The Coca-Cola Co. (KO) is encouraged by the recent consolidation in Mexico's soft drink industry, expecting that the mergers and acquisitions will likely give the brand a sharper competitive edge in a country that contributes heavily to its bottom line.

"For us, anything that improves efficiency is good," Rafael Fernandez, vice president of public affairs and communication for Coca-Cola de Mexico, said in an interview at the company's Mexico City headquarters.

Mexico is a key growth market for Coca-Cola, with the company having reported an 8% increase year-on-year in volume sales here during the July-September quarter. Per capita, Mexicans are among the world's most avid consumers of Coca-Cola products.

Merger fever spread in the country's soft drink industry earlier this year with the fusion of Mexican Coke bottlers Arca and Continental to form the second-biggest Coca-Cola bottler in Latin America, Arca Continental SAB (AC.MX).

Shortly after, Coca-Cola Femsa SAB (KOF), Latin America's largest bottler of Coca-Cola products, agreed to acquire the beverage operations of privately held Mexican conglomerate Grupo Tampico, and then to buy regional Mexican Coke bottler Grupo Cimsa.

There are nine additional independent bottlers in the Mexican Coke system.

Executives with Arca Continental and Coke Femsa reiterated separately last week their willingness and their financial capabilities to undertake additional mergers and acquisitions.

PepsiCo Inc. (PEP) is also consolidating in Mexico, having announced in July plans to form a nationwide beverage company here via a joint venture with local bottler Grupo Embotelladoras Unidas SAB (GEUPEC.MX) and Venezuelan food and drink producer Empresas Polar.

Pepsi is particularly strong in the sports drink category, with its Gatorade brand, as well as in bottled water. Mexico is currently among the world's top consumers of bottled water, sold both in single-serve presentations and large jug containers that are a household essential for many.

Fernandez said Coca-Cola continues its efforts to branch out from carbonated beverages in Mexico, with the Nestea brand posting double-digit sales gains while sales of Jugos del Valle nectars and juices have doubled since Coke and Coke Femsa agreed to acquire that company together in 2006 for $470 million.

Jugos del Valle is now a $1 billion-plus brand, with sales in 20 countries, Fernandez said.

Coke Femsa and Coke teamed up again this year to purchase a dairy and juice firm in Panama.

The Coca-Cola Company is open to any acquisition that contributes value, Fernandez said, adding that "with any luck we will soon have another Mexican brand within the company's portfolio."

In the meantime, the beverage company is aggressively trying to meet internal environmental targets via recycling and water conservation measures.

The company collaborated with Coke Femsa in 2005 to build Mexico's first plastic-recycling plant. Today, the Coca-Cola system processes nearly 40% of the 55,000 tons of PET plastic recycled in Mexico each year.

Coke system participants joined up in Mexico again in October to acquire PetStar, a recycling business that processes approximately 30,000 tons of PET annually. Arca Continental chief executive Francisco Garza said last week that the plan is to double PetStar's production capacity by mid-2013.

Coca-Cola has also undertaken a pilot program that involves pick-up of plastic recyclables by home delivery personnel, who then compact the bottles inside the same delivery trucks.

The Coke system also aims to return all the water it uses both in products and production processes by 2020. In Mexico this effort is taking shape via cleaning reusable bottles with compressed air rather than water, recycling water to the point that it can sustain plant and animal life, and planting trees that act as natural water purifiers.

Fernandez said Coca-Cola has planted close to 30 million trees in Mexico since 2008 in an effort to counteract deforestation. The company estimates that the areas it has targeted for reforestation supply water to more than half of the Mexican population.

Worldwide, Fernandez said Coca-Cola's India business has already succeeded in returning all the water it uses to the community, while the Coke network in Brazil has also made significant progress on the water goal.

-By Amy Guthrie, Dow Jones Newswires; (5255) 5980-5177; amy.guthrie@dowjones.com