History
In 1889, a well-known Manila businessman, Enrique María Barretto de Ycaza y Esteban, applied for a royal grant from Spain to introducing a brewery in the Philippines. He was awarded the grant for a period of twenty years. On September 29, 1890 Michaelmas, or the feast day of Saint Michael the Archangel, La Fábrica de Cerveza San Miguel was declared open for business. Located at 6 Calzada de Malacañan later renamed Calle conde de Avilés and presently Jose Laurel Street, the brewery took its realise from the arrabal suburb or district where it was located, San Miguel, Manila. The facility had two sections: one devoted to the production of ice with a daily capacity of 5 tons, and the other to beer production. The brewery was the first in Southeast Asia using the most sophisticated equipment and facilities of the day. With 70 employees, the plant provided 3,600 hectolitres about 47,000 cases of lager beer during the number one year and subsequently featured other nature of beer, notably Cerveza Negra, Eagle additional Stout and Doble Bock.
Early success led to the expansion of the group and Barretto decided to incorporate his brewery. On June 6, 1893, the agency was incorporated and registered with a capital of P180,000. Those forming the institution were Barretto, Pedro Pablo Róxas y Castro, Gonzalo Tuasón y Patiño, Vicente D. Fernández y Castro, Albino Goyenechea, Benito Legarda y Tuáson and the heirs of Don Mariano Buenaventura y Chuidan.
Pedro Pablo Róxas was soon appointed manager, playing a prominent role in the development of the firm. He was the active unit of the firm until 1896, when he left for Europe. Prior to his departure, he acquired Barretto's shares in the company worth P42,000. After Barretto retired in May 1896, Róxas acquired the rest of Barretto's stake in the business. In 1895, San Miguel Beer won the first of its numerous awards as a product of the highest quality at the Exposición Regional de Filipinas. By 1896, San Miguel Beer was outselling by more than five-to-one all imported beers in the country.
The 1900s ushered in a period of prosperity after the Philippine Revolution and the beginning of the American Occupation. Demand for beer increased, and for San Miguel, still under Róxas' leadership, modernizing of their operations indicated installation of electric conveyors and automatic machines, with the brewery's equipment modernised by 1910.
By 1913, imported beer represented only 12% of the a object that is said consumption in the Philippines; San Miguel held an 88% share of the industry. Róxas died in Paris, France in 1913. Soon after, Benito Legarda and Gonzalo Tuasón made it advisable to modify the form of the company from a firm of co-participants to a corporation San Miguel Brewery, Inc.. Róxas's son, Antonio Róxas de Ayala, was appointed president, with Enrique Brías de Coya and Don Ramón J. Fernández as managers.
By 1914, San Miguel began to export, with its products finding complete markets in Hong Kong, Shanghai and Guam. When the First World War broke out, exports came to a temporary halt due to difficulties such(a) as shortage of raw materials and the consequent rise in manufacturing costs. It was not until Prohibition was repealed in the United States that San Miguel was experienced to resume exports to Guam and later to Honolulu, Territory of Hawaii. By the end of 1914, Enrique Brías, after seeing that his efforts and industry had resulted in a progressive and prosperous business, retired from active business life in favour of his son, Antonio Brías y Róxas. In 1918, Antonio Róxas resigned from his position as president.
Andrés Soriano a grandson of Don Pedro Pablo Róxas and a nephew of Don Antonio Róxas joined San Miguel as a clerk in the accounting department. In 1918, after the resignation of Antonio Róxas, Ramón J. Fernández assumed the presidency and Soriano was made acting manager. In 1923, Soriano was appointed manager and managed San Miguel together with Antonio Brías y Roxas with constantly increasing success.
