New report from Canadean questions how longthis trend will continue

While major international groups continueto invest heavily in the Argentine soft drinks business, it is local players who arecapturing most, if not all, of the growth in this rapidly consolidating South Americanmarket.

This is one of the main conclusions of anew report on the Argentine soft drinks market, from Canadean Limited, the leadinginternational beverage research analysts. The report (one of a series on soft drinks inLatin America) not only reviews current trends at the national level, but also focusesseparately on each of 5 key regional markets.

Coca-Cola and Pepsi-Cola, together, stillaccount for over 85% of the 3 billion litre carbonates market, says the report, but localb-brands (including own-label) have pushed up their share to around 13% from virtuallynothing a few years ago. Moreover, last year b-brands accounted for 112% of totalcarbonates growth – i.e. all other brands went backwards.

However, the report reveals that pricecompetition among b-brand producers has become so intense that “many are showingoperating losses…[and] are now caught in a downward spiral. If they continue todecrease prices…they will price themselves out of existence”.

The report, therefore, questions whetherthe share of b-brands can “increase significantly above its current level”.

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The growth of b-brands has been based ontargeting low-income consumers, mainly in the suburbs of Buenos Aires and subsequentlyacross the country. In addition, the increased availability of cheap non-refillable(one-way) multi-serve PET bottles has dramatically lowered the cost of market entry. Inrecent years the share of one-way PET has jumped from 25% of total carbonates consumptionto over 80%.

With their b-brands selling at less thanhalf the price of the premium brand leaders, local players have even penetrated the colasegment. But it is in orange and, especially, grapefruit they have been most successful:these two flavours have seen their aggregate share of total carbonates expand from lessthan 15% to over 20% in a few years, while that of colas has contracted.

Nevertheless, there has been intenseinterest in the sector on the part of major beverage companies and leading investmentbanks, the report says. A recent example of this was the large number of interestedparties in the sale (finally concluded on 7th September, 1999) of 51.2% of BAESA,Pepsi’s main bottler outside the US. Quilmes, Argentina’s number one brewinggroup, was finally the successful bidder. The shares had previously been held by PepsiCoitself and creditor banks. BAESA attracted interest mainly because of its developeddistribution network across the greater Buenos Aires region which accounts for over halfnational consumption of carbonates.

There has been similar interest on the partof leading multinationals in the bottled water sector, involving both Danone and Nestle,whose recent acquisitions have given them a commanding presence in the non-bulk bottledwater market. While the huge, but traditional bulk soda siphon business has beendeclining, the smaller bottled water market has been growing steadily and now stands ataround 600 million litres.

However, as with carbonates, local playershave recently been going after this market as well. Last year b-brands captured two-thirdsof the market’s growth, assisted by the continuing massive swing to PET bottles whichhave effectively replaced both glass and PVC, according to the Canadean report.



Note for Editors:

The new report from Canadean on soft drinksin ARGENTINA is part of a new series on soft drinks in Latin America, which also includesMEXICO and BRAZIL. All three reports analyse total beverage consumption trends at thenational market level, before focusing on carbonates and packaged water ion a regionalbasis in each country. For further information please contact Canadean’s Soft DrinksMarketing Department on tel: +44 (0)1256 394224, fax: +44 (0)1256 394201 or email: