Yao said the company is targeting to expand in Southeast Asia as well as China.

Alfredo Yao, founder and chairman of Zest-O Corp. and Macay Holdings Inc. on Wednesday bared plans to acquire a foreign beverage company as part of overseas expansion amidst softening growth in the domestic market following higher taxes imposed on sugar-sweetened beverages.

Yao, who refused to give out more details on the transaction, said the company is set to announce more details on the deal by next week. He also did not clarify whether private firm Zest-O or publicly-listed Macay, who both engage in beverage production and distribution, will be the acquiring entity.

Macay earlier on said it is in talks with Asian and African firms for mergers and acquisitions overseas in a bid to diversify its product portfolio, as well as shield it from factors such as the excise taxes imposed on sugar-sweetened beverages in 2018.

For Zest-O, Yao said the company is targeting to expand in Southeast Asia as well as China. Zest-O already has manufacturing plants in Indonesia, United States and Vietnam. It also has a facility in China which Yao said Zest-O intends to expand to widen its footprint in the country.

Right now, Southeast Asia (first) for Zest-O, hopefully with (an) international brand. (Then) China is one. Coconut based beverage will be good for China (because) they want vegetable-based (products), Yao told reporters at the sidelines of the 45th Philippine Business Conference and Expo in Manila on Wednesday, 16 October.

Zest-O’s expansion comes after it registered 30 percent lower sales volume for full year 2018 following the imposition of excise taxes on sugar-sweetened beverages under the Tax Reform for Acceleration and Inclusion (TRAIN) law.

In the case of Macay, its net income further slipped by 33.66 percent in the first half of the year, to PP253.04 million from P381.42 million in the same period last year due to slower revenues.

Under TRAIN 1, the government imposed a tax of P6 per liter of drinks with caloric and non-caloric sweeteners, and another P12 per liter on beverages with high-fructose corn syrup.

Yao said the 30 percent decline in market leader Zest-O also reflects that of the industry. He said companies have resorted to reducing the sizes of its products to accommodate the consumption decline, adding it could take a year or two for the market to adjust to the new product prices brought by higher taxes.

Of course there’s an adjustment period, everywhere where there’s a tax on drinks, there’s an adjustment period. For us maybe (it will take) a year or two. That’s the fastest, Yao said.