BC Cola in Mexico: Case Analysis

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Strategic Issue: How can BC Cola position itself to grow and gain greater market share in a growing Mexican market in order to increase its profitability and profitability for its bottlers under price controls?

Analysis: The political environment is unlikely to change soon in Mexico. While working with the government to ease price controls for soft drinks, BC will have to operate under the current price controls for the foreseeable future. On the other hand, there is economic growth in Mexico, and this means potential growth in sales of BC’s cola product. Since the margins will not grow under the current price controls for a bottle of cola, BC and its bottlers can only achieve growth in profits by increasing sales through maintaining or increasing market share in a growing market. It is, therefore, important to identify where the growth for the cola market will come from; that is, which segment(s) will grow the fastest. Increasing margins through cost-cutting operations seems unlikely, because glass bottles, the containers currently used, are the cheapest containers due to their reusability, and the ingredients cannot be changed. BC’s bottling plants are already more efficient than the competitors’, but the bottling plant owners do not wish to invest to expand capacity due to small margins. One issue, therefore, is if this market is large and profitable enough for BC to help its bottlers to invest in order for BC cola production to increase and grow with the growing market. Mexico’s population is around 100 million. Per capita soft drink consumption is around 1000 8-oz. bottles per year. This translates to 666.67 12-oz. bottles per person per year and, with 12 bottles per case, to 55.56 cases per person per year. That means that in Mexico 5,556 million cases of soft drinks are consumed per year. Half of this, 2,778 million cases, is cola based drink consumption. BC has 48% of this market, that is, its sales per year come to 1,333.34 million cases....
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