Pepsi Cola to expand local production by 7%-8%

MANILA, Philippines - Pepsi Cola Products Philippines Inc. is beefing up its facilities to further expand its production capacity by about eight percent as part of efforts to stay competitive in the multi-billion-peso beverage industry.

On the sidelines of the company’s annual stockholders meeting yesterday, Pepsi Philippines executive vice-president Partha Chakrabarti said they are putting up new production lines, with one coming on line next month and another in February.

These plants are located in Cagayan de Oro and Muntinlupa. When completed, the CDO facility is expected to boost existing capacity by an additional six to seven million cases a year. Putting up a plant would entail a capital outlay of $7 million.

 “These facilities will give us enough manufacturing elbow room and allow us to post a 25-percent growth in sales volume,” Chakrabarti said.

For next year, the company might spend more than the estimated budget of $40 million to $45 million in 2010.

At present, Pepsi Philippines, which manufactures Pepsi, Seven Up, Mountain Dew, Gatorade, Tropicana and Lipton, accounts for 20 percent of the total carbonated drinks market.

Pepsi Philippines has 11 bottling plants in the country. About 70 percent of the company’s production is geared toward carbonated drinks, with the remainder allotted to the faster growing and more profitable non-carbonated products.

Chakrabarti said the company is also open to the possibility of diversifying into the confectionery segment with the entry of leading Korean beverage firm Lotte Chulsung Beverage Co. Ltd. into the local Pepsi unit.

Lotte Chulsung, a unit of the Lotte Group, acquired a 34.4-percent stake worth P4.45 billion in Pepsi Philippines, making it the single largest shareholder in the country’s second largest softdrinks firm.

Lotte Chulsung is a sister firm of Lotte Confectionery with manufacturing concerns in Vietnam, Russia, India and China, and claims a lead in market share in South Korea for its chewing gum, candy, biscuit, ice cream and chocolate goods.

In preparation for its possible venture into non-beverage businesses, Pepsi Philippines amended its articles of incorporation to include confectionery products, possibly to manufacture sweet snacks like candy bars and chocolates.

For the fiscal year ending June, Pepsi Philippines’ year-on-year net sales rose 13.33 percent to P16.13 billion although higher sugar prices tempered profits. operating income dropped to P996 million from the previous year’s P1.1 billion.