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In June 2009 US-based Hormel Foods and Mexico based Herdez del Fuerte announced the launch of a 50-50 joint venture called MegaMex Foods that will market Mexican foods in the US market. The new firm will be launched in the fourth quarter of 2009 and is expected to generate revenues of US$200mn in its first year. The move underlines the growing demand for Mexican food in the US that can partly be attributed to the country's growing Mexican population, which has registered a 17-fold increase since 1970, and also the growing popularity of Mexican cuisine among the wider US population. This represents an opportunity for Mexican producers at a time when the domestic market is being hit hard by the economic downturn.
Hormel's President and CEO Jeffrey Ettinger has suggested that the long-term agreement is an example of how the firm is looking to diversify its product portfolio and the business will have the ‘scale and skill set to establish leadership in Mexican foods and growth in the category'. Ettinger said that the venture will initially focus on shelf stable packaged foods but could eventually expand into refrigerated foods such as fresh salsa. The business will look to leverage Herdez's portfolio of familiar Mexican brands, which cover the canned, bottled and packaged food sectors, and the US distribution and manufacturing expertise of Hormel, a major producer of branded food and meat products that generated revenues of US$6.75bn in 2008.
The US-based Hispanic population is particularly attractive to Mexico-based producers as they generally have greater purchasing power than their domestic counterparts. However, to maximise the return on the investment, Herdez and Hormel will aim to market their products as broadly as possible, with the cache of offering genuine Mexican brand names giving the firm extra and wider appeal when targeting the growing demand for Mexican cuisine.
The growing Mexican population and increased international popularity of their food has directly translated into growing demand for such food and drink products in the US. Data from market research specialists Nielsen suggest that sales of Mexican sauces and seasoning mixes at US food, drug and mass merchandise retailers increased 8.1% in the 12 months to May 16 2009. This rising demand has also been recognised by retailers and in June 2009 Wal-Mart opened its second US ‘Supermercado de Walmart' outlet specifically targeted towards the country's Hispanic population.
Mexico Food and Drink Report Q4 2009: http://www.companiesandmarkets.com/r.ashx?id=ZP14X46N8169557
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