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How Aboitiz plans to conquer Asean market

Sabin Aboitiz, a member of the rich Aboitiz clan who runs one of the country’s most successful conglomerates, believes that producing and buying Filipino products will play a crucial role in surviving the tough competition posed by the Association of Southeast Asian Nations economic integration in 2015.

“Asean is going to bring a lot of imports into our country,” says Sabin, the president and chief executive of Pilmico Foods Corp., the food unit of the Aboitiz Group.

TerraFirma director Amor Maclang, PMFTC Inc.
director for external affairs Bayen Elero-Tinga,
Pilmico president Sabin Aboitiz Pilmico first vice
president and chief resource officer  Maribeth
Marasigan and Pilmico vice president for feeds
sales Hendel Cabral enter into a partnership
agreement to promote high value-crops agriculture
and capabilities building for Filipino farmers and
fishermen under the Mahalin Pagkaing Atin campaign.
“As most of the goods from other countries are cheaper, the tendency for consumers will be to prefer imported goods over our own locally grown produce,” Sabin says. “Obviously, that’s going to pose a huge problem for us, and even the multitude of our humble farming folks will suffer the impact of such a scenario.”

Trade borders across the 10 member countries of Asean will be removed by November 2015, allowing a free flow of commodities and services within the region, which has a combined population of 600 million people. The goal of the Asean economic community is to bring down to zero the tariff rates on goods traded within the region.

Aboitiz says nationalism among Filipinos will be important to make sure that local industries will take on the challenge of regional integration. “It is a known fact that our agriculture here is not as competitive as other countries. So I think we need to look at the consumers to cooperate and become a little more nationalistic and who are willing to buy as much local as possible,” he says.

Sabin, one of the seven children of Enrique and the late Ma. Lourdes Mendieta Aboitiz, knows the Philippine market very well, despite his family’s Spanish heritage. He has led a number of companies that have thrived by serving the needs of the local population.

Aside from heading Pilmico, one of the biggest flour and animal feeds producers in Asean, Sabin is a director of the holding company Aboitiz Equity Ventures and banking unit Union Bank of the Philippines. He is also the president of Aseagas Corp., a new company formed under AEV and heads Aboitiz One, the air transport unit of the group.

Sabin Aboitiz
His siblings, who also hold management positions in the conglomerate’s various businesses, include Endika, Erramon, Txabi, Andoni, Iker and Eukene.

Sabin graduated with a degree in Business Administration, with specialty in Finance at Gonzaga University in Washington. He is married to Bettina Araneta, who once served as an events secretary at Malacañang Palace.

The Aboitiz family established Central Philippine Milling Corp. in 1958, which eventually became known as Pilmico Foods Corp. It is now a subsidiary of the family’s holding company and is engaged in flour production, swine production and animal feed business.

Aboitiz says while nationalism will play a crucial role in regional trade, Philippine industries also need to become competitive in terms of price, quality and efficiency to survive the intensifying competition.

“I am not saying we should buy local at a higher price. That’s why we are trying to launch now Mahalin Pagkaing Atin campaign.  We are trying to slowly come up with programs that make sense,” he says.

Pilmico Foods recently signed partnership agreements with tobacco firm PMFTC Inc. and TerraFirma, a project management corporation, to promote and support high-value crops agriculture and capabilities building for Filipino farmers and fishermen under the Mahalin Pagkaing Atin advocacy campaign.

The campaign aims to encourage more farmers to invest in local production and motivate corporations and entrepreneurs to buy homegrown products.

Pilmico, TerraFirma and PMFTC aim to propagate a strategic action to ensure food security in the Philippines by providing sustainable livelihood businesses to localities with high incidence of poverty, disasters and conflict.

TerraFirma and Pilmico rolled out the Mahalin Pagkaing Atin project in Palo, Leyte through the distribution of egg machines to Palo recipients in order to help them start up with a fresh opportunity for livelihood.

“The first program that we are doing is basically what we call the egg machine kit,” Sabin says, referring to an innovative package designed and created by Taala Farms, involving 48 ready-to-lay hens that will be distributed to farmers.

