January 14, 2016 12:00 pm JST

CEO in the news: JG Summit's CEO-to-be is already putting ambitions into action

CLIFF VENZON, Nikkei staff writer

Lance Gokongwei, president and chief operating officer of JG Summit

MANILA   Long before the ASEAN Economic Community got off the ground at the end of 2015, JG Summit Holdings of the Philippines was busy laying the groundwork for a regionwide expansion drive.

     The fruits of those labors can be seen in Cebu Air, a core unit of JG Summit and one of the region's largest budget carriers. Starting in 2017, it plans to add flights connecting Singapore, Bangkok and Hong Kong to secondary hubs across the Philippine archipelago.

     The strategy of connecting tier-one Asian cities with secondary airports in the Philippines is a way around the overcrowding at Manila's Ninoy Aquino International Airport. It is also a way to take advantage of demand for air travel in cities outside the Philippine capital, which has picked up dramatically as incomes in the country rise.

     The orchestrator of this regional expansion is Lance Gokongwei, chief executive of Cebu Air and the only son of John Gokongwei, founder and chairman emeritus of the JG Summit group.

     "I think, fundamentally, the company's successes have been driven by a keen focus on innovation, which benefits the growing middle class, particularly in ASEAN," Lance Gokongwei told the Nikkei Asian Review on Jan. 6, when he revealed plans for the additional routes. "So the steps we are undertaking are ... focused on meeting these unmet consumer requirements."

     JG Summit's operations include snacks and beverages, real estate, banking and petrochemicals. Its core investments are in power distribution and telecommunications.

     Gokongwei is expected to take over the group after his uncle, James Go, retires as chairman and chief executive.

     The Philippine business community realized in late October that a succession plan was being implemented. The elder Gokongwei sold 475 million JG Summit shares to family members. Lance got 165 million, bringing his direct shareholdings to 7.6%. His older sister, Robina Gokongwei-Pe, received some 105 million shares, giving her a direct stake of 2.5%.

     Lance, currently JG Summit's president and chief operating officer, is prepared to take the reins.

     "I've been working for the company for the past 25 years -- from the smallest [job] to the COO job," he said in 2013. "I have gone through many experiences, and all these have helped me become a better manager."

     Gokongwei considers a good education one of the biggest advantages of coming from a wealthy family. He studied at the University of Pennsylvania and eventually earned a double degree in finance and applied science, summa cum laude.

     "My six years studying abroad enabled me to appreciate and respect other people's points of view, which is a critical skill as an entrepreneur operating in a more global economy," he said in 2007. 

FAMILY LEGACY   Right after college, in 1988, Lance joined one of the family's businesses, Universal Robina, which his father was still actively managing.

     John Gokongwei, now 89, came from a well-off Chinese-Filipino family in Cebu with ancestral ties to China's Fujian Province. His life was upended at age 13 when his father died suddenly.

     Being the eldest of six children, John supported his family during the war by peddling soap, candles and thread. With the profits he accumulated from trading and a bank loan, he started a corn milling company in 1957, which would become the precursor to Universal Robina. In the 1980s, the company diversified into snacks and coffee.

     Lance has said he wants to build on what his father has achieved.

     When he became a general manager of Universal Robina's branded food business in the late 1990s, he led the development of beverages to complement the company's snack portfolio. He scored a major hit in 2004 with C2, a ready-to-drink tea that succeeded in challenging the foreign cola companies dominating the Philippine beverage sector.

ENGINEERING GROWTH   Gokongwei became chief executive of Universal Robina in 2013 and has been busy expanding the business. Last year, he opened the company's first factory in Myanmar, a plant for producing wafers. 

     To break into the upscale snack market, Gokongwei steered Universal Robina into two partnerships in 2014 -- one with Japan's Calbee, for premium potato chips, and one with France's Danone, for healthy beverage products. The same year, he snapped up New Zealand-based cookie maker Griffin's Foods for 700 million New Zealand dollars ($609 million at the time), giving Universal Robina a presence in the South Pacific.

     In the first nine months of its current fiscal year, Universal Robina's net sales rose 18% to 81.9 billion pesos ($1.73 billion), while net income grew 12% to 9.6 billion pesos, making it the biggest business in the JG Summit group.

     Gokongwei has overseen Cebu Pacific Air since its inception in 1996. Now on the cusp of becoming a major regional player, the airline carried 13.7 million passengers in the nine months ending September.

     2015 was a turbulent year for airlines, partly due to safety concerns and cooling growth. But while shares of Cebu Air fell 4.5%, its regional counterparts took a much heavier beating. AirAsia, the region's largest budget airline, saw its share price plunge 48.3%, while shares in Thailand's Nok Airlines plummeted 46.6%.

     Among the challenges facing Cebu Air is the Philippines' slow progress in building up its transportation infrastructure, according to Meredith Cua, an analyst at COL Financial.

     Universal Robina, meanwhile, faces increased competition from global food and beverage companies eager to take advantage of Southeast Asia's 600 million mouths, according to Lexter Azurin, head of research at Unicapital Securities.

     Gokongwei said his company will not be complacent.

     "We plan to execute defensive strategies to protect our market share against the aggressive moves of our competitors," he told analysts in August.

     Despite the headwinds, the regional focus remains intact. "We are firm [in the] belief that, for many reasons, Asia will continue to grow faster than the developed countries," he told the Nikkei Asian Review in 2014. "We are fortunate that we are concentrated in this area."

     As a leader wearing several hats, Gokongwei believes that growing one group business should not come at the expense of another.

     "There are seven businesses within the group. They are all your children. You love them equally and some children, at certain times require more attention, and you just spend more time," the father of two said. "You try to meet them regularly. When there is an issue, there is more time [to spend] with them."

Asia300

JG Summit Holdings, Inc.

Philippines

Market(Ticker): PHS(JGS)
Sector:
Industry:
Producer Manufacturing
Industrial Conglomerates
Market cap(USD): 10,617.1M
Shares: 7,202.84M
Asia300

Cebu Air, Inc.

Philippines

Market(Ticker): PHS(CEB)
Sector:
Industry:
Transportation
Airlines
Market cap(USD): 1,315.91M
Shares: 605.95M
Asia300

Universal Robina Corp.

Philippines

Market(Ticker): PHS(URC)
Sector:
Industry:
Consumer Non-Durables
Food: Specialty/Candy
Market cap(USD): 6,390.74M
Shares: 2,204.16M
Asia300

AirAsia Bhd.

Malaysia

Market(Ticker): KLS(5099)
Sector:
Industry:
Transportation
Airlines
Market cap(USD): 2,762.55M
Shares: 3,341.97M
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