Maltural. A Business Plan of a non-alcoholic Malt Soft Drink for the Mexican Market

LIST F TABLES

Table A-1 Cmpetitrs f Malt Sft Drinks

Table A-2 Brands in Carbnated Sft Drink Industry

Table A-3 Brands in Flavred Water Industry

Table A-4 Brands in Juice and Nectar Industry

Table A-5 Brands in RTD Tea industry

Table A-6 Main Players in Mexican Beverage Industry

Table A-7 Sft Drink Market Value in Mexic

Table C-1 Soft Drink Market Value in Mexico

Table C-2 Maltural's characteristics versus direct cmpetitrs

Table C-3 Average Prices f Carbnated Sft Drinks

Table C-4 Average Prices f Sprt Drinks

Table C-5 Average Prices f Juices and Nectars

Table C-6 States and Cities f Penetratin

Table C-7 Target Market Size by City and Stage

Table C-8 Cntent and Benefits f Malt

Table C-9 Manufacturing Facility

Table C-10 Register f suppliers fr recipients, labels and packaging

Table C-11 Register f suppliers fr cmmdities

Table C-12 Prductin Quantity Year 1

Table C-13 Size f Target Grup by Stages

Table C-14 Mnthly Prductin by Stage and Penetratin

Table C-15 Number f Supermarkets per City

Table C-16 Number f Cnvenience Stres per City

Table C-17 Startup cst by use

Table C-18 Mnthly Breakeven Pint in bttles

LIST F FIGURES

Figure A-1 Sft Drinks Sales in Mexic

Figure A-2 Ppulatin Pyramid Mexic

Figure A-3 Distributin f Mexican Ppulatin

Figure B-1 Cst fr credits in Mexic - Lending rates, in percentage

Figure C-1 Sft Drink Cnsumptin in Mexic by categry Sales in millin USD, 2013

Figure C-2 Evlutin f Carbnates Cnsumptin in Mexic

Figure C-3 Mexic Sft Drinks Sales Distributin by vlume, 2013

Figure C-4 Distributin f Mexican ppulatin

Figure C-5 Spending Structure by Sciecnmic Level

Figure C-6 Crss-Matrix – Specific Actins derived frm SWT Analysis

Figure C-7 rganizatinal Structure

Figure C-8 Cmpany Lg

Figure C-10 Market Size M Water

Figure C-11 Product flow

Figure C-12 Transprtatin Csts

Figure C-13 Implementatin f Marketing Prgram

Figure C-14 Balance Sheet January 2017

Figure C-15 Balance Sheets 2017 - 2021

Figure C-16 Incme Statement 2017 realistic scenari, mnthly

Figure C-17 Incme Statement 2017 – 2021 realistic scenari, yearly

Figure C-18 Incme Statement 2017, ptimistic scenari, mnthly

Figure C-19 Incme Statement 2017 – 2021, ptimistic scenari, yearly

Figure C-20 Incme Statement 2017 - 2021, pessimistic scenari, yearly

Figure C-21 Mnthly Cash Flw 2017, mst likely scenari

Figure C-22 Free Cash Flw Statement, 2017 - 2021 realistic scenari

Figure C-23 Free Cash Flw Statement, 2017 - 2021, ptimistic scenari

Figure C-24 Free Cash Flw Statement, 2017 - 2021, pessimistic scenari

Figure C-25 Key Financial Ratis, 2017 - 2021, realistic scenari

Figure 0-1 Fiexed assests depreciatin rates

LIST F ANNEXES

Annex 1: Overview on Malt Soft Drinks Companies

Annex 2: List f Assumptins and explanatins fr Financial Planning

LIST F ABREVIATINS

EXECUTIVE SUMMARY

Cervecera Apan is a yung startup funded in 2014 in Pachuca, Hidalg, aiming t prduce artisanal beer and a nn-alchlic malt beverage. Bth types f prducts fit perfectly int the Mexican cnsumptin trends. Nevertheless, this business plan fcuses nly n the viability f the launch f the sft drink. The cmpany is incrprated under the legal frm f variable capital crpratin with ne funding partner.

The visin is t create a valued brand and being recgnized in the central regin f the cuntry as a prfitable and successful cmpany that is cmmitted t its custmers by ffering a healthy and delicius beverage. With this in mind, Cervecera Apan decided t create Maltural . This sft drink will be psitined in the market as a nutritius and healthy prduct, its main cmpetitive advantage, as it will harness the recent cnsumer trends twards healthier alternatives in the area f carbnates and ther beverages.

 The distributin will take place in glass bttles f 330 ml, and sld thrugh selected cnvenience stres and supermarkets within regins clse t the prductin plant. Initially, the cmpany will exclusively distribute its prduct in cities with mre than 100,000 inhabitants, as in general, higher incme classes live in urban areas and during the last years, there has been a nticeable grwth f the middle class with imprved purchasing pwer especially in these areas. The distributin will start in Puebla and Mexic City. Bth states are clse t the prductin site and dispse f high ppulatin density within the target grup. Further expansins in the first five years f peratin are planned int Queretar, Len, Guadalajara and Zappan. All cities with custmers f the high and middle classes.

