The Mexican Packaging Industry - Market Opportunities and Entry Strategies, Analyses and Forecasts to 2015
The key end-user sectors for the Mexican packaging industry are the food and drinks and pharmaceuticals industries, which combined account for more than 80% of the value of the packaging market.
Low cost structure and proximity to the US
During the review period (2006â€“10), the Mexican packaging industry recorded a strong CAGR and valued approximately US$9 billion in 2010. Such strong growth was largely a result of the countryâ€™s proximity to the US, which has the largest packaging industry in the world, and the ability of manufacturers operating in the region to manufacture and supply products at a lower cost than other regions.
Factors such as these have encouraged substantial investment in the Mexican packaging industry, and as a result, in value terms, the country is ranked among the top 15 packaging markets in the world.
Mexican packaging industry growth stimulators
The food industry is one of the largest markets in Mexico, and consumer expenditure on food in the country is high. In addition, the country has one of the largest carbonated drinks markets and the third largest beer market in the world. Of total packaging consumption, the food and drinks sector accounted for approximately 75%, and growth in consumption in such key end-user sectors is expected to fuel Mexican packaging industry growth throughout the duration of the forecast period (2011â€“15).
Free Trade Agreement
In terms of imports and exports, Mexico is an attractive investment destination due to the multiple free trade agreements it holds with a number of countries worldwide. The country has close to 30 free trade agreements with countries such as the US, Canada, Japan, Israel and countries in the EU, which have reduced the import and export duty on trade from Mexico. This has encouraged many packaging companies from the US and Canada to establish manufacturing units in the country in order to gain access to the markets in free trade countries.
The Mexican packaging machinery market is import oriented, with more than 80% of packaging machinery demand currently met by imports. European machinery suppliers dominate imports, and the US is second largest exporter of packaging machinery, supplying more than 20% of the Mexican market.
During the review period, domestic packaging manufacturers increasingly adopted new technology in order to meet the standards set by international packaging machinery suppliers. As a result, Mexican packaging machinery suppliers are expected to increase their market share by approximately 25% by 2015. Key end-users of packaging machinery are the food, drinks, pharmaceuticals, consumer goods and personal care industries.
Stringent recycling law
The Mexican packaging industry is governed by stringent recycling laws, and the lack of natural forest reserves has forced manufacturers to use recycled raw material for the production of paper and board packaging. The government is gradually tightening recycling laws in order to satisfy strict packaging recycling legislation outlined by the EU, as Mexico has free trade agreements with a number of EU countries. In order for packaging produced by Mexico to enter EU countries, it must comply with such regulations.
According to new legislation, packaging suppliers will be required to increase recycling rates and implement a system whereby packaging material is collected from consumers and recycled. Such a system will increase the price of packaging material and require additional investment from both packaging manufacturers and end product suppliers.
Competition for market share
Satisfying end-user demand for packaging solutions and the maintenance of a competitive advantage over foreign manufacturers in the domestic market are the key challenges for domestic packaging manufacturers in Mexico. In order to increase competitiveness, domestic companies must invest in new packaging machinery.
The majority of US based packaging companies have established manufacturing facilities in Mexico, which offer packaging solutions for domestic, Latin American and North American markets. One of the key challenges faced by domestic packaging manufacturers is to enhance the quality of packaging solutions. Domestic manufacturers must therefore improve capital investment in research and development and new packaging machinery in order to improve the quality of end products.
Such investment will enable domestic companies to compete with foreign manufactures in the Mexican market, and also assist in the capture of lucrative market share in countries such as the US, Canada and EU countries.
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