding to reach 27.5 by Also increasing capacity of a glass bottles production plant. Total investment in Coahuila of US$2.5 billion. The company also announced in early 2016 the construction of a 10 million hectoliter state-of-the-art new plant in Mexicali with the ability to scale to 20 million hectoliters. The first 5 are scheduled to be in operation by early

31 Cia Cervecera de Chihuahua PM Imports 2015 Origin Value United States of America 91,526,639 Germany 10,928,483 Italy 10,014,763 France 5,242,898 Netherlands 1,215,558 Canada 772,800 China 521,818 Other 6,805 Almost all machinery sourced trough CIH INTERNATIONAL S.a.r.l., a Constellation Brands Subsidiary in Luxembourg established in

32 31 Cia Cervecera de Chihuahua Investments

33 Rest of the Market Excluding Cía Cervecera de Chuhuahua, packaging machinery imports growth was 1% in = US$557 million vs US$552 million in The U.S. still captured the first place in ranking with 27% share, followed by Italy with 22% share and Germany with 18%. The food sector was the largest investor in packaging machinery, followed by the beverage sector. Distant from those the personal care industry had an increase in investments compared to 2014 and the pharmaceutical sector remained with moderate investments. 32

34 Market Trends Demand Drivers Industrial production index improving. Companies moving forward with investment plans for: a) Increasing capacity b) New plants c) Product differentiation Low interest rates. Mexico attracting investments from European companies targeting the domestic and NAFTA markets. Highly competitive manufacturing costs. Favourable demographics and growing middle class

35 Market Trends Demand Inhibitors Depreciation of the Mexican Peso in front of the U.S. Dollar = imported machinery more expensive in peso terms, but finished products are more competitive in the international arena. Euro loosing value to of the US Dollar makes European machinery more price competitive. As most of their domestic markets are slow, European manufacturers are aggressively pursuing sales in Latin America. Due to industry consolidation and demand from large multinational companies, large volume machinery is finding greater demand (U.S. machinery well suited for large-scale production in the food and beverage sectors). Mexican food and beverage companies continue increasing investments in the U.S. to serve the Latin community

36 Forecast Packaging Machinery Imports Forecasts (in million USS) /f 2017/f 400 Most likely Optimistic Pesimistic Source: MILA,

37 Market Shares 2015 PM Import Shares 2015 PM Import Shares w/o CCC 25% 35% 28% 27% 4% 5% 16% 20% 18% 22% USA Italy Germany Spain Rest of world USA Italy Germany Spain Rest of world Source: MILA with data from Secretariat of Economy,

38 2015 Packaging Machinery Importers The top 200 packaging machinery importers accounted for 81% of the total 2015 import value. Among the top 200 importers, 31% of the import value was imported by beverage companies, Food companies accounted 25%, Personal Care and Pharma 8% and 28% of imports were imported by packaging machinery companies or other No of Import value range companies 121 million million million million million million thousand thousand thousand thousand thousand 409 Source: MILA with data from Aduanas (Mexican customs), 2016

39 Agenda Macro Environment Mexico s Packaging Machinery Market Size, Trends and Shares Future Outlook Recommendations / Strategies for Success 38

40 PM Future Outlook Among 32 companies interviewed, 28 plan to continue with their investment plans, 3 are awaiting for exchange rate improvement to place PM orders and 1 cancelled its planned investments. There is optimism in the industry, fueled by strong domestic demand and increasing exports due to exchange rate. Despite of our Government, we continue growing Large multinationals continue investing in Mexico

41 PM Future Outlook Investment Announcements in 2015/2016 Company Million US$ Location Description Diageo 400 Jalisco - Tequila DC, distilling and bottling facility and wwtp Constellation Brands Increase capacity from 10 to 27 2,000 Chihuahua million hectoliters in Chihuahua, 3,500 Mexicali new plant in Mexicali Arca Continental 405 Various Plant expansions and acquisitions Leoni / Envases Universales 120 Yucatán Can production facility Grupo Modelo 300 Yucatán Beer plant in yucatán Ball Corporation 320 Nuevo León Can production facility Heineken 2,000 Chihuahua New Plant in Chihuahua Takeda 80 TBD Expansion 40 40

42 Previous Investments continue Mexico has strengthened its position in the global food market attracting investments from both, large multinational players and medium sized companies entering the North American market. Company Investment Announcement (US$) Period/ Concept Coca-Cola 8.2 billion Pepsico 4.99 billion Nestlé 1 billion 2 new plants + expansion Mondeléz Int. 600 million New plant Heineken 500 million New plant Kekén 300 million New plant Mars 200 million New plant + expansion Kellogg s 50 million Plant expansion

43 Still positive perspectives ? 42

44 Why are international food/ beverage companies so interested in Mexico? Domestic market of over 120 million people. Young population. Migration from rural to urban areas. Increasing number of woman working. Positive GDP and inflation figures. Export opportunities to supply the U.S. market with low logistical costs Mexico supplies 12% of U.S. food imports, and share is increasing fast. Free trade agreements allow importing raw materials and exporting finished products without import duties. Low manufacturing costs. Food manufacturing net operation profits significantly higher than comparable economies. Well-developed retail sector with multiple store formats. Mexican dietary habits. 43

45 Opportunities and Challenges Strong investment plans from multinationals. Mexican companies increasingly investing in the U.S. and Europe, increasing number of Mexican global players. South American companies expanding to Mexico. Energy efficiency and sustainable practices. Peso devaluation makes imported machinery more expensive in peso terms. US$ priced machinery becoming less price-competitive than European machinery. Asian machinery expected to loose share due to bad experiences among some industry players. 44

46 Agenda Macro Environment Mexico s Packaging Machinery Market Size, Trends and Shares Future Outlook Recommendations / Strategies for Success 45

47 Doing business in Mexico Local presence is highly appreciated and becoming a must. Post-sale service is a need, lacking means loosing the sale. Face-to-face negotiations have better results. Personal relations are very valuable. Price references and information is essential. Preference for local trade shows. Market with demanding consumers. Flexibility is key. 46

48 Strategies for Success No NAFTA advantage. Service, flexibility and reliability more important than price. Local service is a key competitive advantage. Credit options and payment schedules can be strong decision making points. Credits in local currency are preferred. Save margin for negotiation. Equipment service packages and local spare parts are a must. Invest in developing relationships. 47

49 Strategies for Success The number of companies willing to purchase from suppliers without a formal presence in Mexico is fast disappearing. Invest in marketing videos, promotional materials, web page in multiple languages. 48

50 49 QUESTIONS?

51 Upcoming FISPAL Technologia (June 14-17; São Paulo, Brazil) Updated Brazil Packaging Machinery Competitive Report Webinar PMMI Pavilion Brazil Market Strategy Luncheon ProPak Asia (June 15-18; Bangkok, Thailand) NEW: Thailand Packaging Machinery Market Assessment: An Analysis of Market Opportunities for Packaging Machinery Manufacturers Webinar PMMI Pavilion 50

52 Contact us: Luis Doménech Managing Director Market Intelligence Latin America, S.C. +(52155) Paige Jarvi Global Marketing Assistant PMMI See you in México! 51 51