 The cnsumers shall be reached thrugh prmtinal strategies that invlve the use f electrnic media, like current scial netwrks and a prper website. Anther strategy will be t ffer prduct samples in supermarkets in rder t prmte nt nly the qualities and benefits f the prduct but als its unique taste. Furthermre, it is planned t attend exps and trade fairs.

The Mexican cnsumer trend is directed twards healthier nutritin. Maltural is designed t satisfy this need, as it is nt nly cmpletely made up by natural ingredients, but thrugh the characteristics f its ingredients (barley, hps and yeast) ffers nutritin, vitamins, minerals and prteins. Furthermre, Maltural will be the first nn-alchlic malt beverage made in Mexic. Mexic is the biggest sft drink cnsumer per capita f the wrld, reaching 140l in 2017. Grwth rates in this sectr during the past decades have been cnstantly abve 4%. Instead f drinking tap water due t health risk, Mexicans cnsume every kind f preferable sweetened beverage. The ttal value f carbnated sft drinks in 2014 was 15,935.7 billin US-Dllars. Fr 2019, a value f 17,479.5 billin US-Dllars is estimated.

Besides frm its high sft drink cnsumptin, the Mexican market is attractive as it is nt nly free frm any trade barriers but als the Mexican ppulatin, with 2.2 children per wman, still has a psitive fertility rate. Anther psitive demgraphic characteristic is that mre than 50% f the ppulatin is yunger than 30 years ld.

The cmpany decided t first fcus n peple between 15 and 34 years ld, als alled ille ials , belnging t the sciecnmic classes A/B, C+ and C that frm 38% f the Mexican husehlds. Upper class husehlds were chsen, as thse are mre cnscius abut healthier nutritin.

The first-year revenue is prjected t be f $40.994.483 Mexican pess (MXN) with a grwth rate f 14% in vlume in the secnd and further 4% in the third year. This is als due t reginal expansin in the secnd year f peratin. With an initial investment f $14,218,211 MXN in land, machinery, building and furniture, after ne year f peratin a

Return f Investment (RI) f already 18% can be achieved. With an estimated EBITDA (Earnings befre interests, taxes, depreciatin and amrtizatin) margin f 17.3% in the secnd year, the cmpany will be abve the median f nn-alchlic beverage cmpanies in Mexic. Still in a pessimistic scenari, the cmpany can prvide psitive numbers. The RI is 5.58%, while the net incme is still abve $1 millin MXN.

A. PPRTUNITY ANALYSIS PLAN

In rder t evaluate a business idea, befre elabrating a business plan, accrding t Hisrich (2013), it is recmmendable t first evaluate the idea and the market fr that idea thrugh the pprtunity Analysis Plan. This plan serves as a basis fr the decisin f launching the idea r nt. In the fllwing, this plan is presented, including the fur sectins the plan usually cntains: a descriptin f the idea and its cmpetitin, an assessment f the dmestic and internatinal market, an assessment f the entrepreneur and the team, and finally a discussin f the steps needed t make the idea the basis fr a viable business venture (p. 61).

1. Descriptin f the prduct and its cmpetitin

1.1. The idea

The idea is t launch a nn-alchlic beverage based n malt n the Mexican market. The beverage cnsists mainly f barley, water, hps and natural sweeteners. It is a dark drink, with a clr similar t that f dark-beers and it has a very sweet taste. This drink is cnsumed the same way as ther carbnated beverages like Cca-Cla and it is segmented in the carbnated sft drink industry. Cmparing the malt drink t sft drinks like Cca Cla, the prduct cnvinces with a high amunt f vitamins b and the exclusive use f natural prducts.

As issued by the Mexican standard NMX-F-439 FD, the prduct is classified as malt sft drink as it cntains a range f 6 % t 10 % f malt extract. At the same time, it is listed as a nutritinal beverage, which is made with a minimum f 1.5% prtein arising in this case frm the malt. Hwever, t get int this classificatin, it shuld be nt carbnated.

As there is any nn-alchlic malt sft drink n the Mexican market, this prduct will be unique when launching. Nt nly the type f beverage will be unique but als the taste and the high amunt f benefits the drink invlves. The main prperties f malt can be fund in the nutritin it prvides. n ne hand, the malt cntains the vitamin B cmplex and n the ther hand, malt cntains vegetable prteins, carbhydrates in frm f maltse, glucse and fructse and minerals like calcium, magnesium, irn, zinc and ptassium. Furthermre, the malt is nt the nly ingredient that brings many benefits, but als the hp plant has many psitive features as well, like its cntributin t maintaining a gd liver functin and prtectin f inflammatry diseases.

1.2. The market needs

The prduct can satisfy different market needs at ne time. Whereas the basic need is t satisfy thirst, anther need is the alimentatin. The prduct is very nutritive due t its different ingredients. The beverage als ffers new energy thrugh the malt – especially esteemed by sprtsmen after physical activities. Beynd that, the custmer wants t have quality and a great flavr. The beverage nt nly has t stp the thirst but als taste well and give a sensatin f ding smething fr the well-being f the cnsumer.

As there is still n knwledge f this kind f beverage amng cnsumers, tday there des nt exist still a market fr this specific prduct. The aim is t create a market niche. Nevertheless, there already exist a cuple f strng players in the market f sft drinks – including functinal drinks –as well as istnic drinks, which fill similar needs.

