Background on Gruma and its Relevance
Gruma, a leading distributor of corn flour for tortillas in Mexico, has agreed with the National Antimonopoly Commission (CNA) to revive competition in the corn flour market. This agreement comes after a two-year investigation by the Comisión Federal de Competencia Económica (Cofece) into potential barriers to competition and essential inputs in the corn and corn flour markets.
Key Measures Proposed by Gruma
Gruma committed to modifying its contractual practices with clients, the flour and tortilla industries. The proposed measures include:
- Eliminating all existing exclusivity or minimum consumption obligations imposed on tortilla plant owners, along with their associated penalties;
- Granting tortilla makers access to tortilla-making and blending machines (tortilladoras y batidoras) through lease agreements, financing, or financial support without any additional costs.
These changes will allow tortilla makers to have greater freedom in choosing their corn flour supplier and significantly reduce their costs, according to the CNA.
CNA’s Resolution and Investigation Details
The Cofece initiated an investigation in November 2022 regarding possible barriers to competition and essential inputs in the corn and corn flour markets. After two years of investigations, the Autoridad Investigadora de la Cofece (AI) released a Preliminary Report in October 2024, identifying insufficient competition conditions in the production, commercialization, and distribution markets of white and blue corn flour for commercial tortilla making.
The AI divided Mexico into eight regions and analyzed total sales and installed capacity of companies from 2016 to 2022. The investigation revealed that Gruma held between 50% and 90% of sales in each region, significantly more than its closest competitor. Gruma’s average prices were nearly 10% higher than its national competitors.
As a corrective measure, the AI proposed selling five of Gruma’s 18 plants in Mexico due to its dominant position in the corn flour industry. This would decrease Gruma’s market share by 17% and lower the corn flour price by 10%, according to José Manuel Haro, AI’s head, in October 2024.
Gruma’s Response
Following the Cofece Preliminary Report, Gruma submitted timely objections, including defense arguments and evidence to challenge the conclusions and propose alternative measures. Gruma emphasized that it never sought inappropriate customer loyalty.
Gruma proposed concrete, feasible, effective, and verifiable actions to adjust support contracts for machinery acquisition (comodato or lease) and financial assistance to customers in the flour and tortilla segment. These adjustments aim to ensure:
- No minimum purchase commitments for corn flour under financial support contracts;
- No exclusivity obligations towards Gruma for corn flour purchases.
Gruma now has 90 to 180 days to collaborate with the CNA on implementing these measures, including contract modifications, client communications, and verification mechanisms agreed upon with the authority.
Key Questions and Answers
- What was the investigation about? The Comisión Federal de Competencia Económica (Cofece) investigated potential barriers to competition and essential inputs in the corn and corn flour markets.
- What measures did Gruma agree to implement? Gruma committed to eliminating exclusivity and minimum consumption obligations, as well as granting tortilla makers access to machinery through lease agreements, financing, or financial support.
- What was the AI’s proposed corrective measure? The Autoridad Investigadora de la Cofece (AI) suggested selling five of Gruma’s 18 plants to decrease its market share and lower corn flour prices.
- What is Gruma’s role in the Mexican market? Gruma is a significant distributor of corn flour for tortillas in Mexico, holding between 50% and 90% of sales in each region.