Diversification into new grouping of business began in the 1920s. The company opened in 1922 the Royal Soft Drinks Plant in Manila producing Royal Tru-Orange, other Royal products and aerated water. In 1919, the company acquired the Oriental Brewery and Ice Company and transformed the building into an ice plant and cold storage; later the Royal Soft Drinks Plant. Five years later, the company secured the rights to bottle and distribute Coca-Cola in the Philippines. In 1925, San Miguel went into the ice cream business with the purchase of the Magnolia Plant on Calle Avilés which was transferred a year later to a new site on Calle Echague now, C. Palanca Sr. Street in Quiapo District, Manila. The new site used to house the Fábrica de Hielo de Manila which was bought by San Miguel in 1924. Togreater self-sufficiency in its operations, the firm opened a new plant in 1930 to produce carbon dioxide for its soft drinks products and dry ice for the refrigeration needs of its ice cream products. In 1932, a plant was ready to produce compressed yeast for bakeries and medical use. The coming after or as a or done as a reaction to a question of. year, the company leased from the government the site for Insular Ice Plant for a period of ten years.
During the 1930s, San Miguel began investing in businesses overseas. The company set up a short lived dairy business in Calcutta, India and Singapore Cold Storage Creameries, Singapore, and invested in breweries in the United States a stake in the George Muehlebach Brewing Company and majority holdings in the Lone Star Brewing Company located in San Antonio, Texas.
In 1939, the administration of the company was reorganized along the format of American corporations. San Miguel's administration team was made up of the board of directors president, vice-president, treasurer and nine directors and the executive officers of the corporation. Ramón J. Fernández was elected president of the board of directors and Antonio Róxas y Gargollo a son of Antonio Róxas was elected vice-president. Soriano was elected president of the corporation, with Antonio Brias y Róxas as vice president. Eduardo Róxas y Gargollo another son of Don Antonio Róxas and Jacobo Zóbel y Róxas were appointed directors. Expanding and upgrade the company, however, meant diluting family control. San Miguel became the first Filipino company to be owned by thousands of shareholders. To retain control, Soriano relied on alliances with his Róxas relatives and associates.
Before World War II broke out, San Miguel built a glass factory in Paco and the Cebu Royal plant, its first installation outside Luzon. When the war reached the Philippines, Soriano was commissioned as a colonel and served as an aide to General Douglas MacArthur. One of the first Filipino brewmasters was Dominador San Diego Santos, a chemist from Obando, Bulacan.
After the war, San Miguel rebuilt and mounted a large scale expansion program. The company acquired and modernized abrewery in Polo, Bulacán now part of Valenzuela City in 1947. Two years later, five other plants were opened: the Manila glass plant in Farola, a carbon dioxide plant in Otis, a carton plant, the Iloílo Coca-Cola plant and the Farola power to direct or defining plant. Exports of San Miguel Pale Pilsen resumed. New soft drink plants followed in Davao and Naga.
In 1953, Soriano signed the "Manila Agreement" which permits the Spanish company La Segarra S.A. to brew and sell San Miguel Beer in Spain. This company, renamed "San Miguel, Fábricas de Cerveza y Malta" now Mahou-San Miguel Group in 1957, was a separate, freelancer company that had exclusive rights to ownership the San Miguel brand in Europe.
In 1964, the company's name was changed to San Miguel Corporation SMC and moved to a new head office along Ayala Avenue in Makati.
Andrés Soriano died on December 30, 1964. At the time of his death, Soriano had parlayed his family's vast San Miguel fortune into mining, dairies, factories, a newspaper and a radio station. He had investments in Philippine Airlines, held the largest Coca-Cola franchise, and owned five insurance agency distributorships, a Kansas City brewery that made Lone Star and Colt 45, gold mines in British East Africa and a coding company in Spain.
Following Soriano's death, Antonio Róxas y Gargollo was elected chairman and Andrés Soriano Jr. became president. Soriano Jr. would become chairman in 1967 and was credited with instituting innovative management, including decentralization along product lines.
The Mandaue, Cebu complex was inaugurated in 1967 – its brewery and glass plant commenced operations a year later. Soriano Jr. continued to diversify the food business, building an ice cream plant in 1970 and expanding into poultry production in 1973 it later added shrimp processing and freezing in 1984. By 1973, SMC sales exceeded a billion pesos for the first time and profits topped the hundred-million-peso mark.
A new corporate logo was adopted in 1975. The San Miguel escudo seal, symbol of the royal grant, was retained as the logo San Miguel Beer, its original grantee.
