Carolyn Cnel, LLbsity Irtitiaiive, Ociober 25, 2012.

In December 2012, Antonio Ortega, be owner of Bebida Su1, had just finished rmding a rcpon done by his
general manager Pedro Corcez, about the possible investmei3i in a new pmduct line. Hola Knla. The idea of Hola-
Kota came about three months earlier when Antorâr' attended a seminar on youth obesi iy organized hy a lacey
high school that his rwo chiJó ren qtzendcd. iv en tktú agk kid oFten he«Jd of che rising obmJ‘}t P’ob}’’n
inMcüoo,AiuoGowmniüvrrydLruJod5yi*nzü::imJtraüngho rh<obci)mminMoiosh*drüpkd
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with Pedro Cortes. Pedro was eiciicd a1›oiit the idea, and IiLed ‹he opportunir,' to la unch something nen', espe-

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Company Backg«aund
Bebida Sol is a emu, priva‹ •ây owned carbonated sob drink company hated in Pucbla, ten. Aretired
e›'- eciitiw from a popular: fist-food miaurant churn, Rob'erio Orte . founded ii in 1998. During his freer
us a restaurant exccu‹'vc, RO£.trio learned diat Mexicans, regardless of social scams, loved their soda pop. Many
wotild drinL 'sJ ir› o,uench *heir thirst on a regularg basis, due to the lack of hygienic, drinkable water. With
cofce, funci:tonal drinks, fruit:fvegenb1e jui‹•es, and other iof: drird ) had local revenues of $39.Ibn in 201 i ,
representing a compound nnnunl grow roe (CAGR) of 6.39fi betu'cen 2007 rind 201 I. MnrR‹ connimpñ on
volumes increased with, a CAGR off.5h b'eewcen 2007 and 20 I I, reaching a oinl of 49.3 billion Iin'rs in 20 I I.‘

163' li (8.3'J ns p'eF yep while he United Sm es consumed 118 liters (5 i *gnlloas) according to smtistics
presented'hy-. the international organization Oxfam and be Mexican NGO Consumer’s Power. Due to be high
obesity prob'fi, henlgth and consumer groups in Mexicn had demgnnded thai the government impose a 20a mx

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The Proposal
Reading anon agcin The cxccuti z summary o*fchc rcpotc, Antonio recalled what his Father both h*m scycr£ times
during tier cwo yeats he was wo rktn¿ with him• "Oon’c grow the company For chs sa!‹c oF gmwJng Cnac only wftcn
in the Inst few years, Bebi‹in Sol hnd accumulated a sizable amounk of cash. With solid financial performance
and study cnsh flows, hi: Hi:er bud agretd ui extend him a five-year, I 6% annum interest tnrm loan to latin A Hola-
Kola. In the proi›i iH, I* .Cortex estimated hat with 20Hu of the needed capitni borrowed, the 20/80
‹kbt-equity siructute'wouid Unit in an 18. 2Wo weighted average cost of capita for this project.
price. low-calorie carbonated soft drinks mighk not be too promising ak this time. If it were the letter, it might
MI:pcArmimingIorBrbASlainimduxHo1rKoli
Pe'3ro hired a eonsulmnt to do a rnarkei study righk Ver Antonio disciissed the idea of Hola-Kola with him.
Tnc rü xultmt m ú ma al it the company couJd set I a tall ofú D0,00D liers oF Joe mm-ccua arbonzms
z montfi, ac a grQcmcd grice oF £ve peos a li tr. Tou youme oFztcs was mpcctcd Gr a gerJoó of Fue Years a
G)smeprix.Th<mak nudpooLa6ou«+omonGsxcdmplneandrm‹G<mmpan fv<miWnnpe*ü,
Since the existing bottling plant was running at 1009s capacity producing re iiiar sodns, :i e giopofi hired
for a freer of new, semi-automated bottling and icegging machines designed for long, high-quality rui*s. The toini
a more competitive position. NA pmper maintenance, these machines could pr‹›dvce *.t least 600,000 liters of
rboriated drinks cr monk Pedro £so estimated tint these machines would have a resale vine of four million
Thcnrwma<hineswouldlvsñou dinanuno‹xupin1ann‹nb ‹hema*n *sducñonfacigofBcdidaSol
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ills new prodiict line. He propestd keeping raw materini Lo vcn ord at a lever cqiinl to one month of produc-
iron. To encourage the independen i grocery stores ui eg:y tire new i›roduct line, he proposed offering a longer
collection period, letting the gro£nrs pay in GS day', instead of the 'ncrmal 30 days. As far as accounts payable,
h‹ wouia rollow the com » 's »ormai lit ana «de .s‹ a con i» 3s aa s.
The proposer also oudined be trious rsliinakes o 8 p:oduction and overhead cosis, rind selling expenses.
Raw materinis needed to prodiicr the sodas z ci-e es tim.ted ro be 1.8 pesos per liter, white Infor costs and energy
costs per month were estimated kr' be * fi0,fi00 pesgs 'and §0,000 pesos, i-espccrively. The inci-emental general
administrative and selling expe»s• were quite i*‹>â e«, e timat‹d to be 300,£i00 a year, u the no produce couid
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