SMC forms Vietnam hog venture with Hormel

Food and beverage giant San Miguel Corp. has sold a 49-percent stake in its agribusiness arm in Vietnam to Hormel Foods Corp. for $20.48 million.

In a disclosure to the Philippine Stock Exchange, San Miguel said the deal would result in a joint venture with Hormel to run San Miguel Pure Foods (VN) Co. Ltd., its feeds and hogs business in Vietnam.

"The joint venture combines San Miguel’s and Hormel’s expertise in marketing, process, technology, and management, thus accelerating the expansion of San Miguel’s presence in Vietnam," the conglomerate said.

San Miguel acquired San Miguel Pure Foods Vietnam formerly TTC Vietnam Co. Ltd.) in 2003 for $35.5 million as its springboard into Vietnam’s basic and processed meats market.

Hormel is San Miguel’s long-time partner in processed meats and a multinational manufacturer and marketer of consumer-branded meat and food products.

Based in southeastern Minnesota, Hormel is perhaps best known as the producer of Spam luncheon meat. The company was founded as George A. Hormel & Co. and changed its name to Hormel Foods Corp. 102 years later in 1993. Hormel sells food under the Jennie-O, Dinty Moore, Stagg, and Carapelli brands, as well as under its own name.

San Miguel Vietnam’s hog farming and feed milling facility in Binh Duong, one of the fastest growing provinces in Vietnam, was bought from the Taiwan Tea Corp. in October 2003.

Analysts said the sale may help San Miguel, which makes nine of every 10 bottles of beer sold in the Philippines, pay debt. The food and beverage conglomerate has been buying companies at home and abroad to cut its reliance on beer and on its domestic market.

A $3.6-billion expansion started in 2000 has inflated San Miguel’s debts and raised financing costs.

Higher financing costs affected San Miguel’s bottomline last year. The company’s 2005 net profit rose by only three percent to P9.15 billion, its slowest since the company posted a 5.7 percent decline in profit in 2001.

Last year, San Miguel made its biggest purchase with the takeover of Australian dairy giant National Foods Ltd. This was followed by a $420-million purchase of Singapore listed food processing firm Del Monte Pacific Ltd. through NutriAsia Pacific.

Aside from this, San Miguel bought an additional 49 percent of Berri Ltd. to take full ownership of the Australian juice maker.

San Miguel is in talks with Atlanta-based Coca-Cola Co. for the sale of its 65 percent stake in Coca-Cola Bottlers Phils. Inc. which has been suffering from declining sales volume as new beverages and health conscious people turn to other beverage products.

San Miguel’s profit last year was dragged down by CCBPI’s losses.

San Miguel and Coca-Cola jointly acquired Coca-Cola Bottlers Philippines Inc., or CCBPI, in July 2001 from Coca-Cola Amatil Ltd. of Australia.