Lima, Peru

We visited a series of companies in both Peru and Bolivia, and also spent time in a variety of supermarkets, large general retailers, and mom-and-pop stores to better understand the consumer and the overall retail landscape. Both countries have benefitted from economic growth fueled by natural resource prices, and this expansion has created a growing middle class. In addition to the overall effort to familiarize ourselves with the consumers in both places, we had a series of management meetings and plant visits between the countries. These discussions and tours were with some companies in which we are already invested and others that we would like to own once the prevailing valuation offers an appropriate margin of safety.

Interest in Coca Cola Bottling

Having spent a great deal of time on the ground around the world visiting Coca Cola bottlers, we have developed a competency in the overall beverage industry and have established a particular understanding of the dynamics of bottling in various countries and regions. During this trip we visited both the primary Coca Cola bottler in Peru (Corp Lindley) and Bolivia (Coca Cola Embonor). We also spent time with AJE Group, a marketer and seller of branded non-alcoholic drinks in several corners of the world that was founded in Peru.


The Peruvian Coke bottler, Corp Lindley, was founded in the early 1900’s. The company did not originally bottle Coke products, but joined the Coca Cola system around the turn of this century; it absorbed the incumbent Coke bottler, Embotelladora Latinoamericana SA, in 2004 and is now the sole bottler in Peru. The Company has 290,000 points of sale in the country, which is similarly fragmented as many other Latin American regions.

Lindley’s long history as an independent bottler before its original strategic alliance with The Coca Cola Company in 1999 meant it spent a century creating and marketing its own products and brands, which has led to a unique market share profile for carbonated soft drinks (CSD) in the country. Peru is one of only two markets in the world where the best-selling CSD for the presiding Coke bottler is not classic/red Coke. In Peru, the top seller is Inca Kola, which the company launched in 1935 to celebrate the fourth centenary of the founding of the city of Lima. It is wildly popular in the country—representing 35% of the CSD market—and its brand was ever-present during our travels.

Inca Kola had billboards throughout Lima, and this was perhaps the most prominent one we saw.
Inca Kola-branded coolers are in the front of many mom-and-pops.

Lindley is attempting to launch a new flavor under the Inca brand, called La Moradita. It is an effort to capture share from a similar existing brand owned by AJE Group. They were just beginning to soft-launch the product while we were there, and it was only available in limited quantities in a few stores.

Billboard announcing the launch of the new Inca Cola flavor, La Moradita. Notice the advertisement has the drink in a pitcher, which is a nod towards the popularity of fresh-squeezed juice in Peru.

Lindley is building an enormous new facility 45 miles south of central Lima in an area called Pucusana. The company will eventually have several hundred million dollars (USD) invested in the facility, and is planning to consolidate several other current bottling locations into the new facility. It is a very large project and the facility is several months from being completed – we drove to the area to get a better feel for the transportation system around the plant. Lindley does the majority of its volume in greater Lima, and the highway system seems sufficient between the plant and Lima.

We took this first picture from the top of a hill at the back-end of a poor residential area immediately adjacent to the plant (new building is in the background). The juxtaposition of what will be a world-class bottling plant next to a tenement-type village seems to be an accurate reflection of the development happening in the country. These pictures were taken from the same spot – the new plant to the south and the housing pointed north.
Additional pictures of the largely makeshift homes surrounding the new plant.

This facility is located most of the way to a summer vacation area called Asia. It was about an hour and thirty minute drive to this facility from central Lima to the Asia developments down in the Canete province. Asia’s beaches and boardwalks are closed outside the summer season, and we were in the country about a month before the main summer season begins in mid-December. However, we got a sense of their popularity by the sheer number of restaurants, bodegas, chicharronerias, and kioskos that lined the road from kilometer 30 through kilometer 100 and beyond. Coca Cola and Lindley have done a good job branding these storefronts with Coca Cola and Inca Kola signage. Interestingly, these shops and stores were often organized in clusters, with the same-looking signage and an unclear distinction between them – although most seemed to be named specifically after their proprietor.

On the stretch of highway between Lima and Asia, most of the shops were “painted” red for Coca Cola or yellow for Inca Kola. Alongside the primary beers, these two nonalcoholic brands were pervasive in this highly trafficked vacation corridor.
This Cusquena billboard (top), with a hammock and palm tree, is one of the more elaborate billboards that we have run across (it is hard to tell in the photo but it is three dimensional). Cristal and Pilsen are two other very popular and heavily marketed beer brands.

Other Observations from Lima:

  • In the larger, more formal grocery stores, we noticed that private labels ranging from ketchup to laundry detergent to breads are very prominent. This seems to be a growing threat to branded food and beverage companies, although the mom-and-pop market remains strong. In fact, according to several of the companies we met with and despite both the entry of larger retailers like Metro and Falabella and a growing per capita GDP, this more informal channel is growing in strength. Part of this outcome is thanks to a move by Credicorp, a large Peruvian bank, to provide financing to mom-and-pops to help expand their stores and add inventory. The bank is also, perhaps most importantly, helping these independent operators offer auxiliary services like paying utility bills, cell phone services, etc.
Private label ketchup in Metro, a grocery and general retailer with a presence through a large swath of Latin America
Interesting juxtaposition of a traditional mom-and-pop retail store and the new, large scale retail malls that are becoming more prevalent with an expanded middle class.
  • In Lima, like in many other developing Latin American cities, there has been an influx of population from the countryside, especially the Peruvian highlands, into the city and surrounding areas. Largely equivalent to favelas in Brazil, Peruvians call this tenement housing invasiones. There has been significant growth in these areas in recent years, with many of the houses built progressively up the hills that surround Lima (especially on the Eastern side of town). These “villages” have historically been largely ignored by the regional and local government, although they have started providing some basic social services when these areas get big enough.
  • It does not always work better this way, but we prefer to rent a car when visiting new places to give us the flexibility to drive in and around a city or region. This preference led to an interesting encounter on this particular trip. On our previously detailed ride to the Asia area, we encountered a traffic stop/roadblock. We were pulled over for not having our lights on during the day and told there was a fine. Initially we were informed it was 300 Nuevo Soles (FX rate at the time: 1 Nuevo Sol = $0.34 USD) to pay for it on the spot or 500 Nuevo Soles to pay for it back in Lima, although it was not clear if we could even do so before our flight left town the following day. Ultimately, we did not have that much in Nuevo Soles so we were going to just take the ticket and let the rental car company sort it out. However, he clearly wanted us to pay on the spot and told us we could pay $100 in USD plus 50 Nuevo Soles. At this point it was clear that this was a very polite shakedown. After some additional negotiation we finally settled on $100 which seemed to be an acceptable result for each side.
  • Construction in the some of the less affluent neighborhoods in Lima (better than the ramshackle invasiones but not as nice as the apartments and brownstone-type structures in neighborhoods like Miraflores) seems to progress as personal savings allowed. In most of these neighborhoods, rebar was popping out of the weight-bearing walls and columns on second floor above what would be the roof line (often there is no typical roof), essentially waiting for the availability of funds to complete the next floor of the building or home.