The Pepsi Challenge.


After falling flat when its Venezuelan bottler deserted it, Pepsi has regained its fizz. Coke is fighting back.

THREE YEARS AGO, WHEN PEPSICO S local bottler switched to Coca-Cola with its entire production and distribution facilities, Venezuelan consumers saw their favorite soft drink disappear overnight from store shelves and restaurants. A massive wave of red and white products and publicity flooded the country, replacing 50 years of Pepsi dominance in a matter of days.

Following a six-month absence from the market, Pepsi launched an aggressive counterattack. Today, the two cola giants are still lodged in a fierce war over control of one of the most attractive soft-drink markets in the region. The average Venezuelan guzzles an amazing 280 eight-ounce bottles of soft drinks per year, which translates into estimated sales in excess of US$1 billion.

According to Pepsi, the red, white and blue is back, with 38% of the cola market (compared with 78% in early 1996). While Coca-Cola questions Pepsi's current share claims, it recognizes that Pepsi has staged a remarkable recovery "They came back very fast:' says Brent Willis, president of Coca-Cola's Vencol division, which covers Venezuela and Colombia. "[And] this is one of the most competitive market environments in the world."

Pepsi's aggressive turnaround is due largely to the financial strength and bottling experience of its local partner, Polar, the country's largest food and beverage conglomerate.

Sorpresa, Polar's 70-30 joint venture with PepsiCo, managed to bottle the first Pepsi only three months after the partnership's inauguration in January 1997. It tapped a ready source of supply for some of its needs from other divisions or joint ventures of the Polar group, including bottles, bottle caps and packaging, as well as rigs and coolers for 1,600 trucks that feed 200,000 of its sales points. Within its first year of operation, Sorpresa had recovered a 17% market share.

At first, market penetration came with high transportation costs, as large parts of the country had to be supplied from distant bottling facilities. But two and a half years and $500 million later, Sorpresa has five of its own bottling plants. "We have recovered the necessary capacity to meet nationwide demand:' says Gustavo Hernandez, Sorpresa's president.

Unlike Coca-Cola, which has 18 bottling facilities, Sorpresa has fewer plants with larger scales of economy but each covers a vast section of the market.

Behind that...

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