Baesa

With a population of 160 million, entering the soft drink market in Brazil can be a great opportunity for BAESA, however the opportunity presents significant geographic, financial, and market driven challenges BAESA will have to overcome. Brazil, geographically, is a large and spread out nation leading to significant differences in income and preferences among regions. This makes national distribution a significant challenge to overcome without an already established network. For this reason the soft drink industry has historically been dominated by small competitors who focus on only a few regions.

Additionally, the current Brazilian market presents challenges BAESA hasn’t dealt with before. One major factor is the extreme difficulty of getting shelf space with retailers. Because beer products are more profitable, retailers prioritize shelf space for companies who offer both soft drinks and beer. BAESA has bottled and distributed beer in the Chilean market, but major beer brands aren’t readily available to acquire in Brazil and a partnership seems unlikely as most beer companies already have soft drinks of their own. Another major factor stems from consumers becoming very price conscious in the 80’s as a result of Brazil’s economic recession, which enabled low-price and low-quality soft drinks to proliferate the market. An important question BAESA has to consider is whether people can be persuaded to move to premium brands.

When considering the large investment required for distribution networks, the difficulty gaining shelf space, and the low soft drink prices in Brazil, profitability for a new entrant becomes a question. Additionally, BAESA is financially disadvantaged when compared to smaller regional companies as these regional companies are able to avoid paying taxes, while large national companies such as BAESA cannot. Altogether, there are significant financial pressures BAESA will have to address.

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