November 21st, 2008

Pepsi Plans Big Mexican Investment

By Betsy McKay
The Wall Street Journal

PepsiCo Inc. plans to spend as much as $3 billion in Mexico over the next five years, in its latest move to expand its snack and beverage businesses outside the U.S. as sales slow at home.

The Purchase, N.Y., maker of Pepsi-Cola, Lay’s potato chips and other snacks and drinks said it will spend about $2 billion of the funds on local research and development, manufacturing, distribution, marketing and advertising for its Sabritas and Gamesa foods businesses.

The company’s plans also include bringing some of its Mexican brands to the U.S. market, to grab a greater share of sales to the rapidly growing Hispanic population.

The remaining $1 billion will be spent on marketing and advertising programs for Pepsi’s beverages over the next three years, Pepsi said.

The investment is part of a larger move by PepsiCo under way to deepen its investment in high-growth markets around the world as sales have slumped in the U.S. in the troubled economy. PepsiCo recently pledged to invest $1 billion in China and $500 million in India.

Mexico is already PepsiCo’s largest revenue-generating market outside the U.S. “PepsiCo’s businesses in Mexico have developed great consumer loyalty to their brands—built through decades of investment,” John Compton, chief executive of PepsiCo’s Americas Foods division, said in a statement.

While Pepsi has a strong snack business in Mexico, the company trails rival Coca-Cola Co. in beverage sales by a wide margin in a big soft drink market. Pepsi had a 16% share of the carbonated soft drink market in Mexico in 2007 against Coke’s 69% share.

Pepsi shares fell 3.5%, or $1.81, to $50.29 in 4 p.m. composite trading on the New York Stock Exchange Thursday.

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