BELGICA, Jullia Francesca Belgica 4CAC Company History
Ginebra San Miguel Inc. (GSMI) is the maker of the world’s largest selling gin Ginebra San Miguel, and the hard liquor arm of San Miguel Corporation C orporation (SMC), the largest and most diverse conglomerate in the Philippines. GSMI has produced some of the most recognizable brands in the Philippine liquor market including the world’s no. 1 selling gin Ginebra San Miguel, GSM Blue, GSM Blue Flavors, Ginebra San Miguel Premium Gin, Antonov Vodka, Primera Light Brandy, and the market leader in the Chinese wine category Vino Kulafu.
Ginebra San Miguel, the company’s flagship product was first produced in 1834 by a family -owned distillery in Manila, making it the Philippines’ pioneering pioneering gin. Through the years, Ginebra San Miguel has been recognized for its high quality and taste. It has been successively awarded with a Gold Quality Label by the prestigious Monde Selection International Institute for Quality Selections.
GSMI’s partnership with SMC that started in August 1987 paved the way for wider distribution and the introduction of a Philippine branded gin to the world. GSMI operates five bottling facilities strategically located throughout the Philippines – Cabuyao, Laguna; Sta. Barbara, Pangasinan; Cauayan City, Isabela; Ligao City, Albay; and Mandaue City, Cebu.
Among GSMI’s subsidiaries are Distileria Bago Inc. (DBI), a distillery located at Bago City, Negros Occidental and Thai San Miguel Liquor Co., Ltd. (TSML), a distillery and bottling facility located in Kanchanaburi, Thailand, which produces beverage-grade alcohol and liquor products for local distribution. GSMI ensures that consumers have immediate access to its liquor products through its vast distribution network. In line with its commitment in providing only the highest quality of liquor products to its consumers, GSMI’s facilities and its subsidiaries subsidiaries have garnered numerous quality accreditations including the International Organization for Standardization (ISO), Good Manufacturing Practice (GMP), and Hazard Analysis and Critical Control Points (HACCP). GSMI continues the tradition of excellence of its flagship Ginebra San Miguel, expanding its brand portfolio with new and diverse products that cater to the evolving tastes of the market.
1. External Analysis a. PESTEL I.
Political Factors/ Legal Analysis
1) ‘Sin’ Tax The Republic Act 10351, or the Sin Tax Reform Law is one of the noteable legislations under President Benigno Aquino III’s administration. It was constituted under the grounds of health measures of the nation. It is furthermore agreed that products with tobacco and alcohol would be the ones subject to this RA. The tax coming from these products would be allocated for the Department of Health. Ginebra San Miguel, being one of the cou ntry’s biggest hard liquor arm of San Miguel Corporation was affected by this tax reform. Since the tax was intended to lower the consumption of the public by such product, the sales of GSM took a toll on liquor and beer producers, as drinkers seemingly get dissuaded from increasing their consumption. The effects of the sin tax were seen on the first half sales for the year 2013.
“Usually, before elections, the volume should be very strong but volume is not strong now because of the recent tax increase” An excerpt from an interview by PhilStar with Ramon S. Ang, chief operating officer of GSM. 2) Excise tax on Sugar sweetened beverages With the recent acquisition of GSM of Non-alcaholic beverages, the tax reform on sugar sweetened beverages would increase GSM’s cost of sales and therefore increase its sales price. This would be a threat to GSM. The company would have to know up to how much its customers are willing to pay for their adjusted price per product.
3) Government regulations There are some cities that have been implementing the 10pm liquor ban. This is to discourage drinkers to drink alcoholic beverages and be intoxicated at night. This is also to minimize commotions due to intoxication. With implementation of such ordinance, the sales of GSM products which is usually consumed at night time would be affected.
II.
Economic Factors 1) Availability of raw materials
GSM’s raw materials are mostly from their subsidiaries such as Distileria Bago, Inc, San Miguel Yamamura Packaging Corporation, an SMC subsidiary, Arcya Glass Corporation and Formosan Glass Distributors Corporation, and San Miguel Paper Packaging Corporation (formerly San Miguel Rengo Packaging Corporation) and Mindanao Corrugated Fibreboard, Inc., which are subsidiaries of SMC. Although GSM acquires its raw materials from its subsidiaries, the availability of their main ingredient in their alcoholic beverages are getting more inconsistent. The company stated that they get 45% of their molasses from Distileria Bago and the other 55% would come from other domestic and foreign suppliers. 2) Propensity of people to spend The company would first have to define what the target market of GSM is. Since GSM has alcoholic and Non-Alcoholic beverages, its Alcoholic beverages’ market would have to be those of legal age to consume alcoholic drink s. It’s Non-Alcoholic beverages’ market would be those who love flavored drinks. The price of their alcoholic beverages would range from as low as Php 85 to as high as Php 1000. While their Nonalcoholic beverages ranges from as low as Php 12 and as high as Php 26.
3) Price Fluctuations GSM is greatly affected by the price of one of its raw materials, sugar. Because of the recent price hike due to excise tax on oil and sugar itself, GSM’s budget for raw materials would then be compromised. Results of such changes would be seen on GSM’s 2018 Financial Report. Sugar is also susceptible to change of weather. But with the recent updated equipment of the PAS-ASA, it would be easier for companies to foresee the quantity and price of its raw materials for the coming weeks.
III.
