Groovies

Mexico has one of the highest rates of childhood obesity in the world. Almost 4 million children between 4 and 10 years of age are overweight.

Most cases could be prevented if family influence and social habits were changed in the early ages of childhood.

Let's dive in.

Imagine this

• As a parent to two daughters and a son, you spend your mornings getting them out of bed and preparing them for school.

• Your go-to breakfast solution is cereal, which the kids happily enjoy in its variety of flavors.

• However, upon noticing the ingredients, you realize how much sugar your family consumes every morning.

• Concerned, you search for healthier cereal options that your kids will still love.

Explain it like I'm five

Around 96% of households in Mexico have at least one box of cereal every year. Even though there is a large variety of cereal options in supermarkets, most of the supply comes from two leading companies—Nestle and Kellogg’s— which control over 59% of the domestic market.

The problem is that most of them are unhealthy and contribute to the obesity crisis we face today. On average, your typical kid's cereal has more than 2.5 teaspoons of sugar per serving. That’s already half the total added sugar that The American Heart Association says children should have in a day.

• Groovies offers a vegan, gluten-free, quinoa-based cereal.

• 60% of their sales come from physical retail channels, while 40% are online.

• They currently offer two flavors, vanilla and chocolate, and are looking to branch into other products beyond cereal, like snacks.

Groovies stands out as a health-conscious cereal brand in the Mexican market, offering a nutritious alternative to traditional high-sugar breakfast cereals.

Groovies ABCs

• Industries: Consumer goods

• Headquarters: Monterrey, Mexico

• Year Operations Started: 2021

• Team Size: 4

• Raised: Bootstrapped (raising seed)

• Business Model: Retail and e-commerce

Background check

What we like:

• Health-conscious: The demand for healthy food has grown over the past few years. Mexico's Norm 51—an initiative that labels goods if they’ve got unhealthy ingredients has given consumers awareness of products based on healthiness. According to Groovy's founders, more countries in Latin America are expected to adopt a similar approach to their food products. This trend would be beneficial for Groovies if they decide to expand internationally.

• Opportunity: The cereal market in Mexico is valued at approximately $1.2 billion dollars, and in Latin America, it surpasses $5.5 billion. The Mexican market is projected to grow at a compound annual growth rate of 5.31% from 2024 to 2028.

• Points of purchase: Groovies is set to make a significant leap in its physical presence by being stocked in over 188 supermarkets from 77 in 2023, including major retailers like Walmart. This shows that consumer interest keeps growing for alternative healthy cereals. 

• Future growth: Groovies plans to start sales in Guatemala in February and hopes to enter the US market. First, they want to become the go-to healthy cereal brand in Mexico before expanding to the US, which they think will happen around 2026.

Roadblocks:

• Industry: It’ll be a challenge to overcome Mexico’s cereal duopoly. Groovies is a new brand, so it is crucial for it to manage its distribution channels strategically and ensure that consumers become familiar with their products before they’re rotated to suboptimal supermarket shelf positions.

• Education: Groovies faces the challenge of shifting consumer mindset by informing them that healthier and “tasty” alternatives are available.

• Costs: Pricing is a significant factor for consumers when choosing what to eat. Healthy foods are usually pricier than unhealthy options. Demand has to continue growing for them to reach an optimal price point and margins. A 250g Groovies box costs $89 pesos making traditional cereals, like Fruity Pebbles and Trix, 40% cheaper per gram.

• Cash Flow: Most of their sales come from retail stores. A struggle working with big retail chains is that most of their clients have extended payment terms, making it tough for Groovies to manage their operations smoothly. Even though Groovies is growing each month, they need a steady cash flow to keep expanding. Help from outside investors or banks could be an interesting move for them.

The Architects

• Rodrigo Marcos, Co-Founder & Co-CEO.

• Jorge Vallarta, Co-Founder & Co-CEO.

Headline Corner

• Mexican real estate investment trust Fibra Uno expects to relaunch an IPO for its Fibra Next unit before the end of January; its previous IPO was set to raise up to $872 million dollars (Reuters).

• Fluna, a Brazilian AI automation startup, raised $500k dollars in funding (LatamList). 

• Membion, a German wastewater recycling company, raised $5.5M in funding (Finsmes).

• Briq, a startup automating financial workflows in construction, raised $8M in funding (TechCrunch).

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