Volume 3 | Issue 1 | Year 2007

Catch the Pepsi spirit” was a popular slogan for the Pepsi brand in the 1970s, and in 2006, that spirit remains alive with Pepsi-Cola Mexicana, launched in 1943 under the name Pepsi-Cola Mexican Syrup Company, as a franchise of the Pepsi-Cola brand names.
“GEUSA’s success is the result of the group’s vision and dynamics under the direction of Juan Gallardo Thurlow, president of the board. GEUSA is a company with business discipline that thrives when it achieves its goals,” said Armando Alvarez Fierro, CFO, and director of Finances and Administration. Gallardo, one of Mexico’s most prominent businessmen, is also chairman of Grupo Azucarero Mexico, S.A. de C.V., an important sugar mill holding company.

Today, GEUSA markets carbonated beverages such as Pepsi-Cola, Seven Up, Manzanita Sol, Mirinda, Kas, O’key and, El Rey, and Non Carbonated such as Power punch, Te Lipton, Be Light, H2OH and Sobe Rush, under PepsiCo’s franchise, and its own brand names Trisoda, Plus, Monte Bello and purified bottled water Santorini, Junghanns and Aqua Di Roma.

HISTORICAL TURNING POINTS

The Mexican soft drink market is considered the second largest in the world after the United States, with estimated sales in the $15 billion range. Mexican consumption of carbonated drinks ranges between 150 and 156 liters per capita annually, with cola beverages taking up to 70 percent of the market. Historically dominated by Coke and Pepsi, the market has been challenged by other corporations coming from abroad. Mostly based on slashing price campaigns, this new competition forced bottling companies to find new ways of marketing their products and keeping customer loyalty.

Globally, PepsiCo brands are available in nearly 200 countries and territories and generate sales at the retail level of about $85 billion. The company obtained 2005 revenues of more than $32 billion and hired over 157,000 employees. PepsiCo’s world headquarters are located in Purchase, N.Y., approximately 45 minutes from New York City.

GEUSA has sustained its growth in the 22.55 percent range over the past year, reaching revenues of over $600 million and profits in the range of $48 million. According to Alvarez, the company’s dynamic growth has been nurtured from its historical turning points such as the introduction of the disposable PET 0.600 ml bottle in 1997, the launching of the market information system in 1998, called SIMER, which established an automated sales system, and the expansion of the purified table water business under the brand name Agua Santorini in big 19-liter containers.

“These numbers were possible because of the level of discipline and commitment the company showed in achieving its marketing planning and strategies, especially our sales force. They are greatly motivated by the quality of the products we offer, and the marketing support of the company,” Alvarez said.

GREAT PRODUCTS TO OFFER

In fact, in the last two years the group’s marketing strategy included launching new brand names and presentations, with a presence in all market segments.

In addition to its traditional products, GEUSA launched Power Punch, Pepsi Light 0 calories, Spin Light, Pepsi Fire, Seven-Up Ice, Manzanita Sol Exotika, Pepsi Clear and Mirinda Narangótica in 2005. The group also added Kas with natural juice, peach Trisoda, currant Rey, tamarind Okey, tamarind Rey, and Sangria Casera. According to Alvarez, the idea is to diversify the traditional products with new packaging and flavors because consumers are constantly seeking new choices.

The company distributes through more than 270,000 points of sale, the result of a diversified market in Mexico, from mom-and-pop stores to big supermarket chains. To help push sales, the company supported a national television and radio campaign, with sampling and materials distribution at points of sale. Some of the promotions included Seven-Up tattoos Fido Dido, sampling of Mirinda, Manzanita Sol, Trisoda Piña and Pepsi, and the “Blue Christmas” campaign.

In addition, the group’s strength is based on its distribution chain, which guarantees the service quality to all clients in a

consistent way. “We continued to invest in our distribution infrastructure in 2005, to ensure product availability and to offer better facilities and tools to our sales force,” said Alvarez.

The group normally invests 70 percent of its budget of Capex in distribution fleet and equipment, while 25 percent goes to plant and manufacturing equipment, and 5 percent to technology improvements.

