Nascent Wine Company, Inc. (OTCBB: NCTW) is the only nationwide distributor of imported food products into the Mexican marketplace. Although the company was incorporated in 2002, it experienced minimal business activity until it obtained the right to distribute Miller Beer in Baja California in 2006. In 2007, sales grew from $4.7M to $42.4M due mainly to the acquisitions of Pasani\Eco, Groupo Sur Promociones de Mexico S.A. de C.V., and Targa, S.A. de C.V. While the company employs a three-pronged sales strategy, its focus on acquiring the small Mom-and-Pop stores, then folding them into the current business, is almost completely responsible for its sales increase in 2007.
According to a 2002 study, the Mexican food service market comprises $46B of Mexico’s total $1 Trillion GDP. Large retailers such as WalMart, Costco, and Commercial Mexicana service about 40% of the market, while small Mom and Pop distributors service an incredible 60% of the market. Distributing to this 60%, many of whom are in remote locations, poses challenges that large multinational distributors cannot manage.
Due to the complex nature of importation, the Mexican foodservice industry requires an intermediary for warehousing and delivery. In addition, the roads and infrastructure in Mexico make logistics and large-scale delivery difficult, requiring the use of smaller vehicles and more frequent deliveries. These unique logistical challenges introduce an important barrier to entry for large multinational food service distributors; consequently, independent distributors service almost the entire country.
Nascent believes that although the current logistical situation in Mexico is challenging for non-Mexican food service distributors, multinational distributors, like Sysco, will indeed enter the market in the next decade. In the meantime, the Mexican market is ripe for knowledgeable, “organically grown” distributors like Nascent. Its strategy of growing through acquisition to expand its customer base will also lower its fixed costs, thus helping it entrench its position as the #1 importer in Mexico. Non-Mexican multinational food service distributors wanting to enter the Mexican market may hesitate when they find a knowledgeable, entrenched competitor in Nascent.
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