MANILA - Despite weakened economic conditions, listed beverage company Pepsi-Cola Products Philippines Inc. managed to post better profits during its 2009

fiscal year ending in June mainly driven by sales of its fast-growing non-carbonated drinks, the company’s financial statement showed.

Pepsi said profits rose 5% to P799.7 million as of June 30, when the firm’s fiscal year ends.

This was due to higher net sales which likewise rose 9.6% to P14.23 billion owing to the growth of brands Sting, Tropicana and Gatorade, which are among the firm’s noncarbonated drinks.

Pepsi said focusing on this segment is part of “its strategy to aggressively tap the healthy growth prospects for noncarbonated brands with health and wellness as [the] platform.”

The company added that it will continue to grow its business by targeting the broad “CD mass market” which still constitutes the majority of the country’s population.

“That is the direction we are taking [as] that  represents the shift in the market,” said a Pepsi official. The company has since spent P1.2 billion to grow its noncarbonated drinks segment.

The company has also completed the expansion of its product lines in Cebu City, San Fernando in La Union and Iloilo to produce its noncarbonated brands.

Previously, these areas only manufactured carbonated products which includes its flagship Pepsi-Cola brands as well as 7-Up and Mountain Dew.

Despite the profit growth, Pepsi acknowledged that its operations were not spared from the effects of the global financial crisis.

“The weak economy, high inflation and stiff competition caused undue pressure on revenues and costs,” noted the company in a statement.

The firm said gross profit margins dropped to 29.4% from 31.6% in the previous year. Pepsi said this was due to the increase in the cost of raw materials

particularly sugar, CO2, packaging materials and fuel during the first half of the fiscal year 2009, when inflation hit a record high.

The company said intense competition in the carbonated soft-drinks industry also put pressure on prices and profits. 

In spite of lower gross-profit margin and higher manufacturing depreciation, Pepsi managed to post a 2% growth to P4.19 billion due to an increase in sales volume.

The company’s operating income grew by 18.8% to P1.14 billion and its operating income margin registered an improvement from 7.4% in 2008 to 8% in 2009.

Meanwhile, general and administrative expenses decreased by 4.2% to P620 million from P648 million in the previous year.