Situation Analysis for San Miguel Corporation

SITUATION ANALYSIS (3 C’s Analysis) Company 

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San Miguel Corporation was the largest publicly listed food and beverage company in SouthEast Asia. Its flagship product, the San Miguel Beer, possessed an iconic status as a prized national institution in its home market. San Miguel also owns 7 of the top 10 selling beer brands in the Philippines. o San Miguel also acquired the Magnolia product line as well as the rights to bottle and distribute Coca-Cola products in the Philippines. The company also purchased gin producer La Tondena, which enabled it to become the largest gin producer with the conception of the Ginebra San Miguel brand, the market leader in the Philippines. Finally, San Miguel acquired Pure Foods, its main competitor in the refrigerated meats industry, hence creating the largest food company in the Philippines during the 2000s. o San Miguel Brewery continued to dominate in its home beer markets. The dominance of San Miguel in the market, however, also posed a challenge due to the increasingly saturated industry, a projected slower growth, and a slowly developing taste for imported beer brands amongst its Filipino market. In line with the current strategy to diversify, however, San Miguel Brewery was not left to deteriorate after the diversification had taken place. o With over 100 facilities operating in various countries, manufacturing 300 different San Miguel products, San Miguel became the largest company in the country ever. San Miguel’s initial strategy was to expand its operations internationally to achieve its ambition to become a major regional player in Asia. The company initially began exporting beer to Hongkong, Shanghai and Guam, as well as partnering with a Spanish company to engage in trade in Europe. Their most productive partnership was with Japan’s Kirin Brewery Company, which allowed San Miguel funding and expertise to push though other numerous acquisitions. o San Miguel engaged in joint ventures with different breweries in other countries by buying stock that gives them around 49% ownership of the companies. They implemented this strategy in Indonesia’s PT Delta Djakarta TBK brewery as well as Khaoh Hoa Beer Co brewery in Vietnam and in Thailand’s Thai Amarit Brewery. The regional strategy had allowed San Miguel to maintain its space among the top 10 beer companies in the Asia Pacific region, where it generated the bulk of its international revenues. San Miguel’s leaders realized that the company’s future lay not just as a beer brewer. San Miguel reversed its international expansion plans and shifted its strategy into non-allied businesses in the Philippines such as in energy, mining, infrastructure and other utilities. o “The new economic realities have required a fundamental rethink of our current priorities and strategic intent. Our recent acquisitions will be critical engines to our new growth strategy.” San Miguel 2008 Annual Report o San Miguel quickly sold off all its Australian assets and made its first acquisition in purchasing a 27% share in Meralco, the Philippines’ largest

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electric power distributor, which followed a takeover of Petron Corporation, the Philippines’ largest oil refiner.  From generating their income solely from beer and food businesses, San Miguel now generated the majority of its profits from the new business it had acquired in the past year: power generation and fuel for transportation  The company purchased 27% of Meralco, who held a monopoly franchise for the distribution of electricity in Metro Manila. Despite not having the controlling power the company was pursuing, they own a majority of the largest electric power producer in the Philippines. o San Miguel also pursued a joint venture with Qatar Telecom (Qtel) as well as Liberty Telecom Holdings and Express Telecommunications Co, Inc. (Extelcom) to develop opportunities in the wireless broadband and mobile network businesses in the Philippines and strengthen its entry into the telecom markets.  This however, remained in a fledgeling state. SMC had rolled out a WiMax wireless digital communications system that was still a small player in the telecommunications market in the Philippines and had only a 5% market share among broadband subscribers in Manila o San Miguel would also go on to set up factories that produced yeast, dry ice, glass, dairy products, cartons, poultry processing, shrimp farming, and other food related investments. San Miguel attempted to acquire the Philippine National Oil Corporation – Energy Development Corporation (PNOC-EDC), the Philippines’ largest producer of geothermal power, as well as the National Transmission Corporation (NTC0, the corporation formed to oversee the Philippines’ National Electricity Power Grid, and the Sual and Pagbilao coal fire plants. San Miguel’s ambition to go into mining, power and infrastructure met with considerable controversy and skepticism from various stakeholders in the company since this strategy was first formulated and implemented. o Many analysts were puzzled by the prospect of a globally renowned beer and food producer aiming at becoming a successful electricity distributor, telecom retailer, oil refiner at the same time. San Miguel’s reply to this was that “the company was only willing to pay what we believe is the right price, that would allow us to extract attractive earning margins and would offer us significant value-creation properties.” o However, the level of success of these endeavors would also determine whether this venerable company would continue to exist as a mainstay of the business environment in the Philippines for the next 100 years.

Competitors 

The Asian market was led by the number one Chinese beer, Tsingtao, followed by Japan’s market leader, Asahi. San Miguel also competed most closely with AnheuserBusen as well as Oetker Gruppe, Empresas Polar and Diageo. Overall, on a global scale, San Miguel remained a relatively minor beer player. This week market position was exacerbated by the rise of competition levels throughout the region, particularly as Chinese brewers started seeking new international markets,

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The Philippine Long Distance Telecommunications Corporation (PLDT) has been seeking to acquire the state-owned shares to take advantage of Meralco’s network infrastructure to complement its telecommunication business network. An alliance between PLDT and the Lopez family enabled PLDT to take control of Meralco, fending off San Miguel’s takeover bid.

Customers