The United Nations just recently announced that Mexico has now outranked the United States as the world's most obese developed country.
While not a huge win on our part (32.8% of Mexico is obese, whereas 32% of Americans are obese), it does point to a shift in the country's dietary behaviors. After all, a mere 40 years ago, "the main causes of death [in Mexico] were malnutrition and infectious diseases," according to Al Jazeera.
But as fats and sugars have become more accessible and cheaper, the scales are now tipped the other way. And this means investors have a chance to cash in on this trend...
Profiting from expanding waistbands
Although this is a serious problem for Mexican health officials (and, despite my tongue-in-cheek tone, I don't mean to discount the severity of this issue), investors should take note.
The new, and clear, preference for salty, fatty, unhealthy foods is on the rise in Mexico -- a shift that can also be expected in other Latin American countries as they continue to develop.
As such, Arcos Dorados (ARCO 0.74%) is a stock to pay attention to today.
The company (whose name is Spanish for "golden arches") is the largest operator of McDonald's (MCD -0.31%) restaurants in Latin America.
It currently serves 4.3 million customers through more than 1,900 restaurants in 20 countries and territories. With sales of $3.9 billion over the past 12 months, it's no small fry, but is growing sales at an annualized clip that's nearly twice as fast as McDonald's itself.
The fast-food industry in Mexico is still insanely fragmented, with most purchases taking place at convenience stores.
Yet Arcos Dorados still boasts a greater market share (9.9%) than its five closest fast-food competitors combined, as the data in the chart below show:
| Company | No. of Stores | Market Share |
|---|---|---|
| Burger King Worldwide (BKW.DL) | 1,124 | 3.1% |
| Subway | 2,505 | 2.5% |
| Habib's | 314 | 1.6% |
| OXXO | 10,715 | 1.3% |
| Yum! Brands' (YUM 0.55%) KFC | 832 | 1.2% |
But here's what's really impressive
With fewer than 2,000 stores, Arcos Dorados looks much like McDonald's did here in America in the 1970s -- before its stock shot up more than 8,000%.
Actually, it looks even better. Consider this: The population of the U.S. is roughly 319 million. Currently, this population supports 14,052 McDonald's stores. For comparison, the population of Latin America and the Caribbean is nearly twice that, at 610 million. And yet Arcos Dorados only had 1,959 stores throughout this region at the end of the first quarter.
Even if it achieves only half McDonald's U.S. store count (a conservative estimate, to be sure), you're still looking at a company four times as large as it is today. Combine this with a growing Latin American middle class and a population growing much quicker than the United States', and you've got a no-brainer investment if there ever was one.
Which is why, with its globally recognized brand and American-style appeal, Arcos Dorados is sure to be the dominant fast-food choice in Latin America for years to come -- just as McDonald's has been here in America.
