San Miguel Corporation

History

Established in 1890, La Fabrica de Cerveza de San Miguel, Southeast Asia’s first

brewery produced and bottled what would eventually become one of the bestselling

beers in the region.

In 1889, a well-known Manila businessman, Enrique María Barretto de Ycaza y

Esteban, applied for a royal grant from Spain to establish a brewery in the Philippines.

He was awarded the grant for a period of twenty years. On September 29, 1890 it was

declared open for business.

San Miguel Brewery, Inc. (1913–1963)

By 1913, imported beer represented only 12% of the total consumption in the

Philippines; San Miguel held an 88% share of the industry. By 1914, San Miguel Beer

was being exported from its headquarters in Manila to Shanghai, Hong Kong and

Guam.
San Miguel Corporation (1964–present)

In the 1970s, then Philippine President, Ferdinand

Marcos imposed a tax on the production of

coconuts, a major Philippine cash crop, with the

proceeds supposed to fund that industry's

development. It was alleged, however, that the

money was funneled into United Coconut Planters

Bank, controlled by Eduardo Cojuangco Jr., which

Cojuangco then used much of the funds to help him

purchase his controlling stake in San Miguel in 1983. The controlling interest carried

nine of SMC's 15 directors seats with it.

SMC encountered its first major competitor in the Philippine beer market in 1982

with the entry of Asia Brewery, Inc.

Introduction

San Miguel started to reinvent the company and focus on a new direction it sold off

its Australian Assets which were National Foods in 2007 to it’s strategic partner Kirin

Holding and J. Boag & Son in 2008 at a higher price than when it was purchased and 42.2%

stake in its joint venture with Nutri Asia group. It also started to reorganize its food business,

concentrating and placing a deeper focus on the brands it fully owned and finally turning its

beer division into a separate subsidiary called San Miguel Brewery becoming a separate

entity in the Philippine stock exchange. This was done in order to raise capital and isolate

the beer business from the potentially negative impact of the company’s new direction. After

San Miguel has diversified into a number of business such as energy, oil, telecommunications

and even proposed on a project which involved the construction of a dam, hydropower plant

and water treatment and storage facilities. In 2008 in acquired 27% of Meralco but later had

to unload its stock due to PLDT’s continued pursuit for the said company. It also acquired

50.1% of Petron and upon its take over implemented a number of changes, transferring key

personnel to Petron. Lastly it pursued a joint venture with Qtel and in 2009 acquired 32.7

percent stake in Liberty Holdings, Inc. Aside from its success full acquisition it also had

numerous failed attempts in acquiring other business concerning energy.

Nature of Business

San Miguel Corporation (PSE: SMC) is a Filipino multinational publicly listed

conglomerate holding company. It is the Philippines' largest corporation in terms of revenue, with

over 24,000 employees in over 100 major facilities throughout the Asia-Pacific region.

Its flagship product, San Miguel Beer, is one of the largest selling beers. San Miguel's

manufacturing operations extend beyond its home market to Hong Kong, China, Indonesia,

Vietnam, Thailand, Malaysia and Australia; and its products are exported to 60 markets around

the world.

Since 2008, SMC has ventured beyond its core businesses, becoming involved in fuel & oil

(Petron Corporation), power generation and infrastructure. It was briefly involved in Philippine

Airlines from April 2012 to September 2014

Businesses

San Miguel Brewery Inc.

San Miguel Brewery Inc. (SMB) is the largest

producer of beer in the Philippines, with nine out of

ten beer drinkers preferring its brands. San Miguel

Beer was first produced by La Fabrica de Cerveza de

San Miguel, an upstart brewery in the heart of

Manila that began its operations in 1890.

Ginebra San Miguel Inc.

Ginebra San Miguel, Inc. is the world’s largest

gin producer by volume as well as the market leader in

the domestic hard liquor market, with core products

such as Ginebra San Miguel Gin, GSM Blue Gin and Gran

Matador Brandy.

San Miguel Pure Foods Company, Inc.

