Boston, MA -- (SBWIRE) -- 04/10/2014 -- While we maintain a strong conviction that economic activity in Mexico will pick up significantly this year, the recovery could be more muted than we initially anticipated. Although the recently introduced tax on sugary drinks and the tax hike on junk food may have a negative impact on the food and drink sector in Mexico, we maintain a favourable outlook for the domestic consumer, and declining unemployment and rising disposable income will ensure a robust expansion in the sector over the long term. We expect consumer confidence to improve as households adapt to the new tax regime in the coming months.

Headline Industry Data (local currency)

- 2014 per capita food consumption = +4.4%; forecast 2014 to 2018 = +17.2%
- 2014 alcoholic drink sales = +7.8%; forecast 2014 to 2018 = +35.3%
- 2014 soft drink sales = +5.6%; forecast 2014 to 2018 = +24.7%
- 2014 mass grocery retail sales = +7.4%; forecast 2014 to 2018 = +31.9%

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Key Company Trends

Mexican Investment Highlights Potential Despite New Taxes: In early 2014 PepsiCo and Nestle both announced significant investments into Mexico, highlighting the potential behind the country despite its recent introduction of taxes against junk food and soft drinks. PepsiCo has committed US$5bn to invest in Mexico over the next five years, while Nestle has revealed plans to invest US$1bn in Mexico, in a bid to establish two new factories in the coming five years.

Comerci Considers Possible Sale: In early 2014 Mexican retailer Controladora Comercial Mexicana (Comerci) revealed that it is exploring a possible sale but that discussions with interested parties remain at a preliminary stage. The retailer said that it has discussed options with domestic and international groups that seem interested in a partnership or strategic purchase, adding that it is looking to do what is best for its shareholders so they can maximize the value of their holdings.

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