Focus - CAGNY 2010: FEMSA sees value outside of Latin America

Mexico-based Fomento Economico Mexicano (FEMSA) is looking to add value to its Coca-Cola FEMSA arm by expanding the business, possibly outside of Latin America.

FEMSA chairman and CEO José Antonio Fernández has said that the group will this year be visiting countries within Asia to try and “understand” the markets.

FEMSA has made no secret of its desire to expand both its Coca-Cola FEMSA and FEMSA Commercio divisions, after agreeing a deal last month to sell its beer arm, FEMSA Cerveza, to Heineken.

But, Fernández was quick to point out that a visit to Asia does not necessarily mean that the group is seeking to expand there.

“Every year, if it is possible for us, I invite the senior management of Coca-Cola Femsa to travel to some region of the world…China, Asia, the US…just to learn how they operate in these markets and how we can develop this market with the way of thinking that we have,” Fernández told analysts at the CAGNY conference in New York yesterday (16 February).

“This year we plan to visit different countries in Asia and try to learn and understand with fragmented markets, how they work, how they implement promotions in market,” he added.

The CEO said the firm’s obligation is to “be prepared”.

“Is it possible to handle different markets outside of Latin America?” he said. “Yes it is possible for us because of the opportunities that we can see in other and different regions.

“We believe that with the knowledge and commercial strategies that we implement in Coca-Cola Femsa, all of this customer value position that we have now, and the segmentation that is the centre of our commercial strategy, we can apply in different markets, not just in Latin America,” he told analysts.

Asked whether the recent PepsiCo acquisition of its bottlers might change the competitive landscape for FEMSA in Latin America, Fernández told attendees that PepsiCo’s plans for the US will be “very difficult” to implement further south.

“It’s very difficult to talk to you about the strategy of PepsiCo, but I believe that the things that they decide to do in US are going to be very difficult to implement in Latin America, at least. I don’t know if it’s possible in Russia or Turkey, but they are going to face, in my opinion, exactly the same problems. The markets in these regions are very very fragmented.”

He added: “When you integrate the work of the bottler with the work of the company…that the company produce brands and the bottler produces the distribution, the execution day-by-day…you can improve the utilisation of your access and utilisation of your skill. But I think it’s very difficult with this kind of model in Latin America, it’s very difficult to pass over this fragmented market, and I can’t imagine how they are going to try to organise in our countries.”

The firm, which recently agreed to sell its beer arm to Heineken in a EUR3.8bn (US$5.5bn) deal, saw sales rise across soft drinks, beer and retail divisions last week.

Net sales for the 12 months to the end of December rose by 17% to MXN197bn (US$15bn), compared to MXN168bn in 2008.

Net profits leapt by nearly 48% to MXN9.9bn, against MXN6.7bn in the previous year, while operating profits rose 19% to MXN27bn.