Social Factors 1) Lifestyle of its market Since GSM sells Alcoholic and Non-Alcoholic beverages,
It has two kinds of market. Its market on alcoholic beverages would have to those of legal age drinkers and its market on its non-alcoholic beverages are those fond of flavored drinks or those looking for softdrink substitutes. The Philippines also have a high rate of Diabetic patients. With an alarming number of 3.7 million cases in the year 2017, GSM would have to consider this data to create new alternative for such customers. 2) Waste management
GSM’s parent company, SMC, covers the protection of land, water, and air. On a smaller scale, the Foundation conducts tree-planting projects on areas identified by different SMC plants. Tree-planting projects are usually scheduled to coincide with plant celebrations. The Foundation advocates the protection of coastal waters through its Coastal Resource Management, which engages in mangrove reforestation, artificial reef installation and regeneration of marine resources. Training on waste management and donation of trash bins through plant facilities are also conducted.
IV.
Technological Factors/ Environmetal Factors 1) Environment Friendly Technology On May 2016, GSM was having talks with 3 foreign firms. Acquisition of foreign firms would also mean expasion of its equipment. Although these negotions are still open, GSM’s current equipment uses clean coal technology in its coal-fired power plants as opposed to pulverized coal power plants which are 7 times more harmful to the environment. "If property-designed plant, halos walang pollution (almost no pollution), that is the kind of power plant that we are putting up. Clean coal technology, meaning circulating fluidized-bed broiler and our emission control comes with water spray tower and bad filters," Ramon S. Ang explained.
b. Porter’s 5 forces This business analysis deals with the competition of the business. It is also known as the reverse SWOT analysis. This would be helpful for GSM to know their competitors.
I.
Rivalry among competing firms GSM has 13 competitors in the industry. It’s main competitor would be Tanduay Distiller’s incorporated. Tanduay is know for their Tanduay ESQ, Emperador, and all other Absolut vodkas which is a subsidiary of Tanduay. It is known that the competition between GSM and tanduay has gone way beyond amount of sales and market shares. Marketing strategies were also part of the competition between the two companies. The two companies had an encounter at the court of appeals due to an infringed trademark of GSM by Tanduay. The CA ordered a market pullout of Tanduay products that carry the trademark “Ginebra.” They also charged Tanduay with a Php 2million fine for such act.
II.
Potential entry of new competitors and Potential development of substitute products There is no doubt that GSM holds the biggest market share in terms of distilled beverages. GSM has already established its name in the market for operating for more than 180 years. Its competitors such as Destileria Limtuaco have also been industry for a long time. The potential entry of new competitors would only have to be new products coming from its competitors. GSM has also established their trademark. This would be easier for the company to maintain its customers through their quality and brand name.
III.
Bargaining power of suppliers GSM acquires its raw materials from its subsidiaries. But 55% of its main ingredient, molasses, is acquired through foreign suppliers. This would be a threat for the company if the foreign company would face impotation problems. This would greatly affect the volume of product that GSM will produce.
IV.
Bargaining power of consumers
With the price fluctuation of its raw materials, GSM’s cost of sales would be graetly affected. The market of GSM’s products are those who look for close alternatives for the product if it’s nowhere to be found in the market. GSM is also know for its affordable alcohol. It would be a huge adjustment for its customers if it suddenly hikes up the price.
C. External Factor Evaluation Matrix
The availability of raw materials is an opportunity for GSM for they have their raw material providers for their subsidiaries. The lifestyle of its market would also be an oppurtunity for the company for the Filipino culture are fond of having a little time of for a drink with friends and relatives. The environment friendly technology lowers the cost of GSM with regards to their energy usage. The propensity of people to spend is both an oppurtunity and threat because GSM’s products are budget friendly yet some customers are sensitive to prices even now that tax reforms have been implemented. The efficient waste management of GSM helps the company attain its corporate social responsibiity. “Going green” has been a trend in the market recently. With recent advocacies on going green, the market and customers are now more inclined to supporting environment friendly companies.
The ‘Sin’ tax is a great threat to the company for its aim is to lower the sale and usage of alcoholic beverages. The effect of such was seen on the great incline of loss that the company incurred in the year 2013 where the tax reform was implemented. The recent tax reform on the excise tax on sugar sweetened beverages will also be a great threat since the aim of such is to lower the usage of sugar sweetened beverages. Government regulations such as the Liquor Ban greatly affects the sale of GSM because its customers are banned to buy its products which contain alcohol.
D. Competitive Profile Matrix
References: https://www.rappler.com/business/industries/176-food-and-beverage/134372-ginebra-sanmiguel-hard-liquor Published 7:30 PM, May 26, 2016 https://prezi.com/jnh286ywdaca/ginebra-san-miguel/ http://business.inquirer.net/203567/ginebra-san-miguel-consolidates-creative-business 03:19 PM December 03, 2015 http://business.inquirer.net/226151/smc-offer-retail-bonds-worth-p15b Doris Dumlao-Abadilla 12:24 AM March 15, 2017 https://www.rappler.com/business/industries/176-food-and-beverage/75177-tanduay-pulloutginebra-products Published 4:54 PM, November 16, 2014 https://businessmirror.com.ph/alcohol-sector-drinks-in-impact-of-sin-tax-law/ VG Cabuag September 11, 2016 https://tanduay.com/corporate/craft/our-subsidiaries/ https://businessmirror.com.ph/ginebra-recaptures-lost-market-share-in-talks-with-foreignfirms/ VG Cabuag - May 26, 2016 http://beta.philstar.com/business/2016/05/27/1587234/ginebra-reclaims-market-leadershipluzon Iris Gonzales (The Philippine Star) - May 27, 2016 - 12:00am
