Coke FEMSA exits Philippines

MANILA, Philippines — The Atlanta-based The Coca-Cola Co. is again taking over full control of its Philippine unit after Mexican bottling giant Coca-Cola FEMSA agreed to sell back its 51 percent stake in Coca-Cola Philippines.

In a statement yesterday, TCCC said its Bottling Investments Group (BIG) will take over bottling operations in the Philippines after Coca-Cola FEMSA’s board voted to exercise the option to sell its 51 percent stake in Coca-Cola Philippines back to TCCC.

 “We respect Coca-Cola FEMSA’s decision, and we appreciate the progress made during their five-year tenure in the Philippines,” John Murphy, president of the Asia Pacific Group for TCCC, said.

“The market is better positioned than ever before for future success, and we are confident about the potential ahead. The Coca-Cola Co. will work to ensure a smooth transition of the Philippines bottling operations to BIG, for all customers, business partners, consumers and, importantly, for all those who work in the bottling operations,” he added.

BIG’s planned takeover of operations in the Philippines would still be subject to regulatory approvals.

TCCC put up BIG to ensure select bottling operations receive appropriate investments and expertise for long-term success.

The Philippines is TCCC’s first venture in Asia.

Winn Everhart, president and general manager of the Philippines at TCCC, said the firm is confident in opportunities and plans in place in the country.

“With BIG’s depth of experience and solid track record in Southeast Asia, we believe they will bring significant value to our business,” Everhart said.

For his part, BIG president Calin Dragan said the Philippines is a welcome addition to the company’s portfolio as Southeast Asia is considered an important market.

“We want all customers and consumers to know that we are fully committed to ensure a seamless transition with Coca-Cola FEMSA. Most importantly, we want all employees to know that we appreciate the progress they have made in moving the Philippines business forward, and we believe that this will continue to improve as part of BIG,” Dragan said.

Earlier, Coca-Cola FEMSA said it was laying off some employees as the higher excise taxes slapped on sugar beverages under the government’s new tax law took a toll on operations.

Also, the unstable local sugar supply has prompted Coca-Cola FEMSA to pull out its stake in the Philippine unit of the beverage giant, Agriculture Secretary Emmanuel Piñol said.

“One of the issues raised was our unstable sugar supply. That is their decision and we cannot do anything about that,” Piñol told The STAR.

“Maybe this is a signal to the sugar industry that we should get our acts together and improve,” he added.

Local raw sugar production remains on a downtrend as it declined 11 percent to 2.58 million metric tons as of end-July, one month before the crop year ends.

This despite local sugar demand increasing three percent to 2.28 million metric tons. In terms of refined sugar, production also slightly decreased two percent to 926,000 MT.

Sugar prices in the mill gate, however, have jumped 70 percent to P1,950 per 50-kilogram bag.

Piñol said he had talks with Everhart a few weeks ago to collaborate and ensure enough production of sugar.

“They committed that they would like to engage our sugar farmers in a corporate farming type where farmers would produce for them, then they will buy the supply,” he said.

From the perspective of financial analysts, the exit of Coca-Cola FEMSA is not positive  for the economy as it gives off a bad signal.

“I hope it will not be big but it does give a bad signal,” said Justino Calaycay of Philstocks Financials.

He cited the challenging domestic environment that includes higher taxes on sugar

“This is something we must really be concerned about. That we must, our government, get its act together and set a clear road, policy wise for all stakeholders,” he added.

An analyst from a foreign bank echoed the same thing. He said that it seems the government was unable to foresee the impact of higher taxes on businesses but only on consumers. With Louise Maureen Simeon and Iris Gonzales.