THAILAND: Serm Suk to terminate PepsiCo bottling contract
PepsiCo owns a 41.5% stake in Serm Suk through Pepsi-Cola (Thai) Trading and Seven-up Nederland
PepsiCo's Thai bottler Serm Suk is looking to terminate its contract with the US soft drinks giant due to a disagreement over terms.
PepsiCo owns a 41.5% stake in Serm Suk through Pepsi-Cola (Thai) Trading and Seven-up Nederland. The two firms were due to sign a new bottling agreement on Thursday (31 March), however both companies have been unable to agree on new terms.
Last month, PepsiCo agreed to amend its contract with the Bangkok-based bottler. However, PepsiCo’s draft of the agreement included some terms that were different to what had originally been agreed, Serm Suk said in a regulatory filing.
As a result, Serm Suk's president and CEO, Somchai Bulsook, will send a termination notice to PepsiCo with immediate effect. If a termination of the bottling agreement is approved by Serm Suk's shareholders, it will take effect within 12 months from the date of the notice.
In a statement on Friday, PepsiCo said that it had "consistently negotiated in good faith" with Serm Suk to review and amend the terms of the agreement. However, the firm said that, while it had agreed to some of the new terms, there were also a number of "unreasonable conditions" added by Serm Suk that it would not agree to.
"PepsiCo's only goal is to ensure that all of our partners enter into agreements with us as genuine partners, prepared to work for the mutual benefit of both companies and a long term future together," the spokesperson said. "Our final [agreement] proposal is fair and transparent. It meets all of the key conditions voted for by Serm Suk shareholders and represents a solid base on which Serm Suk and PepsiCo could move forward together towards a successful future."
A spokesperson for PepsiCo declined to be drawn on what the future holds for the firm and its products in Thailand if the contract is terminated, but added: “Pepsi has been operating in Thailand for more than 50 years. It has a long history and ongoing commitment to Thailand and its Thai customers.”
Click here to view Serm Suk's stock exchange announcement.
Richard Hall is the chairman and founder of Zenith International, a food and drinks consultancy with around 1,000 clients in 50 countries. Here, we ask Hall what he expects the main influences will be...
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