Pepsi has shut down a distribution center in a city at the northern edge of Mexico's Guerrero state — less than three months after Coca-Cola Femsa pulled out of the same city for the same reasons.
Nearly three months after Coca-Cola Femsa — the world's largest Coke bottler — shut down operations in southwest Mexico, a Pepsi bottler is following suit.
In a statement on Monday, Grupo Gepp, which bottles and distributes Pepsi products in Mexico, said it was temporarily closing commercial operations in Ciudad Altimirano, in Guerrero state, because "conditions required for the continued distribution" were not present. PepsiCo told Bloomberg it "respects" the bottler's decision.
Violence, extortion, and a lack of safety for employees reportedly led to the decision.
Employees told Mexican newspaper El Financiero that several months ago they started to receive threats, demands for payment, and attacks from organized-crime groups that wanted to raise prices for soft drinks. Pressure from criminal groups reportedly began to increase on May 29, leading the firm to shutter its facility in the city after 40 years of operations.
The shutdown comes two and a half months after Coca-Cola Femsa ended operations in Ciudad Altamirano, located at the northern edge of Guerrero state, because of harassment from organized crime and a lack of response by authorities.
An executive from the company, speaking on condition of anonymity, told local news outlet Bajo Palabra that the firm increased sales in the Tierra Caliente region after Coca-Cola Femsa left but said there was no official explanation for the shut down — though rumors of the closure had circulated on social media the week before.
"Since three days ago the refrigerators in the stores have been collected, in the store there is no papers or product," the executive said. "There is only dust."
The shutdown in Ciudad Altamirano leaves more than 100 workers without jobs and will affect the supply in six surrounding municipalities. Seventy employees in Toluca, in the state of Mexico, were also laid off, according to Bajo Palabra.
The executive told Bajo Palabra that the local, state, and federal governments were aware of the insecurity "and never did anything" — including "a high federal official [who] knew what was happening."
Joel Moreno Temelo, the president of the Mexican Employers' Federation, said the shutdown was the result of inaction by the federal government.
"We are very concerned, and we are against what is happening, but there it is the federal government that is not acting," he told Bajo Palabra, adding that Coca-Cola Femsa and Grupo Gepp leaving was a severe blow to the local economy.
The involvement of organized crime necessitated a federal response, Moreno said, calling on the government in Mexico City to change its security strategy for the Tierra Caliente region, which is made up of nine municipalities spread across several states and where at least four criminal groups reportedly operate.
Employees told El Financiero that the state and federal governments had reinforced surveillance and security measures in the area, but impunity and violence remained pervasive.
The Guerrero state government said that Pepsi had never asked the federal police for assistance.
"After the closure of the company Coca Cola Femsa ... a group of gendarmerie was sent to that zone of Guerrero," Roberto Alvarez Heredia, state security spokesman, told Bajo Palabra. "That group had special attention for businesses and locals that had problems" with extortion.
"I have no information in the sense that the company Pepsi Cola has asked for security to protect against the pressures that criminal groups exert on businesses," he said.
Alvarez Heredia said in another interview that state officials were not aware of the official reason for the shutdown but were looking into it with the goal of correcting the situation.
Guerrero is one of Mexico's most violent states and consistently among those with the highest number of homicides.
The number of homicide victims in the state rose more than 14% from 2016 to 2017, and the homicide rate rose from 61.67 per 100,000 people to 64.26 over the same period. (The national homicide rate was 20.16 in 2017.) Over the first four months of 2018, Guerrero had nearly 19% more homicide victims than in the same period last year.
Coca-Cola Femsa has had problems with crime and violence in other parts of Guerrero in the past. And a regional administrator from Pepsi was kidnapped in the state in 2015. While businesses largely remain interested in operating in Mexico, rampant crime and widespread impunity have forced companies to shutter their operations in some parts of the country.
At the beginning of May, Grupo Lala, a diary firm that is one of Mexico's largest private companies, shut down a distribution center in Ciudad Mante, near the southern edge of Tamaulipas in northeast Mexico. Pepsi, Dominos Pizza, and other firms have also shut down operations in that area.