Ginebra San Miguel earnings down 38% to P228M in Q1

Ginebra San Miguel Inc. (GSMI), the hard liquor unit of food and beverage giant San Miguel Corp., reported a net income of P228 million in the first three months of the year, down 38 percent from last year’s P368 million, mainly due to higher raw material costs and an increased value-added-tax.

"During the first quarter, we had to absorb the cost of increased value-added tax and more expensive inputs, bringing to fore the harsh macroecnomic realities that are bearing down on our business," said GSMI chairman Eduardo Cojuangco Jr. during the company’s annual shareholders meeting yesterday.

Prices of raw materials had jumped 60 percent, Cojuangco said.

Revenues fell 3.3 percent to P2.94 billion during the period from P3.04 billion the previous year.

"The shift in product mix – a strategic imperative in the light of changing consumer preferences – also affected our operating income which fell below last year’s level at P445 million," Cojuangco said.

He, however, remains confident that "GSMI’s business will pick up in the coming months as the gap between current and year-ago consumption of gin has begun to substantially narrow down," adding that "this is due in part to our aggressive promotional efforts aimed at creating consumption occasions and making our brands more appealing to a wider consumer base."

"We also expect higher volumes as we bring in incremental sales from our new brands," he said.

Last year, GSMI launched six major products: Ginebra San Miguel Premium Gin, Gran Matador Brandy Solera Gran Reserva, Antonov Vodka, Don Enrique Mixkila Distilled Spirit, St. George Premium Whisky and Ginebra San Miguel Life.

Just recently, GSMI released to test market two new flavored Ginebra San Miguel products — Ginebra San Miguel Melon Flavored Gin and Ginebra San Miguel Dalandan Flavored Gin.

Other products in the pipeline are two new flavors of Erg – Ice and Ginger Ale.

"Coming out with more gin products affirms our conviction that there is still room for growth in this category, particularly in the underserved upscale segment. The rest are entries into new liquor categories, pushing us outside the safe boundaries of gin and giving us access to consumer segments not traditionally associated with our brands," Cojuangco said.

Cojuangco said the company’s P2-billion distillery and bottling plant in Thailand in joint venture with C.N.T Wine & Liquor Co. Ltd., is expected to commence by the middle of next year. The plant is expected to produce 75 kiloliters of liquor per day.

The plant, he said, will give GSMI the capability to produce lao khao, a popular local liquor, and possibly other spirits.

To strengthen its market leadership, GSMI will continue to improve its distribution network, manage costs and improve operational efficiencies, Cojuangco said.