The times of the “Mexican Miracle” in the late last century are somewhat behind us, but conditions prevailing in our country reveal a certain dynamism heading towards significant improvements that will allow Mexico to achieve a better position in the international arena. Mexico develops in a region that is increasingly seeking to reinforce public finances and speed up structural reforms based upon recommendationsfrom international organisations to confront the uncertainty that has been affecting their markets and increase their overall competitiveness: in this context, Mexico is considered a cutting-edge nation in fulfilling these recommendations.
Mexico is the second largest nation in its region with almost 120 million inhabitants and is considered a country with good macroeconomic management: controlled inflation, low unemployment, stable exchange rate, high reserves and a strong financial system. This is a country slightly focused on international trade where it actively participates through several organizations, free trade and economic cooperation agreements with nations beyond its region and including key partners such as the United States, the European Union, Israel and Japan.
Mexico’s opening to international markets – a process that started in the late 80’s – has meant that its inhabitants are open to more and more brands from all over the world, making them more able to choose between complex value offers. This openness also represents a huge challenge to local supply, as some of the world’s most important international competitors have their eyes on Mexico because of the size of its market and its highly aspirational middle class.
The two previous administrations – which marked the first time that the PRI party was not in power – made efforts to implement new economic policies in our country based on recommendations for competitiveness from organizations such as the International Monetary Fund and the OECD, among others. Mexico has tried to invest in industries such as electronics, manufacturing, the aerospace and car industries, and other strategic sectors with high international demand. The current administration, headed by President Enrique Peña Nieto from the PRI, has tried to give continuity to such policies, but some adjustments are needed in key industries if our country is to play a leading role in the international arena.
GDP growth in Mexico has fallen short of expectations. This behavior may be the result of stagnation in productivity levels due to the lack of competitors, the lack of mechanisms to ensure the fulfillment of contracts and excessive bureaucracy deriving from generalized informal trade. In order to fight this, Peña Nieto’s administration has backed important reforms to the constitution in tax, labor, energy and telecommunications matters. The approval of these recent structural reforms, particularly in the energy and telecommunications sectors, generated a positive attitude in the markets. According to the World Bank, they are expected to lead to an increase in the potential growth of our country of between 3% and 4%, producing substantial benefits in the short term that will favor a more dynamic 2015 and trigger public and private investment. Private investment, particularly in the energy sector, could boost economic growth in the short run, although an increase in productivity will probably take some years to be noticeable.
The Mexican government is backing, together with constitutional reforms, education and health initiatives, specific actions to fight obesity. These include steps such as regulations regarding the times in which brands are allowed to advertise products with “high calorific content” on TV – the communication channel par excellence in our country – and laws to control the naming and labeling of food products. Such adjustments have lead to significant changes for the brands, as they are forced to explore communication channels other than TV to reach their target audiences. For TV broadcasters, which include some of the most valuable brands in the country, these significant adjustments pose a challenge because they dramatically impact their potential cash flows from huge advertisers.
In this evolving media context, digital and mobile may become increasingly handy for marketers. According to data from a Kantar sister agency, Lightspeed Research, total internet users in the country account for 42% of the population (roughly surpassing the 50 million mark), and there is a strong social media base (45% of consumers are active social media users). With less time to spend on everyday activities and the desire to have more free time for themselves, consumers in Mexico have been increasingly adopting mobile as a way of life. While its main use still remains heavily linked to social and entertainment, more and more, brand and consumers are looking for other uses for it (10% of people use it for banking and 39% have actually purchased through their mobile phones). Brands should aim to take advantage of this trend, making mobile and digital channels that create meaningful impact for their customers.
President Peña Nieto’s administration will focus on secondary laws and will strive to show progress in their implementation prior to midterm elections in July 2015. An important focus, both for the government and the civil society, will be on efforts to restrain the spiraling drug-related violence – a huge challenge that has even affected the ability of local governments to operate normally in certain states where the federal government is currently concentrating efforts.
Consumers are a completely different race in Mexico. Influenced by a rich supply as a result of the market being open to the exterior, but being somewhat restrained by internal factors, Mexican citizens are looking for affordable options with straightforward brand promises which allow them to “maintain appearances” among the people around them. Mexico is a “hinge” country: trapped between two cultural continuum, America and Latin America, and this situation creates a consumer who struggles between innovation and tradition, where the brands that have been “always around” are their favorite, and where increasing – but not exactly radical – innovation is the rule of thumb.
The most valuable brands in the country are those with an incomparable heritage: those brands in many cases have divided time into ‘before and after’ their creation. These brands concentrate significant market shares in the country and have tried to build associations related to “belonging”, aiming at being portrayed as a part of the consumer’s closest tribe. The brands in our ranking are real titans which have survived through economic turmoil and managed to adapt to the contrasting conditions in our country: our bureaucratic system, a significant informal sector, a little sophisticated but demanding and social consumer, and a changing legal environment.
We foresee 2015 as a dynamic year for the country, a year when important structural adjustments that international markets required from Mexico will be reflected on the market. Progress? Perhaps, but it will depend on political determination and its application by the main brands. In a competitive environment where rules are about to change and there is legal determination to create a consumer with better awareness, brands will require renewed efforts and strategic adjustments if they want to profit from the dynamics of the market: an important pool of consumers increasingly eager to purchase.
Fernando Álvarez Kuri
VP Millward Brown Vermeer, Millward Brown