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28 D+C  e-Paper  December 2015 San Miguel Corporation is a national institution and older than the Philippine republic. It started business with a pils beer, which is cherished by millions in the Philippines and around the globe today. In the past century, San Miguel expanded into related industries, and a few years ago, the conglomerate diversified into completely different industries. However, the heritage-rich company is in the hands of a former dictator’s crony. By Alan Robles In 1890, when the Philippines was still a colony of Spain, businessman Enrique Barretto used a royal permit to open a brewery in Manila. He called it “La Fabrica de Cerveza de San Miguel” (San Miguel Brewery) after the capital’s district it was sited in. Then he hired a German brew master to formulate a pils beer. Invited to taste the product, a city official conjured the firm’s success by saying: “May the gold flow each time the beer taps are opened.” His blessing was amply fulfilled. From a first year output of 500 barrels, the brewery grew fast: the mar- ket couldn’t get enough of the pale pils beer. Through years of turmoil – the revolution, the collapse of the Spanish regime, the invasion and takeover of the Phil- ippines by the Americans – San Miguel grew further. The beer was so popular that it was being exported to Hong Kong, Shanghai and Guam as early as 1914. This growth was interrupted by the Second World War, when invading Japanese seized the company and renamed it “Balintawak Beer Brewery”. But after the war, San Miguel reacquired its name, resumed its dominance of the Philippine market and started expanding overseas once more. In a period when products from the industrialised west were flooding the markets of developing nations, San Miguel headed the other way: in 1948 the com- pany set up a brewery in Hong Kong. A few years later, two Spanish businessmen sailed from Europe to Manila on a mission of persuasion. The result was the “Manila Agreement”, under which San Miguel granted the Spanish firm La Segarra the license to bring the beer and its brand to Spain. San Miguel, for its part, slowly expanded into Asia, opening breweries in China, Vietnam, Thailand and Indonesia. It currently exports its beer to 40 countries around the world, including Europe. The independent Spanish licensee, now called Mahou San Miguel, con- tinues to use the San Miguel brand name and a logo similar to the original. As a result, two different tast- ing beers are sold in Europe under the same brand name. Indeed, the “San Miguel beer” made in Spain in no way resembles the original Manila pils – which is said to taste much better. In an interesting devel- opment, the two companies signed a “cooperation agreement” last year in order to “unify the brand”. No details were given though on how this would be done. Here in the Philippines, San Miguel continues to dominate the beer market: In 2012, its share was 90 %. Anyone who asks for a beer in this country will be, by default, served a San Miguel product. But the name now means more than just beer. Even Barretto could not foresee what his brewery – and accompany- ing ice plant – would become. San Miguel Corporation (SMC), as it is now called, is a gigantic conglomerate. With revenues in 2013 coming to $ 17.6 billion and total assets valued at $ 27.5 billion, it is the Philip- pines’ biggest company and among the Forbes list of the world’s 2000 biggest stock-market listed compa- nies. Expansion strategy During the 20th century, San Miguel grew by expand- ing into related industries, buying companies that made soda, ice cream, hard liquor, processed meat, flour and packaging. These turned the conglomerate into Southeast Asia’s largest food, beverage and pack- aging company. But in the 21st century, SMC realised it had a problem that ironically stemmed from its very strength. When you have a virtual monopoly of the Philippine beer market, how else can you grow? The number of beer drinkers is naturally limited. A poor nation’s beer conquers the world picture-alliance/dpa