A primer for selling in Mexico

The North American Free Trade Agreement (NAFTA) accelerated the opening of the Mexican market for U.S. goods to the tune of $5.7 billion in 1996. However, without the right distributor, U.S. exporters may find their products bottlenecked on a warehouse dock or sitting overpriced and unsold on a retailer's shelf.

So far, NAFTA has cut by half the trade barriers imposed on food and agricultural products entering the Mexican marketplace from the United States. The other half will be phased out during the next five to 15 years.

The continuing elimination of trade barriers in Mexico, already our fourth-largest foreign market, promises more opportunities in the future.

This instant access, and the ensuing jump in U.S. exports, has not allowed Mexican businesses enough time to transition to a polished importing process.

To expedite their sales in this expanding market, U.S. exporters need to do their homework and find the best way to sell their products in Mexico.

Tradeoffs on Distributors

U.S. companies have two choices:They can sell directly to a Mexican customer or indirectly through a broker, distributor or agent.

Since most Mexican retailers and food service companies are not yet set up to import directly, only a small volume of U.S. exports are sold directly to the customer. Companies with a limited number of customers - willing to give up possession of their shipments at the border - might find this method workable.

Using the services of a broker is the easiest way to sell a U.S. product in Mexico. If you choose this route, you do not have to worry about export logistics and red tape. Payment is ordinarily handled just like any other domestic transaction with all the customary legal protection. However, you forfeit control over product destination or arrival condition, making it difficult to build a brand identity.

Most small U.S. food companies look for a middle ground. They tap into a preexisting distribution network, either through a distribution company or a Mexican food processor, which provides the best balance between the rewards and risks of exporting.

Exporters with large volumes or extensive product range find having a Mexican agent well worth the initial investment of time and effort. paying off in higher profits and peace of mind.

When an exporter does find a representative, any contract should be made with the company rather than with the individual. Mexican labor laws, which favor the dismissed, make it difficult to break a contract with an individual.

Pegging Your Distributor

Good distributors are hard to find. Lists of companies that already distribute your product are available from the U.S. Agricultural Trade Office in Mexico City and from USDA's Foreign Agricultural Service. Since there are no quality checks available for these companies, the exporter should take special precautions before contracting with any company.

Talk with other U.S. companies that sell products similar to yours, and conduct your own personal research. To help ensure a satisfactory distribution network:

* Inspect warehouse facilities and delivery capabilities. Make sure any special shipping needs can be met.

* Check references with other companies doing business with the distributor.

* Speak with serviced retailers or food service outlets to ask about reliability and timeliness.

[TABULAR DATA OMITTED]

Most distributors will ask to exclusively represent your product in all of Mexico. This commitment should be avoided. Since few can deliver with full-country distribution networks, dealers may instead sell to sub-distributors, adding to markups. More effective for the U.S. exporter: having a distributor in each key market.

Annual Trade Shows

Trade shows provide a popular forum for U.S. exporters and
Mexican executives to meet informally to gather information on
new technologies and opportunities. Participation shows off your
product and provides invaluable contacts.

Trade Show        Location       Product Line

CONFITEXPO        Mexico City    confectionery
EXPO ALIMENTOS    Monterrey      foods, raw materials, machinery
EXPO PAN          Mexico City    bakery
EXPO CANILEC      Mexico City    milk and dairy
EXPOPAK           Mexico City    packaging

COPYRIGHT 1997 U.S. Department of Agriculture
COPYRIGHT 2004 Gale Group