--Coke Femsa interested in U.S. franchises
--Mexico-based bottler feels "invited" to explore
opportunities
--Company had $1.16 billion in cash and equivalents at
end-March
(Updates with comment in last paragraph from Coke CEO on foreign
partners entering U.S.)
By Amy Guthrie
MEXICO CITY--An executive at Coca-Cola Femsa SAB (KOF), the
largest soft drink bottler in Latin America, said Wednesday that
the company is keen to study the possibility of acquiring beverage
distribution rights in the U.S. as Coca-Cola Co. (KO) rejiggers its
franchise model there.
"If Coca-Cola wants to rebrand its franchises, we'd certainly
like to take a look at those, and we feel invited," Coke Femsa
Chief Financial Officer Hector Trevino told analysts during a
conference call.
Earlier this month, Atlanta-based Coca-Cola said it reached an
agreement in principle to expand territorial distribution rights to
five independent bottling partners in the U.S. That would reduce
Coke's direct control over its U.S. distribution to about 75% from
80% currently.
The company said more such deals are on the way as it backs out
of the delivery business.
Bottlers would be given 10-year licenses, which would then need
to be renewed. The initial deals aren't expected to close until
2014. While selling off distribution rights, Coke is expected to
maintain manufacturing control in the U.S., at least for the near
term. Manufacturing of Coke products in the U.S. currently is
spread over hundreds of facilities.
In 2010, Coca-Cola Co. paid $12.3 billion to buy its biggest
U.S. bottler in order to secure control of most production and
distribution in its home market.
Mexico-based Coca-Cola Femsa bottles and distributes Coke
products in nine Latin American countries, as well as in the
Philippines, targeting 315 million consumers. The company reported
net income of $198 million for the first quarter on revenue of
$2.74 billion.
As of the end of March, Coke Femsa had $1.16 billion in cash,
cash equivalents and marketable securities; during the first
quarter it paid $688.5 million to acquire a 51% stake in Coke
Philippines from the Coca-Cola Co.
While Coke Femsa remains focused on expansion and consolidation
opportunities in Latin America, Mr. Trevino said the U.S. market is
tantalizing. "If those opportunities are presented to us, certainly
we will analyze them and take a hard look at opportunities in the
U.S.," he said Wednesday.
Muhtar Kent, Coca-Cola Co.'s chief executive, hasn't ruled out
bringing foreign partners aboard in the U.S. At the company's
annual shareholder meeting in Atlanta on Wednesday, Mr. Kent said
Coke hasn't settled on how many U.S. distribution partners it will
have.
"We're at the beginning of this journey," he said.
--Mike Esterl and Paul Ziobro contributed to this article.
Write to Amy Guthrie at amy.guthrie@dowjones.com
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