San Miguel Pure Foods Company, Inc. offers a

diverse array of food products spanning across the

entire value chain ranging from B-Meg feeds and

San Miguel Mills flour to Purefoods hotdogs,

Magnolia chicken or Monterey ready-to-eat meat

dishes.

Petron Corp.

Petron Corporation is the largest oil refining

and marketing company in the Philippines. Supplying

nearly 40% of the country’s oil requirements, the

company’s world-class products and quality services

fuel the lives of millions of Filipinos. Petron’s vision is

to be the leading provider of total customer solutions in the energy sector and its derivative

businesses.
Infrastructure

San Miguel Holdings Corp.

TPLEX

The 88.5 kilometer, two-lane, Tarlac-

Pangasinan-La Union Expressway, the

company’s infrastructure investment in the

north, was inaugurated in December 2013 by

President Benigno S. Aquino III. As administrator

of the toll project, SMC through the Private Infra

Development Corporation (PIDC), the TPLEX concessionaire, will provide management

services, toll collection, traffic safety and security management, toll road maintenance and

other related services.

Skyway Stage 3

Another major infrastructure

initiative, which broke ground in January

2014, is the Skyway Stage 3 project—a 14.8-

kilometer, six-lane elevated expressway from

Buendia to Balintawak that will link SLEX to

NLEX. The project aims to decongest major thoroughfares, while at the same time creating

new transport routes, giving more travel options to commuters and stretching the capacity

of existing transport systems.

NAIAEX

In April 2013, the company won the concession to build and operate the Ninoy Aquino

International Airport Expressway. An important component of the company’s infrastructure

portfolio, NAIEX will connect the Skyway system to all three NAIA airport terminals and the

Entertainment City of the Philippine Amusement and Gaming Corporation.

MRT-7

In October 2010, SMC finalized a deal to acquire 51% interest in Universal LRT Corp.

Ltd., the company in charge of developing the Metro Rail Transit Line 7 (MRT7), a planned

22-kilometer-long rail line, starting from San Jose del Monte in Bulacan and ending in North

Avenue in Quezon City.

TransAire Development Holdings Corporation (TADHC)

San Miguel Corp. also owns the

Caticlan Airport concession-holder

TransAire Development Holdings

Corporation, which is currently

overseeing the modernization of the

airport. Long-term expansion projects

involve the construction of a bigger

airport passenger terminal, extension of the existing runway from 950 meters to 2,100
meters, improvement of the road network and upgrading of airport facilities and air traffic

control aids. Construction of the expanded facility is currently ongoing.

San Miguel Yamamura Packaging Corp.

The San Miguel Yamamura Packaging

Corporation provides a wide range of packaging

solutions to various industries including food,

pharmaceutical, chemical, beverages, and personal

care across Asia-Pacific, Middle East, Africa and the

United States. It is a major player in the domestic packaging industry with market leadership

in most of its product formats.

San Miguel Properties Inc.

Although initially established to be

San Miguel Corporation’s corporate real

estate arm, San Miguel Properties later

diversified into commercial property

development in market opportunities. Its

current portfolio of projects includes

mixed-use developments with economy to middle-income housing as its core products.

Among its real estate development projects: Bel Aldea, Maravilla, and Muralla in Cavite and

Wedgewoods in Sta. Rosa, Laguna.

Power and energy

In a relatively short period, San Miguel has built a vertically integrated power

company with a full spectrum of power businesses comprising of IPPA contracts (through

holding company SMC Global Power Holdings), mining assets, which supply raw materials

to power plants, and a distribution (through Meralco) which distributes and sells electricity

through a vast network in Luzon island. Being a vertically integrated power company gives

SMC the opportunity to compete and maximize value in key segments of the value chain by

driving and capitalizing on synergies among fuel sourcing, power generation and power

distribution.

Aviation

PAL in a nutshell

Flag carrier Philippine Airlines is a major player in the global aviation industry and the one

of Asia’s most dynamic carriers today, having unveiled a road map that seeks to transform

“Asia’s first airline” into Asia’s airline of choice. More than 70 years after PAL first took to the

sky, the story of PAL continues to evolve. Under a new management that has a track record

for successfully growing businesses and run a highly diversified conglomerate that includes

some of the country’s strongest brands in virtually every growth sector of the Philippines,

PAL is taking a tried-and-tested concept and applying the discipline of a three-pronged

business strategy that’s simple yet bold: fleet modernization, network expansion and service

innovation.

