FUTURE HEATING UP FOR FROZEN FOODS

JAMES TENSER

ZAPOPAN, Mexico -- High hopes for the developing Mexican consumer economy are being translated into new market activity by importers of frozen foods here.

"The opportunity and potential are enormous. Only a few companies have realized that," said Edgardo Diaz Garza, president of Pacific Star Foods, based in this suburb of Guadalajara, Mexico's second-largest city.

Business at Pacific Star has been booming, said Garza, who said his company distributes frozen and refrigerated products for Pillsbury,

ConAgra, Kellog Eggo, Rich's, and Welch's among other U.S. brand marketers.

Although only roughly 8 million of Mexico's 85 million citizens can be regarded as participants in the consumer economy, that number is growing rapidly as more of the population shifts to wage jobs in industry and service businesses. And while most rural Mexicans still shop each morning in open-air markets, supermarkets already account for about 65% of ACV (all commodities volume) nationally, Garza said.

The growth of mass merchants such as Aurrera and Gigante in Mexican population centers has helped fuel frozen foods growth rates averaging more than 40% per year since 1989, according to information companies Cortina in Mexico and Nielsen in the United States. Those same retailers are also selling refrigerators to Mexico's growing middle class.

"There is a big potential considering the demographics," Garza said. "Fifty percent of the population is under 24 years; 40% under 18. With a very young population, the need for convenience products will be there as more and more housewives are working. That is a big change in Mexico."

Such potential is not lost on U.S. frozen foods marketers, who are taking steps to woo and win young Mexicans over to the joys of convenience foods.

In March, mass-media consumer advertising began appearing for Eggo brand frozen waffles, a product of U.S.-based Kellogg Co. -- a first for the brand in Mexico.

And U.S.-based Pillsbury, which has already scored a hit with its Toaster Strudel among young Mexicans, is formulating plans to adapt its Totino's frozen pizza line to local tastes, using toppings such as jalapeno peppers and chorizo sausage.

A division of London-based Grand Met, Pillsbury has been one of the most active in Mexico with regard to frozen foods. Two years ago it purchased a half-interest in Pacific Star, in a bid to ensure its access to the Mexican retail market.

"Distribution is the key," said John Speirs, president of Pillsbury International. He sees "sustainable growth" potential for many of his company's products, including Green Giant frozen vegetables, and Grands refrigerated biscuit dough, which market research shows Mexicans favor for use as a crust for the fist-sized meat pies called empanadas.

In a nation with little distribution infrastructure and few cold storage depots, Pillsbury relies on Pacific Star's fleet of small trucks to deliver its products.

Speirs said the Mexican retail trade is still being educated about handling a new product form. Shutting off the freezers at night to save money was one common early mistake. Few are experienced at handling frozens on loading docks. "That's why it's almost 100% DSD in Mexico," he said.

Garza said that in addition to the delivery services, Pacific Star employs a crew of in-store merchandisers who set and display products. "Some stores are visited each day to display and clean the freezers, because trade doesn't know how."