Lotte Chilsung Acquires Majority of Pepsi Philippines, Eyes Southeast Asian Expansion

Lotte Chilsung Beverage Co., Ltd. has acquired a significant majority in Pepsi Philippines, signaling its intent to expand further in Southeast Asia. The move positions the South Korean brand for growth beyond its home turf.

The company is a leading brand in the soft drink market in its home ground, and on Wednesday, Oct. 4, it announced its acquisition of management rights in Pepsi-Cola Products Philippines Inc.

Lotte Chilsung Beverage secured a 73.6% stake in its deal with Pepsi Philippines. According to The Korea Economic Daily, the company now fully owns the Manila unit of Pepsi since it already purchased a 34.4% stake in 2010.

The beverage manufacturing division of the Lotte Group gradually increased its shares in Pepsi Philippines by directly buying them from the parent firm, PepsiCo. In addition, it tendered an offer on the Philippine Stock Exchange.

Expansion Bid Beyond South Korea

As it now owns Pepsi Philippines, Lotte Chilsung wants to expand its business in the region. The company is eyeing an expansion outside of Korea, probably one of the main reasons for the stake purchase.

The Philippine unit of Pepsico bottles and distributes beverages such as Pepsi variants and Mountain Dew. It also handles the bottling and distribution of Gatorade sports drinks and Sting energy drinks. It has 12 plants and 14 sales branches across the country.

"With this acquisition of management rights, the proportion of our overseas sales, including exports, will expand to the upper 30% range next year," an official of Lotte Chilsung said. "Next year we will be reborn as a global beverage company."

Lotte Chilsung's Plans for Its Newly Acquired Asset

The Korean firm plans to use Pepsi Philippines' facilities to produce and distribute Pepsi-branded sodas and its own beverages, such as Milkis and its Chum-Churum soju. The company also hopes to turn its Philippines-based operations as the starting point for its planned Southeast Asian expansion and the global markets.

The Korea Joongang Daily reported that the deal between Lotte Chilsung and Pepsi Philippines was officially completed on Sept. 29. "We will enhance Pcppi's operating profit margin to 8.5% by 2025 with investments such as in-process optimization through enhancing the IT infrastructure, automation equipment, and the streamlining of our logistics network," Lotte Chilsung said in a statement.

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