Focus - CAGNY 2010: Coca-Cola Co targets Latin America's middle class
Latin America is an "8bn case opportunity"
The Coca-Cola Co is looking to invest billions of dollars in key Latin American markets to target a growing number of middle class consumers in the region.
Coca-Cola will match a planned US$5bn investment in Mexico with a $6bn spend in Brazil over the next five years, according to the president of the soft drink firm's Latin America business, Joes Octavio Reyes.
"In the next three years, 15m people will rise into the middle class in Latin America," Reyes told analysts today (19 February) at the CAGNY conference in Florida.
Most of these consumers will live in cities, of which Latin America already has more than 50 with populations exceeding 1m people in each, Reyes said.
Coca-Cola Co's "fundamental" challenge is to build a pricing structure on its drinks to secure maximum value from this trend.
"There is an 8bn-case opportunity; that is the size of the pond that we are fishing in," said Reyes, noting that Coca-Cola reported volume sales growth in Latin America of 8% in 2008 and 6% in 2009.
Sales of non-alcoholic, ready-to-drink beverages are set to rise by an average 9% annually by volume in Latin America up to 2013, the company said, citing figures from Euromonitor market research group.
By contrast, sales of alcoholic drinks will rise by 8% by volume annually, it said.
"When you look at the opportunites that exist in the marketplace over the next ten years, you cannot help but come to the conclusion that there is no better industry to be in than the non-alcoholic, ready-to-drink industry," Reyes told analysts.
Despite Coca-Cola's plan to target middle class consumers, Reyes added that the key to success also lies in a diverse portfolio that makes soft drinks "affordable to everyone".
In Mexico and Brazil, Coca-Cola's soft drinks volumes rose by 6% and 4% respectively in 2009.
Reyes said that the economic outlook for both countries is promising. "Structurally, I think that Brazil is in a good place," he said.
"Mexico, from an economic perspective, is also a very sold country. We did lousy last year, there is no other word for it, but we are expecting 4% [GDP] growth this year. I think that is more or less where the Mexican economy is gonna be for the next few years."
As for Latin America's economy as a whole, Reyes said: "It's not bad, but we're all conscious that it is still a difficult year. There are going to be some bumps on the road."
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