Femsa Spreads Through Mexico

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As per media reports, Mexican bottler Femsa Comercio, who also co-owns Coca-Cola FEMSA S.A.B. de C.V. (KOF) with The Coca Cola Company (KO) is geared to expand its Oxxo convenience stores with the intention of increasing penetration in South America.

Femsa has reportedly allotted $400 million toward the expansion and improvement of its retail units in 2013.

Oxxo is a primarily-franchised chain of convenience stores in Mexico, wholly-owned by Femsa. The company has over 10,601 stores located across Mexico and Colombia, including a substantial number of new stores totaling 1,040 in 2012.

It operates with the help of 13 strategically-located distribution centers. The Mexican spread was strategized to support Oxxo's business operation.  Management has plans to extend the retail spread outside Mexico.

Femsa delivered robust double-digit revenue growth and operating income in the recently-concluded fourth quarter of 2012.

Femsa has been diversifying its operations and has recently increased its focus on selling prepared foods. Management reveals that the company will consider further expansion into the processed food segment.

The company seems to be on an expansion spree both geographically and in terms of product diversification. Coca Cola FEMSA stepped beyond Latin America with a 51% interest in the Coca Cola bottling operations in the Philippines. Again Femsa Comercio forayed into the drugstore business through the acquisition of a controlling stake in Farmacias Yza in Southeast Mexico.

In Jan 2013, Coca-Cola FEMSA entered into a definitive agreement to acquire another Mexico-based Coca-Cola bottler Grupo Yoli, S.A. de C.V. for $700 million. The deal also added 2 bottling facilities and 20 distribution centers owned by Grupo Yoli to Femsa’s asset base. The deal will extend Coca-Cola FEMSA’s reach to the state of Guerrero as well as in parts of the state of Oaxaca — the two markets in which Grupo Yoli primarily operates.

The Coca-Cola Company has ownership interests in many other bottling operations, including Coca-Cola Enterprises Inc. (CCE), Coca-Cola Hellenic Bottling Company S.A. (CCH), and Coca-Cola Amatil Ltd. Currently, Coca Cola Femsa carries a Zacks Rank #3 (Hold).

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