On 1 October, new regulations came into force in Mexico that aims to change the labelling of processed food and drink products with a high content of sugars, calories, sodium and fats.
In the face of a global pandemic, the impact of this regulatory change has been shrugged off as businesses focus on more pressing issues. COVID-19 has had three major impacts on the market: firstly, it has underlined the need for a healthier diet, secondly, it has rapidly accelerated the digital transformation and finally, it has hit consumer incomes.
Larger companies such Nestle, Coca-Cola, Bimbo, PepsiCo and Lala had largely anticipated the shift towards a more health-conscious consumer and have been reformulating their portfolios for many years. Bimbo has reformulated 82% of its daily consumption products, PepsiCo reformulated 70%, Coca-Cola 60% and Arca Continental 40%.
An executive at Arca Continental explains, “We have been the most transparent with our ingredients, our customers have already internalised the sugar content. The change in regulation will have a temporary impact, any drop in volume will recover after 6 months.”
“The change in regulation will have a temporary impact, any drop in volume will recover after 6 months.”
Executive, Arca Continental, Mexico
The digital transformation was also already on the risk register but the pandemic has accelerated it. The Arca executive described how they have responded, “We have deployed our new omni-channel capabilities and expanded the number of touchpoints with AC Digital and myCoke.com, our e-commerce mobile applications. We also launched Bodega Abierta (open store), to provide the traditional channel with free tools to manage their business, adopt good safety practices and remain open. We are also working with food aggregators (Rappi and Uber Eats) and e-retailers (Mercado Libre and Amazon).”
“When incomes are squeezed, the consumer will move to homemade drinks which are more direct substitutes for low calorie drinks.”
Executive, FEMSA, Mexico
In addition to providing new routes-to-market, the shift to digital is providing other benefits to business, a senior marketing executive at Arca explains, “As we move into the digital space, the volume of data and analytics is interesting, not as a new revenue stream, but certainly as a tool to help us sustain leadership and interact more with the consumer.”
Finally, in Latin America, the biggest risk facing all of these food and beverage businesses is the economic impact on their customers. A FEMSA executive explains how this may be compounded by a shift to healthier drinks, “In Latin America, when incomes are squeezed, the consumer will move to homemade drinks, which are more direct substitutes for low-calorie drinks.”