+2%

MEXICO
THOUGHT LEADERSHIP
TOP 50 MOST VALUABLE LATIN AMERICAN BRANDS 2015
A KALEIDOSCOPE
OF CHALLENGES
AND OPPORTUNITIES
In an environment of surprising significant growths and
slowdowns, Mexico is one of the regional economies remaining
somewhat constant. This is worth mentioning, since it has been
achieved despite the fact that the Mexican economy has been
shaken by oil production, oil prices, the United States growth, and
the financial volatility of international markets. Although at first
sight and from a macroeconomics perspective it might seem only
weakly active, both Mexican society and government have been
forced to make adjustments here and there so as to maintain the
relative stability of LatAm’s second largest economy.
RICARDO BARRUETA
Managing Director
Millward Brown, Mexico, Central America and the Caribbean
Ricardo.Barrueta@millwardbrown.com
A SLOWING ECONOMIC
ENVIRONMENT
The reality is clear: in the 2014-2015 period, Mexico has
slowed down. On July 9th of the current year, the IMF
reduced its estimated growth for Mexico from the already
reduced 3% it had anticipated in April, to 2.4%. Among other
things, this reduction was related to the weakness shown
in the first months of 2015 by the economy of the United
States, Mexico’s most important commercial partner.
Although lower than expected, Mexico’s growth is headed
up by manufacturing exports —largely the result of the
two-digit increase, for the fifth consecutive year, in the
automobile sector. However, local demand has not kept
pace: private consumption is burdened by consumers’ low
trust levels and scarce wage growth. Nonetheless, private
investment has seemed to be more active in the past few
months.
Foreshadowing a longer-lasting drop in oil prices, the
Mexican government announced a 2015 budget cut
equivalent to 0.7% of the GDP and is planning an additional
cut in public expenditure for 2016. The lower public
expenditure will slow the pace of economic growth, despite
the trust that disciplined tax practices will bring economic
benefits.
Growth has been lower than expected, and there has
not been a strong connection between growth and the
reduction of poverty. The latter might be the result of the
circumstances prevailing in the labor market: in recent
years, not enough employment opportunities have been
created, nor have there been jobs paying adequate wages. In
addition, the labor force has increased, due to demographic
changes, balanced migration to the US, and more female
participation in the workforce, all of which the Mexican
economy has failed to absorb. There is a positive aspect,
both government transfers, particularly in urban zones,
and a lower dependency rate have contributed to the
improvement of some poverty indexes in the country.
REFORMS FOR GROWTH
The Mexican government has made progress in its
structural reforms agenda, specifically in the labor and
education areas, competition laws, the financial sector,
telecommunications and laws for the energy sector, all of
which are aimed at increasing productivity, competitiveness
and the potential growth of Mexico in the international
arena. Today, the administration is devoted to the
implementation of these reforms. Opening the energy sector
to private investment is especially promising for promoting
growth, for it is expected to lead to an increase in oil and
gas production and to provide cheaper energy supplies to
Mexican industry. Assessing the distributive impact of these
reforms, the regulations associated with them, and their
implementation will be important, but their nature endows
them with strong potential to drive Mexico’s growth.
Thus, an acceleration of economic activity is expected
for 2017. On the one hand, it’s not anticipated that public
expenditure will be reduced again; on the other, the gradual
growth of US demand will support a continuous and strong
performance of manufacturing exports. This is expected
to result in a gradual recovery of private consumption and
investment.
ELECTIONS, CONSUMERS,
AND BRANDS
The first half of 2015 is a good example of the dynamism
in the market during the period we’re evaluating. Midterm
elections became the main character not only in the political,
but also in the social scenario. The different political parties
reflected — though by means of blaming one another,
rather than presenting proposals — society’s concern about
topics such as security, income, and corruption. Mexican
consumers, who have an essentially short-term view,
think in even more immediate terms thanks to the 24/7
messaging they’re receiving about overly-simple solutions to
complex social issues.
The ever-changing environment leads Mexican consumers
to appreciate particularly three basic features: convenience,
accessibility, and playfulness. In the face of change, Mexican
society prefers brands’ prioritizing “making life easier and
more bearable” over other engagement messages. The
brands with the most marked growth in the last year
definitely prove this. The cases of Oxxo and Tecate, the two
Top Risers of the portfolio, are worth highlighting.
Oxxo is and has been the epitome of accessibility and
convenience in Mexico. With over 12 thousand stores and
an opening pace of a new branch every eight hours, the
brand is emerging as the largest retail chain in this region.
The geographical expansion of Oxxo and the variety of
products it offers have made it a widely known brand,
capable of generating a meaningful difference that has led to
exponential growth not only in terms of sales floor but also
in the minds of consumers.
The Tecate brand has managed to base its growth on a
communication so powerful that it has transcended to an
iconic status in the minds of Mexican consumers. Through
creative campaigns with messages for “the Mexican
macho”, Tecate has become a real cultural happening: a
playful escape that has led its most recent campaign,
featuring Sylvester Stallone, to become part of Mexico’s
pop culture. Tecate has created differentiation, salience,
and meaningfulness by presenting itself as a friend to
consumers, an ally in their best moments.
The learnings brought about by Oxxo, Tecate, and some other
Mexican ranking champions are crystal clear: in an everchanging
environment, Mexican consumers prefer brands
that help them keep pace, acting as important buffers against
uncertainty, and making them forget their difficulties. The
secret is to become a close ally who invites others to think
about the good times to come.
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