URC poised to grab leadership in ‘healthy’ beverage market

Gokongwei-led Universal Robina Corp. (URC) is positioning itself to be the country’s ‘functional’ or healthy beverage leader, with a huge chunk of the expected proceeds from the sale of primary and secondary shares being set aside for URC’s expansion in the beverage sector.

URC president Lance Gokongwei told The STAR that the company’s expansion in this sector was triggered mainly by the success of its C2 green tea beverage drink. Because the current production was no longer enough to meet surging demand, URC recently added another production line, which still was not sufficient.

When asked whether the company is looking at exporting C2, Gokongwei said production right now is not even enough to meet demand. ‘Maybe’ when we expand production,"he said.

URC, the Gokongwei group’s food manufacturing arm, is currently a leader in the snack food business, but is already making its mark in the beverage sector. The company started work on a new beverage plant abroad which Gokongwei said will be operational by March. It will produce not only C2 but other beverage brands as well. URC is introducing a new fitness drink called ‘Rush,’ even as the company is eyeing the introduction of other beverage drinks.

To power its expansion in the beverage business, URC will raise $72 million or roughly P3.9 billion from the proposed sale of 365 million shares to international and local investors in January next year. Proceeds of the sale would be used largely to jack up the production of C2.

The company is building one beverage plant overseas and six local production lines here. It will cost between $10 million and $12 million to build one beverage production plant.

The JG Summit Group was also considering selling some of its shares in URC to increase the free-float of shares in the market. The free float is currently below 10 percent and plans are to increase URC’s shares being traded to 30 to 40 percent.

URC will list P6 billion worth of its unissued shares next year to finance its expansion program and to prepare for the company’s relaunch. This, Gokongwei said, would "unlock" the value of URC.

"Due to its limited free-float and shareholder base, the market is currently not valuing URC shares properly. We believe that in order to unlock the value of URC, the free float should be improved with adequately-size offering, marketed to a broader base of international and local institutional investors," Gokongwei said.

He said the offering will be done sometime in Jan. 2006, and the offer price will be in the range of plus or minus 10 percent of its prevailing price. The company could easily fetch about P6.3 billion with the new offering.

Gokongwei said part of the proceeds will be used to put additional production beverage lines in the country and to complete its plant in Vietnam.

The company would also be expanding its sugar milling and refining capacities in order to support the expansion of its C2 plants.

Gokongwei told The STAR that from a current capacity of 4,000 tons per day, the group’s sugar mill will increase its capacity to 5,000 tons per day this crop season and to 9,000 tons by 2007. "By October or November of 2006, we will be producing 15,000 bags,"he said.

He also revealed that a new sugar refinery will also be put up beside the existing mills.