Bottler case sales (BCS) increased 7% in DPS’s Mexican and Caribbean business – compared to 1% volume growth in the US and Canada.
The company says it has been taking its time to make sure the Mexican business has a solid foundation for growth, allowing it to continue its upwards trajectory in the country.
“Mexico… is becoming an increasingly important part of our business,” said Marty Ellen, chief financial officer, DPS, in yesterday’s earnings call.
“And obviously, their results are fantastic. In this last quarter on a currency neutral basis, sales up 5% in dollars and operating profit up 29%.”
In Mexico, DPS sells primarily in the carbonated mineral water, flavored CSD, bottled water and vegetable juice categories. Key brands include Peñafiel, Squirt, Clamato and Aguafiel.
The success so far of Peñafiel, DPS’s Mexican mineral water brand, shows no signs of abating.
“Lot of growth there in Peñafiel,” continued Ellen. “We've done a great job with brand Peñafiel, including penetrating the largest C-store chain in Mexico, OXO. We're going to start lapping some of that in the second half.”
In Mexico, the company has been innovating and adding value to products, said Ellen, and improving the gross margins on products.
However, there is room for improvement in DPS’s distribution network, said Ellen. But he sees this as a sign that there is potential for further growth.
"We are not actually very well distributed throughout the country at all,” he said. “We're concentrated in the middle part of the country, Mexico City, Guadalajara, to the north a little bit. There's actually lots of white space for us in Mexico, and we think that's a good runway.
“But over the last few years, we wanted to make sure that our business down there had a solid foundation, the house was in order. We believe that's critically important to establish that foundation for growth.
“This business, the margins now are in the low-double-digits, and I remember when they were in the single-digits. This is a textbook case of classic improvement up and down the business, solid team, solid foundation, and we've got some growth opportunity there.”
DPS saw net sales increase 1% in its latest quarter, Q2 2015, and 3% for the year to date. Carbonated soft drinks increased 1% in bottler case sales volume and 3% in non-carbonated beverages.