Soft-drinks firms set expansion in Luzon

By JENNEE GRACE U. RUBRICO, BusinessWorld Sub-Editor Two companies that are into low-cost carbonated drinks are expanding their operations in Luzon to ride on their rising popularity vis-a-vis the more expensive premium carbonated drink brands. Zest-o Corp., producer and distributor of RC Cola in the Philippines, and Interbev Philippines, Inc., producer and distributor of Virgin Cola in the country, are looking at expanding their plants in Antipolo and Cabuyao respectively. Zest-o is owned by businessman Alfredo M. Yao and also produces packed juice drinks. Interbev, meanwhile, is a subsidiary of Lucio Tan firm Asia Brewery, Inc. "We’ve seen that there’s a market for a third player [to compete against premium brands Coca-Cola and Pepsi]... We are studying that [increasing capacity of Luzon]," Michael Tan, chairman of Asia Brewery, told BusinessWorld. He, however, declined to say when the expansion will start, or by how much the increase in the plant’s capacity would be. Should it push through, the move to expand the Luzon line will follow the construction of Interbev’s new plant in Cagayan de Oro. The P250-million plant, officials said, will serve the Mindanao market. Meanwhile, Mr. Yao also told BusinessWorld Tuesday that Zest-o has similar plans for RC Cola’s plant in Antipolo. "That’s on the pipeline. We have plans to increase capacity in Luzon," Mr. Yao said. He said that the company is also aggressively expanding the operations of RC Cola, but declined to say by how much the Antipolo plant will be expanded. Mr. Yao also confirmed that Zest-o also has plans to come out with an energy drink brand, but declined to divulge details of the plan. He said, however, that Zest-o will build a separate facility for the energy drinks. Sources also said that Interbev also has similar plans, but Mr. Tan declined to comment. Affordable colas and health drinks have been gaining popularity due to a shift in consumers’ drinking habits. Industry observers earlier said that the beverage sector has become segmented, with health drinks on one side and carbonated drinks on the other. They also said that premium colas are losing market share to value-priced carbonated drinks as consumers look at price points before buying their drinks. In its June 2006 financial report which was submitted to the Philippine Stock Exchange, San Miguel Corp., which distributes Coca-Cola products in the country, acknowledged that the non-alcoholic beverage business "endured the growing segmentation in the local industry, which has favored the non-carbonated sector." The company said that volumes of Coca-Cola went down 12% in the first half compared to the same period last year. It said, however, that price adjustments tempered the impact of weak volumes. It added that cost-management mitigated the impact of higher raw material and packaging costs, allowing the Coca-Cola Beverage group to report an operating income of P1.011 billion, or 45% higher than the same period last year. - BusinessWorld