Proper Development Faces Quality Product Standardization HurdlesThu, 02/01/2018 - 11:36
The food service sector in Mexico has tremendous potential just waiting to be tapped but challenges that include standardized food quality, security and a lax regulatory environment are holding the segment back, says Federico Rigoletti, Partner and Managing Director at Bajo de la Tintorera, a restaurant operator located in Mexico City. “If you allow the sector to flourish, it will flourish on its own. If you allow for development, development will happen on its own. Stagnation is not born from a lack of creativity, willingness, hard work or manpower but of institutional problems.”
Although challenges vary, Rigoletti says the lack of locally sold, high-quality and standardized food products has the greatest impact on groups like Bajo de la Tintorera, which owns and manages the Puntarena, Torino, Primos and Porco Rosso brands. This is not due to a lack of high-quality food producers but rather, the market cannot pay the higher prices demanded by these products to ensure that national production can be sold locally. “A significant portion of Mexico’s food production tends to go to outlets in markets with higher prices. These are all outside the country and all pay in US dollars,” he says.
Ensuring top-notch basic ingredients alongside impeccable service has always been the group’s motto, an approach that has helped the company maintain growth. “Our value proposition is highly focused on basic ingredients and the cost-quality benefit, as well as the presentation of an innovative concept,” says Rigoletti. With 22 restaurants, Bajo de la Tintorera has assembled an innovative and diverse portfolio that caters to a varied clientele. But Rigoletti says the lack of standardization in the quality of basic products used by the brands has been a constant challenge. “Finding high-quality standardized food producers for one or two restaurants is not that complicated. However, the situation changes when you are trying to apply this to over 20 restaurants.”
The situation is forcing restaurant owners and operators to find their basic ingredients in other markets, Rigoletti says, using Bajo la Tintorera’s own Porco Rosso restaurant as an example. “In Mexico there is a higher demand for pork loin than for ribs, hence butchers would rather sell loin, sacrificing part of the rib. This has forced us to bring rib cuts from the US in an attempt to ensure product standardization at all our restaurants.” While proximity to the US combined with NAFTA’s advantages were an appealing solution, peso-dollar exchange rate volatility in recent years is now a bigger factor in the equation. “The country’s proximity to the US has put us in a somewhat complicated position. Although NAFTA opened the door to obtaining a larger product portfolio it has also put us at a disadvantage due to the existing exchange rate and the demographic we want to reach,” says Rigoletti.
Another key hurdle not only for Bajo la Tintorera but for the sector in general has to do with service quality and the available workforce. “In Mexico, the workforce issue is more related to productivity and education. There are few options for recruiting qualified personnel. You have to develop people and that is a more complicated issue,” Rigoletti says.
In spite of the challenges, Bajo de la Tintorera has enjoyed growth in Mexico City and is venturing into nearby Puebla. However, Rigoletti says the decision to expand to new cities depends heavily on the security that the country’s institutions can provide. “There are interesting cities with impressive growth rates but you have to consider the institutional issue and security constraints. More often than not, security has become a problem hindering the growth of different sectors and it has taken a particular toll on sectors like ours.”
Although Bajo de la Tintorera does not operate abroad, the group has invested in a restaurant in the US. This experience has provided Rigoletti with insight into the restaurant business in the US and how it differs from that in Mexico. “Profit margins are very similar. The real difference lies in how institutions work and in security and regulations. It is far easier to open a business in the US and the regulations are very clear,” he says.
Rigoletti says Bajo de la Tintorera is undergoing an institutionalization process to strengthen the company and allow for expansion. “This will help us access financing opportunities that will boost the growth of our brands and realize their potential while generating a larger offering based on quality of basic ingredients and service.”