“We have launched it in Leyte, about 100 of them, through the LGU,” Sabin says. Pilmico donated P8 million worth of egg machines to families affected by natural disasters in Leyte.

With the support of the local government of Leyte, TerraFirma, Pilmico and the consortium partners including the Department of Social Welfare and Development and the Department of Tourism launched the movement by distributing 100 egg machine kits to different municipalities in the province.

The egg machine kits included a pen and 48 ready-to-lay hens that can produce eggs that are both ready for consumption and for sale. The hens come fully vaccinated and are expected to lay eggs for up to 20 months, after which the hens can be culled and sold as meat. A new batch of hens is then installed in the pen and the cycle starts again. Each kit is worth P30,000 to P35,000.

The first 25 egg machine kits were given to small backyard farmers in Palo, which is currently being restructured as the new business district of Leyte. Pilmico also provided the farmer-recipients with learning sessions to guide them on the proper management of new sources of livelihood. The remaining 75 egg machine kits would be distributed in various areas in Leyte.

“In the process of promoting local goods and encouraging local businesses through this campaign, we are helping elevate the dignity of our farmers and fishermen, and we’re encouraging more people to support the industry,” says Sabin.

“It is a simple thing, but it affects the person immediately.  It offers much cheaper source of protein. We feel that it is simple thing. It is nice, it works and it can be deployed immediately,” he says.

“At the end of the day, we should buy local,” says Sabin.

Sabin says this does not mean he is against imports, which also play a role in checking domestic prices. He says Pilmico, which is a major player in flour production, can compete with foreign products such as flour as long as these imports are not dumped at subsidized prices in the country.

“You have to be low-cost. You have to make sure you produce at the lowest cost possible. It is pricing issue, a distribution issue, a quality issue,” he says.

“I have no issue with imported flour,” says Aboitiz. “But I have issues with subsidized imported flour.”

Sabin, who is also the president of the Philippine Association of Flour Millers Inc., is referring to the alleged dumping of Turkish flour into the country at prices below the rates in Turkey. The Agriculture Department imposed a temporary anti-dumping duty against Turkish flour, but an appeal by a group of Turkish traders elevated the case to the Tariff Commission.

While trying to strengthen its market share in the domestic market, Pilmico is at the same time expanding to other Asean countries.

Pilmico has recently completed the acquisition of a 70-percent stake in Vinh Hoan 1 Feed JSC, one of the largest aqua feed producers in Vietnam.

Pilmico is a profitable company, with a net income of P647.8 million in the first half of 2014.

The purchase marked the Aboitiz Group’s foray into the Asean market, which the group believes will be a growth platform for core businesses, especially in food.

“We bought an aqua feed mill in Vietnam. We took it over this month. Again, it is a fantastic opportunity.  We supply aqua feeds in the Mekong Delta. Vietnam is exporting pangasius all over the world,” he says.

Sabin says Pilmico invested an equivalent of 70 percent of $28 million to acquire VHF.

Sabin says Pilmico would eventually increase its investments in VHF to double its capacity and serve the requirements of the Mekong region. Pilmico is also expanding its operations to Indonesia, Myanmar, Thailand, Cambodia and Laos, ahead of the Asean integration in 2015, he says.

“We are looking at acquisition opportunities in Asean,” Sabin says.

Pilmico is also tapping the Asean market for its flour products. The company already exports flour to Vietnam and Indonesia.

“We are looking at the Asean market. We are investing. We are looking at flour mills. We are looking at feed mills.  We are already exporting flour to Indonesia and Vietnam. We are now looking at Thailand. So for us, it is good. We have 600 million people in Asean. We are looking at those opportunities, while realizing what our home base needs to make sure we are okay and solid,” he says.

Sabin says Pilmico, aside from its goal of expanding the business, is looking at “what is the best thing for the country.”

“We need to get people together to resolve these problems. We need to buy local and support local industries,” he says. RTD

Topics: Aboitiz , Sabin , conglomerate
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