Food
Other businesses

 Anchor Insurance Brokerage Corp.

 ARCHEN Technologies

 Bank of Commerce

 Bell Telecommunications Philippines, Inc.

 Eastern Telecommunications Philippines, Inc.

 Liberty Telecommunications Holdings, Inc.

 San Miguel Energy Corp.

 San Miguel Shipping & Lighterage Corp.

 SMC Retirement Funds Office

 SMC Stock Transfer Corp.

 SMITS, Inc.
Nature of the Company
Distribution Management

Strategic Analysis

The STRATEGIC ANALYSIS is intended to give an extremely far reaching strategic

analysis of San Miguel Corporation and thereby explore the medium and long term problems

and opportunities for San Miguel Corporation. This provides a vital input to Corporate

Planning and Development.

Long Term Market & Product Forecast, Consumption Forecast, Long Range Forecast

for Products, Product Growth, Factors for Profitability.

MARKET ENVIRONMENT: Growth, Structure, Service, Customers.

THE PRODUCT: Life Cycles, Market Share, Product Quality, Product range, Profitability,

Pricing, Service Quality, New Products.

COMPETITION: Market Share, Profitability, Competition, Market.

THE INDUSTRY: Industry Growth, Costs, Capacity, Productivity, Labour, Unionization,

Capital Structure, Investment, Margins, Integration, Marketing costs, Process, Distribution,

Market Penetration.
MEDIUM + LONG TERM STRATEGIES: Build, Hold or Harvest

MEDIUM + LONG TERM CHECKLIST: Profitability, Productivity, Market Shares, Customers,

Sales Promotion, Product Availability, Competence, Products, Quality, Pricing, Competitors,

Performance, Service, Customer Base, Costs & Margins, Distribution Channels, Forecast of

Financial + Operating Data.

MEDIUM + LONG TERM CHECKLIST recommends a working plan or document for the

critical factors which influence the Target Company in strategic terms. The data is given as

a matrix by Subsidiary, Division, Unit or Market sector.

CRITICAL LONG RANGE FORECASTS: Long Term Market & Product Forecast

- Overall Market Forecast for the Industry - Long Range Country / Trade Cell Forecasts

- Long Term Product Growth for the Target Company

THE LONG-TERM MARKETS: The Market section consists of a LONG-TERM MARKET

CONSUMPTION forecast giving data for each year from 2018-2028. Market Consumption &

Market Trend figures are given:- by EACH COUNTRY / STATE / REGION by EACH PRODUCT

Group and/or MARKET by YEAR 2018-2028

LONG-TERM PRODUCT PROFILES: Figures are given by EACH Country / State or Region by

EACH PRODUCT and by Year (2018-2028). This section provides Market data for each

Product or Market Sector in a matrix for all the countries or states (covered by the report)
in the Long-Term.

LONG-RANGE PRODUCT SUMMARY: Figures are given by EACH Country / State or Region

by EACH PRODUCT. The PRODUCT SUMMARY section is designed to provide a forecasted

overview for each Product or Market Sector (covered in the report) in the Long-Term.

Business Strategies of SMC

The principal strategies of SMC include the following:

Enhance value of established businesses

SMC aims to enhance the value of its established businesses bypursuing operational

excellence, brand enhancement, improving product visibility, targeting regions where

SMChas lower market share, implementing pricing strategies and pursuing efficiencies.

Continue to diversify into industries that underpin the development and growth of the

Philippine economy

In addition to organic growth, SMC intends to continue to seek strategic acquisition

opportunities toposition itself for the economic growth and industrial development of the

Philippines.
Identify and pursue synergies across businesses through vertical integration,

platform matching and channel management

SMC intends to create an even broader distribution network for its products and

expandits customer base by identifying synergies across its various businesses. In addition,

SMC is pursuing plans tointegrate its production and distribution facilities for its established

and newly acquired businesses to enableadditional cost savings and efficiencies.

