COCA COLA MEXICO: DUE DILLIGENCE FOR 2006 AWARD

UNCLAS MEXICO 004907

SIPDIS

SIPDIS

FOR EB/CBA SMITH-NISSLEY AND WHA/EPSC SALAZAR

E.O. 12958: N/A
TAGS: AMGT BEXP ECON ELAB ETRD KSEP MX SENV
SUBJECT: COCA COLA MEXICO: DUE DILLIGENCE FOR 2006 AWARD
FOR CORPORATE EXCELLENCE

REF: STATE 133146 AND PREVIOUS


1. (U) Answers given below pertain to Coca Cola de Mexico's
candidacy for the Secretary of State's 2006 Award for
Corporate excellence. They are keyed to the questions in
reftel.

(A) The Embassy sees little downside or embarrassment caused
by the selection of Coca Cola de Mexico for the award.
Nonetheless, it is well known in Mexico that President
Vicente Fox began working for the company as a route
supervisor in 1964, rising to be Mexican company president
before leaving the firm in the mid-eighties. While President
Fox remains popular among Mexicans, his detractors still
point to his formative experience with the firm as evidence
he is too close to big business in general and the United
States in particular.

(B) According to company officials, Mexico represents 12
percent of Coca Cola's worldwide sales. This is larger than
any of the Company's markets outside of the U.S. and Canada.
While the Company imports concentrate (syrup) for its drinks
from its plants all over the world, Coke believes that its
Mexican operations do account for a significant percentage of
overhead at the company's Atlanta headquarters.

(C) Neither Coca Cola's Mexico headquarters, its Mexico City
concentrate plant, nor any of its bottlers' facilities
throughout the country are unionized, though Company
executives underscore that employees are free to bargain
collectively should they wish. Coca Cola officials report no
history of any labor problems at the company or at its
bottlers. A press search confirms this.

(D) The Company and its Mexican bottlers currently have two
cases pending before Mexico's Federal Competition Commission
regarding its competitive position in the industry. Pepsico
and Pepsi's Mexican bottlers contend that Coca Cola is
dominant in the soft-drink market (carbonated beverages) and
abuses its position, while the Company contends that their
position should be taken relative to the beverage market as a
whole which includes fruit drinks, waters, milk, and soft
drinks where it does not hold a dominant position. The case
has received relatively little publicity, adverse or
otherwise. In November 2005, in a similar case, Coca Cola
bottlers was accused of using their dominant position to the
detriment of the Peruvian producers of "Big Cola," as well as
several small Mexican shopkeepers. In this case, Coca Cola
paid a USD 15 million fine. This case received some press
play at the time.

(E) Neither the Chief of Mission, his immediate family, nor
any others in the mission involved in the nominating process
holds shares of Coca Cola stock or has any business dealings
with Coca Cola.


2. (U) Please contact Jonathan Kessler at Embassy Mexico
with any additional questions: phone 52-55-5080-2810.


Visit Mexico City's Classified Web Site at
http://www.state.sgov.gov/p/wha/mexicocity

GARZA