Pepsi growth slows with entry of cheaper priced cola drinks

Pepsi Cola Products Phils. Inc. is expecting a slowdown in volume growth due to the entry of low-priced cola products particularly in Metro Manila which heightened competition and cannibalized its market share.

The company is 22.16 percent owned by Prime Orion Properties Inc. (POPI), a listed investment holding company associated with the Guoco Group of Malaysia.

In documents filed with the Philippine Stock Exchange, POPI said the unfavorable outlook in the economy due to the continued increase in fuel prices, high inflation rates and expanded value-added tax implementation would expectedly put additional pressure on Pepsi’s performance.

Last year, Pepsi registered a seven-percent growth in sales volume as a result of the rigorous implementation of pricing strategies and sustained go-to-market systems which stabilized the sales and distribution infrastructure.

The increase was also attributed to the successful introduction of non-carbonated beverages and the continued product innovations and packaging improvement of carbonated beverages.

Pepsi’s net income, however, fell 10 percent to P798 million from P884 million, mainly due to reduced tax benefit from net operating loss carryover (NOLCO) which were fully utilized last year. Income from operations, on the other hand, rose 10 percent or by P99 million to P1.05 billion from the previous year’s P955 million.

In line with efforts to combat the proliferation of cheap colas, Pepsi will focus on the production and distribution of non-carbonated beverages.

Pepsi entered into a joint venture with Unilever for the Lipton brand, the third biggest beverage brand and the best-known tea brand. Last June, Lipton ice tea ready-to-drink in lemon and green tea flavors were launched as the newest addition in its non-carbonated beverage portfolio.

Other products distributed by Pepsi are Tropicana Juices and Gatorade, the world’s leading sports drink, which are expected to stimulate public consumption and improve sales volume.

Despite intense pricing competition, Pepsi will remain focused on its endeavors to heighten distribution rate and to expand its non-carbonated beverage portfolio in the beverage market.

POPI has interests in real estate and property development, manufacturing and distribution of ceramic tiles and construction-related materials, financial services and integrated forest, logging and paper operations.

The holding company is engaged in an asset disposal program to pare down debts. It continues to undertake a number of initiatives to strengthen core assets including Pepsi Tutuban Properties Inc. and First Lepanto-Taisho Insurance Corp.

Prior to the currency crisis in 1997, POPI was among the leading holding companies in the country boasting a proven track record of profitability due to its investment portfolio in the property, manufacturing and financial services sector and its strategic alliance with the Guoco Group, one of the largest and most respected business conglomerates in Asia.