Mexico is the country with the largest number of people who have chosen not to consume products of animal origin in Latin America. Almost one in five Mexicans is a vegetarian and 9% are vegan, according to Nielsen figures. The potential of consumers grows if they are added to those who have given up lactose for health reasons.
This is the case of Paulina Corona. She doesn’t have a confirmed diagnosis of possible lactose intolerance, but a couple of years ago, she started noticing that it didn’t sit well with her. “I really like it, but I felt horrible when I drank it, until I started taking the almond or soy alternatives,” she says. Despite the higher cost, compared to traditional milk, Corona is testing the alternatives that reach the market, among which are already those of the country’s large milk producers.
Capturing these buyers who are looking for an option for lactose-free diets, or because they are vegan or vegetarian, is an open door for dairy companies to a segment that closed with a global value of 24,000 million dollars in 2021 and that is expected to reach $49 billion in 2028, with a compound annual growth rate (CAGR, which measures return on investment) of 10% from 2022 to 2028, according to Global Market Insights.
But, for now, that companies leave aside the production of cow’s milk is unthinkable. The first vegetable drink reached the Mexican market about 20 years ago and currently has a 1% penetration in homes in the country, explains Adrián Ávalos, Out of Home & Usage Food Manager of the Worldpanel division of Kantar México.
Although each of the brands travels different paths, the goal is to maintain sales in an increasingly competitive market, in which cow’s milk already shares space on the shelf with soy, coconut or oat drinks, which are making their way among consumers with higher purchasing power.
Alpura: rejuvenate and win market
Alpura, with 50 years in the market, wants to include younger consumers among its buyers and for this it recruited a veteran of the wine and barrel industry, François Bouyra, who took over the management of Grupo Alpura in 2021, after working for years at Casa Pedro Domecq and Pernod Ricard.
After his arrival, he recognized that the brand had been “a little behind” in terms of marketing attributes, so one of his missions would be to find the formula to rejuvenate it and obtain long-term results.
Since then, the company has come a long way. In October 2021, it hired the Rock advertising agency, which has led successful campaigns for brands such as Tecate and Oxxo, and which developed the ‘Pasión por la leche’ campaign for Alpura, with the aim of returning to the origins of the brand and highlight the manufacturing processes of the products in its portfolio.
Adrián Varela, Marketing Director of Grupo Alpura, explains that the company outlined a three-year plan to position the product portfolio that, in addition to milk, includes yogurt, creams and cheeses. “The brand penetration in the young target with the campaign grew almost 20% and we are gaining market share in all categories,” he says.
The next step was the alternative milk segment without animal protein, a segment that, according to data from Fortune Business Insights, grew 13% in the last year.
The company debuted in the vegetable milk market in May, with its Seeds line, under which it offers coconut and almond drinks. “We don’t enter this category to play catch-up, we enter because we are convinced that the product we have will have a relevant participation in the next 24 months,” says Bouyra.
“Now we are starting, the base is small, but we hope to have a double-digit participation,” he adds.
Jonathan Mata, director of Trade Marketing at Alpura, explains that the company, through the Business Intelligence department –which captures and provides market insights to the product development area–, has placed the consumer at the center of the development of new formulas, packaging and brands.
“We have the task of connecting with consumers emotionally and thus breaking down some barriers,” says Mata. “In the north of the country, for example, where there is an opportunity for Alpura, it is not easy to enter. The consumer is very rooted in local brands. But they still need to try us, to get excited about the emotional part of the advertising so that the magic of preferring Alpura begins”, he adds.
But, unlike what happened in the past, when the market consumed what the brands put on the shelves without having a voice or a vote, now Alpura is attentive to what consumers want to see when they visit the supermarket.
For Juan Manuel Ramírez, director of Postgraduate Studies at the Commercial Banking School (EBC), the marketing campaigns that “hit the consumer’s heart to reach their heads” are the ones that generate income.
“Doing it with an organic approach will allow [Alpura] to position itself, enter new niches and stop being perceived as ‘a granny brand,’” he says. “We are excited to find growth opportunities, it is part of this new culture that we are building, in addition to being more aggressive with the market,” says Varela.
Lala and the diversification of her portfolio
Grupo Lala has also opted for diversification and has gone beyond milk and its derivatives. The company deployed a very aggressive strategy to bring new products to market between 2018 and 2019, when Mauricio Leyva ran the company. However, analysts criticized that there were too many novelties launched in a very short time and they failed to give a boost to sales, while expenses hit the rest of the items.
In the fourth quarter of 2019, the operating flow or Ebitda fell 27.5% and the net profit fell 86.5%.
At the end of that year, Lala announced Leyva’s departure. And it was in the first quarter of 2020 when the company called an old acquaintance to the management: Arquímedes Celis, who announced an adjustment in the portfolio in his first movements upon his return to the head of the company that he had directed for 14 years, until 2015.
The company decided to leave its line of Greek yogurt and Vita, the brand of its almond, rice, coconut and walnut drinks, on the market, and which it consolidated in 2019, by closing an alliance with Blue Diamond Growers, which allowed it to expand its offer of almond drinks. Already with the adjustment in its products, in April 2021, the company launched 11 new ones to strengthen its presence in the cold meat sector under the Lala Plenia brand.
“Definitely, optimizing and keeping a relevant portfolio is a priority, but in the case of cold meats we have everything to grow, and that is why we have created a team dedicated to the development of this business,” said Miguel Fuertes, commercial and marketing vice president, during the presentation. new company business.
For Carlos Hermosillo, an independent analyst, the scope of Celis’s return is still unclear, due to the pandemic and inflation context, “although in terms of strategy, his knowledge of the company and the market, the adjustments are favorable so that eventually Let’s see Lala show better results. Focusing on smaller presentations and markets will be good to recover profitability, and later, refocus on growing”, he says.
In May 2021, the company announced its intention to leave the Mexican Stock Exchange (BMV) and, although it did not reveal the reason, the decision occurs in a context of low marketability. As of press time, the dairy group has already acquired 99.9% of its papers in the stock market and is awaiting authorization from the National Banking and Securities Commission (CNBV).
Analysts have shown that getting away from the banking regulator’s scrutiny and not having to pay commissions to the BMV could pay off in the company’s efforts to recapitalize and better navigate the choppy waters of inflation.
Grupo Lala was not available for an interview until the closing of this report.
Marco Montañez, deputy director of Analysis at Vector Casa de Bolsa, comments that by becoming a private company, it will have more freedom to make decisions, make mistakes and rectify without affecting its financial performance. But this new freedom will be accompanied by a challenge.
“The company will have to obtain resources through other channels, that is one of the costs of leaving the stock market. Eventually, you can raise capital with private investors and invest the resources in strategic projects”, he explains.
