Topo Chico Breakout
Procor, a predecessor of our long-time portfolio company Arca Continental, began bottling Topo Chico in the late 1800’s. Coca-Cola recently purchased U.S. rights to the brand to increase awareness and expand the availability of the drink. Coke will have to carefully manage this growth so the brand does not lose its unique positioning in the market. Topo Chico has a fantastic taste – stop by our office anytime to try one!
Coca-Cola Co.’s secret weapon in the sparkling water war comes from a limestone spring hidden under a mountain in northeastern Mexico. Topo Chico, a cult favorite in Texas that was acquired by the beverage giant in 2017, takes its name from the Cerro del Topo Chico, which rises nearly 4,000 feet above the outskirts of Monterrey. The naturally fizzy mineral water has been bottled from the same underground source since 1895, with the brand mostly known in northern Mexico and a handful of U.S. states.
Now, that’s starting to change. Coke acquired Topo Chico for $220 million two years ago—a bet that the brand can help the beverage giant fend off rival PepsiCo Inc. as both companies navigate the shift away from sugary drinks. With the sparkling market in the U.S. drawing more and more customers, Topo is getting pushed into the spotlight. Coke typically uses its vast distribution network to blanket the U.S, and just about everywhere else on earth, with beverages that range from Diet Coke and Powerade to Smartwater and Minute Maid. When it comes to Topo Chico, the challenge is preserving the local vibe and Mexican heritage that gives the brand its cachet with consumers. The company says it’s taking a measured approach as it expands—an effort to preserve some of the scarcity that has added to the brand’s mystique over the years.
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Topo Chico’s history started in the 1400s, when, according to legend, an Aztec princess was cured by its thermal waters. The springs were a bathing destination for centuries until a Texan came along in the 1890s with a business plan: bottle the water as a drink. The business was acquired by a pair of Mexican workers in 1920 and six years later they got the first rights to bottle and sell Coca-Cola in Mexico, using the same plant where Topo Chico is made today. That company later became Arca Continental SAB, the second-largest Coca-Cola bottler in Latin America and the original parent company of the Topo brand.
Topo Chico’s offices are housed in a former boutique hotel about 15 minutes from downtown Monterrey—a marble two-story building with red bricks for window frames, baroque balconies and antique street lamps and palm trees outside. The water is processed at a nearby plant, with a hint of CO₂ added to make up for some of the minerals lost during purification, according to the company. Topo Chico’s fans swear by its clean taste, and even say it can be used as a hangover cure. “Coca-Cola is aware they’re buying a brand that needs to be taken care of,” said Ramon Maraboto, who oversees the Topo plant for Arca. “This brand has its own fingerprint.”
Arca, which is still in charge of bottling the product, has poured about $42 million into the Topo Chico operation to meet the increased demand that is bubbling up since the Coke purchase. Over the last year, Topo Chico U.S. sales jumped 39% to nearly $130 million, according to data
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Cult-Favorite Topo Chico Breaks Out of Texas With Help From CokeExpect to see more of the regional favorite as the company taps into bigger distribution channels.