The number of independent soft drink bottlers in Latin America is less than half what it was 20 years ago, and their ranks are still thinning in the face of the multinational challenge. Some say independents are a dying breed, but a few have developed survival skills, as Steven Lewis reports.

All independent bottlers in Latin America have faced the same major challenge in recent years: surviving competition from the leading international brands. A clear case in point is Costa Rica, where 20 years ago local soft drink brands had a major market share. Coca-Cola now enjoys an 85% share of the soft drink market, and independent bottlers must compete with PepsiCo for the remaining 15%. Rodrigo Bola, president of Embotelladora Muñoz says: "The competition from the major soft drink brands has been merciless."

Without access to cooler-space it is very difficult for independent brands to compete in the warm weather markets of Latin America. In most markets international brands dominate the cooler-space. As Bolaños explains: "A cooler for soft drinks costs at least US$750 and one of the multinational companies offers them free to stores in order to display their brands. We simply can't do this."

Coca-Cola now enjoys an 85% share of the soft drink market in Costa Rica.

The strength of Latin America's independents is, and always has been, fruit flavours. With few exceptions they were content to let Coca-Cola and Pepsi battle for the cola sector. Serious problems for the independents began when the leading international bottlers began to heavily promote their own fruit flavoured brands. In addition they have acquired popular local/regional brands and expanded their market presence by means of their extensive distribution networks.

The need to combine resources

Although the majority of independents operating in Latin America 20 years ago have already disappeared, many of their brands live on. Most of those bottlers merged with other independents or sold out to the majors. The majority of independents now operating in Mexico are the product of a merger.

A case in point is Mexico's Maquiladora de Refrescos y Aguas Embotelladas (MARAESA), which was formed in 1978 by the merger of two independents in Southern Mexico. A third regional bottler joined them in 1985 and their combined resources allow them to hold onto a healthy share of the flavoured soft drink sector in the south.

"Independents need to be agile and creative in order to anticipate changing consumer habits."
Fernando Ramirez

Fernando Ramirez, corporate brands manager for MARAESA says: "The beverage market is increasingly competitive and as a result independents need to be agile and creative in order to anticipate changing consumer habits." MARAESA's strategy is to stay one step ahead of the majors in introducing new flavours.

As Ramirez put it: "We offer our customers a wide range of flavours and this distinguishes us from our competitors. Our leading flavours are apple, citron, currant, grape, lemon, orange, peach, pineapple, and tamarind." By consolidating, companies like MARAESA are able to stay abreast of changing preferences in flavour and packaging.

Capitalization is a key to survival

Independents fall into two categories: those that are adequately capitalised and those that are not. Peru's independents have become increasingly starved for capital in recent years and this led many of them to combine their financial resources through mergers. Peru's Embotelladores Unidos (EU), the by-product of such a merger, is using its increased capital to stay abreast of production technology.

EU recently invested US$3m in a plant in the southern part of the country where it will produce soft drinks under its Carnaval and Max brand names. Even though it has been operating in Southern Peru for only two years, EU has carved out a 20% market share in several key urban markets.

"The key to the longevity of brands are attributable to one common strength: a loyal regional market dating back several generations"

EU president Fernando Martorell was quoted by Gestion newspaper as saying: "We are a local soft drink company that is achieving good results, and we haven't felt the impact of the nationwide reduction in soft drink sales. Our results so far this year are 15% ahead of last year".

Sustainable survival strategies

The key to the longevity of brands like Costa Rica's Minerva, Mexico's Titan, and Trinidad's Apple-J are attributable to one common strength: a loyal regional market dating back several generations. All of them have cultivated brand loyalty over the years. Rather than attack the majors head on, successful independents focus on expanding within regional markets, starting with those that they have served for years.

While focusing on their unique strengths, independents must emulate some of the strengths exhibited by multinational brands. Long-term survivors must invest in modern production facilities and distribution equipment. In addition, they need to stay abreast of changing customer expectations related to flavour, image, and packaging. In order to accomplish this, companies like Mexico's MARAESA are continuously conducting market surveys which are used to develop new products and improve upon existing ones.

Soft Drinks: The International Market