Corporate News

Zest-O plans more factories abroad to cut on export costs

Posted on March 29, 2011

ZEST-O Corp., the homegrown beverage maker, plans to build more factories in China and Thailand in the short-term with each investment expected to cost P250 million.

This should allow the company to directly tap the booming economies of China and Thailand as exporting becomes costlier, its top executive said last week.

“To increase our revenues, we have to concentrate now on overseas and that is not necessary exports, maybe putting up plants…in China or Thailand,” Alfredo M. Yao, chairman of Zest-O, said in a chance interview.

Zest-O so far exports products to China, Indonesia, and Vietnam, as well as in other parts of Asia, the Middle East, and the United States.

Overseas operations account for a little more than 10% of the total Zest-O business.

“[But] we have to increase [production abroad] because freight is going up,” Mr. Yao said.

Surging oil prices have resulted in higher transport costs.

Mr. Yao said Zest-O already has a production plant in the Middle East and is currently putting up one in Indonesia.

In 2008, Zest-O acquired Arab Beverages Establishments, a producer of fruit juice in doy packs and based in Dubai, for P600 million.

The move to build plants overseas comes in line with a strategy to first test markets abroad via exporting before investing more into a market, Mr. Yao said.

“The next 10 years is a big challenge for Zest-O to keep up with the changing market environment to compete in the global economy. The company is preparing not only for the local market but also making itself competitive internationally,” the beverage maker echoed on its Web site.

Domestic operations, however, would still account for bulk of the business of the beverage maker which claims to have pioneered the first ready-to-drink juice in flexible foil pouch or the doy pack system in the country.

“The domestic is still our major market. We are not yet done, we are still expanding,” he said without elaborating.

In March last year, Zest-O entered into a joint venture with PT Kalbe Farma Tbk of Indonesia, Southeast Asia’s largest publicly listed pharmaceutical company. The partners agreed to manufacture a new line of energy drinks under the Extra Joss brand.

Continuous growth is hinged on the market demand and the launch of new products.

“Last year is a good year because of the elections. Hopefully it will continue this year,” Mr. Yao said.

“We have new products in the pipeline but we rely also on the old products that we have,” Mr. Yao added.

Aside from the flagship Zest-O brand, it markets Sunglo juice drinks and Big 250 fruit drinks as well as carbonated drinks and fruit sodas under the Zest-O-Cola, Rootbeer, Twist, and Squiz brands.

Health drinks are marketed under the One brand.

Established as a privately owned corporation by Mr. Yao in May 1981 as Semexco Marketing Corp., Zest-O has grown to be one of the biggest firms selling juice drink in doy packs, cornering as much as 90% of the local market.

In 1995, the company adopted the name of its flagship brand.

In 2007, it reported annual sales of around P3 billion and more than P450 million in assets, up from around P2.6 billion in sales in 2004.

Zest-O invested around P500 million for two integrated plants in Pampanga and Davao in 2007.

Other existing plants are in Novaliches in Quezon City, Marilao in Bulacan, Canlubang in Laguna, Mandaue City in Cebu and in Cagayan de Oro in Misamis Oriental.

The Yao family has diversified into instant noodles with its “Quick Chow” brand, personal care products such as “Beam” toothpaste, and other sectors such as air transport through Zest Air. -- Neil Jerome C. Morales