TBY talks to Brian J. Smith, President of Coca-Cola Mexico, on Mexico as a production base and the power of domestic demand in the FMCG sector.
TBY How would you describe the presence of Coca-Cola in Mexico?
BRIAN SMITH We operate with 12 bottlers, including Jugos del Valle, which is a joint venture set up three years ago when we bought the company. In total, these bottlers have 64 plants across Mexico and around 385 distribution centers, with 29,000 trucks. We serve about 1.4 million points of sale throughout the country. Our penetration rate in the Mexican market is fairly extensive, and because of that a lot of our business is in the traditional channels—even in small towns around the country. Concerning our labor force, we have 500 employees in our office, 93,000 at our bottlers, and 800,000 indirect employees.
How significant is the Mexican market for Coca-Cola’s overall global operations?
The Mexican market is the second most important for Coca-Cola after the US, and it represents about 12% of worldwide volumes. In addition, Mexicans drink the most Coca-Cola portfolio products per capita in the world. In fact, we are the leader in the market for soft drinks, juice and juice drinks, and in teas. We are third in energy drinks and also third in water, as well as second for sports drinks.
In 2009 your company declared its intention to invest $5 billion over five years in order to develop the business. At what stage are these investments?
We are on track with our investment plan with an average of $1 billion invested each year. Given the size of the Mexican market and its strong performance in terms of sales, we plan to double our revenues within 10 years—and the only way to maintain the necessary pace of growth is to continue investing in this market.
How would you rate Mexico as a production base?
We have been doing business in Mexico for 85 years, and from our perspective it has always been a great market to operate in. There’s a strong and educated workforce as well as a good level of quality managers. The infrastructure is very good in the country, and the distribution system is highly developed. It is also a great base for companies producing for export due to the country’s location close to the US.
Domestic demand is one of the engines of the Mexican economy. How do you see its performance changing in the long term?
The internal market in Mexico includes more than 100 million people—with the average age standing at 27 years. Having a young population means that the workforce will benefit, while from a company point of view it represents a very good opportunity because domestic demand can sustain the growth path of every business. In that respect, over 99% of our production is destined for the domestic market.
What are the country’s advantages over other Latin American countries?
Its proximity to the US and the fact that Mexico has coasts on the Pacific and Atlantic oceans are its main advantages. Secondly, macroeconomic policies over the last five years have been consistent. Inflation is under control and the government is working to maintain a predictable and sustainable growth rate. The environment for doing business and openness to new businesses is very comfortable, and the government is open to the participation of foreign companies and capital in the territory. The labor force is highly skilled, and there is a huge availability of raw materials. Mexico is not experiencing explosive growth like Brazil or China, but if you look at the country’s economic performance from a historical perspective, you can see that growth has been strong and predictable over the years.
What are the main challenges in the distribution segment?
I firmly believe that Mexico should continue to channel more into infrastructure development. This will improve the environment for companies looking to set up in the country. Any investment in this sector will certainly pay off.
© The Business Year