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Acquire Market Leadership in Mexico City 63% vs. Coca Cola

Acquire Market Leadership in Mexico City 63% vs. Coca Cola

Situation

Based on the success Mr. Gonzalez experienced elsewhere in Latin America, the Division CEO — hungry for more wins — promoted him to Mexico, the largest Pepsi Cola market outside the US, where market share sat in the low 30s. He was given a limited bench of talent and had to secure external hires to build a team quickly. Mr. Gonzalez moved to Mexico in November 1993. His welcome was the 300% devaluation that hit the country the following month.


Actors

  • The Division CEO, looking for more successes
  • The President of Mexico (a newly hired executive from Colgate-Palmolive)
  • PepsiCo directors in Mexico, all expatriates
  • Mexican Bottlers, who had invested millions in new equipment, glass, and truck fleets
  • The Mexican consumer

Solution

The first move was to launch the Pepsi Challenge, concurrent with the devaluation. The new President of Pepsi Cola Mexico also had a strong relationship with the Vitro Group, which secured Pepsi an exclusive on a new package called the Plastic Shield.


The Bottlers didn't feel the full impact of the devaluation until August 1994 — almost eight months later, as their credit came due. By then, the Pepsi Challenge and the Plastic Shield exclusivity had driven Pepsi to a +60% market share in Mexico City. Mr. Gonzalez worked with the Bottlers to soften the financial crisis's impact, and inside the franchise organization he reduced the benefits of the 5–6 expatriates whose cost represented over 50% of the country's payroll versus the remaining 100 Mexican employees.


He also began replacing expats with local nationals to better represent the system's interests. Through the crisis, Mr. Gonzalez kept the Bottlers focused on the market and built strong relationships with the three largest Bottlers, enabling PepsiCo programs that grew volume. By the time he left, only 2 expats remained in Mexico, costs were under control, and he had been promoted to VP of HR, Latin America.


Outcome

Once again, Mr. Gonzalez played multiple game-theory scenarios to benefit every actor. The share growth against Coca-Cola gave employees a major morale boost during the economic crisis. Volume growth delighted the Division CEO and boosted his standing, resulting in his promotion to COO of Pepsi Cola International, Europe and Latin America. Mexican consumers got a great product at a great price during a major economic crisis. The expats didn't love Mr. Gonzalez, but all were relocated to bigger, better jobs elsewhere — and the local executives he developed were eventually promoted to bigger roles inside PepsiCo as well.