You need to be looking at a Contact folder to see the mail merge option!
Set the view to view any contact folder.
From the Outlook main window (ie not from an open new mail) select Tools/ Mailmerge
In the dialog select 'Only selected contacts' and 'new document'
It will open up a new Word document with the mail merge window open
Click 'Select Recipients' / 'Use existing List' and navigate to your excel spreadsheet.
Youi should be back on familiar territory by now. Create you email in Word. Add the merge fields. Send the email.
You could also just start the whole process in Word and skip the Outlook bit since you are not using Outlook contacts.