Latin Finance - September/October 2010 - 48

ajegroup

quicken as the country’s economy grows countries instead of trying to tackle by a predicted 6%-7% annually over the China and India, because of the size coming years, according to Scotiabank’s of the investment and time that would research unit. be required to break into these bigger In the first half of 2010, the company markets. re-invested $11 million to open a sixth “We have opted to consolidate plant in Mexico, and also in modernizing production in an area where we have and expanding operations in Colombia, been successful. The Thai operations will Ecuador and Peru. represent 10% of the group’s sales by the The fastest growth in Latin America has end of 2010,” says Paredes. been in Colombia, where production and Ajegroup has also decided against branching into more complicated beverage sales doubled between 2008 and 2009, lines, such as dairy products. It pilot tested says Paredes. He adds that Big Cola and other brands should give the group around a milk-based drink, “Milkshake,” in Peru, 28% of the Colombian market by the end but decided against it because of costs of this year. and logistical reasons. Paredes says dairy products require an entirely different approach, because Ajegroup Soft Drink Production (liters, bn) Steady ramp up they are perishable, need special vehicles for distribution 3.5 and have a totally different logic when it comes to presentation 3.0 and shelf life. It has also opted against 2.5 snacks or candies, preferring a soft-drink niche. “We are 2.0 comfortable with the core business,” says Paredes. “We 1.5 have researched different products and have received 1.0 offers of joint ventures, but have always decided against them.” 0.5 Paredes says he could not reveal the sources of offers, 0.0 1997 1999 2001 2003 2005 2007 but says they were well-known Peruvian and international Source: Ajegroup brands.

re-engineered products and packaging, and abandoned the original strategy of foregoing advertising. “We used to be the brand that cost less. We still are, but the market requires a new, aggressive strategy,” says Paredes. The change corresponds with a number of factors, including the changing tastes of consumers, and competitors, including the big players, adopting bottom-of-thepyramid strategies to target the lower middle-class and poor people who account for the majority of the population in Latin America. The larger international companies have followed the so-called “B” brands, dropping prices and introducing larger sizes. Ajegroup was the first to introduce 3.3-liter bottles in several of the countries, such as Peru and Mexico, where it operates. “The big companies, Coca-Cola and Pepsi, are not losing sleep over the B brands. They have introduced different packaging and have targeted sectors attracted by low-cost brands with promotions and other strategies,” says Ana Paula Pedroni, a beverage analyst with 2009 Mexico’s IXE Grupo Financiero. She says that while Ajegroup has certainly created a niche in Mexico, it is unlikely to take more of the market for soft drinks. It faces greater pressure from the dominant companies in other lines, such as juices and bottled water, according to Pedroni. Big Cola had a market share of 11% in 2009, according to the company. Noncarbonated drinks, including juices, were at 23% and, bottled water at 3%. Pedroni says she is unfamiliar with Ajegroup’s numbers, but those published by Coca-Cola and other companies would point to a smaller market share for the company, especially in the juice sector. LF

Mexican Niche

Colombia Surprise

The company has not forgotten its roots and continues to expand in the Americas. It operates in Colombia, Ecuador, Peru, Venezuela, Guatemala, Costa Rica and Mexico. The most recent incursion was Panama, where Ajegroup began distribution in 2009. Mexico represented 40% of the group’s sales in 2008, but that participation is declining as a result of growth in Thailand and markets where consumption is expanding very quickly. In Peru, for example, soft-drink consumption doubled in the second half of the last decade, to 45 liters per capita, according to the beverage committee of Peru’s national society of industries. The trend is expected to

While there are no plans in the immediate future to open a plant in Bolivia, Ajegroup’s Peru operations in May began exporting its sports drink, Sporade, and iced tea (Free Tea) to Bolivia. The goal is to capture 15% of the market by mid2011, says Paredes. Ajegroup has also been adding new products, including Volt, an energy drink, flavored waters and a new line of juices. Two beer brands, Franca and Club, were also supposed to be launched internationally, but the group decided to limit that segment to Peru and concentrate on soft drinks in new markets. While still focusing on lower-income sectors with inexpensive soft drinks, Ajegroup has over the past few years

UPDATE
The complete Ajegroup interview is available exclusively at www.latinfinance.com

>

48 LatinFinance

September/October 2010


http://www.latinfinance.com

Latin Finance - September/October 2010

Table of Contents for the Digital Edition of Latin Finance - September/October 2010