1.3. The cmpetitrs

Direct and indirect cmpetitrs

In the Mexican market up t nw there d nt exist any natinal nn-alchlic malt drink. The nly nn-alchlic malt drinks available n the market are imprted nes. Frm Ve ezuela the e d e ist the Malta Pla d i k, hi h is sld as  -al hli alt ee a d f  Cl ia the e e ists P Malta , sld as alt sft-drink. Nne f these cmpanies wrks actively in the Mexican market. Nevertheless, these tw cmpanies wuld be cnsidered as the nly indirect cmpetitrs as they ffer the same prduct, but address a different target grup.

The fllwing table shws sme characteristics f the direct cmpetitrs in cmparisn with the wn prduct:

Table A-1 Cmpetitrs f Malt Sft Drinks

Surce: wn illustratin based n cmpanies hmepage; retrieved: 10.08.2015

Pssible substitutes

The mst dangerus cmpetitrs fr the malt beverage are all the substitutes the market ffers. In the sft drink industry, there are three main cmpetitrs with a ttal market share f 69% (Eurmnitr, 2015b). The market leader is Cca-Cla de Méxic SA de CV with a share f 45%. In the carbnated sft drink (CSD) industry, they even have a share f 68%; fllwed by Pepsi-Cla Mexicana SA de CV with 16% f ttal carbnates vlume sales.

ne f the main strengths f Cca-Cla is the well-expanded and efficient distributin netwrk, as well as its FEM“A’s  e ie e st es, XX, hi h a e available at every crner in almst every Mexican state and which still cntinue grwing at strng rates (Eurmnitr, 2015a).

In the sectr f Ready T Drink (RTD) teas nce again the market is shared by the CcaCla and Pepsi cmpanies. While thanks t the grwing presence f its Fuze Tea, the market share f Cca-Cla increased rapidly up t 43% f the ttal value share, Pepsi-Cla Mexicana SA de CV still wns 25% f the share (Eurmnitr, 2015d).

In the sectr f sprts drinks, the leading cmpanies nce again are Cca-Cla and Pepsic with their brands Pwerade (31% market share) and Gatrade (57%) respectively.

The third mst successful cmpany in this sectr is the Mexican cmpany Grup Jumex with Ju e “p t with a ttal market share f 7% (El Ecnmista, 2015a).

A third substitute can be fund in the juice and nectar sectr. Mainly three cmpetitrs share the market: Jugs del Valle SA de CV (25% market share), Grup Jumex Sa de CV (23%) and Grup Industrial Lala SA de CV (22%). Lking at the strengths f the three cmpanies, at the first glance it can be stated that Jugs del Valle as a subsidiary f Cca-Cla de Méxic benefits by taking part in its negtiatins in bth the ff-trade and ntrade channel. The ther tw cmpanies benefit frm the lng presence they already have in Mexic (Eurmnitr, 2015c). The trend twards healthier prducts and a pssible increase in juice cnsumptin, induced cmpetitrs t be prepared fr this event e.g. thrugh acquiring crrespndent cmpanies. ne successful example is the acquisitin f Mexic´s secnd largest fruit juice firm, Jugs de Valle by the Cca-Cla Cmpany (Business Mnitr Internatinal Ltd, 2015).

Lists f all cmpeting prducts and cmpanies in the beverage market

Having analyzed all the different types f beverages seen as pssible substitutes ffered by the supermarket chain Superama, which frms ne f the selected distributin channels, there can be fund 28 different carbnated sft drink (CSD) brands, 14 brands f flavred water, 44 juices and nectars and 10 f RTD teas.

Table A-2 Brands in Carbnated Sft Drink Industry

Surce: Superama retrieved 21.08.2015

Table A-3 Brands in Flavred Water Industry

Surce: Superama retrieved 21.08.2015

Table A-4 Brands in Juice and Nectar Industry

Surce: Superama retrieved 21.08.2015

Table A-5 Brands in RTD Tea industry

Surce: Superama retrieved 21.08.2015

The fllwing table lists different cmpanies that wn the mst f the abve-mentined brands:

Table A-6 Main Players in Mexican Beverage Industry

The table abve shws that the beverage market – althugh full f different brands and fferings – is mainly shared by nly a very few, huge cmpanies.

Prducts launched during the last years have respnded t the trend f a healthier nutritin. Peñafiel, fr instance, launched 10 new prducts in 2014, all healthy, with the bjective t nt nly gain mre market share but als t cmpensate lsses caused by the new tax intrduced at the beginning f 2014 (Rivas, Peñafiel ´destapa´nuevs prducts, 2014). During 2015, Starbucks launched a new, carbnated artisanal beverage in tw different flavrs: Ginger Ale and Lemn Ale. Bth with lw calries and caffeine free. The drinks d nt cntain high-fructse crn syrup, r artificial flavrs nr preservatives (Espinsa, 2015).

In 2014, Alpina and Quala launched a new prduct - als in the carbnated drink sectr - under the brand name Frizz. It is a refreshing natural juice drink slightly carbnated, free f artificial sweeteners and with 40% less sugar and calries than the Cca-Cla. Its target market include 17 t 25 years ld peple f all the sci- ecnmic classes (Negcis, 2014).

