(NIKKEI): HONG KONG -- Swire Pacific is expanding its Coca-Cola bottling business into Southeast Asia.
The Hong Kong-listed British conglomerate announced on Monday after trading hours that it is spending $1.01 billion to acquire full stake in bottlers in Vietnam and Cambodia, currently owned by Coca-Cola (Japan), which is a full subsidiary of Coca-Cola of the U.S.
"This acquisition marks a major milestone for Swire Coca-Cola, significantly expanding our operating footprint and population served to a new region," Patrick Healy, who serves on Swire's board of directors and also as chairman of both the group's Coca-Cola business and Cathay Pacific Airways, said in a statement.
"This expansion of territories is part of a broader strategy to expand the global scale, volume and revenues of our bottling business," he added.
According to the filing to the Hong Kong Exchange, after-tax profit of the Vietnamese Coca-Cola operation was $32 million, while the Cambodian unit's was $3.8 million, both declining by 12% and 65%, respectively, from the year before. However, those units are the largest carbonated soft drink players in each country, holding three bottling facilities in Vietnam and one in Cambodia.
Swire is the fifth-largest Coca-Cola bottler in the world by volume. It has been a bottler for the iconic American beverage brand since 1965, when it acquired a majority stake in the Hong Kong operation.
The franchise area where it has exclusive rights to manufacture, market and distribute the product has gradually expanded to include Taiwan, 13 states in the U.S., and 11 provinces and the city of Shanghai in mainland China. By adding Vietnam and Cambodia, the franchise population increases by 15% to cover about 876 million people.
Swire's revenue is predominantly derived from its operations in mainland China, Hong Kong and the U.S. It has a property development projects in Vietnam, but no significant footprint in Cambodia so far, according to the company's latest annual report published in April.
Coca-Cola business has been one of the bright spots in Swire's business portfolio. Cathay Pacific has been sinking in red for the last two years due to the lingering pandemic, while Swire's long loss-making offshore oil support unit was sold off in March. But the beverage unit and Swire's property business were the main engines to pull the group back to net profit of 3.36 billion Hong Kong dollars ($428 million) in 2021, from a first-ever net loss of HK$10.99 billion in 2020, the company's first drop into the red since its stock market debut in 1959.
The beverage business has been one of the main areas where the group's investment resources has been allocated. Guy Bradley, Swire's chairman, told reporters at the annual earnings briefing in March that it was making a 900 million yuan ($134 million) investment in a new factory in Zhengzhou in the central Chinese province of Henan. "We will continue to invest in Swire Coca-Cola to create a strong and sustainable business," he then said.
