Pass Pepsi a Margarita: The Company Is Going Big in Mexico
In November, India was the country on PepsiCo’s (NYSE:PEP) mind and bank statement. Two months later, it is Mexico that is now getting the big investment. According to the Wall Street Journal, the world’s second largest food and beverage business revealed Friday that it plans to invest $5 billion to expand production and marketing in Mexico over the next five years. Pepsi’s funds are expected to add more production lines to its Mexican facilities, allowing the company to take on 4,000 more employees as a result. Pepsi hopes to also roll out products over the next five years that will cater better to the Mexican consumer’s palate and help it bolster its research and development arm.
Like its No. 1 rival Coca-Cola Company (NYSE:KO), Pepsi has invested significantly in emerging countries recently because business in these new markets is what is currently keeping the company’s head above water. Faced with a domestic consumer base that is turning away from sugar-laden beverages and putting more of a premium on healthier products, Pepsi has been able to offset those losses by boosting its development efforts in new countries and reaping the benefits of being the new face in town. The Journal reports that developing and emerging markets accounted for 35 percent of Pepsi’s revenue in 2012, and that figure is only expected to increase.
Pepsi currently employs 40,000 workers in Mexico, and it hopes to significantly increase that number within the next five years. Thanks to a growing middle class in Mexico and a reinvigorated demand for Pepsi’s soda and snack products, the company recognizes space in the country to expand, and it wants to invest to do so while also launching new products that are developed for Mexico especially.
Before Mexico, there was India. As aforementioned, Pepsi made its big India announcement in November when it said that it plans to invest about $5.5 billion in the country by 2020 to bolster its product base, double its manufacturing capacity, and improving its sales and distribution network. Like Mexico, India has a growing middle class, and many retailers have jumped on any opportunity to expand in the country, including Pepsi’s rival, Coke.
Aside from its international investments, Pepsi is also working to ressurrect success in its domestic market which has recently given many food companies a run for their money. As consumers turn away from sugary beverages, Pepsi’s snack business has continuing to drive its results in the U.S., leading activist investors to pressure CEO Indra Nooyi to split the company’s snack and soda business, but the chief executive has so far refused to do so. Pepsi has stood by its strategy to boost its snack offering in the U.S. while also launching new beverage products — and it is also now evidently doing both in Mexico, too. Pepsi shares were down 0.10 percent sitting at $82.35 as of 11:30 a.m. Friday.