The deal gives Coca-Cola Co. 100 percent ownership of CCBPI, which handles the whole range of non-alcoholic beverage brands of San Miguel, including those under Coca-Cola and Cosmos, as well as juices and bottled water brands.
Analysts viewed the deal as a "win-win" solution for both parties, particularly for San Miguel whose earnings in the past two years had been dragged down by CCBPI’s losses.
CCBPI has suffered from weakening domestic sales volume as more and more people turn to non-carbonated drinks like fruit juice and tea-based drinks.
Coca Cola Co. president and chief operating officer Muhtar Kent, however, said the group is confident they could reverse the declining losses of CCBPI through focused management and streamlined distribution network.
"We had a long-standing partnership with San Miguel but we evaluated our strategic options together and we have decided that both would mutually benefit if we own all the shares of CCBPI. And going forward we have every confidence that we can keep growing our business," said Kent.
"The per capita of our business in the Philippines is substantially less here than they are in many markets around the world like Mexico and South Africa. Per capita means how many times a year the population consumes our brand. Therefore that gives us confidence plus the strength of the brand itself gives us material confidence that we can sustainably grow our business in the Philippines for the benefit of our stakeholders here which are our consumers, the government and our employees," he added.
San Miguel chairman Eduardo Cojuangco, for his part, said the sale of CCBPI provides the company the opportunity to focus on its core business areas in the Philippines and its planned expansion in the Southeast Asian region.
Cojuangco said the company will develop its own beverage products including juice drink and ready-to-drink tea to complement existing operations in Thailand and Indonesia.
The agreement signed between San Miguel and Coca-Cola, involves a non-compete clause that prevents San Miguel from selling carbonated drinks, sports drinks, energy drinks and/or flavored water for a period of five years from closing of the deal.
Kent said the group will "ramp up its investments in the Philippines" but in a prudent and very disciplined manner. He, however, didn’t say how much the group will be shelling out to improve the business of CCBPI. "We will serve all channels to make sure that the right conditions are present to properly manage customers’ expectations," Kent said.
An earlier disclosure by Coca-Cola Co. to US regulators showed $370 million will be paid at the closing of the transaction plus $100 million in escrow. Another $20 million will be paid 18 months later and the remaining $100 million on the fifth anniversary of the purchase.
"Our partnership with San Miguel over the years has been extremely important to our business in the Philippines. We are grateful to San Miguel for its continuing support of our long-term commitment to the Philippines, and we look forward to continued cooperation with San Miguel, who will remain a key supplier to our business," said Kent.
"Coca-Cola has been sold in the Philippines since the beginning of the 20th century and has been locally produced since 1927. This is a very important market for us, and we believe our business here has great growth potential," he added.