San Miguel Still Dealing with Coke to Renew a Bottler's Agreement

07/07/06 Southeast Asia's largest food and beverage company, San Miguel Corporation continues to hold talks with Coca-Cola Co. regarding the renewal of a bottler's agreement after the lapse of the old deal.

Last July 1, the five-year agreement covering royalty charges and bottling restrictions ended. A source at Philippines-based San Miguel Corp. told Reuters that the two giant companies had yet to agree on new royalty charges.

"The company confirms that discussions are still on-going between itself and The Coca Cola Company," according to San Miguel in a statement to the stock exchange in Manila.

65 percent of Coca Cola Bottlers Philippines Inc is owned by San Miguel, while the remaining 35 percent is being held by Atlanta-based Coke.

According to a San Miguel source, franchise holder and distributor of PepsiCo Inc. products Prime Orion Philippines, negotiated a 50 percent cut in royalty fees when they renewed their bottler's agreement more than a year ago.

In the first quarter, Coca Cola Bottlers chipped in almost 15 percent, or 8.95 billion pesos ($170 million), of San Miguel's group revenues. From a year earlier, the beverage arm's January to March revenues were increased just 1 percent.