Coca-Cola commits to hike local sugar procurement

By Louise Maureen Simeon (The Philippine Star), Mar 31, 2017

MANILA, Philippines – Beverage giant Coca-Cola Femsa Philippines has vowed to increase its local sugar procurement provided the Sugar Regulatory Administration (SRA) allows its access to the export market which is significantly cheaper than the domestic one, the Department of Agriculture (DA) said.

During the SRA’s latest board meeting, Agriculture Secretary Emmanuel Piñol said stakeholders agreed that Sugar Order No.3, which puts a cap on the volume of high fructose syrup to be imported, remains valid and legal despite opposition to it.

Piñol said Coca-Cola agreed to make advance purchase of its 2018 sugar requirement to stabilize the current oversupply in the country.

“They also agreed to increase even more their utilization of sugar provided that they’ll be given access to D sugar, “ Piñol said.

The SRA classifies sugar into “A” for sugar for export to the US, “B” for domestic consumption, “C” for reserves, “D” for export to countries other than the US and “E” for food local processors.

Coca-Cola was supposed to purchase “B” sugar since it is a domestic consumer. But “D” sugar is significantly cheaper than “B” by about P300 per 50-kilogram bag based on SRA’s latest price inventory.

Pepsi-Cola Products Philippines Inc. is also making a similar request.

“Let’s look at Coke and Pepsi-Cola as multinationals. That’s why my instruction (to SRA) is to look into the request to access the D sugar. And there was no opposition from SRA,” Piñol said.

Currently, Coca-Cola uses 90 percent HFCS and just 10 percent sugar. Piñol said Coca-Cola is willing to adjust to up to 80:20 ratio.

Coca-Cola remains the biggest company consumer of commercial sweeteners. Approximately 40 percent of the country’s total sugar production goes to the beverage industry.

“They said that if we can assure them access to the D sugar, they will even increase their consumption of local sugar provided they will be given enough time to adjust their manufacturing process,” the agri chief said.

“I actually asked for a higher ratio, 70:30. But that was just my request. We have to understand that they are businessmen. If we will give them access to the D sugar, they said we might be surprised with the ratio (that they are willing to increase),” Piñol added.

Coca-Cola has also agreed to withdraw the case it filed against the DA, SRA, Bureau of Customs and other members of the Sugar Board.

The company has been given six months to restructure its production process to avoid a surge in soft drink prices.

Piñol has instructed SRA administrator Anna Rosario Paner to accept Coca-Cola’s request to have its HFCS released.

Approximately 300 containers of HFCS imported by Coca-Cola have been stalled at the Customs.

Since 2010, Coca-Cola has heavily relied on the use of HFCS when the prices of local sugar doubled compared to those imported from other countries.

The SRA earlier blamed the higher sugar inventory to the unabated entry of HFCS, which beverage firms use as a significantly cheaper alternative to sugar.

Local sugarcane producers said that for the past six years, beverage makers and food processors imported almost 800,000 metric tons of HFCS into the country, displacing the demand for 23 million 50-kilo bags of locally produced sugar and depriving the country, particularly the sugar industry, of P35.2 billion in potential income.

For the current crop year alone, HFCS importation has pulled down sugar prices from P1,800 per bag to about P1,400 per bag, translating to potential revenue losses of about P20 billion.