Milling & Baking News - February 22, 2005 - 11

E D I T O R I A L

Mexico's wheat consumption at last is increasing

hen the North American Free Trade Agreement
(NAFTA) was being launched in the mid-1990s,
expectations were high that one of the major
impacts of the agreement would be increased consumption of wheat-based foods in Mexico. This page enthusiastically joined in predicting that consumers in Latin
America's largest economy would be gradually weaned
away from corn-based grain foods to the wheat-based
foods that dominate diets north of the border. This did not
happen in the early years of NAFTA, causing disappointment among millers and bakers in Mexico, and prompting questions about the impact of economic gains on how
people in developing countries might be influenced to
adopt new eating patterns. Indeed, some observers attribute aggressive expansion of Mexico-based companies
such as Bimbo and Gruma, into the United States and
throughout the Western Hemisphere, to their desire to
seek growth outside of their home country.
Now, a full decade after NAFTA began, consumption
of wheat-based foods in Mexico appears to be on the
upward course predicted earlier. This is best indicated
by the sudden surge in Mexico's imports of wheat to a
new record total of nearly 4 million tonnes. That is up
a third from the 3 million tonnes that were being imported annually five years ago and compares with average imports of 2.6 million in the late 1990s. A fall in the
country's 2004 wheat crop to 2.5 million tonnes from 2.9
million in the prior several years accounts in part for the
import expansion. Mexico's wheat production fell due
to irrigation water shortages and the decision by many
farmers to switch to producing higher-value crops,
mainly vegetables that are destined for both domestic
and export markets. Mexico's wheat area has dropped
to only half of what it was prior to NAFTA.
While the crop reduction is important, the major force
driving the rise in imports has been the long-anticipated,
but only recently realized, growth in consumption of
wheat-based foods. "Rising incomes have caused a diver-

sifying of diets toward wheat products, and this, coupled
with population growth, has boosted consumption," the
U.S. Department of Agriculture commented about Mexico's expanding imports. Not so incidentally, that trade pattern has made Latin America of increasing importance as a
market for U.S. wheat. The region now accounts for nearly
a third of total American exports, contrasted with hardly
10 per cent a decade earlier. It is the export market where
American shippers have the advantage of proximity.
Propelled by a population near 105 million and annual
growth of 1.47 per cent, wheat consumption in Mexico
also has been boosted by rising consumer confidence as
well as by economic gains. The latter mainly are fueled by
large-scale expansion in exports to the United States, reflecting the growing shipments by export-assembly factories known as maquiladoras. These plants have increased
their employment and their salaries. Another favorable
factor for the economy has been oil price gains. Consumer
confidence has been boosted by a marked expansion in
bank credit availability. Indeed, many Mexican banks are
now offering credit to consumers at fixed interest rates,
which has not been available for several decades in the
wake of severe currency devaluations in the 1970s.
Even though the administration of President Vicente
Fox Quesada has not proved as economically dependable or as forceful as many had hoped, sufficient reforms
have occurred to provide the base for improvements
across the entire economy. A measure of this lies in the
way prosperity continues in the face of last year's seven
increases in interest rates by the Banco de Mexico, raising the benchmark 28-day Treasury bill from 4.69 per
cent in January 2004 to 8.2 per cent currently. The point
probably could be made that the increase in Mexico's
wheat consumption, which has been many years in the
making, signals more than a temporary upward blip in
the economy. Going a step forward would be to conclude that such economic improvement is essential to
effecting measurable changes in food consumption.

Food service shifting to dinner and fast-casual

s the share of American meals eaten away from
home continues to increase, almost inexorably
heading toward accounting for 50 per cent of
U.S. food consumption, the importance of this channel to
grain-based foods continues to grow. Hardly anything is
more important to doing business with this sector than
building the sort of supplier-customer relationships that
do not prevail in other spheres where grain-based foods
are traditionally sold. Most food service operators like to
look to suppliers to provide them with menu and service
innovations. At the same time, food service companies
are urged to be increasingly selective in choosing suppliers, aiming to identify the partnerships and alliances
that offer the most productive way of increasing volume
and profits. Much of this effort is driven by awareness
that profitability in food service depends more on volume than in almost any other part of the food industry.
In aiming to be the preferred supplier to successful
purveyors of meals to the public, grain-based foods companies need to be alert to the many shifts driving massive
changes in this industry. After a long period when the
largest food service chains focused first on providing
lunch meals, and then turned to breakfast to expand their
sales, it now is evident that dinner is the meal where fu-

bakingbusiness.com / world-grain.com

ture food service growth will be concentrated. One recent
forecast by Food Distributors International said that by
this yearend, dinner will account for 51 per cent of the
away-from-home meal occasions, compared with 45 per
cent in 1987. At the same time, the breakfast share of such
meals will fall from 14 to 11 per cent, and the occasion
share for lunch will drop from 41 to 38 per cent. Considering the vastly different foods eaten at these meals,
particularly grain-based foods, it is no wonder that such a
shift is looked upon as portending huge change.
Targeting these changes becomes especially important
in light of forecasts that food service volume in the next 10
years will grow at no more than 2 per cent annually. This
is faster than population gains, but much less than experienced at the time the "hamburger revolution" caused
major changes not just in food service, but also in baking.
Recent research conducted by McKinsey & Co. concludes
that the so-called "fast-casual" area of food service will
account for more than half of all food service growth in
the first decade of the 21st century. The focus here is on
fast service of fresh food. The message that delivers to
grain-based foods, when combined with the rising preference for dinner away from home, is great change in how
and what foods are provided to this major channel. MBN
Milling & Baking News, February 22, 2005 / 9

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Milling & Baking News - February 22, 2005

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