The size of the Mexican packaging market - estimated at 92 million consumers - and its relatively underdeveloped status, make it attractive to packaging firms and material suppliers. But experts agree that development of the packaging sector in Mexico faces a number of challenges, not the least of which has been the tumultuous position and devaluation of the peso on world financial markets.
The largest flexible packaging problems facing Mexico are raw material supply and the need for more modern machinery, said David Fernandez Alvarez of B&F Consultoria, a Mexico City-based consulting firm.
The Flexible Packaging Association in Washington reported U.S. firms sold $128.7 million in flexible packaging materials in 1993, compared with materials worth $17.7 million that were made in Mexico and shipped to the United States.
``It is evident that flexible packaging manufacturing in Mexico comes from one main source, which is polyolefins,'' Fernandez said at the Flex-Pak Worldwide Conference on Flexible Packaging in Chicago. ``In 1993, more than 90 percent of all [flexible] packaging was made from these resins.''
The majority of the resin and film used in flexible packaging in Mexico is either biaxially oriented polypropylene or low density polyethylene, he said.
The majority of packaging resin production comes from Petroleos Mexicanos (Pemex) and Indelpro SA de CV, a joint venture between Monterrey-based Grupo Alfa SA de CV and Himont Chemical Co. of Wilmington, Del. About 595 million pounds of LDPE was used in packaging in 1993, the last year for which complete data is available. About 70 percent of that amount was converted into film, and 30 percent went into general-use plastic bags.
In 1994, Fernandez said, about 66 million pounds of BOPP was produced. Use of the film in packaging - including sophisticated applications such as snack foods - grew 10 percent annually from 1988-1994. Resin imports of packaging material rose from 6 percent of the market to 13 percent between 1988-1993, primarily because resins such as linear LDPE were not available from the two main producers.
Fernandez said the peso devaluation will limit Mexican packaging firms' ability to upgrade machinery and pay for increased resin costs.
Jose Antonio Medina Romo, director of customer service for Novacel SA de CV, a diversified converter in Tlaquepaque, Mexico, agreed the hard money situation will delay development. He added Mexican firms will try to maximize existing capacity and focus efforts on stimulating exports. The stable economies in other countries offer alternatives to markets within the country.
He said Mexican film converters that produce BOPP and LDPE face competition from multinational converters that ship finished material into Mexico.
In regard to rigid packaging, Mexico reflects the popularity seen in other markets of the use of PET. Experts say PET for the huge Mexican beverage market continues to encroach on glass bottles as the No. 1 rigid container material. PET use is expected to grow at a double-digit percentage rate in 1995. Multinational end-user giants such as Pepsi-Cola Co. either have begun to expand plants, seek sites for new ones or consider joint ventures with Mexican companies to increase production in the country.
Interest has grown in hot-fill operations. Many multinational food companies have shown interest in creating packaging facilities near their existing plants.
In 1993, Pepsi-Cola of New York announced it would spend $750 million by 1998 on bottling and packaging upgrades.
Processos Plasticos, a subsidiary of Grupo Embottelador de Mexico SA de CV based in Mexico City, set up facilities in Mexico City and Canc£n to make 11/2-and 2-liter bottles for Pepsi. Smurfit Carton y Papel SA de CV of Mexico City built bottle-making facilities to supply Procter & Gamble Co. of Cincinnati with shampoo bottles. Colgate-Palmolive Co. of New York built a $200 million bottle-blowing and filling plant in San Jose de Iturbide.
Eastman Chemical Co. of Kingsport, Tenn., is building a plant in Cosoleacaque, Mexico, with capacity to produce 264.5 million pounds of PET a year. The plant is expected to supply bottle and container makers and several end-users.
In general, Medina said, Mexican packaging makers face a struggle to modernize and diversify production because of the peso devaluation, and improvement could be delayed. He said end-users and consumers, however, are requiring more and different kinds of packaging, and those demands must be met.