NAFTA Revisited

By David Morse and Warren Thayer


It’s been ten years since NAFTA went into effect. At that time, Ross Perot
was talking about the “great sucking sound” of losing jobs to Mexico while Mexicans
worried about their economy being inundated by U.S. multinationals.


Few of us were speaking about U.S. Latinos at the time, at least not as part
of the NAFTA debate. But there are now 40 million of them, two thirds of whom
are Mexican. According to an article appearing on brandchannel.com, the opportunity
that these 40 million represent is not lost on companies on the south side of
the Rio Grande — the same companies that make the brands many of these consumers
grew up with.


It used to be that Mexicans would always choose an American brand over a Mexican
brand. There’s a Mexican word for it – “Malinchista” – named for the Aztec woman,
known as “La Malinche”, who helped the Spaniards during the conquest.


But to Mexicans living in the United States, Mexican brands, particularly of
the edible or drinkable variety, offer nostalgia.


Novamex is a company whose entire focus is on importing Mexican brands into
the United States and marketing them to Mexican consumers. Sales of one of its
iconic brands, Jarritos, have actually outpaced sales in Mexico.


According to Novamex’s Director of Marketing, Bob Leppan, it’s all about offering
an authentic experience. “Mexicans in the U.S. crave the flavors, the tastes,
the culture of Mexico. They welcome U.S. culture, but they love and miss Mexican
culture as well. We enable them to have the best of both worlds.”


Moderators’ Comments: How successful will Mexican manufacturers
be in attacking the U.S. market with brands familiar to Mexicans now living
here? Would they do well to form an alliance with a retailer or manufacturer?
Or would they be best off, over the long haul, to remain independent? Can they
do it alone?


As Mexican companies become more aggressive in targeting
Mexicans in the U.S., you have to wonder whether there will be room for some
interesting new alliances. Mexican brands – with U.S. manufacturers, or with
U.S. retailers?


Surely the Mexican companies could provide extraordinarily
good guidance to U.S. manufacturers who are stumbling in their efforts to attract
the huge and growing number of Mexicans in this country. They could also, perhaps,
ink some lucrative deals for exclusive distribution with major retailers such
as Wal-Mart, Kroger or Albertsons, to name a few
.

David Morse – Moderator
;
Warren
Thayer – Moderator

BrainTrust

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Virgilio Perez Pascoe
Virgilio Perez Pascoe
18 years ago

Companies like NovaMex should focus ultimately on the widest possible array of consumers….in order to increase their scale and become even more of a factor with retailers. So I agree with all of the commentaries that suggest a new stage for the company.

There are already examples of products that have ceased to be consumed due to the “nostalgic” factor: Corona, the beer, comes to mind. As I understand it, Corona took off with the Hippies in the 70´s as they traveled to Baja California and found the beer in places like Hussong’s bar in Ensenada. Corona caught on, even though it was not the largest selling beer in Mexico. (Superior, was in the 70’s.) Corona kept on growing in the US until the early 80’s when the marketing importers Gambrinus and Barton shifted their attention to the Mexicans…and that is when it continued its upward climb to the point today where it is the largest selling import in the US for beer. There are other examples….tequila, even Tabasco (a sauce that was never Mexican, but because it is a chile sauce it has the umbrella of being foreign).

But how should NovaMex do it? It has already some built in capabilities, that it may not realize….and that is, that they are adept at dealing with brokers, distributors and retailers in areas where immigrants congregate (the independent mom and pop stores in California, Texas, the Southwest, Chicago and the bodegas of New York). This capability is a strength that few mainstream manufacturers have. And it is a counterpoint to the huge chain retailers, who may be not as efficient in directing these products to the appropriate stores. Somehow, the NovaMex distribution system can make many low volume deliveries and still make money (contradicting the “high throughput per delivery” concept of reducing distribution costs).

It should also develop its capability to deal with the high end market…the gourmet, specialty retailers. This means that they need to look for product offerings in their home market that are more sophisticated, high margin, but where volume may not be very high and selectively introduce these…to further broaden its base.

It should also expand its offerings from countries other than Mexico….for example “arepas” from Colombia and Venezuela, juice drinks from Brazil, candies and beverages from the Caribbean, that can flow into the same retail stores it already covers (on the theory that where there are first generation Mexican immigrants, you will also find immigrants from other Latin American countries) and obviously, the choice of which products it keeps in its portfolio will be determined by success in the market.

Finally NovaMex should be religious in analyzing product trends for its offerings and understand volume per store to plan which are the products it offers that could be expanded nationwide, and which products are not. And also, keep its ear to the ground to determine what products it should bring in.

NovaMex should own the independent mom and pop retail segment coverage. It would be a great alternative to the food brokerage system which is concentrating more and more on the giant retailers.