2. Assessment f the market

2.1. Glbal market

Taking a lk at the internatinal nn-alchlic malt beverage market, it can be nticed that the beverage is already well implemented in sme Eurpean as well as Latin American cuntries. In Germany, fr example, where the nn-alchlic beverage has its rigin, there are tw big players dminating the market – Vitamalz and Karamalz. Bth brands advertise ffering a natural prduct supplying imprtant vitamins, vital minerals, trace elements and glucse. The beverage gives energy fr bth getting things dne at wrk and fr sprts.

Brands frm Latin America like Pny Malta (Clmbia), Malta Plar (Venezuela), Actimalta (Hnduras) and Malta Vigr (Panama) all are fcused n children and sprtsmen as target market. Their advertising expresses the nutritin the beverage gives, and what benefits the child gains by drinking their malt prduct. Mre infrmatin abut nnalchlic malt beverages in the glbal market can be fund in the Appendix I.

In reference t pssible substitutes fr malt drinks, it is nt necessary t lk at the glbal market, as the main cmpetitrs in the Mexican market are glbal players that are similarly strng n the glbal basis.

2.2. Cnsumptin in Mexic

Like already mentined befre, Mexic des nt have a nn-alchlic malt drink market. In this sectin, the general sft drink market in Mexic is analyzed.

The per capita sft drink cnsumptin in Mexic is the highest in all Latin America. After the United States, Mexic has the secnd largest sft drink market in the wrld. Accrding t the Business Mnitr Internatinal Ltd (BMI), ttal sales in sft drinks in 2014 amunted t 18,301.74 millin liters, which had an equivalent value f 13,442.20 millin

USD. The per capita cnsumptin amunted t 147.80 liters (Business Mnitr Internatinal Ltd, 2015). Figure 1 shws the estimatin and frecast f sft drinks in Mexic between 2014 and 2019.

Figure A-1 Sft Drinks Sales in Mexic

Surce: wn elabratin, based n BMI Fd & Drink Reprt Mexic Q3 2015

The illustratin shws that the cnsumptin f carbnated sft drinks dminates the cnsumptin by far. Mre than 90% f the ttal sft drink cnsumptin are carbnated; in 2014, the cnsumptin per capita f fruits/vegetable juices was just 7 liters and 3 liters fr bttled water. Thrugh 2019, it is estimated that the percentage f juices f the ttal sft drink cnsumptin will rise slwly frm 5.34% t 6.07%, a cnsumptin per capita f 8 liters. The cnsumptin f bttled water will remain stagnant.

Just as a survey frm 2012 shws, 78% f the Mexican ppulatin cnsumes nnalchlic beverages, carbnates and ther sweetened drinks. Frm this grup, 31% stated they wuld cnsume it nce r twice a week, 29% daily, 22% three r fur times a week and 10% nly every nce and again (Parametria, 2013).

A study by Kantar Wrldpanel Méxic demnstrated that ne quarter f husehld spending is dedicated t sft drinks. Purified water, sft drinks and flavred water are cnsumed instead f juices and nectars. In the grup f the 14 beverage categries analyzed, there are tw that are cnsumed by every Mexican husehld: purified water and sft drinks. Eight ut f 10 cnsumed liters are water, 1.7 liters are sft drinks (Kantar Wrldpanel, 2013).

Lking at sft drinks at a whle (bttled water, carbnates, cncentrates, functinal drinks, juices, RTD tea and cffee, and ther sft drinks), it can be seen that there has been a stable grwth during the last years. The cmpund annual grwth rate f the market between 2009 and 2013 was 6.3%.

Table A-7 Sft Drink Market Value in Mexic

 “u e:  ela  ati , ased  Ma ketLi e I dust P file “ft D i ks i Me i  “ept. 4

2.3. Trends

ne trend affecting a lt the sft drink market is the grwing cncentratin f the gvernment twards a healthier nutritin f the ppulatin. The gvernment already intrduced a variety f prgrams and initiatives, aiming an expanding cnscience fr a healthier alimentatin. The last measure was intrduced in 2014 in frm f a tax. The IEPS tax (Impuest Especial Sbre Prducción y Servicis) levies an 8% tax n all packaged fd prducts cnsidered high in calries and a MXN1 per litre tax n sugar-sweetened beverages withut milk cntent. The main bjective with this tax is t reduce the nging increase f besity and diabetes II (Eurmnitr, 2015c).

 The cnsequences f implementatin f the IEPS tax n sugared beverages in 2014 have nt been that clear s far. Whereas the Natinal Institute f Public Health (INSP) states an average decrease in cnsumptin by 6% in the first year and a specially high reductin in lwer incme husehlds (9% in average), ther surces like the Center fr Ecnmic Studies f the Cllege f Mexic (Clmex), states that there was n real reductin in cnsumptin (Hernández M., 2016). At the same time the INSP states that cnsumptin f beverages nt affected by the tax – especially bttled water – increased by 4% during 2014 (Secretaría de Salud, 2016).

