Over the last quarter, the onset of swine flu has changed the dynamics of the Mexican businessenvironment. BMI now believes that Mexico's economy will suffer more in 2009 than in the aftermath ofthe 1994-1995 Tequila Crisis, with little chance of positive growth until 2011 at the earliest. The falloutfrom the swine-flu outbreak is indeed bad news for the country’s economy and, combined with downwardpressure to private consumption levels, has led BMI to lower our already below-consensus real GDPgrowth forecast for this year from -5.5% to -7.1%.
In Mexico, the outbreak of swine flu has been linked to around 150 deaths and led to thousands of peoplebecoming ill. The authorities have taken a number of measures to limit the spread of the virus and manyof these could have a direct impact on beer (and soft drinks) consumption. As well as forcing the closureof bars and clubs, the government has also placed a restriction on large gatherings, which has meant, forexample, that football matches are being played without spectators. Beer consumption is also likely to beimpacted by changes in public behaviour, with anecdotal evidence suggesting that Mexicans aresocialising less and choosing to spend more time indoors. A decline in tourist numbers during the usuallybusy spring-break period could cause further damage to the drinks and fast food/restaurant sector. BMItherefore expects the beer market to more or less stagnate this year before declining slightly in 2010. Thehistorical strength of the sector means that a return to growth is predicted in 2011, but we envisage adifficult two years, which could be made substantially worse if the flu epidemic really takes hold.At the beginning of April 2009, Mexican brewer Grupo Modelo, which markets Corona beer, announcedplans to cut 1,200 jobs and has attributed the move to the global economic downturn. The firm, which is50%-owned by the world's largest brewer, Anheuser Busch InBev (ABI), blamed lacklustre sales figuresin 2008 on the global financial crisis. Full-year net sales rose by just 3.4% to MXN75.36bn (US$7bn),while consolidated net income fell by 3% to MXN14.81bn (US$1.13bn).
The country’s retailers are also feeling the impact. At the end of April 2009, Mexico's second-largestretailer, Soriana, disclosed details of a cost-cutting plan to save MXN2bn (US$152mn) in the hope ofcountering the adverse impact of ongoing economic slowdown. The company is planning to cut down onenergy and maintenance expenses, improve store logistics and revise its distribution routes as part of thecost-cutting initiatives, which were implemented from the second half of March 2009. Over the quarter,the country’s third-largest retailer, Comercial Mexicana (Comerci), gained further breathing space for itsrestructuring plan from its key four US creditors. However, the National Retailers Association of Mexico(ANTAD) has forecast that same-store sales at its members' stores, which include supermarkets,department stores and speciality stores, will decline by 4% in 2009. Therefore even if Comerci managesto come to an arrangement with its creditors and stave off liquidation, its lack of market share along withdeclining consumer sentiment is likely to mean it faces a torrid 18 months, while the lack of global creditmeans that a foreign buyer is unlikely to materialise.
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