BUSINESSWEEK ONLINE : APRIL 10, 2000 ISSUE
COVER STORY Today, Mexico. Tomorrow... Late last year, PepsiCo Inc. CEO Roger A. Enrico entered a changarro in Mexico City that is smaller than his bedroom in his Greenwich (Conn.) home. Inside the crowded store, he congratulated the bemused shop owner on becoming the 8,000th retailer in Mexico to adopt the company's ''Power of One'' strategy. Enrico's visit is a reflection of the importance he places on the strategy, which aims to better leverage the sales and profits of its top brands. In Mexico, Power of One has been an enormous success. The large, colorful displays that unite snacks and soft drinks have led to average sales increases of 36% for PepsiCo products, including a 26% rise for Pepsi-Cola. So far, the company has installed Power of One shelving and displays at 8,000 mostly small neighborhood retailers in Mexico, with plans to add 10,000 more this year and 40,000 by 2002. But Enrico's trip also underscored the snack food supremacy of Frito-Lay Co. in Mexico, where its Sabritas brand boasts an 81% share of the salty snack market. That's why PepsiCo (PEP) is exporting its business model for Mexico to other emerging nations, from India to China, where it now has three snack food plants. Much is at stake because the company's greatest growth prospects for its all-important snack food business are outside the U.S. In this larger arena, it's not merely a game of capturing market share. In most developing nations, where personal income levels are a fraction of what they are in the U.S., Enrico must increase consumption of snacks by keeping prices low and vastly increasing availability. Price segmentation, in which some snacks are priced as low as 1.5 pesos, or 16 cents, is a key part of the success formula in Mexico. ''Our focus is being the lowest-cost producer because our success is based on making our product more affordable to consumers,'' says Rogelio Rebolledo, who leads Frito-Lay's operations in Latin America and Asia Pacific. ''FOREIGN LEGION.'' PepsiCo arrived here in 1967 when it acquired Sabritas, a Mexico City maker of snack foods. Back then, it was a $16 million business with 100 delivery routes, nearly half of them via bicycle. Today, the company racks up $1.8 billion in sales, boasts 12,000 delivery routes, and sells 100 million bags of snacks per week. For several years now, Rebolledo has been dispatching what he calls his ''foreign legion,'' a group of 15 Mexican managers, to China and other Latin American countries to duplicate the success story in Mexico. They employ a mix of clever merchandising, low pricing, and efficient distribution to hook the rest of the world on potato and corn chips. Rebolledo's objective is to more than double Frito-Lay's $2.5 billion in yearly sales in Latin America to $6 billion by 2004. Ultimately, though, it is the Asia Pacific market, where Frito-Lay garners only $600 million in annual sales, that holds the greatest long-term opportunity. In China, Frito-Lay's market share is a mere 4%. In India and Japan, it is only 2%. ''All of our Asian business is in its infancy,'' he says. ''The sales aren't important enough to make people blink. But someday, they will be the growth engine of this company.'' If the history in Mexico is any guide, he just might be right. By John A. Byrne in Mexico City _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS PepsiCo's New Formula COVER IMAGE: PepsiCo's New Formula CHART: The New PepsiCo TABLE: A Life at PepsiCo TABLE: Pepsi Facts A Potent Ingredient in Pepsi's Formula Today, Mexico. Tomorrow... ONLINE ORIGINAL: "The Sweet Spot of Convenient Food and Beverages" ONLINE ORIGINAL: Is Pepsi's Stock Finally Ready to Pop? INTERACT E-Mail to Business Week Online

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