In the verall segment f sft drinks, it is frecasted that cnsumptin keeps grwing, but nly by 1% during the next 5 years. Fcus is put mre and mre n healthier sft drinks, using natural sweeteners that wuld reduce the number f calries withut affecting negatively the taste (Eurmnitr, 2015b). In the CSD segment, grwth can hardly be reached due t the new tax and the stable change t RTD teas and flavred water drinks (Eurmnitr, 2015a). A huge grwth is been predicted in the segment f sprts drinks/istnic drinks. Frm 2014 t 2019, a ttal grwth in vlume f 13% is expected. This wuld mean an increase frm 310 millin liters t 349 millin in 2019. The per capita cnsumptin was 2.6 liters in 2014 (El Ecnmista, 2015a).

The cnsumptin f juice is expected t grw by a 4% vlume CAGR and 5% value CAGR at cnstant 2014 prices ver the next 5 years, t reach MXN76 billin and 5 billin liters in 2019. 100% juices are thse which mst are expected t grw, nevertheless there are still many peple wh are nt able t acquire these beverages due t their elevated prices (Eurmnitr, 2015c).

Many cnsumers with hectic lifestyles in larger cities switch frm cnventinal carbnates t healthier value-added frtified/functinal (FF) beverages in rder t be able t cnsume vitamins and ther nutrients, which they culd nt btain frm natural surces due t lack f time. These beverages prvide health benefits beynd their nutritinal value and/r the level f added ingredients wuld nt nrmally be fund in that prduct. The market size f functinal beverages is prspected t grw a lt during the next years; frm

3,248 millin US-Dllar in 2012 t $6,583 millin in 2018 (Agriculture and Agri-Fd Canada, 2014, p. 8). FF beverages can be in frm f bttled water, fruit/vegetable juice, energy drinks r sprt drinks. Teenager and yung adults are the main cnsumers f FF energy drinks and FF sprts drinks (Agriculture and Agri-Fd Canada, 2012, p. 2).

2.4. Custmer prfile

The cmpany decided t implement a multiple-minded target market apprach inside the sciecnmic level A/B (6.8% f urban husehlds^[1]), C+ (14.2%) and C (17%). The cmpany decided t first f us  peple et ee a d ea s, als alled ille ials . The s called millennials are persns brn between 1981 and 1995 and are characterizing a new generatin with specific characteristics, new demands and needs. In very different ways, they frm an attractive target grup: 35% f Mexican ppulatin (50% in 2025), first generatin f digital natives, highly educated, and fcus n heathier nutritin.

The reasns behind the selectin f this grup are several. Having analyzed the beverage market, a clear trend twards healthier prducts is recgnized, preferably cntaining further benefits (functinal drinks). Nevertheless, this trend cannt be seen arund all sciecnmic levels but nly in the upper classes where educatinal and financial backgrund exist in rder t put frward a change in nutritin. Many lw-incme Mexican cnsumers are nt familiar with the benefits f healthier fds r brader nutritinal infrmatin and, fr the mst part, cannt affrd t pay premiums n prducts in this sectr (Agriculture and Agri-Fd, 2013, p. 6).

Accrding t INEGI (Natinal Institute f Statistics and Gegraphy), husehlds f the level C+ (upper middle-class) are thse wh earn between $40,600 and $98,499 MXN, wn tw r mre huses r flats, have a cmprehensive health services insurance , and wn tw cars. Level C (middle-class) is characterized by an incme between $13,500 and

$40,599, renting r wning ne flat r huse, having scial security and a cmprehensive health services insurance, and having ne car shared thrugh the whle family. During the last decade, the Mexican middle-class grew by 44% (Franc, 2014).

Accrding t a recent study (published in May 2015), upper-middle class and upper class husehlds are characterized by very much higher educatinal levels than thse f lwer classes. Whereas the husehld head in upper-middle classes in almst 60% f the cases had a secndary schl degree, 30% even wned a high schl r similar degree. Hwever, nly 2.2% stated that they wuld have higher degrees. In the upper class, almst 76% f the husehld heads wned a higher degree, 11% still had a high schl r similar degree. In this segment, the percentage f self-emplyed wrker r emplyer als was the highest (33%), cmpared with 19% in upper-middle classes. The share f a frmal emplyee wrk status in the tw classes are with 56% and 59% respectively quite similar. In bth classes, less than 2% were inactive (Levasseur, 2015, p. 168).

Husehlds f the upper class are characterized by mature husewives with university degree and small number f family members. They buy envirnment friendly, rganic fd and put imprtance n quality and a variety f the prducts they acquire. In cmparisn t husehlds f the ther classes, they d nt buy with such a high frequency (347 times a year, whereas middle class husehlds buy 385 times a year), but spend mre n each ccasin ($55.3 MXN) in cmparisn t middle class husehlds ($42.2MXN). The ttal amunt f spending in 2013 has been $19,170 MXN. Almst half f their purchases a e a ied ut i supe a kets/ h pe a kets autse i is , al st  e ua te i cnvenience stres. Hme deliveries get an increasing imprtance, reaching 6.3% f ttal husehld spending and price clubs (10.4%) in 2013 (Nielsen, 2013). In 2009, 53.3% f the spending in the price clubs was dedicated t fd and drinks (Altnivel). Leading price clubs are Sam´s Club with a market share f 74.8% and Cstc with 15.6% (Tejeda, 2014).

