US's Coca-Cola Co. to take over PHL bottling operations from franchise bottler FEMSA

US's The Coca-Cola Co. is planning to take over the bottling operations in the Philippines after Mexico-based franchise bottler Coca-Cola FEMSA decided to sell its 51-percent stake in Coca-Cola FEMSA Philippines Inc.

In a statement issued on Friday, the Atlanta-based The Coca-Cola Co. announced that its Bottling Investments Group (BIG) plans to buy back Coca-Cola FEMSA's 51 percent stake in its Philippine unit, subject to regulatory approvals.

This came after Coca-Cola FEMSA notified the US company it will exercise its put option to sell its 51-percent stake in Coca-Cola FEMSA Philippines. The Mexican firm is the largest franchise bottler of Coca-Cola products in the world.

Coca-Cola FEMSA acquired the 51-percent stake in Coca-Cola Bottlers Philippines Inc. (CCBPI) from The Coca-Cola Co. in 2013 and renamed the Philippine unit Coca-Cola FEMSA Philippines.

"As part of our efforts to expand our geographic reach, we have been operating in the Philippines for more than five years, deploying our expertise and capabilities to develop and operate in fragrmented markets... However, given the recent evolution in the business outlook in the Philippines, and our commitment to a disciplined capital allocation approach focused on driving shareholder returns, our Board of Directors has concluded that exercising our put option represents the course of action for Coca-Cola FEMSA's shareholders," Coca-Cola FEMSA chief executive officer John Santa Maria said.

"This was not an easy decision and it comes after a deep and thorough process of analysis based on our best interest to protect our shareholders' value," Santa Maria said.

By the time it announced the acquisition of the Coca-Cola's Philippine bottling business, the Mexican firm described the deal as "a vote of confidence in the strength of the Philippine economy" and "first acquisition beyond Latin America."

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

“The market is better positioned than ever before for future success, and we are confident about the potential ahead. The Coca-Cola Company 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," Murphuy said.

While Coca-Cola FEMSA did not specifiy its reason to exit the Philippines, the company has earlier reduced its workforce in light of the passage of the Tax Reform for Acceleration and Inclusion (TRAIN) Act, which mandates a P6 per liter excise tax on beverages using caloric and non-caloric sweeteners and P12 per liter on beverages using high-fructose corn syrup. 

“The Coca-Cola Company has been operating in the Philippines for more than 100 years, and we know that long-term, sustainable success is built on strong fundamentals,” Winn Everhart, president and general manager of the Philippines for The Coca-Cola Co., said.

“In every market’s evolution, there will be ups and downs. We are confident both in the opportunities that we have ahead and in the plans we have in place for the Philippines. 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.

“Southeast Asia is an important market for us, and we look forward to the Philippines joining our portfolio,” said Calin Dragan, president of BIG.

“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.”

The Coca-Cola Co. said it created BIG to ensure that select bottling operations receive the appropriate investments and expertise to ensure long-term success.

“Southeast Asia is an important market for us, and we look forward to the Philippines joining our portfolio,” Coca-Cola BIG president Calin Dragan said.

“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. —KG, GMA News