Coke Femsa pouring in $800 M for Philippine expansion

MANILA, Philippines – Newly installed Coca-Cola Femsa Philippines CEO Fabricio Ponce revealed yesterday the company  intends to invest up to $800 million, or $200 million a year, to expand its Philippine operations.

In his first meeting with local media yesterday, Ponce said the company remains committed to reinvest all profits in the Philippines up to 2020 despite incurring a $100 million loss in 2014, and achieving a breakeven financial result in 2015.

Coke Femsa Philippines is primarily involved in bottling operations. It operates only in the Philippines and does not export any of its products.

Coca-Cola Atlanta is the beverage parent company.

For 2016, Ponce said Coke Femsa Philippines is projecting a five percent  growth, tracking the country’s economic growth.

Last year, the company’s third and fourth quarter growth was at six percent after a dismal first semester.

The new Coke CEO acknowledged this year would be “challenging” for the company as it faces headwinds from the Chinese devaluation and possible developments in Saudi Arabia, specifically involving possible job cuts for overseas Filipino workers.

Ponce warned that a possible loss of jobs in Saudi Arabia or the Middle East would affect the remittances of OFWs to their families here in the Philippines.

The substantial drop in remittances, Ponce said, resulted in the dismal performance of Coke Femsa in the first half of 2015.

However, Ponce is more hopeful of an improvement this year due to the coming elections which has already resulted in a pick up in beverage sales.

At the same time, though, Ponce said a Chinese devaluation and its subsequent effect on import cost would adversely impact on the production of Coke Femsa as it imports a lot of its raw materials.

Ponce explained the Philippine market is very price sensitive and that Coke products compete not only with other beverage firms, Pepsi-Cola and RC Cola, but also with cellphone load.

Coke controls about 65 percent of the Philippine soda market.

Their best seller, he said, is the P7 Time Out Coke, and a previous attempt to adjust the price upward to P8 immediately resulted in a 50 percent  drop in sales.

Fortunately, Ponce said Coke Femsa remains optimistic about the economic prospects of the Philippines, thus the commitment to reinvest its revenues.

Sometime in July this year, the company is proceeding with the installation of two additional PT (plastic bottle) production lines as part of a previously announced $160 million investment program.

The $800 million investment of Coke Femsa, however, appears to be lower than the figure cited by another Coke executive.

In a previous interview with The STAR, Coca-Cola group president for Asia Pacific Atul Singh said Coca-Cola Atlanta, together with its bottling partner for the Philippines Fomento Economico Mexicano S.A.B. de C.V. (Femsa),  would  invest $1.2 billion until 2020 to expand its facilities and beef up distribution and operations in the country.

“The money would be invested in more manufacturing lines, in trucks, in equipment, in distribution infrastructure, in marketing, in developing people, and training. So it’s a broad spectrum of investments across the board,” Singh said.

“We have high hopes of our business moving forward in the Philippines. The Philippines is a very important market to us and we have strong plans for it,” he added.

Singh said Coca-Cola has already invested $1.5 billion in the Philippines from 2010 to 2014.

He said the investment enhanced its distribution network and created over 2,000 new jobs for Filipinos.

According to Ponce, Coke Femsa currently employs 14,000 Filipinos and has 19 plants spread all over the country.

The Philippines is among the top three markets of Coca-Cola in Asia, with China as the biggest market.