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4.2 The Mexican Consumer Profile

Inhibited by a population of 109 million, Mexico is the largest Spanish-speaking country in the world and the second most populous country in Latin America behind only the Portuguese-speaking Brazil. Similar to many other countries in the region, Mexico has a very young population. Nearly 80% of the total population is at or below 45 years old, with a median age below 26 years old. The young population on one hand represents a ready source of labour to various economic sectors, and on the other hand, a lucrative consumer market for a wide variety of products catered for the peppy youth.

Population Distribution, 2007

 

Source: US Census Bureau

Thanks to the international oil boom and the close ties with the US economy, Mexican households are earning higher incomes and spending more to improve their quality of living. Over the period 2003-2007, the average gross income in Mexico rose by 29%, partly reflecting the country’s strong industrial development and expanding network of FTAs. In addition, lower interest rates and greater availability of credit have enabled many low-income consumers to borrow to improve their standards of living. On the other hand, since the official income figures have not taken into account the full contribution of the sizable “informal” economy, which is estimated to account for 27% of the country’s official GDP, the genuine increase in purchasing power among Mexican consumers should therefore be well beyond what the official figures have indicated.

Average Gross Income in Mexico

 

Source: Mexico National Institute of Statistics, Geography and Informatics (INEGI), Euromonitor

As a regional power and the only Latin American member of the OECD, Mexico is widely considered an upper-middle-income country. With one third of its population belonging to the socioeconomic classes C and C+, Mexico presents one of the largest middle classes (in absolute numbers) in Latin America. Given such a rosy picture, however, income inequality and poverty are still very serious in Mexico. It is estimated that the richest 10% of households earn nearly 40% of the total income, while the share of the poorest 10% is less than 2%. On the whole, despite a steady growth of higher-income consumers in recent years, Mexico’s mass consumer market is still skewed to the mid- to lower-end products.

By and large, Mexican consumers can be categorised into three socioeconomic classes, i.e. A&B, C+&C and D+&D&E. With an average monthly household income of over US$8,000, A&B consumers belong to the upper-income class in Mexico and have strong demand for brands and quality imports. Meanwhile, earning a monthly household income of US$1,000-8,000, consumers falling within classes C+&C are the middle class in Mexico, who are also brand-conscious and fond of mid- to high-end products. The D+&D&E consumers, on the other hand, are regarded as the low-income consumers, who, however, represent the majority of the population in Mexico. Following gradual and continuous expansion, the size of Mexico’s middle class is estimated to be 33% of the total population or 36 million inhabitants, up from 29.8% in 2000, demonstrating a growth of 11% over the period 2000-2006.

 

Concerning the spending pattern, food, beverages and tobacco, transport and housing make up the lion’s share of consumption expenditure in Mexico, accounting for nearly 60% of all spending coming out of the consumers’ pockets in Mexico. Setting these three categories aside, Mexicans spend some 40% of their income on other goods and services.

 

Household Spending Patterns

 

Source: Euromonitor

With increasing but still limited purchasing power, the mass consumer market in Mexico is price-sensitive, where consumers tend to place price as their prime factor when making purchases. On the other hand, with greater availability of credit to low-income borrowers, it is not uncommon to see consumers make payments by instalments, especially for big-ticket items such as certain household electrical appliances like refrigerators and air conditioners. Other than price, Mexican consumers have adapted to the US culture and living style. Given their preference for products which are trendy and popular in the US, Hong Kong companies, when promoting products to the Mexican market, should pay more attention to the product and consumer trends in the US.

Content provided by Hong Kong Trade Development Council
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