PepsiCo Inc.'s biggest franchise bottler outside the United States, Grupo Embotellador de Mexico SA de CV (Gemex) has completed a two-year, US$70 million investment in PET packaging. The company is making the hefty investment despite a short supply of PET in Mexico that forces the firm to pay a premium to import bottle resin.
The firm has been aggressive in its bid to drive Mexico's huge soft drinks market into nonreturnable packaging and integrate PET bottle production with its bottling operations. As previously reported, Gemex has bought 11 Husky preform injection lines, 19 Sidel, MAG and Aoki blow molding machines and 11 Cincinnati Milacron injection machines for twist-off cap production.
The blow molding equipment has been installed in-line with filling units at bottling plants in and south of Mexico City. Several Husky machines are to arrive at the Tultitl n, Mexico, plant of Gemex's packaging subsidiary Procesos Pl sticos SA de CV.
Meanwhile, cap-making facilities at Tultitl n will be in place by year's end, Gemex said.
Gemex has reported success of its new PET 2-liter returnable and 1-liter nonreturnable bottles, representing 4 percent and 7 percent, respectively, of total soft drink sales volume. In the first nine months of 1995, the bottler sold the equivalent of 144.9 million 8-ounce unit cases.
Nonreturnables, including half liter, 1-liter, 1.5-liter and 2-liter PET bottles, now represent 42 percent of total soft drink volume mix, the company reported.
But transforming its packaging from glass to plastic has a serious, if temporary, downside for the Pepsi bottler. A shortage of PET resin in Mexico is eroding Gemex margins, adding almost a third to the cost of its bottles, a company spokesman said.
The spokesman said Gemex must pay a substantial premium for imported resin, due partly to short supply abroad and to Mexico's peso devaluation crisis.
``The problem is that the scarcity [of resin] is costing us 30 percent on the standard cost for the nonreturnable preforms and bottles,'' he said. ``But this is a temporary situation and that is why we'll keep pressing for nonreturnable [PET] presentations.''
Referring to plans of several supplier companies to install new PET resin capacity in Mexico, the spokesman said Gemex investors dearly want to see its arrival sooner rather than later.
Two leading resin producers, Eastman Chemical Co. of Kingsport, Tenn., and Shell Chemical Co. of Houston, plan to start up PET resin plants in Mexico.
Gemex recently concluded a joint deal with Pepsi giving the cola giant a direct 25 percent equity stake in the firm in return for US$154 million and three Pepsi franchises north of the capital in the states of Durango, Aguascalientes and Zacatecas.
