Panamerican Beverages announced today that it has reached an agreement with The Coca-Cola Company ("TCCC") to convert its Risco water volume in Mexico to TCCC's brand Ciel beginning in the first quarter of 2003 for US$65m.

"The transaction underscores the importance of the water business for both parties, and enhances the growth and profitability potential of this segment in Mexico," Panamerican said in a statement.

"Panamco is delighted to have reached an agreement with The Coca-Cola Company to distribute Ciel in our territories in Mexico. We regard water as a high growth and foundation beverage category, and believe that a nationally available and advertised brand is key to long-term share leadership in water," said Craig Jung, Panamco's chief executive officer.

"By leveraging Ciel through Panamco's distribution system, we expect higher volume growth for water, and the category's transition from jugs to personal sizes to accelerate. This mix shift will provide an added benefit to Panamco because of the significantly higher profitability that personal sizes represent,"

Over the past 8 years, Panamco has developed its water business under its own Risco brand, with volumes in 2001 reaching 168 million unit cases and revenues for this segment reaching US$104m.

Under this agreement, Panamco will leverage the existing Risco brand leadership to gradually convert all its water volumes to Ciel. It is expected that US$56m of the total consideration will be paid in the first quarter of 2003, with the remaining amount paid in the following four years.

Panamco is the largest soft drink bottler in Latin America and one of the three largest bottlers of Coca Cola products in the world. The Company produces and distributes substantially all Coca-Cola soft drink products in its franchise territories in Mexico, Brazil, Colombia, Venezuela, Costa Rica, Nicaragua, Guatemala and Panama, along with bottled water, beer and other beverages in some of these territories. Panamco is an anchor bottler of The Coca-Cola Company.