We expect that the seasonal effect historically observed in the fourth quarter of the year will greatly benefit companies towards the end of 2021
Since the beginning of 2020, Mexico has shown a series of closely related economic effects that have had an impact on the development and behavior of the national economy. Some of these, caused by the onset of the Covid-19 pandemic, have been called “transitory”, that is, temporary effects that occur due to atypical factors in the daily behavior of these industries and that we hope will normalize in subsequent periods .
Among these effects we find the increase in inflationary levels in the country, the increase in the reference rate as a precautionary measure, the recovery of consumer confidence, among others.
The behavior of the frequent consumer sector is subject to different socioeconomic factors that facilitate the commercialization of its products. Being focused on the production and marketing of basic consumer goods, its demand has remained stable over the years, however; Despite its high resilience, the sector is not exempt from changes in consumption patterns.
In the last five years, the price-volume relationship had maintained an optimal behavior, where stable volume levels allowed greater flexibility in prices in order to obtain the greatest benefit from net sales; However, during the start of the pandemic (2Q21) and due to the economic pause, the sales volume suffered a fall of around 2% YoY, forcing companies to implement an increase in prices, close to 6% a / a according to our sample of companies; this with the aim of preserving the level of income and profitability prior to the pandemic.
After a year of pandemic, the sector began to show a recovery in sales volume, however, the lags generated by the current situation of the national economy caused inflationary pressures damaging production costs and as a consequence, a decline in volume of observed sale and a new increase in the sale prices established in the market.
From the new strategies implemented in sales prices, most of the companies within the industry have managed to stabilize and strengthen their operations to obtain greater profits. In the specific case, Arca Continental (ticker: AC) has shown the highest growth in net sales (accumulated 12M) in the last 10 years, growing 218.41% (2021 vs 2012).
On the other hand, Becle (ticker: CUERVO) has shown the highest growth in the last five years of operation by advancing 42.61% (2021 vs 2017); Finally, Industrias Bachoco (ticker: BACHOCOB) positioned itself as the company with the highest growth in net sales in the last 3 years and 12 months after growing 27.77% (2021 vs 2019) and 14.51% (2021 vs 2020), respectively.
Likewise, consumer behavior has presented modifications and, therefore, generated new consumption habits. This effect has been reflected, to a greater extent, in the reweighting of the importance of distribution channels.
Over the years, the traditional channel has shown the greatest importance in the industry, however, after the confinement of the population, and the rise of the technology sector, both digital strategies and direct sales to the consumer have taken on special relevance. .
That said, we expect that the seasonal effect historically observed in the fourth quarter of the year will benefit companies to a large extent towards the end of 2021.
On the other hand, the dynamism in inflationary levels would be a factor that would show a mixed effect in results, benefiting the growth of the sector’s income, although offset by higher costs in inputs.
We consider that, after the behavior observed in the sector, there are a number of investment opportunities in the stock market, although we can find issuers with strong appreciations in recent months; there are others dedicated to the canned and protein segment that, after important adjustments, show a high potential attractiveness in the short term.
Reference-www.eleconomista.com.mx