RFM Group reviews business portfolio

RFM Corp. is currently reviewing its business portfolio to determine which to let go of and which to retain as part of an overall strategy to give better value to its stockholders and to prepare the company for more challenging days to come for Philippine business and the economy in general.

But whatever the challenges, RFM president and chief executive officer Jose Concepcion III is confident that the food and beverage company is all geared up for the worst with no debts and with a substantial sum from the sale of Cosmos to San Miguel Corp-Coca Cola.

"We had to take the conservative stand of selling one of our prized jewels which is Cosmos while we can still get a good price for it. This way, we are able to pay off our debts and still leave around P4 to P5 billion although right now, we still do not know what to do with the money," Concepcion said.

The deal came at a right time, what with the pessimistic scenario in the economy and the banking system not strong enough. "The problem is if you are not a triple A company, then they are not going to lend you money. And the price given to us by SMC is pretty good although it could have been better," he added. He says that following the deal, many companies have offered to buy certain businesses of RFM while banks have started calling and are now willing to lend money.

The RFM chief officer said the company has the ability to spot opportunities — buying companies, creating strong brands, and selling them for a good price — and this strategy will remain in the years to come.

"What is important is that at RFM, we have the entrepreneurial ability to create a good brand, and develop it and then decide what to do with it later on. This, we did in the case of PSI Technologies where we were able to sell our shares at a very good price. This was also the case for Consumer Bank which we created and then sold," Concepcion explained.

Among its existing businesses which RFM is carefully reviewing are its poultry and flour divisions. "If we are neither number one or two in the industry and rather a far third and fourth, then we would rather get out. As for the poultry business, it continues to be a difficult business to be in especially with smuggled and cheap chicken still coming in. We have to look at our level of competitiveness in these areas. Probably, it is better to just leave one group to control the industry just to compete with these imported products," Concepcion explained.

SMC, following its purchase of Purefoods Corp., now has a very dominant position in the poultry industry. In order for Swift Foods Inc. poultry division to remain competitive, it may have to partner with another player, which in this case is Vitarich Corp., just to give SMC-Purefoods poultry good competition.

But Concepcion said that while they have been talking with Vitarich, "their families (the Sarmiento family) have not made up their mind and considering the huge debt which Vitarich still has, I don’t think it will be a good decision."

As for the processed meat business, the division is undergoing rightsizing. RFM has just created a branded foods division which will handle the marketing and operations of seven divisions, including processed meat. "By centralizing many functions, we will be able to reduce overhead. RFM has become so old and there is a need to shrink the organization," he said.

Concepcion explained that right now RFM is not yet quite clear as to what role it wants in the food and beverage industry.

He says SMC will be a tough company to contend with in this area. "But there are niches in the food and beverage sector and in the medium-term, we might focus on select categories such as noodles, branded flour, and non-carbonated drinks such as juices, milk, and powdered drinks," he noted.

In the flour business, RFM is currently in talks with a foreign strategic investor. In case this does not materialize, then the company will have to review its competitiveness in the flour sector.

"Basically, the company’s direction is to grow its non-carbonated line which is juices and milk and then determine whether or not our other products are still part of our long-term strategy of creating value," he said.

Going into strategic partnerships will also play a key role now and in the near future for RFM. For instance, RFM has already sold 50 percent of its shareholdings in Selecta to Unilever and created better value for the company. RFM likewise plans to expand its relationship with Uni-President which is the largest F&B company in Taiwan to go beyond noodles and to include branded flour and milk. Discussions are going on at this point.

RFM earlier entered into a memorandum of agreement with Uni-President for the latter to buy into the company’s existing White King branded flour business. "If they expand their role, then we can look at exporting our products to Taiwan," Concepcion said.