Middle class husehlds are characterized by a higher amunt f family members and husewives between 25 and 40 years with certificate f secndary educatin. Befre chsing their favrable brand, middle class husehlds use t try different brands. They put imprtance n quality as well as n price. In 2013, husehld spending reached $16,209 MXN. The main purchasing channels are supermarkets/hypermarkets (37.2%), cnvenience stres (41.2%) and hme deliveries (6%) (Nielsen, 2013).

As stated in the Natinal Survey f Husehld Incme and Expenditures (ENIGH) in 2014 there have been 31,671,002 husehlds f which arund 24 millin (24,705,710) have been in cities with 2,500 and mre habitants. The average number f members in these husehlds have been 3.7 persns. Cnsidering the expsed figures abve, the verall target grup frms 38% f the Mexican urban husehlds; equivalent t 12 millin husehlds. At the same time, these husehlds are respnsible fr arund 60% f ttal Mexican husehld spending.

The ppulatin pyramid shws that arund 30% f the Mexican ppulatin is between 15 and 34 years ld. With an estimated ppulatin f 121,736,809 peple, the percentage is equivalent t mre than 38.9 millin peple (CIA Factbk, 2015).

Accrding t the fertility rate, althugh the birth rate is decreasing, with 2.2 children per mther in 2014 the rate is still psitive (INEGI, 2015).

Figure A-2 Ppulatin Pyramid Mexic

Source: CIA Factbook, 2015

Lking at the gegraphic situatin it can be nticed a mvement twards mre urbanizatins. The graph belw shws that urban ppulatin will have been dubled between 1990 and 2025 up t 113 millin habitants, whereas the rural ppulatin will keep stable with 25 millin. In 2025, almst 82% f the cmplete Mexican ppulatin will live in urban areas. As upper classes in general are living principally in urban areas, distributin will be withut exceptin in urban areas.

Figure A-3 Distributin f Mexican Ppulatin

Surce: wn elabratin, based n BMI Fd & Drink Reprt Mexic Q3 2015

3. Entrepreneurial self-assessment and the entrepreneurial team

The idea f the prduct was created many years ag. The investr and businesspersn was reminded t its infancy when discvering nn-alchlic malt beverages in Ecuadr and Clmbia and the s- alled Ce adi a hi h is a l al e e age i Gua ajuat, ased  pineapple barley. What he disliked at these beverages (amng thers he tried Clmbian Pny Malta) was the extreme sweetness. Thus, he wanted t change this by develping his wn beverage.

The investr and businessman has a Bachelr Degree in Ecnmics frm the Universidad de las Américas Puebla (UDLAP) and a Master Degree in Internatinal Management frm the Institut Tecnlógic Autónm de Méxic (ITAM). He was directr f the Reginal Center fr Business Cmpetitiveness (Crece-Puebla) and he is specialized in financial analysis (4 years f prfessinal experience as financial cunselr), strategic cnsulting, prject evaluatin and the develpment f new businesses. He has a vast experience in funding cmpanies. After having funded the cnsultancy CE Business Cnsulting S.C. in 2003, he als funded a cmpany fcused n the prductin f lubricant il (Lubecil de Méxic SA de CV) and the artisanal beer brewery (Cervecera del Valle de Apan S.A.P.I. de C.V.).

The reasn fr ging int the new business is evidently getting a prfit but als the main investr is interested in selling his favrite beverage and making it famus, harnessing the huge market Mexic is ffering.

Up t nw, there is n staff recruited yet in rder t be able t start the business. The recipe has been develped by engineering students, supprted by a prfessr in alimentatin, specialized in beverages.

4. Next steps fr translating this pprtunity int a viable venture

When finishing the develpment f the beverage, it is necessary t execute a market research thrugh different fcus grups and tastings in rder t ensure that the beverage fits the taste f the Mexican cnsumer. If needed, afterwards sme slightly changes in the prduct frmula will be made. This step is planned t be executed befre June 2016. At the same time, the develpment f the image and lg f the beverage has t be finished and presented t the targeted audience.

Besides, it is still necessary t acquire the required machinery. First ffers have been received already and a decisin twards f machinery f BrewHigh Engineering S.A. f C.V. has been made. The csts amunt t $7,002,326 MXN.

 ANALYSIS F THE BUSINESS PPRTUNITY

1. Analysis f the trading cuntry

1.1. Ecnmic envirnment

Mexic is the secnd largest ecnmy in Latin America with a ttal GDP f 1.2 trillin USDllars (USD) and GNI per capita f 9,980 USD in 2014 (The Wrld Bank, 2015a). The average real grwth f GDP frm 2004 t 2013 was 2.7% and is estimated t repeat in the next decade as well. The estimated GDP per capita in 2023 is 27,490 USD (Business Mnitr Internatinal Ltd, 2015). The inflatin rate was 4% in 2014 (The Wrld Bank, 2015a) and ended in 2015 at 2.13% which was the lwest level since begin f measuring (Peña Niet, 2016).

