Pepsico in Mexico
This case describes the complexity of PepsiCo's competitive position in the Mexican softdrink market in late 1996. Following PepsiCo's anchor bottler in Mexico, Gemex, the case details the strategies employed by PepsiCo's senior management beginning in 1993 to expand its market share versus its traditional "red nemesis," Coca-Cola. The various dimensions of PepsiCo's strategy -- marketing, management, financial, strategic -- are all seen to have deteriorated in the aftermath of the unexpected fall in the Mexican peso in December 1994. Focusing on the financial implications of the peso devaluation, the case then describes PepsiCo's response which only seemed to increase the financial burdens imposed on the faltering Pepsi market share.
The continuing battles or wars between Coca-Cola and Pepsi are always of high interest to students. This case has a tendency to interest students of marketing as well as students of finance. It is particularly powerful in its ability to illustrate how financing cash flows can threaten even healthy operating cash flows, and how a troublesome capital structure can threaten the ability of a global firm to implement a corporate strategy for increased market penetration.