SMC selling Coca-Cola back to Atlanta

Atlanta-based Coca-Cola Co. and food and beverage conglomerate San Miguel Corp. (SMC) have reportedly reached an agreement allowing the beverage giant to seize management and operational control of Coca-Cola Bottlers Philipines Inc. (CCBPI), according to an industry source.

The source said it is now a "done deal" between Coca-Cola Atlanta and SMC, and that an announcement is forthcoming.

The same source, however, did not give an estimate on how much the transaction would fetch.

But SMC pointed out that no definite agreement has been reached so far. "There’s no final agreement yet. Discussions on the ownership of CCBPI are still going on," an SMC source said.

CCBPI, one of 10 bottlers of Coca-Cola worldwide, is 65 percent-owned by SMC with the remaining 35 percent held by the Coca-Cola parent company.

Earlier reports said Coca-Cola Co. was not pleased with the way its local partner, SMC, was running CCBPI because of plunging sales

of the Coca-Cola Beverage Group as health-conscious people shift to non-carbonated drinks or green-tea based drinks.

Coke products have been losing ground to the Gokongwei-owned food and beverage unit Universal Robina Corp.’s C2, other tea-based drinks, and to the much cheaper and long-time rival Pepsi.

Sales of CCBPI fell eight percent in 2005 to 520 million cases, resulting in a 63 percent decline in profit to P1.2 billion. Revenues likewise dipped seven percent to P39.8 billion, due to the downturn in the Philippine carbonated softdrink market.

Gains in the juice and water businesses were not enough to offset the slump in the carbonated softdrink business. This, even as CCBPI deferred price moves and implemented rigorous cost-containment measures and improvements in operational efficiencies.

In the late 1990s SMC sold its Coke stake to Atlanta for $3 billion only to get it back years later at half the price, enabling it to make a profit of at least $1 billion and leading to the formation of CCBPI.

CCBPI owns subsidiaries that include Philippine Beverage Partners, Philippine Bottlers, and Cosmos Bottling Corp.

Analysts said the transaction, if it materializes, would enable SMC to raise funding for its acquisitions and allow it to concentrate on its bread and butter business-beer.