The Mexican ecnmy highly depends n exprts t the United States f America, with 80% f ttal exprts ging t this cuntry (Villarreal, 2012). The fall in il prices and the pssibility f a rise in interest rates have weakened the pes against the US Dllar in 2015 and still in this year. In February 2015, it was estimated that the dllar by year's end wuld cst abut 14.15 pess per dllar, cmpared with the initial frecast f 13.98 pess (CNN Expansión, 2015). Nevertheless, until January 2016 the pes depreciated even a lt mre, reaching 18.87 pess per dllar (Lng, 2016).

Mexic has shwn grwing cmmitment t trade integratin and liberalizatin since the 1990s, and its trade plicy is amng the mst pen in the wrld (Villarreal, 2012). Currently, it has twelve free trade agreements (FTAs) which invlve 44 cuntries. The 1994 Nrth American Free Trade Agreement (NAFTA, which includes Canada and the USA) and the 2000 FTA with the Eurpean Unin (EU) are amng the mst imprtant nes. (Business Mnitr Internatinal Ltd, 2015)

An increase in husehld expenditure due t a decline in unemplyment and higher cnsumer cnfidence has taken place in 2015. Business Mnitr Internatinal (BMI) expects the unemplyment rate t remain lw after hitting 4.4% in June 2015, cmpared with 4.8% in 2014. Real private cnsumptin is estimated t grw by 3.2% in 2016, cmpared t 3.0% in 2015 and a 2.1% grwth in 2014 (BMI, 2016, pp. 10-31).

The mst imprtant grwth driver in the Mexican ecnmy has been the manufacturing industry, nevertheless, it is believed that Mexic is abut t begin the transitin t a mre service-riented ecnmy with increasing imprtance f private cnsumptin (Business Mnitr Internatinal Ltd, 2015).

Ding Business in Mexic

The annual data published by the Wrld Bank Grup shws the ease f starting a business i Me i . I its Di g Busi ess ep t, Me i  a ked ut f ecnmies and imprved its rank by fur psitins cmpared t 2014. In the reprt, cmpanies are evaluated in ten categries, cnsidering different indicatrs in each categry, such as number f prcedures, time needed, and csts. The imprvement frm 2015 was reached a  g the s tha ks t ef s i ateg ies Getti g edit ^th pla e a d Resl i g i sl e ^th place) where Mexic imprved by tw and six psitins respectively. Categries where Mexic is still st uggli g a lt a e i pa i g ta es ^th place),

Registe i g p pe t ^th , Deali g ith  st u ti pe its ^th a d Getti g ele t i it ^th) (The Wrld Bank, 2015b).

Mexic des nt nly have a large number f free trade agreements but als ffers liberal rules fr freign investment. Freign investment is generally accepted in all sectrs with the exceptin f thse that are reserved t the Mexican gvernment r t Mexican natinals r cmpanies. Nevertheless, in the last years the gvernment pened als reserved sectrs like the il industry fr freign investments. In nn-reserved sectrs, it is als pssible that freign investrs hld up t 100% f the capital stck f a Mexican crpratin r partnership (Delitte, 2014, p. 2). Althugh these aspects sund very gd, the fact is that ttal Freign Direct Investment (FDI) with $22.6 billin USD was barely 1.8% f the GDP in 2014 – even less than cuntries like Hnduras (ver 5%). Reasns fr the lack f higher FDI are missing interesting sectrs as Mexic des nt have attractive cmmdities and many sectrs already are characterized by fierce cmpetitin (e.g. telecmmunicatin, banking sectr, retail). The nly prmising sectr is the manufacturing, already representing 57% f ttal FDI. The cnsumer-riented service sectr up t nw has nt been interesting fr FDI, als because the purchasing pwer f the Mexican ppulatin has nt increased enugh yet (Aguilera, 2015).

In terms f access t financing, there is still a lt f rm fr imprvement, althugh there already have been intrduced sme refrms in rder t facilitate credits especially fr small and medium sized enterprises (SMEs). In 2012, 76% f the small enterprises pssessed a bank accunt, while nly 17% f the micr cmpanies did. This had as cnsequence that nly 27% f the micr cmpanies had access t frmal financing. Accrding t the Grup Financier BBVA Bancmer, f the SMEs, nly 33% gt financing by frmal institutins. It has t be mentined, that 98% f all the Mexican cmpanies are micr and small enterprises, generating three ut f every furth emplyment (Rbles, 2012). ne f the cmmn prblems are the high interest rates banks require frm the cmpanies. The fllwing graph demnstrates the interest rates fr micr, small and medium firms fr varius types f brrwers withut supprt.

Figure B-1 Cst fr credits in Mexic - Lending rates, in percentage

Surce: wn elabratin based n Cmisión Nacinal Bancaria y de Valres (CNBV) (12/2014)

Still mre difficult is the financing fr cmpany fundatins and cmpanies at seed stage. The share f private capital and venture capital f the GDP frm nly 0.02%. The ECD recmmends in its reprt frm 2015 t imprve and expand prgrams rientated t the financing thrugh business angels and venture capital (ECD Mexic, 2015, p. 22).

1.2. Plitical envirnment

After the electin f Peña Niet as president in 2012, the plitical envirnment during 2012 and 2013 has been very stable. Nevertheless, due t the case f kidnapping f 43 students f Iguala, the es ape f El Chap in 2015 and the suspicin f crruptin (cnflict f interest) f the presidential cuple, the plitical envirnment has recently been disturbed a lt.