Latin Finance - September/October 2010
Contents
Investment Banking Fees
Stanley Motta
Compensation Survey
Bill Rhodes
Private Equity Fees
Investing in Venezuela
Argentine Borrowing
Brazil Investor Report
Inside Banco do Brasil
Mexico Investor Report
Temasek talks LatAm Strategy
Latin Finance - September/October 2010 - Latin Finance - September/October 2010
Latin Finance - September/October 2010 - Cover2
Latin Finance - September/October 2010 - Contents
Latin Finance - September/October 2010 - 2
Latin Finance - September/October 2010 - 3
Latin Finance - September/October 2010 - 4
Latin Finance - September/October 2010 - 5
Latin Finance - September/October 2010 - 6
Latin Finance - September/October 2010 - 7
Latin Finance - September/October 2010 - 8
Latin Finance - September/October 2010 - 9
Latin Finance - September/October 2010 - 10
Latin Finance - September/October 2010 - 11
Latin Finance - September/October 2010 - Investment Banking Fees
Latin Finance - September/October 2010 - 13
Latin Finance - September/October 2010 - 14
Latin Finance - September/October 2010 - 15
Latin Finance - September/October 2010 - 16
Latin Finance - September/October 2010 - 17
Latin Finance - September/October 2010 - 18
Latin Finance - September/October 2010 - 19
Latin Finance - September/October 2010 - 20
Latin Finance - September/October 2010 - 21
Latin Finance - September/October 2010 - Stanley Motta
Latin Finance - September/October 2010 - 23
Latin Finance - September/October 2010 - 24
Latin Finance - September/October 2010 - 25
Latin Finance - September/October 2010 - Compensation Survey
Latin Finance - September/October 2010 - 27
Latin Finance - September/October 2010 - 28
Latin Finance - September/October 2010 - 29
Latin Finance - September/October 2010 - 30
Latin Finance - September/October 2010 - 31
Latin Finance - September/October 2010 - 32
Latin Finance - September/October 2010 - 33
Latin Finance - September/October 2010 - Bill Rhodes
Latin Finance - September/October 2010 - 35
Latin Finance - September/October 2010 - Private Equity Fees
Latin Finance - September/October 2010 - 37
Latin Finance - September/October 2010 - 38
Latin Finance - September/October 2010 - 39
Latin Finance - September/October 2010 - 40
Latin Finance - September/October 2010 - 41
Latin Finance - September/October 2010 - Investing in Venezuela
Latin Finance - September/October 2010 - 43
Latin Finance - September/October 2010 - Argentine Borrowing
Latin Finance - September/October 2010 - 45
Latin Finance - September/October 2010 - 46
Latin Finance - September/October 2010 - 47
Latin Finance - September/October 2010 - 48
Latin Finance - September/October 2010 - 49
Latin Finance - September/October 2010 - 50
Latin Finance - September/October 2010 - 51
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Latin Finance - September/October 2010 - 53
Latin Finance - September/October 2010 - 54
Latin Finance - September/October 2010 - 55
Latin Finance - September/October 2010 - Brazil Investor Report
Latin Finance - September/October 2010 - 57
Latin Finance - September/October 2010 - 58
Latin Finance - September/October 2010 - 59
Latin Finance - September/October 2010 - 60
Latin Finance - September/October 2010 - 61
Latin Finance - September/October 2010 - 62
Latin Finance - September/October 2010 - 63
Latin Finance - September/October 2010 - 64
Latin Finance - September/October 2010 - 65
Latin Finance - September/October 2010 - Inside Banco do Brasil
Latin Finance - September/October 2010 - 67
Latin Finance - September/October 2010 - 68
Latin Finance - September/October 2010 - 69
Latin Finance - September/October 2010 - 70
Latin Finance - September/October 2010 - 71
Latin Finance - September/October 2010 - 72
Latin Finance - September/October 2010 - 73
Latin Finance - September/October 2010 - 74
Latin Finance - September/October 2010 - 75
Latin Finance - September/October 2010 - 76
Latin Finance - September/October 2010 - 77
Latin Finance - September/October 2010 - 78
Latin Finance - September/October 2010 - 79
Latin Finance - September/October 2010 - 80
Latin Finance - September/October 2010 - 81
Latin Finance - September/October 2010 - Mexico Investor Report
Latin Finance - September/October 2010 - 83
Latin Finance - September/October 2010 - 84
Latin Finance - September/October 2010 - 85
Latin Finance - September/October 2010 - Temasek talks LatAm Strategy
Latin Finance - September/October 2010 - 87
Latin Finance - September/October 2010 - 88
Latin Finance - September/October 2010 - 89
Latin Finance - September/October 2010 - 90
Latin Finance - September/October 2010 - 91
Latin Finance - September/October 2010 - 92
Latin Finance - September/October 2010 - 93
Latin Finance - September/October 2010 - 94
Latin Finance - September/October 2010 - 95
Latin Finance - September/October 2010 - 96
Latin Finance - September/October 2010 - Cover3
Latin Finance - September/October 2010 - Cover4
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