Philippine Beverage Makers Seek to Buy Sugar Directly from Farmers, Regulator Says
Key Takeaways
- •Beverage producers in the Philippines, including Coca-Cola and Pepsi, have asked the Sugar Regulatory Administration to explore purchasing sugar directly from farmers instead of millers.
- •Under the current supply structure, sugarcane is processed into raw and refined sugar at mills, and beverage companies requiring refined sugar source it from millers rather than growers.
- •Coca-Cola's Philippine unit is the single largest buyer of domestic sugar, accounting for than 52,000 metric tons, or over 1 million bags.
- •Coca-Cola attributed its imports of finished beverages to a late-April fire that affected can and 1.5-liter bottle production, a claim the SRA verified, and said the imports cover a production shortfall rather than replace domestic sugar purchases.
- •Industrial users consume about 60% of the national sugar supply, while oversight of finished beverage imports rests with the Food and Drug Administration rather than the SRA.
Beverage manufacturers in the Philippines have approached regulators to explore the possibility of bypassing millers and buying sugar directly from farmers, according to the Sugar Regulatory Administration (SRA), the government attached to the Department of Agriculture that oversees the country's sugar industry.
"The ones I've personally talked to are Coke, Pepsi, almost all of those using refined sugar. They're all interested in finding a way to buy directly from the farmers," SRA Administrator Luis Pablo S. Azcona said.
Under the structure of the Philippine sugar sector, farmers harvest sugarcane and deliver it to mills, where it is processed into raw sugar and subsequently refined. Because beverage producers require refined sugar for their products, they currently source the sweetener from millers rather than from growers. Any direct-purchase arrangement would therefore mark a departure from a supply chain in which millers currently stand between growers and the industrial buyers that need refined sugar. Sugarcane cultivation in the Philippines is concentrated in the Western Visayas, particularly on Negros Island — long known as the country's "sugar bowl" — with additional production in provinces such as Batangas and Bukidnon.
Coca-Cola, whose Philippine operations trade as Coca-Cola Europacific Aboitiz Philippines, Inc., is the single largest buyer of domestic sugar, Mr. Azcona said, accounting for more than 52,000 metric tons, equivalent to over 1 million bags.
The company has come under scrutiny for importing finished beverage products, which it said was due to a fire at one of its plants in late April.
"We checked into the claim that they had a fire, and it's true," Mr. Azcona said, adding that the fire affected the production of cans and 1.5-liter bottles.
He said the company described its imports as covering a shortfall in its own production, and not as a substitute for domestic sugar purchases. Mr. Azcona added that neither the SRA nor the Department of Agriculture has jurisdiction over imports of finished beverage products, which are overseen by the Food and Drug Administration.
Beverage makers and other industrial users consume about 60% of the national sugar supply, Mr. Azcona said — a share that makes industrial buyers the largest segment of demand for the country's sugar and underscores the scale of the interests now seeking a new sourcing route. With the approaches still at an exploratory stage, how the SRA responds to the requests, and whether any direct purchasing framework takes shape between growers and beverage makers, are the next developments to watch in the sector.
— Moureen Ylessandra B. Dizon, BusinessWorld
Source: BusinessWorld Online
