Pepsi-Cola Products Philippines, Inc. (PIP, the Company) is majority owned by foreigners. The Company is a licensed bottler of PepsiCo, Inc. and manufactures carbonated soft drinks (CSD) and non-carbonated beverages (NCB). The Company’s well-known brands are Pespis-Cola, 7Up, Mountain Dew, Mirinda, Mug, Gatorade, Tropicana/Twister, Lipton, Sting, and Propel. Mountain Dew is PIP’s strongest CSD flavor while Gatorade is their forefront on the NCB market.
Below is PIP’s revenue mix:
The Company’s drive on growing its NCB products is their response to the increasing health conscious consumers.
For the year ended 2012, PIP displayed a 14% increase in revenues and an impressive jump in net income of 192%. The huge disconnect between revenues and net income increase is best explained by decreasing raw material costs which is explained by low sugar prices in 2012. Raw sugar averaged P1,346.22 in 2012 while P1,863.98 in 2011.
The combination of 14% increase in revenues and 4% increase in operating profit margin contributed to the huge jump in the Company’s earnings. A favorable development for PIP and all businesses that has majority of their costs tied to sugar costs is the expected decline in sugar prices due to the tariff rate reduction. 
The decline of tariff rates on sugar exports from 38% in 2011 to 28% in 2012 dragged sugar prices low enough for PIP to generate a jump in earnings. Therefore, we should expect PIP to present earnings growth from 2013 to 2015 even though the Company reports flat revenue during the same span of time.
- Raw Sugar and Molasses Millsite Prices, http://www.sra.gov.ph/wp-content/uploads/downloads/2012/12/MILLSITE-PRICES-RAW-SUGAR-AND-MOLASSES0001.pdf
- Executive order 892, http://www.tariffcommission.gov.ph/eo_892.htm
Disclaimer: I do not claim to be an expert and nothing I say should be taken as a recommendation to buy or sell. Read more in the ABOUT page.