Panamerican Beverages, Inc. (Panamco, PB)

Case outline


Panamco Beverages, Inc. is a holding company of Coca-Cola bottling companies in Mexico, Brazil, Colombia, Venezuela, Nicaragua, Costa Rica and Guatemala with a combined work force in excess of 46,000. Panamco started operations in 1941 in Panama, and went through a successful initial public offering in the United States in 1993. Panamco used the proceeds to acquire additional Coca-Cola bottlers in Latin America, and achieved an average annual sales growth of 20% between 1994 and 1999. Over the same period, the annual growth of total assets was 36% and equity 39%, but that of operating income was only 4% and net income 15%, and earnings per share remained practically flat. Net income actually decreased 30% in 1998 compared to 1997.

Panamco has its subsidiaries located in unstable and poor, but developing markets. It stands to gain handsomely as living standards improve in Latin America and consumers switch to soft drinks that reflect their aspirations (e.g. drinking from a nonreturnable can). Recently, however, the economy has been in recession in several countries Panamco serves, such as Brazil and Colombia. New acquisitions in 1997 in Venezuela, and in 1998 in Guatemala and Brazil required promotional and distribution expenditures (for instance in installation of refrigerated containers and distribution machines). This has eaten into net profits, such as a 43% drop in profits in Venezuela in spite of sales growth of 58%. Panamco claims a dominant position in each market it serves: 78% in Mexico, 53% in Brazil, 61% in Colombia, 69% in Venezuela, 87% in Costa Rica, 81% in Nicaragua and 41% in Guatemala. Several Coca-Cola brands are included in sales (e.g. Fanta, Sprite, Fresca and Lift), but Panamco also distributes beer and mineral water.

Over the past five years (i.e. late 1990's), Panamco's strategy was threefold: 1) organic growth (i.e. modernizing and expanding plants and fleets demanded $ 1,200 millions); 2) acquiring minority interests (i.e. raising its ownership to 98% of its subsidiaries in 1998 required cash outlays of close of $ 776 millions); and 3) acquisition of existing bottlers previously discussed (e.g $ 1,400 millions some of which paid with Panamco common shares). This combined spending of $ 3,376 millions was financed by retained earnings ($ 453 millions), new stock issues in 1993 and 1996, and new debt. More than three quarters of the debt was obtained from the United States, including $150 millions of notes due 2003 issued in 1996, $ 300 millions notes due 2009 issued in 1997, and $ 200 millions three year loan arranged through Coca-Cola Financial Corporation in 1998. The Coca-Cola arranged loan was used to repay a short term bank loan. Yet, short term borrowing remains above $ 300 millions resulting in significant negative net worth in 1999.

Financial data:

Condensed financial statements without notes are presented for selected years in following tables:

Table T-PB.1 - Panamerican Beverages, Inc. Balance Sheets
Table T-PB.2 - Panamerican Beverages, Inc. Income Statements

Normalized statements and selected ratios based on above financial statements are presented in

Table T-PB.3 - Panamerican Beverages, Inc. Normalized Balance Sheets
Table T-PB.4 - Panamerican Beverages, Inc. Normalized Income Statements
Table T-PB.5 - Panamerican Beverages, Inc. Ratios

Information sources:

Visit company web site at

SEC 10-K file available at

Panamco stock is traded on the NYSE exchange under the symbol PB. Find stock quotes and recent news from or or from the exchange.