Big Cola ups competition against Femsa in Mexico

LIMA/MEXICO CITY Thu Mar 22, 2007 5:00pm EDT

LIMA/MEXICO CITY (Reuters) - Peruvian bottler Ajegroup, the maker of Big Cola, plans to boost sales in Mexico by up to 20 percent annually over the next few years as it takes on dominant soft-drink maker Coca-Cola Femsa.

Upstart Ajegroup says it has snatched an 8 percent share of Mexico's massive soft-drinks market in just a few years by undercutting larger players on supermarket shelves.

"We're going to gradually increase market share," Ajegroup Chairman Angel Ananos told the Reuters Latin American Investment Summit on Thursday. "We would like to increase sales by 15 or 20 percent every year."

Mexican consumers drank $300 million worth of Big Cola last year, he said, speaking by phone from Madrid.

Big Cola sells in supermarkets for significantly less than Coca-Cola and Pepsi (PEP.N) and fans say it tastes similar to Coke.

Mexico is the world's biggest per-capita consumer of soft-drinks, with consumers typically gulping down about 40 gallons (150 liters) of carbonated drinks a year, according to producers.

Privately held Ajegroup's move into Mexico has put pressure on regional giant Coca-Cola Femsa, or KOF (KOFL.MX)(KOF.N), which is part owned by Coca-Cola Co. (KO.N).

Ajegroup has juggled some of its machinery from its plant in Puebla to other production centers around Mexico, such as Guadalajara and Villarhermosa, to reduce transportation costs.

"In Mexico we are relatively stopping our investment in soft drinks and carbonated drinks. We have enough installed capacity for several years," Ananos said.

KOF's sales in Mexico dipped slightly in the fourth quarter of last year as it cut prices in the increasingly competitive market.

Ajegroup is considering a move into Mexico's fruit drink market and could be selling the beverages by the end of this year, Ananos said.

"We would like to increase our brand coverage in different markets in Mexico," he said.

Ananos said Ajegroup has walked away from a plan to start a brewery in Mexico after Congress passed a law to tax beer sold in non-returnable bottles and cans at a higher rate than returnable bottles, creating a hurdle for new entrants.

Mexico's two main brewers, Femsa (FMSAUBD.MX) (FMX.N) and Modelo (GMODELOC.MX), which makes Corona, have networks of convenience stores that make it easier for them to run a system of returnable bottles than it would be for smaller beer makers.

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