SRA blocks Pepsi’s planned sale of HFCS stocks to Lucio Tan group

Citing Pepsi-Cola Products Philippines, Inc.’s (PCPPI) incoherence and ambivalence, the Regulatory Administration has blocked the plan of Pepsi-Cola Products Philippines, Inc. (PCPPI) to sell its unused high-fructose corn syrup (HFCS) to Lucio Tan group that could have saved the beverage firm from further losses.

In an interview, SRA Board Member Roland Beltran said the Board was unconvinced of PCPPI’s letter of reconsideration and ordered “immediate destruction” of the unused sweetener.

"The Sugar Board is unconvinced of Pepsi’s letter of reconsideration. The Sugar Board noticed the ambivalence of Pepsi from the start. It was not sure of the remedy sought for,” said Beltran.

Last week, PCPPI was said to be selling 9,196 MT of the stocks to Lucio Tanowned Asian Alcohol Company (AAC). AAC is the second biggest distillery in the Philippines located in Negros Occidental. It has distillation process that uses molasses, yeast, water and other ingredients.

Beltran admonished PCCPI for their being ambivalent and incoherent decision on what to do with their 15,000 metric ton HFCS.

Beltran explained that the SRA Board already denied PCPPI's request to re-consider its decision to reclassify PCPPI's HFCS stocks from D to B and have it destroyed immediately. D sugar is meant for world market exports, while B is for the domestic market.

At first, he said, the SRA reclassified as C the HFCS, then upon Pepsi’s request, they had it reclassified as D upon representation that it will sell the HFCS to Vietnam. Then PCPPI filed another request to further reclassify from D to B without providing any plans of disposal. C is reserved sugar and for other purposes.

To recall, PCPPI, together with other soft drink manufacturers, earlier requested to dispose their HFCS, which they use as a cheaper alternative to sugar, to avoid the higher tax newly imposed on sugar-sweetened beverages (SSB).

Drinks with HFCS have been slapped with a tax rate of R12 per liter, which is higher than the tax rate of R6 per liter for SSBs.

Because of this, most beverage companies shifted their formula back to 100 percent sugar, from the mix of 60 percent sugar and 40 percent HFCS.

SRA approved this request with the issuance of Sugar Order (SO) No. 3 in January. The order showed that SRA has already allowed some companies to export their unused HFCS.

But PCPPI, even if it was ready to do so, faced some challenges. First, it was supposed to export its unused HFCS to Suntory PepsiCo Vietnam Beverage but the latter found it difficult to accept it due to strict importation rules of Vietnam.

PCPPI also found it hard to ship the HFCS back to China where it got it because it has to be stored in a stainless steel packaging.

Finally on March 27, SRA already decided that PCCI should destroy all of these unused stocks, which stood around 15,000 metric tons (MT).

While committing to follow SRA's order, PCPPI made a few other requests to the agency, which already "confused" the agency, Beltran said.

SRA also received another PCPPI letter informing the agency that one company will under take the destruction of HFCS.

"At this point, the Sugar Board is already confused of the approach taken by Pepsi. Pepsi has to make a coherent and plausible presentation, not in a confusing manner as it had earlier dealt with the regulatory agency," he added.