Mexico: A look at the top U.S. beef export market

by Chad Russell, Regional Director for Mexico, Dominican Republic and Central America – U.S. Meat Export Federation

Introduction

The United States’ neighbor to the south, Mexico, is an essential partner to the U.S. beef industry in two ways: It is the largest volume market for our beef exports and is a key source of feeder cattle for the U.S. cattle feeding and processing industries. Even though Mexico’s domestic industry supplies 86 percent of its beef needs, demand is high enough, especially for certain round, chuck and offal items, that the United States sold 247,614 metric tons (545.9 million pounds) of beef to Mexico in 2010 – equal to 23.2 percent of all U.S. beef annual exports. Those exports were valued at more than $819 million, and accounted for 82 percent of Mexico’s beef imports. Looking ahead, Mexico is showing signs of rebounding from the lingering effects of the global economic downturn that reduced exports over the past two years. However, rising beef prices and competing foreign demand for reduced U.S. beef supply could pose challenges for Mexican consumers to recover purchases of U.S. beef at the record level observed in 2008.

Discussion

A huge market with great untapped potential

Mexican consumers appreciate U.S. beef for its tenderness, color and ease of preparation. While many “old school” shoppers in Mexico still patronize the traditional “wet markets” where beef is sliced from carcasses in conditions most U.S. shoppers would find unappealing; there is a growing middle class that enjoys the same modern supermarkets and Wal-Mart supercenter-style outlets that consumers patronize in the United States. U.S. exports to Mexico have been focused on the retail sector, where about 70 percent of U.S. beef is sold. The Mexico beef processing industry utilizes another 20 percent with the balance going to an ever-changing hotel, restaurant and institutional (HRI) sector. With more than 112 million people, Mexico contains many untapped market segments that are unfamiliar with the characteristics of U.S. beef. To reach those who have not yet experienced high-quality, grain-fed beef from the United States, the U.S. Meat Export Federation has developed a program for this market, utilizing support from the beef checkoff and the U.S. Department of Agriculture (USDA) Market Access Program (MAP), which is focused on education.

Reaching out to consumers

USMEF has positioned U.S. beef under a common theme: “La major carne de los Estados Unidos…mas tu sazon,” which roughly translates as “the best meat from the United States…plus your personal touch.” Thus far, marketing and outreach efforts have been concentrated in the three largest cities: Mexico City, Monterrey and Guadalajara.

Consumers in Mexico have focused on flavorful value-added cuts, typically inside and outside rounds, as well as boneless chucks. Tripe, outside skirts and livers are popular variety meat items. While most shoppers are drawn to the value-added cuts, restaurants in high-end hotels are less sensitive to price and want to serve their clientele beef that meets the highest quality specifications. U.S. beef is finding increasing opportunities in this niche.

As part of its educational effort with consumers, USMEF has implemented several in-store programs that have proven effective in increasing familiarity with U.S. beef. These include:

• The Ideal Meat Case – The goal of this program is to provide clear U.S. beef identification in the refrigerated meat section of Mexico supermarkets, along with product information at more than 200 retail stores throughout the year. The program helps consumers identify U.S. beef at the retail point of sale (POS), making it easier for shoppers to find similar products each time to repeat a positive eating experience.

“Don Pepe” meat consultants – For many shoppers, understanding the differences between cuts and how they should be prepared for maximum enjoyment is a learning experience. To help bridge the information gap, USMEF developed the Don Pepe meat consultant program. The Don Pepe consultants are trained by USMEF in meat preparation, menu ideas and nutrition. In addition to interacting with customers in the grocery store’s meat section, the Don Pepe team of consultants also work with store staff to answer their questions and help manage meat case displays.

Meat department managers at participating retail chains have praised the Don Pepe consultants as an important resource that increases meat sales. Increases in U.S. beef sales on the days when Don Pepe consultants were present in stores ranged from 5 to 30 percent. While USMEF initially supplied beef samples for the Don Pepe consultants to distribute, the program has proven so effective that 100 percent of the participating stores now supply U.S. beef at their own expense. Even Wal-Mart, whose corporate policy is to avoid point-of-sale promotions, has requested more Don Pepe consultants be dispatched to additional Wal-Mart Supercenters and Sam’s Clubs throughout Mexico’s metropolitan areas to help increase sales of U.S. beef.