Invest in and develop businesses with leading market positions

SMC intends to further enhance its market position in the Philippines by leveraging

its financial resources and experience to continue introducing innovative products and

services. Potential investments to develop existing businesses include possibly constructing

new power plants and expanding its power generation portfolio, building additional service

and micro-filling stations and expanding distribution networks for its beverage and food

products. SMC believes its strong domestic market position and brand recognition provide

an effective platform to develop markets for its expanding product portfolio. SMC plans to

continue to invest in and develop businesses it believes have the potential to gain leading

positions in their respective markets.

Adopt world-leading practices and joint development of businesses

SMC continues to develop strategic partnerships with global industry leaders, such as

Kirin for beer, Hormel for processed meats, K-Water for powerand NYG, Fuso and Can-

Packfor packaging products. These partnerships provide marketing and expansion

opportunities.

Risks of Investing

Prospective investors should also consider the following risks of investing in the

Offer:

1. Macroeconomic risks, including the current and immediate political and economic

factors in the Philippines and the experience of the country with natural

catastrophes, as a principal risk for investing in general;

2. Risks relating to SMC, its subsidiaries and their business and operations; and

3. The nature, the absence of a liquid secondary market and volatility, and other risks

relating to the Offer.For a more detailed discussion, see “Risk Factors” inthe

Prospectus.
Distribution Channel

San Miguel Brewery Inc. (SMB) is primarily engaged in the manufacture and

sale of fermented and malt-based beverages, including beer of all kinds and classes,

as well as non-alcoholic beverages such as ready-to-drink tea and bottled water.

SMBhas six production facilities strategically located across the Philippines and a

highly developed distribution system serving more than 400,000 on-premise and off-

premise outlets nationwide. The SMB Group also operates one brewery each in Hong

Kong, Indonesia, Thailand and Vietnam, and two breweries in China. SMC also

produces hard liquor through its majority-owned subsidiary, Ginebra San Miguel, Inc.

(GSMI).

GSMI is one of the largest gin producers in the world by volume with some of

the most recognizable brands in the Philippine liquor market. It operates one distillery,

five liquor bottling plants and one cassava starch milk plant, and has engaged two toll

bottlers strategically located throughout the Philippines and one bottling and distillery

plant in Thailand. GSMI distributes majority of its liquor products nationwide to

consumers through territorial distributorship by a network of dealers and through

GSMI’s territorial sales offices.

Furthermore, some off-premise outlets such as supermarkets, grocery stores,

sari-sari stores and convenience stores, as well as on-premise outlets such as bars,

restaurants and hotels are directly served by GSMI or through its key accounts group.

The Logistics Group of GSMI is responsible for planning and delivering the products
from the plants to the dealers and sales offices. Thereafter, the products are sold by

routing these to retailers and consumers across their territories. GSMI has 98 dealers

and tensales offices as of December 31, 2016. GSMI uses third party services in the

warehousing and delivery of its products.

Conclusion

San Miguel management should change their marketing strategy, as well as their planning
programs, especially that the business had meet its slow growth rate. They can use “twist”
to make their product more presentable. Such as, the improvement of their product
packages. They can also add some flavor to their current selling beers. Making new mixes
to have new and attractive flavors. As well as, they can also use the gimmick approach to
try if the response from the market and projected customers will be great help.
Advertisements using celebrities to catch the attention of people and customer’s
patronization.

Recommendation

As our alternative course of action, we strongly recommend and chose #1.Constitute a

more active team of managers in the planning process, develop new strategies based on the
past and provide planning manuals to all Business Family and Element Team.
1. Managers will be more active in the organizations and learn firsthand how the
organizations operate.
2. The more active managers are within the organization, the more aware they become
of the inefficiencies and ineffective aspects of the operations. .
3. The more active managers are within the organization, the more aware they become
of the inefficiencies and ineffective aspects of the operations. .

4. A more active team of managers would generate better decisions made through
employee cohesion, collusion and synergy.

5. A manager is responsible for resources and methods at his disposal. He is to use

these resources to reach his objectives.