Nearshoring to Mexico: A Golden Opportunity for Food and Beverage

The nearshoring wave is bringing incredible opportunities for companies looking to streamline their supply chain and save money on their operations. This is what you need to consider if you want to take advantage of this opportunity in food and beverage.

Since the beginning of the pandemic in 2020, more American companies started to look in Mexico's direction to bring their supply chains closer to home. This is a logical step, as nearshoring has many benefits, such as lower cost of labor, shorter supply chains, beneficial free trade agreements, and business infrastructure, among others.

The immense growth of this trend is reflected by exciting recent milestones. In October last year, trade via the land port of Laredo, TX exceeded that of the seaports of Los Angeles and Long Beach combined, a clear sign of changing times for global freight. We are bullish about what this means for the future of US-MX trade relationships.

For the food and beverage industry, this is especially relevant due to Mexico’s strategic location, closer to end-users in key markets, offering easy access to both the US and Latin America. There are 60 ports of entry along the length of the US-MX border alone, and every day 427,000 vehicles, 30,000 trucks, and 1,000,000 people cross between the two countries. Coca-cola, Mars, ABInbev, Walmart, and many other food and beverage companies are already taking advantage of this growing opportunity.

These are some key things to know about nearshoring to Mexico:

USMCA and intertwined economies. Rising tensions between the US and China, coupled with very favorable trade conditions from the new USMCA free trade agreement, which contains enhancements and modernized approaches to rules of origin, agricultural market access, intellectual property, digital trade, financial services, labor, and numerous other sectors, have contributed to US and Mexico’s economies becoming more intertwined than ever before. In fact, in a recent episode of The Daily podcast from The New York Times, Peter Goodman stated that “the data shows that when we buy a good that’s made in Mexico, roughly, 40% of the value of that good is actually produced in the United States by American workers. The figure for China is something closer to 4 percent, and of course, Chinese state policy is aimed at driving that as close to zero as possible, as China aims for self-sufficiency. So you know, again, when we trade within the region, we’re effectively creating demand for American-made goods.”

The nearshoring effect in the food and beverage industry: The food and beverage industry in the U.S. is leveraging cross-border logistics with Mexico to boost efficiency and reduce costs. Walmart is a prime example, as it plans to open a new fulfillment center in Mexicali to cater to online customers in southern U.S. states. By doing so, Walmart can achieve faster deliveries and significantly lower shipping expenses.

Since 2003, experts in supply chain management have recognized the concept of nearshoring as a way to outsource production to countries with lower labor costs, such as China and India. However, the current trend is shifting towards bringing operations closer to home. Mexico's proximity to the U.S. makes it an ideal location for companies in the food and beverage industry looking to regionalize their supply chains. This approach leads to reduced shipping times, and transportation costs, and minimizes the risks associated with long-distance shipping.

Mexico’s transition to a Knowledge-Based Economy. Mexico has established itself as the United States’ largest trade partner, in part due to a growing, highly skilled, and affordable workforce. The country has set up clusters for key industries in manufacturing to facilitate their successful transition in the region, benefiting the exchange of information, and offering concentrated areas of skilled workers with specialized expertise, advanced industry-specific technology, supplier networks, economies of scale, and an established knowledge base. 

Food and Beverage companies can tap into this existing infrastructure and leverage local expertise to optimize their supply chain operations. 

The opportunities that nearshoring is bringing to food and beverages are abundant, so don't let them pass you by.

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