In the afternoon of Tuesday, Sept. 29, top officials of San Miguel Corp. gathered to mark a milestone that comes only once in one and a quarter century —the 125th anniversary of SMC.
The National Historical Commission led by Chair Maria Serena Diokno was there to validate the historic event with a marker. San Miguel began in 1890 as a fabrica de cerveza beside Malacañang, the presidential palace in what is today the San Miguel district in Manila.
From a single product 125 years ago, San Miguel has expanded into a sprawling conglomerate of at least 38 companies in eight major industries. Since there are huge companies in each industry, making them virtual conglomerates by themselves.
SMC is the largest Philippine conglomerate and largest company in revenues, P782 billion in 2014, the largest in EBITDA (earnings before interest, taxes and depreciation) P121 billion a year, and the largest industrial company in assets, P1.245 trillion as of early 2015. SMC revenues are 6.2 percent of total economic production or GDP (gross domestic product, in 2014).
With over 100 plants in the Philippines and the rest of Asia, San Miguel is No. 1 in beer, No. 1 in beverages, No. 1 in food , No. 1 in packaging, No. 1 in petroleum refining and marketing, No. 1 in power generation, No. 1 in infrastructure, No. 1 in private airport management.
Only very few companies last a hundred years in the Philippines. So if you last 100 years, you must be very, very good, very, very durable, and have a business which is very sustainable in the short and long term.
Among the five original countries of the Asean (Philippines, Malaysia, Indonesia, Singapore and Thailand), the Philippines has the worst environment for doing business. In Asean, the Philippines is No. 5 or the worst, in global competitiveness. The Philippines is also the worst in Asean in quality and level of infrastructure—a key ingredient to economic dynamism and success in governance.
The Philippines’ global ranking, per the latest World Economic Forum World Competitiveness 2016, is 47th (the last among the Asean 5). Singapore is 2nd, Malaysia 18th, Thailand 32nd, and Indonesia 37th. Please note: the citizens of these countries are no more talented nor more intelligent than we, Filipinos, are. Their countries are no better endowed in resources than the Philippines. If you ask me, the Philippines has the best among resources of the five, has the most strategic location, and has the best people – 100 million Filipinos, the 12th largest population on earth.
What is the problem then? One word: Leadership. We have had bad leaders. They have come from a very small gene pool—in a nation of 25 million families or 100 million people.
In the last 55 years, our leaders have come from only four families—Marcos (Ferdinand and his cousin Fidel V. Ramos, 26 years); Macapagal (Diosdado Macapagal and his daughter Gloria Arroyo, 13 and a half years); Cojuangco-Aquino (Corazon Aquino and her son, BS Aquino III, 12 years and four months); and Ejercito-Estrada (Joseph Estrada, three years).
Singapore had no toilets, no water, very few people, almost no land, and hardly any resource when it began 50 years ago. Half a century ago, the Philippines was the richest country in Asia.
Today, Singapore is the richest economy in Asean and the third richest in the world in per capita GDP ($82,762 per IMF 2014)—thanks to a man named Lee Kuan Yew, who singlehandedly built a nation from scratch. The Philippines is 119th, with $6,962 per capita GDP.
San Miguel is No. 1 because of its top management. It is No. 1 primarily because of two people—Eduardo M. Cojuangco Jr., the chair and CEO, and Ramon S. Ang or RSA, vice chairman, president and chief operating officer.
ECJ and RSA are not products of Ivy League schools. They are the product of raw talent and experience. ECJ took up agriculture in UP Los Baños and California. He began business as a teenager. RSA finished engineering at FEU. He began in business as a 13-year-old buying and selling auto parts, and later cars and trucks and industrial machines. He was a multi-millionaire before he was 20, starting with zero capital but only with three phone books (which had lists of buyers and suppliers).
As early as 1983, Cojuangco or ECJ saw the potential of SMC. He worked with then Ayala Corp. CEO Enrique Zobel to buy into San Miguel, initially, with the 20 percent owned by the Zobel-Ayala family, and later on, to buy the 31 percent that John Gokongwei Jr. had acquired from the family of Andres Soriano Jr., SMC’s long-time president and who had become sickly. ECJ ended up as majority owner of SMC.
In 1986, the government sequestered both blocs of shares —the 20 percent of Ayala for which ECJ paid a premium (P50 when the market was doing at P30 a share), and the 31 percent of Gokongwei for which ECJ again paid a premium. ECJ himself went into exile, leaving RSA to hold the fort and take care of ECJ’s assets. RSA preserved them and kept them out of harm’s way from greedy government bureaucrats and envious tycoons.
Later, the Supreme Court declared the 20 percent indeed belonged to ECJ. However, the high court declared the 31 percent belonged to the coconut industry since ECJ allegedly borrowed and thus used coco levy money deposited with the United Coconut Planters Bank. What the Supreme Court failed to see is that San Miguel was a much bigger depositor of UCPB. ECJ borrowed San Miguel money to acquire the additional 31 percent—and control—of San Miguel. The entire 51 percent should have been returned to ECJ.
Today, ECJ, on paper, has very small shareholdings in SMC, less than 4 percent. The biggest stockholders are Iñigo Zobel, EZ’s son, 31 percent, and RSA, 24 percent.
In 1999, ECJ brought RSA into SMC’s executive, initially as his special assistant and de facto COO, with the title vice chairman. RSA didn’t want to be named president initially, preferring to work in the background. In 2002, RSA became president.
In 2007, having earned his spurs, RSA embarked on the largest expansion and diversification ever undertaken by a Philippine company.
With beer, beverages and carton/plastic boxes, SMC was making good revenues and profits. But these were not enough for a business that should last another century.
In less than seven years, SMC transformed itself from a market-leading beverage, food and packaging business with a globally recognized beer brand, into a diversified conglomerate with market-leading businesses and investments in the fuel and oil, energy, infrastructure, telecommunications and banking industries.
SMC operates the airport of the most exciting tourism destination in the Philippines—Boracay.
The company operates the power plant of the most important dam in the Philippines, Angat whose reservoir is 35 kms long and 3 kms wide at its widest, with a surface of 2,300 hectares and water storage capacity of 850 million cubic meters. It supplies 97 percent of residential water of Metro Manila.
SMC has a pervasive but positive influence—beer, gin, soda, juices, coffee, milk, or water, cheap electricity, highways —San Miguel provides it. And any processed food you eat—chicken, hotdogs, corned beef, ham, luncheon meat, biscuits, ice cream, popsicle, butter or margarine is probably made by SMC.
In the future, SMC will build more coal plants, more cement plants, steel mills, the new Manila international airport, and what RSA calls “the fastest, cheapest and best” cellular phone and landline service. “We will have the most advanced 5G cellular phones.”
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