Venezuela has historically been on the radar of soda giants PepsiCo (PEP) and Coca-Cola (KO) because the nation combined oil-driven income, a large urban consumer base, and very high soft-drink consumption compared to other South American and Central American countries. For several decades, Venezuela was one of the most profitable cola markets in Latin America and a branding beachhead before economic and political turmoil disrupted the market dramatically.
PepsiCo (PEP) first entered Venezuela in 1940 and worked through the Cisneros group to build Pepsi into the country’s dominant cola brand for several decades until Cisneros abruptly switched the bottling operations to Coca-Cola (KO) in 1996. In response to the sudden change, PepsiCo (PEP) re-entered the market by forming a nationwide beverage joint venture with leading local food and beverage conglomerate Empresas Polar. The new Pepsi-Cola Venezuela JV produces and distributes Pepsi beverages while separately owning Venezuelan snack and food entities such as PepsiCo Alimentos S.C.A. that manufacture products like chips and other packaged foods. That structure means Pepsi’s core bottling and route-to-market operations sit in a locally controlled Polar–PepsiCo joint venture, with PepsiCo (PEP) as a brand owner and minority equity partner, rather than through a wholly owned PepsiCo (PEP) subsidiary.
For its part, Coca-Cola (KO) is still present in Venezuela through a local bottler tied to Coca-Cola FEMSA (KOF), although the business has been deconsolidated and operates in a constrained, high-risk environment. Coca-Cola FEMSA (KOF) holds an investment, referred to in the company’s financial reporting as “KOF Venezuela.”
The U.S. campaign against President Nicolás Maduro and the increased U.S. involvement in Venezuela could set the stage for PepsiCo (PEP) and Coca-Cola (KO) to see enough improvement in supply chain management, plant modernization, and currency stabilization over the medium term to reset their strategies in the once key Latin American market.