SMC to set up brewery in Johor, Malaysia

Food and beverage giant San Miguel Corp. (SMC) is stepping up its presence in the Asia-Pacific region with its plan to put up a new brewery in Johor, the southernmost state of Malaysia.

SMC vice-chairman and president Ramon Ang said plans are now underway for the acquisition of a 20-hectare property in Malaysia to house its proposed beer and hard liquor facility. He said the company has applied for a business permit from the Malaysian government and is optimistic of securing one anytime soon.

The ground-breaking for the proposed plant has been tentatively scheduled in September or October this year. The plant is expected to serve the markets of Malaysia and Singapore, Ang said.

Johor is one of Malaysia’s most developed states with an expanding economy fueled by agriculture, manufacturing, commerce and tourism. It is also the nation’s major producer of palm oil, rubber, pineapples and bananas.

With an annual population growth rate of 1.9 percent, Johor’s population is estimated to total over 25 million by 2005. The labor force is also expected to increase to 11.2 million by next year.

SMC has set aside between $700 million to $1 billion for its capital expenditures within the next three years as part of efforts to rank among Asia’s top 10 food and beverage companies by 2007.

The company is expanding in seven Asian countries this year to propel its growth as it faces saturation in the local market where it dominates the beer, liquor, softdrink and food sectors. The company controls the beer segment with a commanding market share of more than 90 percent.

SMC chairman and chief executive officer Eduardo Cojuangco earlier said the conglomerate’s focus is to take advantage of the vast regional opportunity given the demographics of overseas food and beverage industries.

With a war chest of about P22 billion and a healthy credit line, SMC is confident it could replicate overseas the strong domestic operations of the company anchored on the good quality of products it produces.

SMC’s expansion covers markets in Indonesia, Thailand, China, Taiwan, Vietnam, Malaysia and Australia.

The aggressive expansion will cover not just the beer and liquor segments but all the core products of the SMC group, including food and animal feeds. SMC has already penetrated overseas markets for beer while its subsidiary Ginebra San Miguel exports hard liquor.

Recently, SMC acquired for $102 million a modern and fully equipped brewery in central Thailand, inclusive of 11 hectares of vacant land for future expansion.

SMC also purchased TTCV, which wholly owns TTC (Vietnam) Co. Ltd. – a profitable hogs and feed mill business – to serve as platform into the country’s food industry and cater to the rapidly-growing economy of Vietnam. SMC spent $35 million for this acquisition.

Apart from this, SMC is expanding its processed meats business in Indonesia through PT Purefoods Suba to complement its existing brewery and plastics packaging plant.

Last May, SMC broke ground for a manufacturing plant at the Amata City (Rayon) Industrial Estate in Thailand. The venture, called San Miguel (Thailand) Co. Ltd., involves manufacturing and distribution in Thailand of all of SMC’s product lines, including beverage products, processed food and snacks, and feed mill operations.

The company is also putting up a non-alcoholic beverage facility in China, particularly in Shunde, Guangdong province, which will produce tea and juices.

Meanwhile, Ang said the company is expected to report a 30 percent growth in its net income for the first semester this year, fueled by the strong performance of all its businesses. Revenues are likewise seen to grow by 16 percent compared with the previous level. Net profit for the first half last year amounted to P3.05 billion while consolidated net sales reached P72.16 billion.

"Compared to last year, the first six months is 30 percent better this year. In terms of revenues, we are tracking 16 percent better than last year," Ang said.

SMC"s international operations currently contribute about 15 percent of total revenues. After SMC’s venture to other countries, their contribution could go up to as much as 70 percent.

From 1998 to 2003, SMC’s sales have doubled and assets grew from P139 billion to P185 billion. The company now has over 100 facilities in six countries compared with only 80 five years ago.

To sustain its income growth, SMC will continue to drive improvements in its core categories in every business, pursue opportunities in categories where it still has relatively low share and deliver growth in its soft beverage sector.