Solid Customer Relations Make Meat Sales Sizzle in Mexico

By Mary Ponomarenko

Three years after Mexico’s worst economic crisis in modern history, U.S. meat exports to Mexico are setting records.

Today, Mexico is the second largest market for U.S. red meat exports.

Sales of U.S. beef, pork, lamb and variety meat have rebounded dramatically to record levels – reaching $470 million in 1997, more than 60 percent above the 1996 level and 9 percent above the previous record high in 1994. Another record is in the making, with exports during the first eight months of 1998 off to a great start – 40 percent above the previous year.

The dramatic expansion is a tribute to the market opportunities afforded by NAFTA, as well as a credit to the industry/customer relationships forged by the long-term market presence of the U.S. Meat Export Federation (USMEF). These factors have enabled the United States to benefit from our relative competitive advantage in red meats.

By maintaining a visible market presence during the economic crisis, and not losing sight of the Mexican consumers’ needs, USMEF was able to secure goodwill and product loyalty. This positioned U.S. red meat for strong growth following the Mexican economic recovery and subsequent drought-induced production shortfalls.

Trade Agreements Expand Export Opportunities for U.S. Red Meat

Mexico has always been a price-sensitive market where tariff levels dramatically influence the red meat trade. In 1988, the replacement of restrictive import licenses with modest tariffs opened up significant market opportunities when Mexico joined the General Agreement on Tariffs and Trade (now called the World Trade Organization or WTO).

Shortly after, pent-up demand increased imports of U.S. meat more than fourfold from 1987 to 1988. Economic growth and changes in diets fueled continued growth in Mexican red meat imports in the late 1980s and early 1990s. By 1992, U.S. exports had reached about $386 million, triple the 1988 level.

In reaction to the rapid climb in meat imports, Mexico raised tariffs on fresh and frozen beef from almost nothing to the 20- to 25-percent range in November 1992. Suddenly, the importance of price and tariffs was once again a factor in trade. U.S. red meat exports fell by over $110 million in 1993.

In 1994, NAFTA eliminated these tariffs, and Mexico’s 20-percent beef offal and pork tariffs were put on a schedule to be phased out in 10 years. Not surprisingly, U.S. red meat exports reached a record $433 million in that year.

A study by USDA’s Economic Research Service estimates that shipments of U.S. exports to Mexico, and in particular beef exports, were at least 10 to 15 percent more annually than they would have been without NAFTA’s tariff reductions. In addition, NAFTA provided a degree of stability and long-term opportunity that helped keep U.S. exporters in the marketplace throughout the 1995 peso crisis, speeding recovery.

Words To Live by: "Know Your Customer!"

"Know your customer" has been USMEF’s credo in Mexico since 1984. While trade policy breakthroughs provided marketing opportunities for sales, USMEF’s role as a business facilitator–knowing the needs and dynamics of the market–helped make this trade potential a reality.

For years, a major factor restraining trade in the Mexican market was the lack of knowledge of U.S. meat variety and the general perception that U.S. products were too expensive.

USMEF worked with individual customers to demonstrate the profitability of U.S. red meats. They improved yields in the meat department, educated buyers about the profitability of a wider range of U.S. cuts, improved product handling procedures in retail meat departments, worked to understand the needs of buyers and showed buyers how to take advantage of seasonal pricing.

Marketing prime, higher end cuts to "white tablecloth" restaurants opened the door for the introduction of other, more affordable cuts to a broader restaurant and supermarket-retail client base. For U.S. pork, the Mexican processing sector was initially the main focus, and relationship building has expanded to the retail sector, primarily in the no-tariff border areas, where U.S. pork is most competitive.

Not Just a Fair-Weather Friend

It was even more important to be aware of customer needs in difficult times. All the while that the peso was falling against the dollar in December 1994, USMEF’s Mexico staff met with key account decision makers, stressing the U.S. red meat industry’s commitment to them and identifying solutions to the problems caused by the new market conditions.

