August 30, 2005

Coke Mexico in health push amid spiraling diabetes

By Chris Aspin

MEXICO CITY (Reuters) - Coca-Cola Co. has launched 20 new
health drinks in Mexico in what analysts say is an effort to
fight rivals and also fend off growing medical worries about
links between soft drinks and diabetes.

Doubling the number of brands it sells, Coca-Cola de Mexico
this month started to serve up the milk and fruit-based drinks
-- and also drinks with soluble fiber -- in a bid to become a
"total beverage company."

Coca-Cola said the launch was a multi-million dollar
business strategy and had nothing to do with diabetes.

"The non-carbonated drinks segment has grown approximately
20 percent in the last three years and that is obviously a huge
opportunity for us to grow in," Jorge Casimiro, the company's
Latin American communications director, told Reuters.

But analysts said the marketing strategy aims to fend off
growing low-priced soft drink competition and a Mexican public
increasingly looking for healthy beverages rather than
traditional fizzy soft drinks to quench their thirsts.

Mexico is the top per capita consumer of soft drinks in the
world, ahead of the United States, and diabetes has overtaken
heart disease as the No. 1 killer in Latin America's second
most populous country.

"Diabetes is the main cause of death in Mexico and there is
an increasing awareness about drinking healthy products," said
Mauricio Brocado, an analyst with Actinver brokerage.

"What we are seeing is that they (Coca-Cola) are betting on
noncarbonated products that are more healthy, more balanced,"
Brocado said. "The flavored water sector has been growing at
double-digit rates," Brocado said.

Around 4 million Mexicans are estimated to have diabetes,
according to the World Health Organization.


An eight-year study by the Harvard School of Public Health
recently linked frequent consumption of sugar-sweetened
beverages to diabetes in women.

"Those who reported drinking sugar-sweetened sodas more
than once per day showed an increased risk for ... diabetes of
more than 80 percent compared to women in the study who drank
less than one per month," the Harvard study said.

The World Health Organization reckons the cost of diabetes
in Mexico to be $12 billion per year and rising, as incidence
of the disease expands. Analysts worry that rising costs
associated with diabetes could prompt public health sector
efforts to lower soft drink consumption.

Coca-Cola de Mexico, analysts said, is including
health-oriented drinks in its portfolio, such as Ciel Dasani,
Minute Maid and Spacio Leve, because of the threat of lower
consumption of products including Coke.

"It is diversifying," said Manuel Jimenez, an analyst with
Vector brokerage. "There is a large segment of the population
that consumes these (health) products and it cannot go against
the market tendency."

Coca-Cola's Casimiro said the American Diabetes Association
has said foods and beverages containing sugar can be consumed
by diabetics and that the U.S Department of Health and Human
Services has said there is no evidence that sugar intake is
linked to diabetes.

"Most of it has to do with obesity, lack of physical
activity and genetic pre-disposition, so unequivocally we are
not doing this because of any kind of linkage between soft
drinks or sugar (and diabetes)," Casimiro said.

Coca-Cola de Mexico says consumption per capita of its
products is running at 527 eight-ounce servings per person per
year, higher than the average 411 servings in the United States
and Canada.

Coke has 13 bottling affiliate companies in Mexico, the
largest being Coca-Cola Femsa, the world's No. 2 Coke bottler
and the biggest in Latin America. Known as KOF, Coca-Cola Femsa
operates in nine Latin nations. Coca-Cola Co. has a 39.6
percent stake in KOF.