U.S. FIRMS WEIGH OPTIONS IN MEXICO

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Mexico's economic turmoil continued to wreak havoc on the plans and budgets of U.S. marketers in the region last week.

As companies are waiting to gauge long-term effects of the plummeting peso, most are reacting with caution rather than tightening their belts right away.

Eastman Kodak Co., for one, gloomily predicts "a high-inflation, recessionary environment for the first part of the year." Kodak anticipates price increases and lower volumes and said it is revising business plans and budgets in the face of the devalued peso.

But while most of Mexico's domestic sales are taking a severe beating, exporters in the country may find themselves at an advantage.

Kodak, for example, markets Mexican-made camera and film products locally and abroad and could benefit from selling its low-cost products at high prices in the U.S. The company didn't disclose if it would change its domestic production to take advantage of the peso's low value.

A spokesman for Sara Lee Corp. also said, "It's too early to know what the devaluation's short-and long-term effects will be" on sales or marketing.

Mexico accounts for about 2.5% of Sara Lee's $15.5 billion worldwide sales of food, clothing and personal and household products, with a mix of domestic and imported items sold through both local manufacturers and distributors.

Weight Watchers Food Co., which began substantial product distribution in Mexico late in 1992, said it has been affected by the economic problems, but is waiting to determine the extent before changing its marketing plans. The H.J. Heinz Co. unit sells frozen foods through distributor Consupharma and refrigerated foods through Commercializadora DSC Internacional; each must buy the U.S.-made products to resell to Mexican consumers.

If a battered currency exchange rate is spooking some U.S.-based multinationals, others are almost entirely unfazed. Coca-Cola Co. said its Mexican sales don't have any dependence on U.S.-made products.

"The local character of the soft-drink business tends to offset any potential impact, since we're sourcing locally and selling locally," said Polly Howes, Coca-Cola's media relations manager.

Sears, Roebuck de Mexico is moving forward with plans to open four stores in the market this year. The retailer's expansion is largely unaffected in part because it sells mostly domestic products.

U.S. music store chain Tower Records opted to keep its Mexican prices down in the wake of the peso's drop.

The retailer made a well-timed decision to shift its stock prior to the holiday season to music products sold by domestic distributors rather than U.S. companies.

"If you start jamming your prices up, all you're doing is alienating your community-and losing sales too," said Robert Olsen, regional director at Tower Records de Mexico.

"Buying locally for our massive Christmas promotion probably saved our shirts," Mr. Olsen said.

Unlike many U.S. marketers in Mexico, Tower is addressing the economic crisis actively through a new limited marketing campaign. Tower is placing ads developed in-house in the English-language national daily The News, as well as Spanish-language point-of-purchase posters to promote its momentarily stable prices.

For the moment, the prevailing response of worried U.S. companies is no marketing response at all.

"Everyone is looking at the second quarter to break us out of this," Tower's Mr. Olson said. "I can compare this to what our economy was like in California recently, when we had two years of absolute hell."

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