Mexico's largest beverage bottling company, Bepensa, has got the thumbs up from analysts following an improvement in market conditions and its business position.
Market analysts Fitch Ratings upgraded the company as the result of a continued strong improvement in its business position and financial profile. These factors are balanced between the company's improved financial position, the historical volatility of the Mexican economy, and the uncertainty surrounding a potential consolidation of Coca-Cola's 15 bottlers in Mexico.
During 2001, Bepensa had an estimated carbonated soft drink market share of approximately 80 per cent. The company's chief competitor is Pepsi-Gemex, PepsiCo's largest bottler in Mexico. While Pepsi-Gemex has changed the dynamics of the market by facilitating the evolution of packaging from returnable glass bottles to one-way PET containers, it has not dented Bepensa's market position during the past decade.
Bepensa's dominant position vis-a-vis Gemex is due in part to the strong brand image of Coca-Cola in Mexico. Bepensa has built upon this competitive advantage during the past 50 years by developing an unparalleled beverage distribution system in the region. The company has modern facilities and production equipment, and continues to invest in its business to maintain its competitive edge.
To further enhance its profitability, the company has integrated the production of beverage coolers, truck bodies, plastic enclosures and bottles, which are used internally, and also sold to other Coca-Cola bottlers in Mexico.
In the near future, it is expected that the Pepsi Bottling Group (PBG) will acquire a controlling stake in Gemex from PepsiCo and businessman Enrique Molina. PBG's ownership of Gemex should not dramatically alter the competitive landscape in the Yucatan Peninsula, however, as the group is expected to focus its energy and resources on large markets such as Mexico City and Monterrey, in which a percentage change in market shares means substantial additional sales volumes.
Unlike most Coca-Cola bottlers in Latin America, Bepensa has aggressively built a non Coca-Cola beverage business to augment its Coke sales. Since 1995, Bepensa's sales of purified water have grown from 12.2 million five-gallon jugs to 46.7 million five-gallon jugs. As a result of its efforts to diversify its sales mix, during 2001, approximately 33 per cent of the company's revenues were generated from the sale of purified water, and proprietary carbonated and non-carbonated soft drinks. These sales are very profitable for the company because the company does not pay Coke a concentrate fee for these products.
Bepensa is the exclusive bottler for Coca-Cola in several Mexican states, and ended 2001 with $137 million (€146m) of cash and marketable securities and $174 million of total debt.