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Coca-Cola Femsa Begins Coffee-Dispenser Business in Mexico

Oct. 26 (Bloomberg) -- Coca-Cola Femsa SAB, the largest soft-drink bottler in Latin America, plans to install as many as 35,000 coffee machines in corner stores in Mexico under the brand name Blak.

Coca-Cola Femsa is competing with Switzerland’s Nestle SA to sell coffee products such as cappuccino and latte, said Javier Astaburuaga, chief financial officer of parent company Fomento Economico Mexicano SAB, known as Femsa. The Mexico City-based bottler is setting up the dispensers in cities where it delivers Coca-Cola Co. products.

“We believe that in Mexico, even though Nestle has a very strong presence in this segment, there are opportunities for us because of our direct service to corner stores,” Astaburuaga said in an interview in Monterrey late yesterday.

The incursion into the coffee market is part of Coca-Cola Femsa’s push into non-carbonated drinks in cooperation with the world’s biggest soft-drink maker. The Mexican company, which has a 50-50 partnership with Coca-Cola, said on Oct. 14 it signed an agreement for exclusive talks to purchase Grupo Industrias Lacteas, a maker of dairy products in Panama.

Coca-Cola Femsa fell 1.5 percent to 95.19 pesos in Mexico trading yesterday, paring its gain this year to 10.6 percent.

Jugos del Valle

In 2007, Coca-Cola Femsa purchased Mexico’s second-largest juicemaker Jugos del Valle and has since increased sales to Latin America in a partnership with the region’s bottlers.

Coca-Cola Femsa began a pilot program for coffee last year and will have 5,000 dispensers in Mexico City by December, Astaburuaga said. That number could jump by five to seven times over the next two to four years in Coca-Cola Femsa’s territories in Mexico, he said. The company will determine after the first quarter how quickly it will roll out the machines, he said.

“I anticipate it will be aggressive,” Astaburuaga said, referring to the speed of expansion.

If the Blak coffee brand follows the Jugos del Valle model and other Coca-Cola bottlers in Mexico join the partnership, the number of dispensers may increase to 50,000 or 60,000, he said.

Astaburuaga declined to say how much sales the coffee business may generate.

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

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

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