Arca Continental SAB de CV (PK) (USOTC:EMBVF)
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From Jun 2019 to Jun 2024

Soft-drink bottler Coca-Cola Femsa SAB (KOF, KOF.MX) is gearing up for fiercer competition in Mexico, its biggest market and the country that consumes the most Coke per capita.

PepsiCo Inc. (PEP) said this week it plans to form a nationwide beverage company here via a joint venture with bottler Grupo Embotelladoras Unidas SAB (GEUPEC.MX) and Venezuelan food and drink producer Empresas Polar.

In a conference call Wednesday, Coke Femsa Chief Financial Officer Hector Trevino described the Pepsi tie-up as "clever" and "interesting," adding that Polar is a tough competitor. "We compete with them in Venezuela--we fight them in the streets," he said.

Coke Femsa is Latin America's biggest bottler of Coca-Cola Co. (KO) brand products, with 30 plants in nine countries.

Trevino didn't respond to a question regarding possible recent Coca-Cola brand market-share gains in Mexico and Brazil.

Atlanta-based Coca-Cola Co. reported 10% volume growth in Mexico during the second quarter, but didn't break out that figure in terms of unit cases. PepsiCo, Purchase, N.Y., has yet to report second-quarter earnings.

Comparing the two soft-drink rivals' market share in Mexico is difficult, as PepsiCo folds its booming snack business sales into financial results.

Trevino said that the Coke system is pouring marketing dollars into the Powerade brand in Mexico in an effort to chip away at sales of Gatorade, a major source of profit for PepsiCo in the country. Powerade has captured a 30% market share, he added. Coke Femsa contributes to the Powerade budget on a 50/50 basis with Coca-Cola Co.

Trevino said that during the June 2010 World Cup, marketing for the Powerade brand represented more than 50% of sales compared with around 4% for Coca-Cola brand beverages.

Mexican bottlers in the Coke system have been consolidating, with Coke Femsa announcing in late June that it will acquire regional Mexican bottler Tampico and with Mexican bottlers Arca and Continental having merged this year to form Arca Continental SAB (AC.MX), the second-biggest Coca-Cola bottler in the region.

-By Amy Guthrie, Dow Jones Newswires; (5255) 5980-5177; amy.guthrie@dowjones.com