PepsiCo is in talks to buy Mexican soft drinks maker Jugos del Valle.

PepsiCo is looking to expand its presence in Mexico through buying the leading manufacturer of fruit juices, purees and fruit drinks. Should
PepsiCo succeed, this could act as a springboard for other players to enter the market and bring about an increasingly competitive environment.

With many of the more attractive soft drinks targets in the US already
having been snapped up, PepsiCo is spreading its acquisition web beyond US
borders. As the world's largest per head consumer of soft drinks, Mexico
offers many advantages for soft drinks manufacturers.

The Mexican market has been less lucrative for PepsiCo in the past than it
might have hoped, with the beverage giant holding a paltry 20% of the
market. The world's second-largest soft drinks company is keen to claw back
some of the ground it has lost to Coca-Cola, which currently claims a market
share of around 70%.

Jugos del Valle would be a prize scalp for PepsiCo, and is seen as an
aggressive response to the recent decision by Femsa, Latin America's largest
beverage company that acts as an anchor bottler for The Coca-Cola Co. in
Latin America, to enter soft drink production through its purchase of Mundet
beverage brands. Jugos del Valle is highly regarded in Mexico, with a strong
brand name and a broad juice product portfolio regarded as its key
strengths.

Should PepsiCo be successful in adding to its Mexican portfolio, it is
thought that the acquisition would prompt Modelo, Mexico's biggest brewer,
to reassess its recent decision to eschew the Mexican soft drinks market.

The precise impact of this increased competition is hard to assess at this
stage, but would surely result in lower margins and a harsher manufacturer
environment.