Exploring the packaging industry in Mexico reveals a landscape rich with opportunity and growth. While certain challenges exist – from the need for automation to the push for sustainability – Mexico is rising to meet these challenges.
Foreign businesses and investors looking for a packaging market to leverage will find that Mexico’s industry includes strong sub-sectors, supply chains, labor pools, FDI, innovation, and more. And perhaps most importantly, the country is experiencing sustained and significant growth rates in the plastics and packaging industry that ensure continued profitability and success.
According to data from the US Department of Commerce, the packaging industry in Mexico, encompassing both equipment and materials, is currently experiencing unprecedented demand, reaching record highs. In 2022, Mexico’s market for packaging machinery and materials reached a remarkable $906 million USD, following three consecutive years of stagnation. This reflects a surge of 25%.
There were several factors contributing to this growth. Consumption habits, both locally and internationally, certainly shifted. There was also a substantial increase in remittances from abroad totaling $58.5 billion USD in 2022. Additionally, the country benefited from significant government social programs that totaled over $32.8 billion USD. These programs have notably boosted the consumption of beverages, processed foods, medical products, and personal care items.
But the rise of e-commerce also played a pivotal role. As a result of the 2020 lockdowns, online shopping from home skyrocketed in Mexico. Indeed, 2022 alone saw a remarkable 23% increase, alongside a double-digit increase in retail sales (around 18% annually). Additionally, exports of agriculture-related products from Mexico increased by 12% in the same year.
This historic shift in shopping patterns boosted the packaging material production industry to represent approximately 1.8% of Mexico’s overall GDP in 2022. This contributed 5.5% to the industrial sector GDP and 8.6% to manufacturing GDP, boosting Mexico’s economy prospects overall.
This sector in particular offers promising opportunities for US involvement in Mexico, given their reputation for innovative technology and geographic proximity. And according to the Packaging Machinery Manufacturers Institute (PMMI), Mexico now stands as the second-largest buyer of US packaging equipment (in addition to being the largest US trading partner). Mexico also sources a large quantity of supplies from Germany and Italy.
The dramatic surge in demand for packaging and processing machinery in 2022 was attributed to improved political stability post-COVID-19, coupled with the necessity to increase installed capacity to meet the growing demand for packaged products. Early numbers for 2023 indicate more of the same. 2023 is expected to record an expected growth rate of 5.5%, with machinery and equipment purchases expected to increase 7-12%.
There are several drivers for this growth. Some of which including investment in:
Despite the positive outlook, US exporters face challenges, including stiff competition from European equipment, perceptions of US-made equipment as suitable only for large-scale production, and concerns about higher energy consumption.
The packaging industry in Mexico is varied. And several sectors may afford opportunities for foreign investors and outsourcing companies.
Plastics, in particular, emerge as the most dynamic sector, consistently gaining market share. Mexico’s plastics sector holds a significant 29.3% market share, closely followed by paper and cardboard at 32.7%. Other materials like glass, metal, and wood contribute to the remaining market share.
Major opportunities for US businesses and investors in the Mexican packaging machinery market lie in processing equipment and materials for the food and beverage industry. Notably, these areas cater to the 50% of Mexican packaging machinery imports. But there is also a sizeable demand for plastic container manufacturers targeting the personal care industry, as well as opportunities in cleaning and sanitizing products.
Domestically, Mexican users demand higher-quality materials. This, combined with the need for compliance with advanced production standards mean there is a specific focus on flexible packaging. This area constitutes over 60% of food product usage, and has been experiencing growth rates exceeding 10% annually. Mexico is a very environmentally conscious country. And the push for environmentally friendly solutions creates avenues for innovation and flexibility in packaging machinery sales. There is a clear emphasis on the need for higher quality and greener packaging materials to meet evolving market demands.
As major investments from companies like Constellation Brands, ARCA Continental, Grupo Bimbo, Diageo, Brown Forman, and others are announced, the packaging industry in Mexico becomes increasingly attractive as a foreign direct investment opportunity. These projects signal near-term demand for processing and packaging equipment, presenting lucrative prospects for US businesses in the Mexican market.
