Mexican regulators have approved the Pepsi Bottling Group's $1.25 billion acquisition of Pepsi-Gemex, the largest Pepsi bottler in Mexico.

Pepsi Bottling Group, which is itself 43%-owned by PepsiCo, intends to expand Pepsi-Gemex's business in Mexico, the world's second largest cola market after the US. However, the Mexican market is dominated by Coca-Cola, whose bottlers command a 72% share of the soft drinks sector. Pepsi brands have around a 19% share.

Having taken control of Pepsi-Gemex, Pepsi Bottling Group will be looking to take share from Coca-Cola. But analysts have suggested it should be targeting Coca-Cola in large regional markets before attempting to take on the market leader in the key Mexico City market where its principal bottler, Femsa, has an extremely commanding position.

Pepsi-Gemex is the second largest Pepsi bottler outside the US. It produces around 65% of Pepsi branded drinks in Mexico including Pepsi-Cola and 7-Up. It also distributes alcoholic drinks and owns Mexico's largest purified water company and two other soft drinks bottlers.