CV-19 Insights

RSi COVID-19 Insights From Around the Globe – Mexico

Mexico Enters Phase 3: What That Means

As COVID-19 progresses around the world, Mexico’s health authorities established contingency measures correspondent to Phase 3. Like most other countries, there have been markers set in place to identify the stages of a disease before it becomes an epidemic – which in Mexico is Phase 3. As of April 21st, Mexico has entered this Epidemic phase, the main guidelines being:

  • Maintain a “Healthy Distance” from others until May 30th
  • Regionalize the mitigation measures intensity
  • Segment mobility in the national territory
  • After May 30th, maintain measures for the protection of vulnerable groups

The mayor of Mexico City announced more restrictions, including a 20% public transport reduction and restricting private vehicles from traveling one day per week. He also implemented a more exhaustive verification process for business with non-essential activities that are not complying with the closure. Mexico’s Metropolitan Zone has a population of over 20 million people –  17% of Mexico’s total population. Other major cities, such as Guadalajara restricted mobility, instituted fines and are urging people to use facemasks.

In an effort to reduce the spread of the virus, the “Healthy Distance” campaign, embodied by the animated character Susana Distancia, outlines the safety measures people must take, such as:

  • Staying at home
  • Electing one person per household to go shopping for food and other essentials
  • Keeping a one-and-a-half-meter distance from others
  • Only essential business can be opened

The health department’s Undersecretary of Prevention and Promotion Dr. Hugo López-Gatell has emphasized the “imminent” arrival of Phase 3, which is also the phase with the highest number of infections. However, Mexico is currently one of the countries with fewer cases reported.

A main concern for the Health Secretary is how many people could be infected; he admitted that the main challenge in Phase 3 would be to ensure that there is an availability of space to care for COVID-19 positive patients. According to the calculations by the Ministry of Health, in the best of scenarios around 0.5%, or 600,000 people, of Mexico’s population would be affected by COVID-19.  In the worst-case scenario, this figure could reach 1.2 million people – 1% of the population.

A light on the Horizon. Dr Hugo López-Gatell announced that those cities with the least number of cases may lift social distancing measures, “with activities reopening, only if the adequate implementation and compliance Healthy Distance measures are ensured and if the municipalities are kept with low transmission as control is achieved.”

Moreover, the leader of the COVID-19 task force said the Coronavirus epidemic in the metropolitan area could end on June 25th, if people stay at home and physical distance is kept in the incoming weeks.

The government’s challenge is to make people stay at home. Due to “voluntary” isolation measures, life goes on as usual in many regions and urban zones.

Mexico’s Economic Landscape

Unfortunately, Mexico’s economic landscape is far from good. The ‘4th transformation’ led by President Lopez Obrador is making the corporate investors nervous about the strength and safety of their money in our country. A week ago, Moody’s reduced our grade from A3 to BAA1 with a negative outlook. At the same time,  Pemex (Mexico Oil) was reduced from BA2 to BAA3. In addition, officials expect the economy to decrease 3% to 4% and analysts (for example BoFA ML) expect up to a 9% decrease.

The government also announced that there would no aid provided to corporations and all the aid will go to the poor. Leading Mexico economic analysts expect that without financial and fiscal aid to businesses, we can expect at least 200,000 companies to go under due to the pandemic.

However, it’s not all bad news! Mexico’s society is coming together and positive nationalism is arising (similar to during the 2017 earthquake and other crisis). Some examples are:

  1. Mexico’s biggest companies agreed to make advance payments to suppliers to help with their cash flow and manufacturing power
  2. The biggest retailers made the decision to not increase prices (even if our exchange rate moved from mid-18 pesos per USD to high 24’s) and
  3.  The “buy Mexican” strategy will be getting stronger in the following days and weeks.

COVID-19’s Effect on Retail and Mexico’s Commerce

ANTAD (National Agency of Retailers) just announced a decrease in their growth forecast for 2020 from +3% same stores and +6.8% total stores.

Because of panic buying during Phase 1 of the pandemic in Mexico, grocery retailers showed an increase of 22% in sales; specialized retail (non-grocery) decreased 19%. Currently, in Phase 3, it’s forecasted to see a slowing down of growth for grocers and a deeper decrease for non-grocers because of lack of public transportation, mobility issues and supply chain stress to get the products on the shelf.

Long lines, crowded stores
Photo by: Cristina Rodriguez
OOS shelves
Photo by: La Jornada

Traditional trade and Wholesalers grouped in ANAM (National Agency of Wholesalers) reported an increase of 18.6% in March. They reported growth in all of their categories (except pet foods). Categories with the most growthwere: Foods +22.3%, Paper Goods +17%, Home Care +16% and on specific products, Soap +241.3% and Healing Materials +111.3%.

Many studies confirm that the COVID-19 pandemic will cause Mexico E-commerce to grow in a month what it was expected to grow in 2 years in terms of sales, market penetration and customer trust. It’s expected to grow +60% in 2020 catalyzed by COVID-19.

Traditional Trade
Photo by: Cuartoscuro
Traditional Trade
Photo by: Víctor Camacho

The Phase 3 announcement in Mexico will force many of the grocers to restrict their hours of operation, decrease head-count in stores and potentially close some stores. They expect a new wave of panic buying in the following days, followed by a decrease in sales. Stores will implement a  50% max occupancy policy, will make a 10 by 10 customers to access and perform some auto rationalization of the max products each customer can buy.

Although Mexico supply chains and manufacturing capabilities demonstrated an amazing readiness for COVID-19, ensuring that essential products were available in stores, out-of-stocks became a huge issue for many CPG’s and a majority of retailers in modern and traditional trade. We also saw a much higher substitution index – if the consumer needed a specific brand and it was unavailable, they purchased was available without a thought.

Looking Ahead

As Mexico begins to enter Phase 3 of this pandemic, CPGs and Retailers alike are further preparing for a “new normal” as the lives of their customers are rapidly changing. We will continue to unify as a community and weather out this storm together!

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