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Asia300

San Miguel to spend $300m to boost beer production

Philippine conglomerate refocuses on core business after diversification push

San Miguel’s decision to expand its breweries reflects a renewed interest in its original businesses.

MANILA -- San Miguel, the Philippine food producer-turned-infrastructure builder, will spend $300 million to boost its beer production, company President Ramon Ang said Wednesday.

San Miguel Brewery, the operating unit partly owned by Japan's Kirin Holdings, will start building a new plant in the southern Philippines, home of President Rodrigo Duterte, and expand an existing one on the main Luzon island, Ang told reporters.

He said the construction will be completed in less than two years, but did not give details on the plant's capacity. The Philippine Daily Inquirer reported that the expansion will cover upgrades on logistical systems to make distribution more efficient. Euromonitor International said Philippine brewers are expected to take efficiency measures to offset the impact of higher excise taxes that took effect in 2013.

San Miguel brands already control more than 90% of the domestic beer market, and the expansion is seen as a move to fortify their dominance as craft beers and foreign brands enter the market.

San Miguel Brewery competes with LT Group subsidiary Asia Brewery, which last year formed a joint venture with Heineken International for the local production of the Dutch lager beer.

But Ang, during an interview last year, said he was not worried, citing the popularity of the century-old brand, which grew faster than the overall industry in the country.

From January to September last year, San Miguel Brewery sales surged by 17.88% to 69.30 billion pesos ($1.39 billion), buoyed by election spending and ramped up marketing and promotional campaigns. In contrast, industry sales grew by only 1% in 2016 from 2015, according to Euromonitor. The Philippines' expanding middle class and young population are expected to fuel demand.

San Miguel's move to increase beer production is also part of conglomerate's renewed focus on its traditional businesses after devoting much of its capital expenditures to new ventures in recent years. The company last week confirmed a report that it would spend 75 billion pesos on its food, beverage and packaging ventures.

San Miguel, one of Southeast Asia's largest food and beverage firms, in 2007 embarked in an aggressive expansion into oil refining and retailing, power generation, tollways, railways, airports, banking, real estate and mining. In the course of its diversification, the company invested in, and later divested from, ventures in power distribution, airlines and telecommunications.

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