Comebacking Coca-Cola to announce plans for PH operation after FEMSA exit

The Coca-Cola Company said it will announce in the months ahead regarding their transition plan in the Philippines, including investments, capex and manpower, as they go back to operate the Philippine unit after buying it back from Coca-Cola FEMSA of Mexico.

“We will share more information in the weeks and months ahead regarding the transition plan, ensuring zero disruption to our employees, the business and our partners,” said Scott Leith, senior director for financial communications of the Atlanta-based beverage company, in reply to an email questionnaire by Manila Bulletin Business regarding the company’s investments, capital expenditures, and manpower hiring.

Leith, however, acknowledged that the Philippine softdrinks market is faced by higher taxes on sugar sweetened beverages and scarcity of sugar.

Under Package 1 of the Tax Reform for Acceleration and Inclusion (TRAIN), otherwise known as Republic Act (RA) No. 10963), drinks using sugar and artificial sweeteners are slapped with an excise tax of 16 per liter while it is 112 per liter for drinks that use high fructose corn syrup. As producers shift to the cheaper sugar sweetener, there has been scarcity of sugar supply in the country that affected beverage companies including Coca-Cola.

“The challenges in the market include both sugar taxes and sugar scarcity. We do, however, see many long-term opportunities, including a young, growing population and a growing economy,” he said.

“We always face changes and challenges – whether it involves new competition or new taxes – but our company has a heritage of focusing on the decades ahead, not just the quarters ahead.”

Leith said that Coca-Cola FEMSA has made great progress in the Philippines since they operate in 2013. The strong fundamentals that Coca-Cola FEMSA established over the last five years has made the local market better positioned for future success than eve.

On its comeback, Leith said The Coca-Cola Company will operate CocaCola Philippines as part of its Bottling Investments Group (BIG), which already has extensive operations in Southeast Asia and is focused on building a foundation for long-term success.

In buying back what it sold to CocaCola FEMSA, Leith said they had an option to sell its 51 percent stake back to The Coca-Cola Company in year six per the definitive agreement that was first announced in December 2012.

The value of the transaction cannot yet be disclosed at this time, but he said that the value will be set according to terms that were disclosed in the initial transition, calculated using the same EBITDA multiple paid for the transaction. However, according to the agreement, it cannot exceed the aggregate enterprise value for the 51 percent acquired, which was $688.5 million at the time of acquisition.