PepsiCo, Nestle plan big push in Mexico
Jan. 24, 2014
by Eric Schroeder
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PURCHASE, N.Y. and VEVEY, SWITZERLAND — The food and beverage market in Mexico will be getting a significant makeover during the next five years thanks to two sizable investments announced Jan. 24 by PepsiCo, Inc. and Nestle S.A.
PepsiCo said it plans to invest $5 billion in Mexico over the next five years, a move the Purchase-based company believes will further strengthen its food and beverage business in Mexico, one of the most attractive markets in Latin America with a growing middle class and numerous opportunities for long-term economic growth.
In investing in Mexico, PepsiCo continues its trend of strengthening its presence in developing and emerging markets. Most recently, PepsiCo this past November unveiled plans to invest $5.5 billion in India by 2020. The company plans to use the funds to support its efforts in innovation, manufacturing, infrastructure and agriculture in India. In 2012, developing and emerging markets represented approximately 35% of PepsiCo’s net revenue.
“The investments we’ve made to bolster our position in key markets around the world are fueling our success and positioning PepsiCo to deliver sustainable long-term growth,” said Indra Nooyi, chairman and chief executive officer of PepsiCo. “PepsiCo brands have been enjoyed by Mexican consumers for more than a century, and we see tremendous opportunities to further expand our food and beverage business. We’re confident in Mexico’s future, and we believe this investment will create significant value for PepsiCo, our customers, our shareholders and for Mexico as a whole.”
PepsiCo said the investment is expected to create 4,000 new jobs in the Mexican economy and that the investment will focus on four key strategic priorities:
• Innovation and brand building: PepsiCo said it intends “to continue to invest behind its portfolio of iconic food and beverage brands and expand the range of products in its portfolio to cater to the wide and evolving needs of Mexican consumers.” In addition, the company plans to work to further strengthen its research and development capabilities, such as the company’s Global Baking Category Innovation Center in Monterrey, Mexico.
• Infrastructure: Plans are in place to expand the company’s production capacity by adding new manufacturing lines. PepsiCo also intends to invest in additional selling and delivery infrastructure throughout the country, including new technologies designed to enhance service to retail customers and increase efficiency across go-to-market systems.
• Agriculture: PepsiCo said it will work to strengthen its partnerships with local farmers and invest in sustainable agriculture programs that benefit both the company and the growers by improving yields, conserving resources and boosting demand.
• Community: The PepsiCo Mexico Foundation will continue to invest in local communities and societal development projects throughout the country.
“PepsiCo is committed to growing in Mexico, for Mexico,” Ms. Nooyi said. “Our investment is guided by Performance with Purpose, which is PepsiCo’s global vision for building a profitable and sustainable corporation that is a good investment for our shareholders, a good environment for our employees, a good citizen in our communities and a good steward of our planet’s resources. Performance with Purpose is driving sustained value for PepsiCo around the world and it will be central to how we operate in Mexico for many years to come.”
Meanwhile, Vevey-based Nestle said it will invest $1 billion in Mexico over the next five years. The funds will be used to build two new facilities in the country — a new infant nutrition plant in Ocotlan, in western Mexico’s Jalisco state, and a petfood plant in the city of Silao, in the central Mexican state of Guanajuato. In addition, Nestle said it will expand its cereal facility in Lagos de Moreno, also in Guanajuato state, making it the company’s largest plant in the region.
“This investment is a striking example of our commitment to Mexico, and our long-term vision in a market with high growth potential,” said Paul Bulcke, chief executive officer of Nestle, during the World Economic Forum in the Swiss resort of Davos.
Mr. Bulcke said the investment will create 700 direct and 3,500 indirect jobs, and will boost the amount of raw materials purchased locally.
The announcement comes just a few days after Nestle entered into a partnership with the Singapore government’s Agency for Science, Technology and Research (A*STAR), under which the groups will set up global research programs in food science and technology. The agreement will focus on areas such as nutrition, packaging, data analytics and biotransformation. Biotransformation is the use of natural processes, such as fermentation, to transform raw materials into ingredients with nutritional or functional benefits.