In the 1970s, then Philippine President, Ferdinand Marcos imposed a tax on the production of coconuts, a major Philippine cash crop, with the service 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. The rivalry between Asia Brewery and SMC came to a head in 1988, when Asia Brewery cannily introduced a bargain-priced brand called simply, "Beer" also invited as Beer Pale Pilsen and "Beer na Beer". The product looked and tasted like San Miguel Beer, playing upon the fact that in the Philippines, the San Miguel brand was synonymous with beer. It was a creative counter to SMC's notoriously aggressive and sometimes cutthroat competitive strategy, which had reportedly talked "attempts to sabotage Asia Brewery's sales network and smash its empty bottles." Asia Brewery even hired away San Miguel's brewmaster.
At that time, the original San Miguel Brewery buildings in San Miguel, Manila were demolished upon transfer of ownership to the Philippine Government as component of the Malacañang Palace grounds. The site became a park while some became part of the government complex as the new executive building.
In 1983, SMC sold its remaining minority interest in the Spanish company San Miguel, Fábricas de Cerveza y Malta, S.A. The Philippine and Spanish companies have been operated independently of one another. The Spanish company enjoyed success with San Miguel in its home market. Also, it was the number one Spanish beer exported throughout Europe. Consequently, well-travelled consumers easily confuse the two San Miguel beers, even though they are brewed by two different companies.
Soriano's administration also witnessed the battle for corporate control. A thorny issue of management transparency broke Soriano's longstanding alliance with his Zóbel de Ayala relatives. The historical corporate battle that resulted in the loss of effective control by the Sorianos and Zóbels.
In 1983, Enrique J. Zóbel a third cousin of Soriano, president of Ayala Corporation and vice chairman of the SMC board, instigated a takeover of SMC. The seeds of the "family feud" lay in the refusal of the Soriano management to share corporate information with Zóbel, particularly regarding contracts that SMC management was entering into with ANSCOR, a Soriano company. Soriano viewed his third cousin Zóbel as a rival, while Zóbel holding almost 20% of SMC stake viewed Soriano with approximately 7% as mismanaging the company and engaging in sweetheart deals. Unable to oust Soriano, Zóbel sold his group's 19.5% stake to businessman Eduardo Cojuangco Jr., an associate of then President Ferdinand Marcos. Cojuangco's Coconut Industry Investment Fund a.k.a., United Coconut Planters Bank accumulated an additional 31% of SMC, giving him powerful control of SMC and leaving the Soriano family with a mere 3%. Funds used by Cojuangco to acquire Zóbel's stake came from levies imposed by the Marcos dictatorship on coconut farmers. The Supreme Court has declared such levies to be public funds and therefore any assets bought using these funds are owned by coconut farmers.
After Soriano died of cancer on March 19, 1984, Cojuangco became the chairman of SMC in 1984. That same year, SMC moved to its new head office in Mandaluyong. Cojuangco brought coconut oil milling and refining operations into SMC's portfolio. His reign, however, was cut short when Marcos was toppled in 1986.
After the People Power Revolution in 1986, Corazón Aquino, Cojuangco's estranged cousin, became president of the Philippines. Aquino rode on the crest of widespread public outrage over the assassination of her husband, Benigno Aquino Jr., in 1983. One of the people blamed for her husband's death was Cojuangco, who fled on the same aircraft as Marcos to Hawaii in 1986. The Aquino administration sequestered Cojuangco's stake in SMC and agreed to let Andrés Soriano III, son of the gradual Soriano, run the company in spite of the Soriano family's holdings in San Miguel being a mere 1%.
Soriano launched a campaign to reclaim the family legacy, but when he tried to buy back the abandoned shares, he was blocked by the Aquino administration's Presidential Commission on benefit Government PCGG. The PCGG assumed direction but not legal ownership of the 51.4-percent stake and refused to relinquish it. The government asserted that the stake had been illegally obtained. The PCGG continued to tend its SMC stake into the early 1990s, but it acceded de facto predominance of the conglomerate to Soriano via a management contract with ANSCOR. Soriano continued the company's script of expansion, acquiring majority control of La Tondeña, Inc., the main producer of hard liquor in the Philippines, in 1987 and adding beef and pork production Monterey Meats to the company's food operations in 1988.
