FEMSA exits PHL, sells back stake in Coca-Cola bottling operations

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MEXICO’s Coca-Cola FEMSA is selling its controlling stake in its Philippine operations to the Coca-Cola Co., which will take over operations here via its Bottling Investments Group (BIG), the Coca-Cola Co. said.

Atlanta-based Coca-Cola Co. said in a statement Friday that the entry of BIG is still subject to regulatory approval.

The board of Coca-Cola FEMSA Philippines Inc.’s Mexican parent, Coca-Cola FEMSA, S.A.B. de C.V. approved the sale of its 51% stake in the Philippine unit to the Coca-Cola Co.

Mexican parent FEMSA is the world’s biggest franchise bottler of Coca-Cola trademark drinks.

It acquired 51% of Coca-Cola FEMSA Philippines, previously named Coca-Cola Bottlers Philippines, Inc. (CCBPI), in 2013 from the Coca-Cola Co. for $688.5 million in an all-cash transaction.

When it announced the deal back in December 2012, Coca-Cola FEMSA described the move as its “first acquisition beyond Latin America” and “a vote of confidence in the strength of the Philippine economy and the opportunities it provides… reinforcing its exposure to fast-growing economies”.

Mexico’s FEMSA had the option to buy the remaining 49% within seven years or sell back the 51% to the Coca-Cola Co. after six years.

“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 Coca-Cola Co.’s Asia Pacific Group , said in the statement.

“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.

While Friday’s statement did not disclose the reason behind the development, Coca-Cola FEMSA Philippines has been struggling since last year after the government regulated imports of high fructose corn syrup (HFCS), a sweetener used by the food industry as an alternative to cane sugar.

The Sugar Regulatory Board has expressed fears that imported HFCS ingredient has been taking up a major share of the sweetener market to the detriment of cane sugar farmers.

The government, under the first package of its tax policy overhaul, also levied a P12 tax on HFCS-sweetened drinks at the start of the year, double that of beverages using sugar.

Since the new tax regime was put in place, Coca-Cola FEMSA Philippines has laid off an undisclosed number of workers and has reduced volumes of of some products

Winn Everhart, President and General Manager of the Philippines for the Coca-Cola Co., said “long-term, sustainable success is built on strong fundamentals.”

“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 thePhilippines,” Mr. Everhart said.

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

The Coca-Cola Co. formed BIG in 2004. With 45,000 employees around the world, BIG’s Asian operations include Nepal, Bangladesh, Vietnam, Cambodia, Brunei, Malaysia, Singapore, Myanmar, Sri Lanka and India.

“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,” Mr. Dragan added. — Janina C. Lim