Mexico’s Arca Seeks Candy Maker to Bolster Snacks

Embotelladoras Arca SAB, the second- largest Coca-Cola bottler in Mexico, is seeking to buy a candy company to complement its expansion into salty snacks nationwide, Chief Executive Officer Francisco Garza said.

Arca wants a confectionary business with sales of at least $50 million to jump-start its candy business, Garza said in a Dec. 3 interview. The bottler began selling salty snacks three years ago and now generates sales of about $100 million a year from the unit, Garza said.

“The potential for confections is enormous,” he said. “It’s very similar to snacks and makes a good combination.”

The bottler is taking on PepsiCo Inc. and Grupo Bimbo SAB, which together have about 90 percent of the $3.5 billion annual snack-food market in Mexico, even as it consolidates its Coca- Cola franchise in Ecuador and looks to expand its soft-drink business in South and Central America, Garza said.

Arca, based in Monterrey, purchased the Ecuador business in October, adding to operations in Argentina that it acquired in 2008.

Garza said the company plans to sell snacks throughout Mexico and has entered the market in Mexico City and Guadalajara. National advertising may start running at the end of next year, he said. Arca probably will begin snack operations in South America in 2012, he said.

Arca’s sales will likely rise more than 15 percent in 2011 Vending Machines from this year with the Ecuador acquisition, Garza said. In the first nine months of 2010, sales advanced 5.8 percent to 19.2 billion pesos ($1.55 billion).

Commitment to Grow

“Have no doubt that the commitment is to grow in this region,” he said, referring to Central and South America. “We have a very good financial position that lets us capitalize on opportunities.”

In another business line, Arca plans to increase the number of its vending machines in Mexico by 5,000 to 30,000 during the next two years, Garza said. The company is equipping the machines with wireless modems to remotely monitor needs for stocking and repair, he said.

Arca rose 15 centavos to 53.64 pesos in Mexico City trading at 4:10 p.m. New York time, the highest since the shares first began to trade in December 2001. The shares have gained 24 percent this year, outpacing a 17 percent gain in Mexico’s benchmark IPC index.

To contact the reporter on this story: Thomas Black in Monterrey, Mexico, at tblack@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net

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