In 2005, which was the latest consensus taken, Mexico was shown to have approximately 103 million people living inside its borders. When one considers the magnitude of that many people, sometimes something that seems “every day” and mundane, can become something quite startling that jumps up to grab your imagination. For instance, who feeds all these people? Here in the US, it’s an everyday occurrence for people to go to the local Publix, or Shoprite, or Whole Foods, or Pathmark, or WinnDixie and buy their groceries. Do they have such places in Mexico? Interestingly, the answer is no.
There are no large, national food service distributors in Mexico. The food services industry consists of three main arteries for distribution. One such example is the fast food distributors focused on international chains such as McDonald’s, Kentucky Fried Chicken, Domino’s Pizza and Burger King. Then there are the specialized importers who serve middle and upper-tier markets and provide primarily foreign foods or products that are not widely available in Mexico. Thirdly there are the produce and basic dry goods distributors who distribute local products and widely-available foreign products. But the concept of a large regional or nationalized grocery distribution chain, such as we might employ via Sysco foods for example, simply didn’t exist. Until now.
Nacent Company Inc. saw the opportunity that Mexico provided and soon became Mexico’s largest food distributor, marketing and distributing over 2,000 national and proprietary brand food and non-food products to over 1,400 customers. Realizing that the bulk of the food distribution efforts in Mexico were carried out by small family owned businesses, Nacent realized that growth through careful acquisition of these smaller entities was the proper path toward a nationwide distribution network. Nascent believes that the Mexican food service distribution market, which is highly fragmented, is ripe for consolidation. Small food and beverage distributors in Mexico suffer from high operating costs, a fragmented market, low volumes, low bargaining power, poor economies of scale, financing issues, redundant services and inventory related issues. Because of these negatives, most small family operated businesses, remain small and business stagnates.
Although competition is intense, the Company’s exclusive licenses, broad product line, prompt delivery and value-added services distinguish Nascent as a leader, and provide a sustainable competitive advantage. This market is ideal for consolidation and larger companies able to take advantage of the market conditions through acquisitions are emerging as the industry’s first major players. Nascent is aggressively pursuing acquisitions that can help it expand its presence and market share in Mexico’s food and beverage market, both of which are growing at a furious pace.
Which brings us to the beverage distribution. According to MexicoBeverage.com, Beer has a 76% share of the alcoholic beverage market in Mexico, and the average Mexican drinks 52 liters of it per year. Tequila, brandy and rum constitute the remaining 23%. Interestingly, some 65% of the beer consumed in Mexico is imported from abroad. With such a strong demand, it’s easy to see why Nascent teamed up with Miller Beer Company for the distribution of Miller beer throughout Baja Mexico. With a population that enjoys its beer so heartily, the company that can supply the most demanded brews will indeed make a fine profit and Nascent is in a great position with Miller.
As Mexico grows, Nascent will grow with it. As they build out their infrastructure and weave it together through strategic acquisitions of smaller distribution companies, Nascent has the profound ability to be one of the very top players in this exciting emerging market. Combining high demand quality products, with a growing network of high tech distribution centers, Nascent is forging a bright future in an area that’s been overlooked and neglected. Investors with a sense of appreciation for good timing and good execution of plans should take the time to get acquainted with them. In fact, pull up a chair, enjoy a glass of Miller and some Cabo chips, and you’ll see why it’s easy to think Nascent has hit on a winning combination. It’s worth a close examination for sure.
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