Restaurant Industry Opportunities

An Expert's View about Kitchen Equipment in Mexico

Posted on: 12 Nov 2012

The restaurant industry in Nuevo Leon, Mexico has faced serious difficulties in the last three years due to, among other things, increased insecurity and violence, the Swine Flu health emergency (AH1N1), Hurricane Alex in 2010, and other factors such as, increases in Mexican taxes and new paperwork to obtain or renew the license to operate a restaurant.

However, in 2011 this sector started to recover and in 2012 growth has been reported - as well as large amounts of investment in the sector. According to the National Restaurant Chamber in Nuevo Leon (CANIRAC), there are approximately 13,091 establishments with restaurant facilities in Nuevo Leon, and the industry is expected to grow 12% in the present year. Growth for 2013 could be impacted by the new economic policies and measures to improve the economy that the new President who was elected last July, takes during his tenure.

The great majority of companies that supply the restaurant industry, 80%, are Mexican, and 20% are foreign companies. The United States, Italy, China, and Germany, in that order, are the main players in the restaurant equipment market. Competition is high among restaurants to gain more costumers, which obliges restaurant owners to look for the new trends to modernize their restaurants. Although there are several local manufacturers of restaurant equipment in Mexico, such as kitchen furniture, stoves, knives, and refrigerators and coolers, the lack of locally produced high technology products, generate business opportunities for U.S. restaurant equipment exporters.

The national restaurant industry is considered to be Mexico’s second largest private sector employer. It represents 1.4% of the GDP with an estimated value of USD$13.6 billion (X Rate MXP$13.40 = US$1.00), and around 12.5% of the tourism GDP.

Market Demand
In spite of the recent economic crisis and security issues that Nuevo Leon has been facing, according to the National Chamber of Restaurant Industry in Nuevo Leon, the industry grew 3.7% in 2011. This growth represents an opportunity for U.S. exporters not only in Nuevo Leon, buy in other states in Mexico that have also reported large amounts of investment in the restaurant industry with the trend expected to keep increasing.
For example, Guadalajara which is considered as “the place of big events,” reported a growth of 3.5% due to multiple events and conventions that took place in Jalisco during 2011.

Queretaro has been attracting many investors in the restaurant industry lately. During the first quarter of 2011, around 200 new restaurants were established in this state, representing an investment of around USD$ 6.2 million.

In Tijuana, halfway through 2012, the sector recorded a 5% increase in sales compared with the same period last year, with expectations for new restaurants to open with investments for over USD $400,000.

Some foreign companies have begun to take advantage of opportunities in this fast recovering sector. For example, Manitowoc, a leading producer of ice machines for the restaurant industry, is planning to open a manufacturing plant in Monterrey. The company handles brands like Manitowoc Ice, Cleveland Range, Garland, EDI, Servend, and Kolpak. Another example is Fagor Industrial, a Spanish company that produces and distributes large electro domestic products such as stoves, dishwashers and industrial refrigeration equipment for the hotel, restaurant and other industrial sectors. The company opened a plant in San Luis Potosí four years ago. Due to their success, driven by high demand, Fagor has increased their production up to 50%. In addition, they recently announced an investment in the plant of USD$3.5 million. Jorge Mendez, CEO of the company, stated that this year they are expecting 40% growth in sales of their products.

Starbucks Coffee is another company that recently announced a new investment in Mexico. The company is planning to invest in coffee serving machines to provide service not only in their own establishments, but also in hotels, restaurants, and offices. Their goal is that in 2013 Starbucks Food Service serves at least 18 of the principal chain hotels in Mexico - which means about 80 different hotels and restaurants.

The hotel chain Intercontinental Hotel Group with its business class hotel Crown Plaza in the Apodaca area, which is close to the Monterrey international airport, has reported that they plan to open nine more hotels in the airport area in the next few years.

Market Data
Despite all the challenges Monterrey and Nuevo Leon have faced, Mexican Institute of Competitiveness (IMCO) stated that Monterrey is still the most competitive city in Mexico - the third time in a row that Monterrey is ranked as the most competitive city in Mexico. Monterrey’s competitive advantages are many and strong. The city combines a good business climate with an educated and talented labor force that has developed an economy oriented to industries of high value added, intense in innovation, creativity and knowledge. In addition, the income per capita in Monterrey in 2010 was the highest in Mexico.

In February 2012, the president of the National Chamber of the Restaurant Industry in Nuevo Leon (CANIRAC) stated that Nuevo Leon restaurant industry has “100% recovered from the 2009 economic downturn.” The jobs lost during the period 2009-2010 were quickly regained by the opening of new large and small restaurants, which generated more than 1,200 jobs in 2011, and sales of approximately USD$ 2.3 million dollars (X Rate MXP$13.40 = US$1.00.)

As mentioned previously, during the past few years, the Mexican restaurant industry has faced serious threats and many establishments did not survive. Some of the factors contributing to the decrease in size of the restaurant industry were the global financial crisis; raise in tax payments in years 2009 and 2010; the increase in violence as well as competition from informal street vendors of which there are about 700,000 in Mexico. Another factor adversely affecting restaurant revenue is the low and limited ability to deduct business meal expenses from Mexican taxes-only 12.5% is tax deductable, compared to the U.S. and Canada where the deduction rate is 50%.

According to the Mexican Economic Secretariat, the U.S. is the major exporter of (HS 841850) cabinets for storage/freezing; (HS 842219) dish washing machines; (HS 843850) machinery for the preparation of meat and poultry; (HS 843860) machine for the preparation of fruit, nuts and vegetables; (HS 847982) mixing, kneading, crushing and grinding equipment; (HS 850940) electro mechanic food grinder.
China is the major supplier for small electronic appliances such as: (HS 851660) Ovens, cookers, cooking plates, boiling rings, grillers and roaster; (HS 821500) tableware; (HS 841829) refrigerators/freezing display counters;
(HS 851650) microwave ovens; (HS 851672) electric toasters; and (HS 851671) coffee/tea makers.

Best Prospects
The equipment mostly imported from the U.S. is refrigerated preparation tables and special stainless steel refrigerators for industrial/commercial kitchens. There is no local production in this area because due to the focus in the manufacturing of bottle coolers.
The U.S. is the main exporter of ice making machines to Mexico. Also refrigeration components for cold/freezing rooms, which are imported, and then the cold rooms are assembled locally.

There is strong local competition with U.S. equipment on items such as stoves, fryers, ovens; however, there is no local production for special equipments such as band ovens for pizzerias and steam cooking equipment, which are generally imported.
The majority of utensils are imported but not all are from the U.S. The great majority of stainless steel furniture is manufactured locally, only very sophisticated, customized furniture is imported.

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Posted: 12 November 2012

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