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Wednesday, November 22, 2017 | MANILA, PHILIPPINES
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Date posted: Friday, December 11, 2015 | Manila, Philippines

how competitors compare

Pockets of monopolies amid growing economy

COMPETITION HAS always been seen by many as a condition for an economy to function properly. Companies providing the same goods and services compete with each other to entice buyers and thus earn a profit. Inevitably, the competition will end up with winners, which in this case, is based on market share.

In coming up with the list of Top 1000 Corporations in the Philippines, firms are not only ranked in terms of gross revenue but also compared with like companies. The Competitors’ table thus shows which companies dominate a particular sector.

The groupings are based on the Philippine Statistics Authority’s 2009 Philippine Standard Industrial Classification (PSIC), which is a “detailed classification of industries prevailing in the country according to the kind of productive activities undertaken by establishments.” In accordance with PSIC’s general rule, the classification of these companies is “determined from its principal activity or range of activities.”

One may look at the table to see familiar names like Universal Robina Corp. and Nestlé Philippines, Inc. take control of their respective subsectors. However, there are companies that hardly face competition, which implies a competitive advantage over those that did not meet the P1.69 billion cutoff.

In 2014, there are 79 such companies, compared to 74 the year before and 82 in 2012. This is not necessarily a bad thing. From the point of view of potential investors, this might mean something to keep an eye on, especially when these companies decide to go public.

And why not? Despite the Philippine narrative of robust economic growth, the number of listed companies in the country remain small relative to its ASEAN neighbors. Of the 271 listed companies in the Philippine Stock Exchange, only 82 are included in this year’s Top 1000 Corporations.

In this article, three privately owned market leaders are highlighted: Mercury Drug Corp. in the retail sale of medicines; Zest-O Corp. in the manufacture of fruit juices; and National Book Store, Inc. in the retail sale of books.

What we’re saying is that these firms could be the darlings of the stock exchange if they choose to. In fact, the possible listing of these three companies has been grist for the rumor mill.

The Que family-owned firm has long been rumored to be joining the Philippine Stock Exchange through the backdoor route. And for good reason. Starting as a small drugstore, the company has since grown into a network of more than 1,000 outlets across the country, employing over 12,000 people.

In the retail sale of medicines, Mercury Drug has long been the uncontested leader, with its P104.49- billion gross revenue, or a 62% share of the market. This has catapulted Mercury Drug to the 6th spot in this year’s Top 1000 Corporations. Its competitors, Watsons Personal Care Stores (Philippines), Inc. and Rose Pharmacy, Inc., trail Mercury Drug by a mile, with revenues of P19.34 billion and P8.44 billion, respectively.

Since its inception in 1980, Zest-O Corp. has emerged as one of the strongest players in the country’s beverage sector. Zest-O pioneered the first ready-to-drink juice refreshment in flexible foil pouch.

The company has cornered 80% of the country’s ready-to-drink juice market. It manufactures over 40 brands in highly competitive, fast-moving categories, and exports its products to China, select Southeast Asian countries and the US. To date, the company operates 12 branches and five plants across the country.

Last March, Zest-O was acquiring a production plant in the US in a move to cut transport and logistics costs. Alfredo M. Yao, chairman of Zest-O, had said the move to build plants overseas follows the company’s strategy of first testing markets abroad through exports before committing to more substantial investments.

The company’s gross revenue last year grew 10.4% to P4.41 billion, placing it on 465th in this year’s rankings. In recent years, Zest-O has been the sole entrant in the “manufacture of drinks flavored with fruit juices, syrups or other materials” category, thus underscoring its niche position.

The Ramos-controlled company operates the country’s largest bookstore chain. Aside from the flagship bookstore, it also operates more specialized stores, like Powerbooks, NBS Express and Bestsellers. The company as well is the local franchise holder for Hallmark greeting cards under unit Filstar Distributors Corp.

Unlike Mercury Drug, the company has announced its intention to go public through the back door. Plans surfaced in 2012 when National Book Store acquired shares in listed Vulcan Industrial and Mining Corp., another Ramos-controlled company. In 2013, Vulcan obtained shareholder approval to change its corporate name to National Book Store Retail Corp. and its primary purpose to retail from mining.

Last August, Vulcan disclosed that National Book Store subscribed to 850 million of its shares at P1 each, allowing the school supplies and book retailer to control 68% of the listed firm.

The backdoor listing was supposed to take place last year, but the bookstore chain put off the plan, opting to undertake a systems upgrade and expand its store branch network.

Another member of the controlling family, Adrian Paulino S. Ramos, director and treasurer of Vulcan, said the listing could push through next year.

*Send e-mail to Leo at lguy@bworldonline.com or follow him on Twitter.com @leouy037.

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