In-store Dietitians – In a country where obesity rates have tripled over the past few decades, USMEF has targeted those supermarkets where consumers have the greatest purchasing power and staffed them during peak shopping hours with dietitians to help consumers better understand the nutritional benefits of U.S. red meat and provide them with recipe information.

A team of 20 dietitians staffed 33 stores on four peak shopping days for a period of six months at Mega Comercial Mexicana, Comercial Mexicana and Chedraui supermarkets. During this period, they achieved the following results:

• Nearly 85,000 customers were contacted and provided information related to the dietary benefits of U.S. beef and pork, with more than 22,000 of those receiving detailed, personalized suggestions.
• Among the 10,000 customers who completed surveys, 98 percent said that their perception and knowledge of U.S. red meats had improved, and 95 percent said they planned to increase their purchases of U.S. products.
• Comercial Mexicana, one of the participating supermarket chains, reported a 22 percent increase in the volume of U.S. product sales, and a 10 percent jump in value versus the prior year.

Training buyers and in-store personnel

The shoppers aren’t the only ones who benefit from greater familiarity with U.S. beef. Meat buyers are targeted for training on a regular basis to help ensure that they are familiar with the benefits – both in terms of quality and margin enhancement – of beef products from the United States.

One such program was a four-day seminar involving 89 staff members from 39 Al Super regional supermarket stores. Conducted in collaboration with the Monterrey Institute of Technology and Higher Education, the seminar addressed market trends, suggestions for increasing meat yield, and sales techniques that can help retailers more effectively merchandise and promote U.S. beef.

Cultivating chefs

Key decision-makers at Mexico’s leading hotels and restaurants are the target of seminars led by Max Covaliu, USMEF’s executive chef in Mexico. Each seminar hosts about 20 chefs, kitchen staff, and food and beverage managers from hotels in top tourist destinations, such as Cancun and Playa del Carmen.

In one recent seminar, Covaliu illustrated the harvesting of value-added cuts from the shoulder clod, which most of the attendees were using only for ground beef. It was one example of helping chefs and kitchen staff members develop tender and flavorful menu items from value-added cuts.

Supporting exports at the border

The U.S. beef industry through USMEF has cultivated a positive relationship with a number of Mexican agencies that are responsible for managing product shipments at border crossings by providing periodic seminars that address U.S. food safety practices, the USDA Food Safety Inspection System (FSIS) meat inspection process, types of U.S. red meat cuts, meat classification and branded beef programs.

The seminars serve to facilitate relationship building and enhance USMEF’s efforts to troubleshoot and resolve problems at the point of entry, as well as to keep Mexican officials informed of U.S. practices. Agencies that have been involved in recent seminars have included SENASICA (Mexico’s Health, Agri-food Safety and Quality Services agency) and Comecarne (Mexican Meat Council), as well as customs brokers, customs officials and personnel from the Secretariat of Economia.

Conclusion

While traditionally a more price-sensitive market, Mexico had seen its imports of U.S. beef on a generally upward trend until the global economic downturn of 2009, which lingered in that country throughout much of 2010. The positive news for the U.S. industry is that exports were strong in the fourth quarter of 2010, and in the first two months of 2011, are up 3 percent in volume and 22 percent in value versus the previous year.

While the signs of a rebound are positive, the global competition for U.S. value-added cuts favored by Mexican consumers could drive up prices and siphon away some of those products to higher-priced markets in South Korea and Japan, not to mention consumers in the United States who are in the market for more affordable beef options.

One factor that is currently in favor of continued export growth to Mexico is the strengthening of the Mexican peso versus the U.S. dollar. In March and April, the peso increased in value to levels not seen since late 2008 (before the global economic and financial crisis caused most currencies to devalue against the U.S. dollar). The Mexican peso reached 11.8 pesos/usd compared to about 12.5 pesos/usd in March/April 2010 (about a 4.5 percent increase in Mexican consumers’ purchasing power). If that trend continues, the stronger peso will continue to offset at least some of the increasing price of U.S. beef.

At the same time, Mexico’s domestic beef industry is expected to boost its production by 1.4 percent in 2011, which will increase competition for sales while overall demand is expected to remain relatively level.