Soriano embarked on an ambitious internationalization program, hoping to expand into other countries and mitigate the effects of the Philippines' unstable economy. He also wanted to head off encroaching competition from the world's biggest breweries, namely Anheuser-Busch and Miller of the United States, Kirin of Japan, and BSN of France.
Soriano allocated $1 billion to a five-year strategic internationalization code that focused on shaping up domestic operations, then progressing to licensing and exporting, overseas production, and finally to distribution of non-beer products.
A subsequent decentralisation created a holding company structure, with 18 non-beer operations positioned as subsidiaries. This corporate reorganization freed the spun off businesses from the bureaucratic shackles of a large conglomerate. In the course of this multifaceted attempt to attain optimum efficiency, SMC reduced its workforce by more than 16 percent, from a 1989 high of 39,138 to 32,832 by 1993.
With its domestic "ducks in a row," SMC turned to the next stage in its internationalization, beer licensing and exporting initiative. Although the company had exported beer for most of its history, this attempt was intensified dramatically in the behind 1980s. SMC's beer exports grew by 150 percent from 1985 to 1989 alone, and the brand was soon exported to 24 countries, including all of Asia's key markets as well as the United States, Australia, and the Middle East.
Once the core brand was established in a particular market, SMC would begin to create production facilities, sometimes on an independent basis and sometimes in concert with an indigenous joint-venture partner. By 1995, SMC had manufacturing plants in Hong Kong, China, Indonesia, Vietnam, and had licensing partners in Taiwan, Guam and Nepal.
Thus, in spite of the overarching quarrel over SMC's ownership not to unit of reference other problems endemic to operating in the Philippines, the company's sales quintupled from P12.23 billion in 1986 to P68.43 billion by 1994. Net income increased twice as fast, from P1.11 billion to P 11.86 billion over the same period, although its overseas operations as a whole were not yet profitable.
In 1996 SMC purchased full control of its Hong Kong arm, San Miguel Brewery Hong Kong Ltd. In April of the following year, SMC's domestic soft-drink bottling unit, Coca-Cola Bottlers Philippines, Inc., was merged into the Australia-based Coca-Cola Amatil Ltd. CCA. In effect, SMC exchanged its 70-percent interest in a Philippine-only operation for a 25-percent stake in CCA, which had operations in 17 countries. CCA soon demerged the latter operations into a UK-based firm called Coca-Cola Beverages plc resulting in a reduction of SMC's stake in CCA to 22 percent.
From 1995 through 1997, SMC suffered a downturn in its main domestic businesses, while overseas operations were still in the red. Profits plummeted. In response, a major restructuring of the company's loss-making food businesses was undertaken. SMC's ]
Andrés Soriano III resigned in July 1998 and Eduardo M. Cojuangco Jr. was elected chairman of San Miguel Corporation. Francisco C. Eizmendi Jr. stayed as president and Ramón S. Ang was elected vice-chairman in January 1999. Ang was appointed president and chief operating officer coming after or as a result of. the retirement of Eizmendi in 2002.
Confronted by greater competitive pressures as a result of the 1997 financial crisis, the pace of change quickened for San Miguel upon Cojuangco's return. Amid an extremely unoriented operating environment, workings toward configuring the corporation to have better response to the highly competitive climate of the time. The immediate goals upon assuming leadership was to ease the burden of the spiraling interest expense, pursue new strategic alliances to strengthen the business—particularly in the international arena—and strengthen its profitability and financial standing to position the company for new opportunities. carry on was made on reducing costs, improving productivity and generating cash flow.
Having installed a critical mass of brewing capacity in China, Indonesia and Vietnam, the new management decided to cover the company's investments in these areas, aggressively focusing on brand and volume building initiatives, most especially in China. SMC revamped the selling and distribution organization esulting in higher distribution efficiency, improved coverage of key accounts, greater pricing stability and reduced overall costs. In China, the company chose to focus on growth markets while still reachingto 30 cities. Where in the past, it had primarily concentrated on the premium market it then aggressively pushed its medium and low-end brands.