| luiscabral.net > IIO Home > 15. Strategy and Entry > | |
How Coca-Cola and importer Cisneros forced Pepsi out of the Venezuelan market
"An unprecedented defection in the global cola wars yesterday [August 16, 1996] saw 4,000 blue Pepsi-Cola delivery trucks become Coca-Cola red in Venezuela and a network of 18 bottling plants switch from producing Pepsi to Coke.
With military stealth and to the complete surprise of Pepsi, Cisneros, one of Venezuela's most powerful family businesses, severed overnight its 30-year relationship with Pepsi during which it built up a 45 percent market share for the US soft drink against 10 per cent for Coke...
Cisneros officials broke the news to Pepsi executives yesterday at their suburban New York headquarters. Pepsi immediately attacked the move as `illegal in several respects' and said it would `exhaust all legal remedies in Venezuela and in the US' ...
Pepsi's lack of resources appeared to be the trigger for Cisneros' switch to Coke. Cisneros told Pepsi it wanted to modernize and broaden the geographic scope of its business. Rebuffed by Pepsi, Cisneros approached Coca-Cola which swiftly agreed to a joint venture ...
At the weekend, Hit de Venezuela frantically began refurbishing production and distribution facilities. Coca-Cola sent several cargo aircraft with essential supplies, including bottles and bottle caps, to get operations under way. But it will be some time before company banners, logos and other advertisements throughout the country are replaced. `The talks were held so confidentially that we had little time to prepare promotional activities,' Coca-Cola said ...
Losing the Venezuelan bottler is a damaging blow to Pepsi. It is one of only a handful of countries where Pepsi heavily outsells Coke. Only Pepsi's market share in Thailand and several Middle East countries can compare with its Venezuelan dominance...
Although its Pepsi contract expired yesterday, Cisneros has offered to continue to produce Pepsi for up to a month at 25 per cent of the previous output to give Pepsi a chance to sign up other bottlers. But Pepsi's options seem limited--Cisneros is a near monopoly supplier in Venezuela ...
Hit de Venezuela has placed six of its 18 production plants, two to three weeks of inventory, lorries and other assets in a trust fund with a local bank with the option for Pepsi-Cola or a designated operator to immediately lease the assets. After an extendible one-month lease, those assets would be sold, the company said... The idea 'is that Venezuelan consumers will continue to have the option of purchasing Pepsi-Cola products,' said Mrs Violy McCausland, consultant to the Cisneros Group and one of the architects behind the deal."
Source: The Financial Times, August 17 and August 20, 1996.