Food Engineering

The future looks bright for Latin America

March 27, 2003
Despite economic setbacks, the Latin American market continues to stabilize, allowing domestic food and beverage companies the opportunity to take a deeper look at their internal operations for cost improvements. Maintaining and upgrading product quality remained a focus, as did the introduction of prepared, ready to eat products. However, many of the top Latin American processors mirrored their U.S. counterparts by growing through acquisitions. Ceval Alimentos, traditionally a meat processor, incorporated Santista Alimentos' soy processing operations, increasing its production capacity by 40 percent. South America's largest soft drink bottler made two bottling acquisitions in Venezuela: Coca-Cola and Hit. Many Latin American processors also entered into joint ventures to extend their market reach. Brazil's Brahma invested $150 million in Pepsi's market and also signed a joint venture with Gessy Lever to form the new Ice Tea Do Brasil.

Aided by a stronger Mexican economy, FEMSA, Mexico's largest integrated beverage producer of beer and soft drinks, as well as a major bottler of soft drinks in Argentina, experienced strong volume growth. Through its subsidiary FEMSA Cerveza, the company holds 45.2 percent of Mexico's beer market with brands such as Sol, Tecate and Dos Equis. FEMSA's portfolio of beer brands is exported mainly to the U.S. and selected Latin American, European and Asian countries.

Another FEMSA subsidiary, Coca-Cola FEMSA, accounts for 24 percent of all Coca-Cola sales in Mexico and 35 percent of all Coca-Cola sales in Argentina. According to Jos┬┐ntonio Fern?ez Carbajal, chief executive officer of FEMSA, the company's core beverage operations are positioned to benefit considerably from favorable demographic trends in Mexico. The population of people aged 18 or older has grown at an annual rate of 3 to 4 percent, outpacing the comparable growth rates in other countries.

Like its U.S. counterparts, FEMSA is particularly sensitive to both the consumers it serves and the retailer customers it works with to ensure growth. "...We acknowledge that consumer satisfaction is the most effective way to ensure long-term success, and that brand creation is fundamental to achieve consumer preference," said Carlos Salazar, CEO of FEMSA Cerveza. "Similarly, we view the retailer as the most important link in the distribution chain in order to insure availability of our products."