Basic or necessary consumption?

Although there are hedging strategies to limit the impact of the rise in costs, there is still some impact and not all of the rise in prices can be passed on to the consumer so as not to put downward pressure on sales volumes.

The consumption sector has had a year that has been marked by the high level of inflation experienced in the country and in the world. The latest annual inflation data, according to Banco de México, stood at 8.7%, a figure not seen in the last 22 years.

The main companies in the sector have faced high levels of raw material costs, including grains, flour and soybeans, which they have had to pass on to the final consumer in order not to affect their profitability levels.

Although there are hedging strategies to limit the impact of the rise in costs, there is still some impact and not all of the rise in prices can be passed on to the consumer so as not to put downward pressure on sales volumes.

There has been a significant investment in productivity with technological advances to have more automated processes that allow to counteract the rise in costs and thus be able to maintain the greatest possible price stability.

In the second half of the year, the light at the end of the tunnel has begun to be seen. Some of the commodity prices have already stabilized and although these have not decreased, at least they have not continued their upward trend.

Towards the end of this year and the next, we expect the sharp rise in costs to continue, which should begin to favor the level of profitability for companies in the consumer sector, while limiting the rise in prices for the final consumer. .

So far this year, there have also been supply problems, mainly in glass, which has affected both beverage and food companies. This problem still continues, however, signs of regularization are beginning to be seen.

However, in this environment, companies in the sector have managed to maintain solid sales levels. The rise in the price of the main consumer products has not caused a drop in sales volume and, on the contrary, increases continue to be seen quarter after quarter.

An advantage of the consumer sector is its ability to mold itself to the needs of the market. This is done through different products or presentations that make the products more accessible to consumers.

With globalized operations, companies can also have a greater focus on one region of the world to drive a higher level of sales there and with this, improve their operations and profitability.

Such is the case of José Cuervo, who has focused on his Premium brands, thus improving his portfolio with a focus on brands that provide him with a greater margin.

An important head start towards the end of the year is the World Cup, which will be played in the fourth quarter for the first time, merging with the Christmas season with which we expect food and beverage sales volumes to have a strong boost.

The basic consumption sector has shown to be resilient in different economic periods with the ability to adapt to current needs and recovering levels of profitability with higher productivity and in an environment that is beginning to look more stable in terms of raw material costs.