Although sales of pricey boxed beef shut down, USMEF was able to keep U.S. variety meats on the shelves and worked with individual chains to help them identify specific areas of profit, loss or opportunity. These efforts helped maintain key accounts that tempered the impact of the crisis on meat sales margins.

At the height of the crisis, only a handful of key customers were able to purchase U.S. beef variety meat items. But within a year, all companies affiliated with USMEF during the crisis resumed purchases of U.S. beef.

Educate Your Industry

USMEF’s leadership coupled with NAFTA’s opportunity have left marks in Mexico. Since USMEF opened its Mexico office in 1991, many U.S. meat companies have opened their own offices.

After NAFTA was implemented in January 1994, industry funds were used to partner U.S. and Mexican firms in joint ventures. To meet Mexican specifications, U.S. exporters have modified products and adjusted formulas to consumer preferences.

The value and importance of increasing U.S. meat exports is reflected not only in national beef and pork producer funds, but also in the substantial investment by a number of state corn, sorghum and soybean groups.

These investments have paid off. Today’s $470 million in U.S. meat exports generates an estimated $1.3 billion worth of economic activity.

A USMEF study estimated that 1997 pork and beef exports represented 251 million bushels of corn and 27 million bushels of soybeans. USDA’s Foreign Agricultural Service estimated that indirect exports of corn and soybean meal–those exported through exports of beef, pork and poultry worldwide–represented 18 percent of total corn and nearly a third of total soybean meal exports in 1997.

Export Opportunities Growing

Mexico’s rapidly growing and increasingly sophisticated supermarket sector continues to provide marketing opportunities for U.S. meat.

A USMEF market assessment concluded that although previous promotional programs had helped introduce U.S. beef to most major retail chains in Mexico, retailers were not consistently buying and identifying U.S. beef during non-promotional periods.

An Educated Customer Is a Loyal Customer

To establish product loyalty, USMEF began working with targeted retail chains through a systematic program designed to teach retailers how to profitably purchase, cut, merchandise and promote U.S. beef. Retailers who complete the course are entitled to establish permanent, distinct sections for U.S. beef in the meat case. USMEF offers promotional support to retailers who qualify.

The program is very popular in Mexico’s expanding retail sector. More than two years since the first such U.S. meat case was established in April 1996, the number of retail outlets with a permanent U.S. meat section has grown to 124. Currently 11 chains are participating in this program. Essentially all the major retailers are involved and their success has set a valuable example of the profitability of U.S. beef.

In fact, there is so much interest in the program that USMEF has had to confine participation to chains that meet strict quality standards. U.S. beef is positioned as a high-quality product and it is essential that high standards of quality be set and maintained with retailers in the way the U.S. beef is cut, handled and merchandised.

The success of this program has also expanded to include pork as a permanent fixture in supermarkets along the border. The number of supermarket outlets including U.S. pork in a permanent display grew from one in June 1997 to 70 in April 1998. As Mexico’s retail sector modernizes and grows, the U.S. Meat Section Program will expand along with it.

What’s Next for USMEF

USMEF’s message of U.S. meat’s safety, value, quality and variety has come a long way. Programs continue to identify new customers in established regions or market sectors and will penetrate new regions. Beef marketing will expand beyond Mexico City, the border and resort areas and pork promotion and activities will increasingly move into the interior and retail sectors.

The U.S. Meat Section Program will expand as well as efforts to further U.S.-Mexican partnering. Strategy will emphasize underutilized cuts to diversify product usage.

As in the past, USMEF will continue to educate potential end-users about U.S. meat attributes and profitability. The need to identify potential customers, meet their needs and differentiate U.S. product is stronger now than ever as Mexican marketing opportunities are attracting other exporting countries.

Perhaps due to USMEF’s successful efforts in Mexico, Canada initiated a Mexican marketing program in 1997. Other countries are likely to follow.

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The author is an agricultural marketing specialist with USDA-FAS Dairy, Livestock and Poultry Division. Tel.: (202) 720-4455; Fax: (202) 720-0617.

Last modified: Thursday, October 14, 2004 PM