Produce Market Replete with Growth Opportunities

Since the early 1990s, Mexico has transitioned from a traditional producer and marketer of fresh products to open its door to the global sector and players. Alberto López, Director General of Grupo Tarahumara, says the changing market could boost Mexico's production potential. "Mexico is a major produce exporter and has experience in marketing imported produce to local consumers. The country and its key players can learn from this experience to satisfy the demands of the market. Change is full of opportunities.”

Grupo Tarahumara is one of the oldest marketers of fine fruits in Mexico. The group began commercializing Mexican products within the country in 1994 and subsequently grew to include exports and imports. "Today we have a wide range of categories and varieties of products such as apples, pears, grapes, kiwi, stone fruits, and exotic fruits such as persimmon, quince, clementine and pomegranate," says López. "Our products are present in several regions, from Guatemala, Chile and Panama in Latin America to China."

However, López says that the globalization of Grupo Tarahumara was gradual and came about due to market opportunities. “In 1994, there were neither facilities to import products nor a culture of consumption of exotic or foreign products. It was not until 2014 that Grupo Tarahumara made its first export,” he says. With the signing of NAFTA in 1994, Mexico went from producing 19 million tons of fruit and vegetables per year to 37 million tons in 2017, according to the Grupo Consultor de Mercados Agrícolas. The consultancy estimates that Mexico exports almost 28 percent of what it produces and 80 percent is destined for the US.

NAFTA also played an important role in opening the country to imports of fruits and vegetables. "After the market opened, Grupo Tarahumara sought to import common fruits such as apples and pears from Washington, and exotic fruits from California," López says. "Globalized markets have led us to the possibility of importing from even further away, such as bringing apples from South Africa to Mexico." In 2018, the US accounted for US$20 billion in agricultural exports to Mexico, making it the second-biggest agricultural export destination for maize, soybean, milk goods, pork and beef products.

The transition to a globalized and open market not only changed the variety and product categories accessible in Mexico, it also transformed the marketing space and consumer behavior. López says Grupo Tarahumara originally worked in traditional marketing spaces, such as wholesale markets, but subsequently demand shifted to supermarkets and comparable shops. "When the market opened, the equilibrium between our wholesale and supermarket revenues started to change. Most of our sales were traditional before, but today 60 percent of our sales is concentrated in supermarkets."

With the change in habits and marketing, came a change in how supermarkets themselves operated. "Supermarkets are also evolving from merely selling products to offering services. Before, these stores served only whole fruits and vegetables. Now, they are selling sliced fruit, juices and salads," López says. Everyday supermarkets continue to evolve, according to the Symphony Retail Supermarket 2020 Report, which says that stores will remove center aisles in the coming years to create space for prepared food, given that annual growth for these services is 8-9 percent for supermarkets.

In line with this evolution, Grupo Tarahumara has also adapted its strategy. “Every day, we are looking to be better and to provide better products to our clients, well aware that there is a difference in consumer behavior between supermarkets and wholesale markets,” López says. Annually, Grupo Tarahumara markets approximately 4 million of boxes of fruit and as consumer needs change, the company adapts. “Currently, we are testing the acceptance of kiwis from Italy and other fruits from Spain in Mexico. We want to be sure these varieties appeal to Mexican tastes before launching them fully into the market,” says López.

While the market for fruits and vegetables has widened, Mexican consumption has remained low overall. It is estimated that less than 50 percent of the population consumes daily fruits and vegetable, according to the National Survey of Health and Nutrition of 2016. “Low fruit consumption and openness to consume new products has hindered the full potential of this market, but there are signs that the market will continue to grow in the coming years,” says López.

While consumer behavior is the main internal obstacle to greater commercialization of exotic fruits and vegetables, taxes and trade wars are the two key external factors. López points to the retaliatory Mexican tariffs imposed on US apple imports in 2018 as one example. “Apples are among the most-favored fruits in Mexico but the trade war between the US and Mexico resulted in a 20 percent tariff on US apple imports, creating a barrier. It is vital that treaties facilitate the import and export industry,” he says. Annual apple production in Mexico is estimated at 716,000 tons per year, while national consumption is approximately 927,000 tons, according to SAGARPA. National production accounts for 77.26 percent of consumption and 22.75 percent of imported apples come mainly from the US and Chile.