General Profile of the Industry and Country

General profile of the industry and country

General profile of the industry

The toys and games worldwide market totalized USD187.1 billion in 2016. According to the  Toys and Games Global Industry Report 2016 – Euromonitor there are two main segments, traditional toys and games and videogames.

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Source: Euromonitor

Globally, at present there are five trends regarding toys and games consumption,

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Source: Euromonitor

General profile of the country

In order to provide an idea of the country industry income, there is a comparative forecast regarding sales of traditional toys and games for 2015-2020, comparing vs. other emerging markets and the rest of the world.  As it can be inferred China has potential to grow, however the market represent incomes for Mexico of almost USD2.0 billion (without considering video games).

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Source: Euromonitor

Now if we look onto the consumption side, we have the toys and games segment and the videogames one.  About toys and games, Mexico offers good opportunities, as it is forecasted to expand during 2017 by USD306 million. This growth has a strong correlation with: birth rate, as for this year the 0-14 year population is expected to totalize more than 32 million, rising number of working women, and the increase in household disposable income.

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    Source: Euromonitor

The largest video games in emerging economies are Mexico, China and Russia. By 2012, in half of the emerging markets gamers spend below USD10 indicating there was strong potential. Particularly, situation in Mexico is different as they spent almost USD40 in 2012 and their CAGR 2012-2017 is abput 10% resulting in an attractive market.

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Source: Euromonitor

Economics aspects

According to the Passport report provided by Euromonitor (Jun/2017), the country “is expected to continue to benefit from its competitive manufacturing sector and gradual recovery in oil prices. However, its business environment is plagued by high levels of corruption; drug-related crimes; and violence, all of which are issues that are likely to persist in the medium to long term”.

Before going into economics aspects, let’s provide a Strengths, Weaknesses, Opportunities and Threats analysis for the country.

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Source: Euromonitor

Looking into economics aspects, firstly we have to consider the key macro indicators:

• For 2016, the GDP of the country represented USD 1.0 trillion and the GDP per capita USD 8,542.

• The country has an average real GDP growth of 2.8% for the years 2011-2016, and the forecast regarding the period 2017-2020 is about 2.2%.

• According to their GDP, is the 15th country in the world out of 203, now if we consider the GDP per capita is ranked 89. This evidence there is a huge inequality regarding population income.

Regarding inflation, long-term interest and overnight interbank rates, as we can see Mexico’s central bank raised the benchmark interest rate “Tasa Objetivo” by 100 basis points to record its highest level in the last 8 years (6.75%), the objective is to combat inflation which is estimated to record 4.77% by the end of the year. In line with this, the overnight interbank rate and the long-term interest rate will continue to rise going forward.

Inflation, Long-term interest and Overnight Interbank rate: 2011-2017

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           Source: Euromonitor

About imports and exports, there is very close relation with the United States. As provided in the graph below, almost 50% of the imports in 2016 come from the USA.

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Source: Euromonitor

Regarding the goods imported, the top 10 list is composed by:

1. Electrical machinery, equipment: US$84.2 billion (21.8% of total imports)
2. Machinery including computers: $67.1 billion (17.3%)
3. Vehicles: $37.2 billion (9.6%)
4. Mineral fuels including oil: $25.1 billion (6.5%)
5. Plastics, plastic articles: $22.1 billion (5.7%)
6. Optical, technical, medical apparatus: $14.5 billion (3.7%)
7. Articles of iron or steel: $8.7 billion (2.3%)
8. Iron, steel: $8.6 billion (2.2%)
9. Organic chemicals: $7.3 billion (1.9%)
10. Rubber, rubber articles: $6.1 billion (1.6%)

The ratio of imports to GDP for 2016 was 37.1% so we can affirm that the country is reliant on imports.

Now, looking on the other side of the scale, the top buyer of mexican exports is United States, this confirms what we stated before. As provided in the graph below, more than 80% of the exports go to USA.