The gvernment's biggest challenge is the fight against vilence and crruptin. Bth issues already have a lng histry in Mexic and up t nw, the gvernment was nt able t find a slutin t this.

In reference t plitical influence int the ecnmy f the cuntry, an increasing trend twards reprivatizing gvernment-wned cmpanies can be bserved. The electricity sectr, fr instance, pened up t private investment and in 2014, further refrms liberalized the il and gas sectr fr freign investments. Nevertheless, the current gvernment at the same time is actively cmmitted t g against the huge besity and diabetes II, which is als affecting the beverage industry as they are fcusing n a healthier nutritin. The gvernment already intrduced a variety f prgrams and initiatives that aim t a higher cnsciusness fr healthy nutritin. The latest initiative that shall supprt a change in nutritin has been the intrductin f the tax IEPS (Special Tax n Prductin and Services). The main bjective f this tax is t reduce the cnsumptin f sugary drinks and unhealthy fd t cmbat the increasing rate f besity and diabetes II, especially after having becme the wrld leader in terms f besity in 2013 (Eurmnitr, 2015c). The tax culd result in a decrease in the purchase f sugared beverages.

1.3. Legal envirnment

Since Peña Niet tk pwer, the Mexican gvernment intrduced several refrms f the tax system and laws. The tax refrms were meant t increase gvernment revenues by 7.5% in 2015.

Implemented laws in 2012 have been the PPP Act (Public Private Partnerships Act), which regulates the frmatin f partnerships between the public and private sectrs in an effrt t prvide services, build infrastructure t imprve scial welfare and increase investment and a law against crruptin in rder t cntrl crruptin and make the cuntry mre transparent. The law includes legal actins against any freign r Mexican crpratin being detected t directly r indirectly benefit frm signing cntracts with the Mexican gvernment.

The high number f pen cases cnstitute a prblem and the impunity rate f abut 90%, which is a result f an inefficient judiciary system and crruptin cnstitute a huge prblem. Besides the Mexican curts rarely cnvict criminals, the judicial system is slw in reslving cases and is vulnerable t crruptin. Judicial delays have becme increasingly cmmn, leading t lnger perids f testing. Amng the ECD cuntries, Mexic is ne with the lwest values within the rules f law and scres very high in crruptin (MarketLine, 2015a, p. 27).

1.4. Technlgical envirnment

During the last decades, Mexic put a lt f effrt int the educatin f engineers with the gal t get cmpetitive with Eurpean cuntries, United States and Japan. This is reflected nwadays in a high number f well skilled wrkers in the technlgical sectr. Nevertheless, as it can be seen in the number f registered patents thrugh the USPT (The United States Patent and Trademark ffice), innvatins keeps at a lw level (155 in 2013) (MarketLine, 2015a, p. 22).

2. Trade area and cultural analysis

Mexic has a ttal ppulatin f mre than 121 millin habitants within an area f 1,970,000 square km. Almst 40% f Mexic is arid r semiarid. Nevertheless, the climate varies widely. There are als regins with trpical r semitrpical climate.

Mexic City is nt nly the capital and frms the plitical and ecnmic center f the cuntry; with 21 millin habitants, it als frms ne f the biggest urban areas f the wrld. The ppulatin mves mre and mre twards urban areas, nwadays, the urban ppulatin is already cnsidered t represent 79.2 % f the ttal ppulatin (Central Intelligence Agency, 2015).

The fficial language f Mexic is Spanish. Nevertheless, there exist ver 60 indigenus languages as well, which are still spken especially in rural areas. Accrding t the CIA, arund 93% f the Mexicans speak nly Spanish, whereas 5.7 % speak Spanish and an indigenus language such as Mayan, Nahuatl r ther reginal languages (CIA, 2015). In the business cmmunity, English is cmmnly understd. In areas clse t the brder with the US, English is spken as well (PwC Mexic, 2015, pp. 2-4).

The cuntry enjys religius freedm; nevertheless, tday still the majrity is Rman Cathlic (82.75 % in 2010). The literacy rate has imprved during the last decades t 95.1% f the ttal ppulatin (2012). The expected schl life fr male and female have been 13 years in 2009 (CIA, 2015). The educatin is universally free up t the preschl. The grwing level f educatin has led t higher-paying jbs and cnsequently t higher purchasing pwer fr Mexican cnsumers (Agriculture and Agri-Fd, 2013, p. 2).

2.1. Sciecnmic classes

In terms f living standards, there are huge differences between the different sciecnmic levels. Althugh the gvernment has made serius attempts t alleviate pverty, accrding t the UN, nearly half the ppulatin f Mexic is still within the base pverty line, which means that their basic needs are unmet. In additin, peple in rural suthern regins have n access t basic services such as health, sanitatin and educatin (MarketLine, 2015a, p. 48).

Accrding t the Mexican Assciatin f Market Intelligence and Public pinin (AMAI), seven different sciecnmic levels represent the urban husehlds f the cuntry:

 Level A/B frms the upper class with a minimum level f incme f 98,500 MXN per mnth, which currently represents 6.8 % f urban husehlds in the cuntry (Rdríguez, 2014).

 Level C+, C and C- frm the middle classes, whereas C+ (upper middle class) t