Limited-Service Restaurants in Mexico

2020 IMPACT

Significant declines across the channel during pandemic, with eat-in losing notable value share to to-go options due to home seclusion trend

Limited-service restaurants in Mexico had been starting to gain momentum in terms of value sales, transaction and outlet growth pre-pandemic, driven by the entry of new brands and an increasing number of players within the Asian, pizza and burger categories offering accessible pricing strategies and promotional bundles to attract less affluent consumers, employees who eat away from home and younger consumers who look for the most affordable options. The emergence of the pandemic resulted in the government introducing lockdown restrictions for several months, which reduced footfall through this channel due to the closure of many businesses with remote working wherever possible in addition to home schooling.

Increasing costs of mainstream third party delivery apps encourage limited-service operators to look to other innovative options

While eat-in had continued to dominate value sales pre-pandemic, it was already losing ground to to-go options in Mexican limited-service restaurants due to the increasing popularity of consumers placing orders online through third party delivery platforms such as Uber Eats, SinDelantal and Rappi which tend to form partnerships with chained players. While home delivery and takeaway gained further dynamic value share in 2020 as eat-in options were significantly reduced, delivery apps have been increasing their commissions, forcing foodservice operators to increase their prices.

Highly fragmented competitive landscape with a number of chained brands performing well despite unfavourable environment

Limited-service restaurants in Mexico remained a highly fragmented competitive landscape in 2020, dominated by independent operators. However, the channel continued to be led by chained convenience store banner OXXO from FEMSA Comercio SA de CV, which despite the pandemic had continued to expand its vast outlet network at the end of the review period.

RECOVERY AND OPPORTUNITIES

Marked improvement heading into 2021 but independents will take several years to return to pre-pandemic levels

Despite lingering price sensitivity heading into the forecast period, a relaxation on restrictions depending on the threat level of the virus is set to result in a marked improvement in value growth for limited-service restaurants in 2021, although it will take several years for sales (at constant 2020 prices) to recover to pre-pandemic levels. In addition, a number of limited-service restaurants will remain closed in the short term, a trend that will be more significant amongst independents than chained, with some unable to reopen following the impact of the pandemic.

Investment and expansion plans likely to resume in early part of forecast period

Many players within limited-service restaurants were forced to postpone their plans to open new outlets during the pandemic, but will likely resume their expansion plans later in 2021. Many operators are also investing in creating their own delivery and collection apps and websites, or using social medic platforms such as WhatsApp and other messaging sites to avoid the high fees charged by last-mile delivery apps.

Operators to review options with likely further shift towards to-go services

Limited-service restaurants will need to be more innovative in the coming years in terms of offering delivery options, an issue that operators within ice cream, fish, and other difficult food products to deliver will need to address if they want to expand their options. For example, ice cream operator Helados Santa Clara has started offering ordering options from an outside window for takeaway.