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Thursday, August 17, 2017 | MANILA, PHILIPPINES
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Date posted: Friday, December 11, 2015 | Manila, Philippines

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Leveraging on a beer brand



SAN MIGUEL CORP. (SMC) may have transformed itself into one of the country’s most diversified conglomerates, but it is still best known for its beer brand, whose dominance is unrivaled in the Philippine market.

So dominant was the San Miguel Beer brand that SMC, which was purely a food and beverage company back then, was forced to look at its neighbors in Southeast Asia for growth.

“The foremost motivation for San Miguel’s expansion overseas, particularly in the ASEAN (Association of Southeast Asian Nations) region, was to look for growth opportunities,” SMC President and Chief Operating Officer Ramon S. Ang said.

“While our beer business has long had a presence in Hong Kong and other export markets, it was in the 1990s when we started to look for even more opportunities outside the domestic market,” Mr. Ang said.

The main strategy for its ASEAN expansion was to leverage on the strength of the San Miguel Beer brand. San Miguel Brewery, Inc.’s (SMB) flagship product is one of the largest selling beers and among the top 10 in the world.

In this year’s edition of Asia’s Top 1000 Brands, Campaign Asia-Pacific and Nielsen said San Miguel Beer ranked as the region’s 10th most popular alcohol brand, and the second top brand among Asia’s homegrown beer brands, next only to Singapore’s Tiger Beer.

The beer business provided the foundation from which SMC expanded its traditional food and packaging businesses overseas. Following the footsteps of San Miguel Beer made perfect sense for the two units given the country’s proximity to ASEAN countries and its cost advantages.

“San Miguel is a Philippine brand that is already well-known in many parts of the world. Naturally, we wanted to take advantage of this equity in order to push and grow our businesses further,” Mr. Ang said.

Now, SMB has one brewery each in Indonesia, Vietnam, Thailand and Hong Kong and two breweries in China, with total capacity of approximately seven million hectoliters. San Miguel Pure Foods Co., Inc. has plants in Indonesia and Vietnam, while SMC’s packaging group has 10 international facilities located in China, Vietnam, Malaysia and Australia.

LOCAL HIRES KEY TO ADAPTING

As San Miguel enters new markets beyond its home turf, the conglomerate adjusts to different regulatory policies and business cultures, while contending with larger multinational, as well as well-loved local brands.

“We need to adapt to these conditions if we want our businesses to have a chance at competing and to prosper in these markets,” Mr. Ang said.

To help the company navigate through the diverse business environment, San Miguel hires local talents who are more familiar and knowledgeable about the market.

“There is a lot of potential for growth, but you have to be fully prepared. You have to have a deep understanding of the market, not just consumer behavior, but equally important, local culture, business practices, and regulations,” Mr. Ang said.

Given its vast footprint in Southeast Asia, the San Miguel group can be regarded as one of the most successful local companies in the international front. But what ultimately cemented the conglomerate’s regional ambition was its subsidiary Petron Corp.’s $600-million acquisition of American multinational oil and gas firm Exxon Mobil Corp.’s (ExxonMobil) downstream oil business in Malaysia in March 2012.

While Petron already exports various products to other Asia-Pacific countries, the takeover of ExxonMobil’s businesses gave the Philippines’ biggest oil company an integrated refining, distribution and marketing operations in Malaysia. Petron’s Malaysia operations include an 88,000-barrel-per-day refinery, seven storage facilities and a network of 560 service stations.



“We see more opportunities for San Miguel as the ASEAN integration takes into effect. We feel that the presence we have established throughout the region is a distinct advantage in terms of helping bolster our competitiveness,” Mr. Ang said.

The San Miguel group is excited at the prospect of the creation of a single market across Southeast Asia that will not only expand its reach but afford it access to better quality inputs at lower prices.

ROOM FOR EXPANSION

SMC’s international business is still “relatively small” in the context of the conglomerate’s total operations, which now include power generation, infrastructure and mining. In 2014, the overseas ventures accounted for 26% of consolidated revenues, but Mr. Ang considers the company’s international operations as a “very promising area” with tremendous potential for growth.

For San Miguel, there is still room for expansion in Southeast Asia even after establishing manufacturing operations in the region’s major economies.

“Given the right opportunities, we may further expand our reach in these markets, or other countries within the ASEAN. It is just a matter of identifying the opportunities in each country and determining the right time for us to enter,” Mr. Ang said.


Ms. Montealegre has been writing about the corporate scene for nearly a decade, the last year or so for BusinessWorld.
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*Send e-mail to Krista Angela at krista.montealegre@gmail.com or follow her on Twitter @_kmontealegre.

 
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