Last year, investment went to new vehicles, construction and improvement of distribution centers, and new and replacement hand computers for all sales people. The company also acquired 17,500 refrigerators for product distribution to the final consumer, 80 percent of which where placed in small stores and markets while the remainder was set with exclusive clients. Vending machines were also placed in corporations, offices, schools and commercial centers.

SANTORiNI…A STAR PRODUCT

Seven years ago, the group launched Agua Santorini in 19-liter containers. In 2005, the group sold 71 million containers, which revealed a 31 percent increase from 2004. The reasons for such growth were from an increase in home delivery routes, as well as commercial and institutional clients. The routes included 1.5 million homes visited three times a week.

“Santorini is not only growing in our franchised territories but also in states such as Querètaro, Mèxico and Guerrero, which is a successful case of marketing,” said Alvarez, “The group has established 12 purifying plants with advanced technology and the product is distributed to main cities in Jalisco, Michoacán, Guanajuato, Colima, Nayarit, Tlaxcala, Tabasco and partly in Veracruz.” The product is now being officially sold in one third of the national territory.

GEUSA’s purified water brand names, Santorini and Junghanns, were especially promoted in 2005 with a broad television and radio campaign that focused on increasing growth and brand name perception, and also offered special seasonal promotions. The campaign included information about the advanced technology used to purify the water with ozone and minerals, and it also emphasized the highly hygienic containers in which the water is presented.

“We focused on the benefits that purified water brings to the family, and how mothers look after the health of their families by buying high quality products such as ours,” Alvarez added.

FIGHTING THE PRICE WAR

GEUSA’s number-one priority in today’s competitive market is to offer the best product at the best price to minimize the impact of other brand names and similar products. With that goal in mind, the department of operations synchronizes the supply chain with the product demand. Internal productivity concentrates on an efficient use of the facilities and equipment while developing excellent relationships with vendors that can provide innovative products at less cost. “We work to build strategic alliances with our suppliers and vendors to provide activities complementary to our business so that the cost impact is reduced,” said Alvarez. “The frequency of distribution is high so it demands a great deal of coordination among the different aspects of production.” The company also uses Six Sigma methods, which brings more quality to its operation.

The manufacturing area has maintained a high productivity level as well. Carbonated beverage plants are located in Guadalajara, Morelia, Celaya, Puebla, Veracruz, Minatitlán and Oaxaca, in addition to the 12 water-purifying plants.

In 2005, GEUSA completed the upgrading of its Veracruz PET containers center, a modern facility with an installed capacity of 12 million cases yearly. Currently, the group has a capacity of 150 million cases of carbonated beverages and table water, and 98.5 million units of big water containers. Highly trained technical staff reached a level of efficiency of 89 percent in reusable products and 93 percent accumulated efficiency in the PET lines, attaining excellent internal quality standards.

“Quality is an important goal in our group, and our efforts have been recognized several times with awards such as the International Quality Award we received in 2005 from Pepsico for the job we’ve done at our plants in Guadalajara, Morelia, Celaya and Veracruz. In addition, and for the fourth year in a row, the Guadalajara plant received recognition for effectively applying the Manufacturing and Warehousing program, which placed our facilities at an international level,” said Alvarez.

Also, with the “Scholastic Center Guadalajara” (Centro Escolar Guadalajara), GEUSA furthers its commitment to give gratuitous primary education of high quality to children of lesser resources, reaching a high number of students in the 2005 school year.

The company plans to participate actively in each city where it has a presence.

CLEAN MEXICO

As a dependable organization, GEUSA has developed a corporate policy of social and ecological responsibility that complies with national standards and regulations. The group works towards a culture of water preservation and use of fewer pollutants, such as biodegradable detergents for washing containers, modern water treatment plants and constant and active maintenance of the vehicles’ fleet.

In addition, the company is a member of the ECOCE, an association that gathers business owners and industrialists handling PET products, and promotes collection and recycling as well as careful handling of the containers.

“In the over 18 years I’ve been with the group, I’ve seen it growing successfully and constantly. However, in the last six or seven years, we have doubled our client portfolio with the addition of big containers from Santorini. As we have done in the past, once more we have detected a market need and we are providing the quality that is preferred by the Mexican people in an expanding market,” Alvarez concluded.