The Philippines: San Miguel Corp. to build five to six new breweries in the Philippines

Philippines’ diversified conglomerate San Miguel Corp. (SMC) is planning to put up five to six new breweries worth around $250 million each in the country, in a bid to bring down logistics costs and boost profitability for the beer business, GMA News reported on June 14.

SMC President and Chief Operating Officer Ramon S. Ang said the breweries will have a capacity of two million hectolitres each. He identified several locations for the breweries — Sta. Rosa, Laguna; Quezon province near the Bicol area; Cagayan de Oro; Zamboanga; and near the boundary of La Union and Pangasinan.

“We will be putting up additional five more breweries in the Philippines with investments of around $250 million for each. And with that, we will be able to bring down the logistics cost,” Mr. Ang told reporters after the company’s annual shareholders’ meeting in Pasig City on June 14. Logistics in the brewery business currently account for 30% of total costs, he said.

“We think the brewery profitability will keep on growing double digit, every year by at least 20%… Operating income of the beer business to grow by 20% per year. Because we are coming from a very low profit, higher taxes, low volume,” Mr. Ang explained.

SMC’s beer business is under San Miguel Brewery, Inc., which is currently being merged with Ginebra San Miguel, Inc. and San Miguel Company, Inc. under one unit called San Miguel Food and Beverage, Inc.

For the food business, SMC is currently completing six feed mills with a capacity of one million tons per year by the end of 2018. The feed mills are located in Mariveles, Bataan; Mabini, Batangas; Cagayan de Oro; San Ildefonso, Bulacan; Mandaue, Cebu; and Iloilo City.

SMC will also be building a facility that will manufacture canned cooked meat brand Spam for export in the Asia-Pacific region. The plant will have a capacity of 150,000 tons per year.

“For the region ang license natin, this license to manufacture Spam has been with Pure Foods for 20 years. Kaya lang hindi naaasikaso, ngayon lang natin naasikaso magtayo ng planta to produce Spam,” Mr. Ang said.

The breweries, feed mills, and facility for the manufacture of Spam form part of the conglomerate’s plan to build a total of 18 new facilities for the food and beverage business within the next two to three years.

Petron Corp., which is SMC’s biggest contributor to revenues, is also in the process of expanding its capacity by 90,000 barrels a day. This is expected to bring total capacity to 270,000 barrels a day by 2020.

Petron currently has a station network of 3,000. Of this, 2,400 are located in the Philippines, while 600 are in Malaysia. The company earlier said that Petron ranks third in terms of market share in Malaysia.

The expansion is also part of SMC’s commitment to spend P742 billion in capital expenditures from 2017 to 2019.

For its expansion overseas, Mr. Ang said the company is looking at opportunities in Malaysia, following the assumption of Prime Minister Mahathir Mohamad into office last May.

“The trust of Mahathir is to bring down the level of debt, so therefore I think they will be doing a lot of privatization…If there’s an opportunity, we will take a look at power sector in Malaysia,” Mr. Ang said.

SMC’s recurring profit grew by a third to P19.4 billion during the first quarter of 2018, supported by a 20% jump in consolidated revenues to P234.3 billion for the period.

Shares in SMC closed flat at P140 each at the Philippine Stock Exchange on June 14.

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