Zest-O acquiring int’l brand, pursues overseas expansion

Published October 16, 2019, 12:00 AM

by manilabulletin_admin

By Bernie Cahiles-Magkilat

Zest-O Corporation, the country’s leading beverage firm, is looking at acquiring an international beverage brand for the domestic market to expand its product portfolio aside from pursuing an aggressive Asian expansion amid a 30 percent decrease in volume following the imposition of higher taxes on sugar-sweetened beverages.

Alfredo Yao, founder and owner of Zest-O, the flagship company of the Yao Group, said they will announce its acquisition in a disclosure at the Philippine Stock Exchange next week.

According to Yao, they are also looking at further expanding its southeast Asia presence to take advantage of the more than 600 million population in the region. The company has already existing presence in Indonesia and Vietnam.

Zesto is also expanding its China operation to possibly offer a coconut-based drink.

Yao noted that the beverage industry, particularly the sugar-sweetened sector, suffered a 30 percent reduction in volume in 2018 because of the imposition of higher sugar tax under the TRAIN Law.

Drinks with caloric and non-caloric sweeteners are taxed P6 per liter while those using high fructose corn syrup at P12 per liter.

“The high sugar tax has a deep impact on carbonated drinks,” he said noting that Zesto alone also reduced volume by the same 30 percent. This has also affected sales although Zesto has already recovered towards the last quarter last year on higher prices.

“It would take another one or two years for the industry to fully recover,” he said.

Yao, a self-made businessman from Tondo starting from a candy factory, turned critical to the government’s imposition of the higher sugar tax stressing that softdrinks are considered a poor man’s drink.

“The government should tax the milk tea products not softdrinks,” he said. Softdrinks are low-margin products and thus need volume sales to realize profit. The cheapest cola drink ranges from P6-P8-P12 bottle compared to over P200 cup of milk tea.

With more expensive soda products, consumers shifted their drinks to simple water and other alternative cheaper beverages.

The healthy campaign, which also targeted cola products for their sugar content, may have also contributed to the decline in volume, but Yao said the higher tax on softdrinks was the biggest deterrent.

“Because prices have gone up, we have to reduce the size,” he said.
The industry has also tried to save their workers, but they have to cut down on overtime because they are already producing lesser volume.