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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 (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 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 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 country’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 drinks. 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 Non-
alcoholic 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-san-
miguel-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-pullout-
ginebra-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-foreign-
firms/ VG Cabuag - May 26, 2016

http://beta.philstar.com/business/2016/05/27/1587234/ginebra-reclaims-market-leadership-
luzon Iris Gonzales (The Philippine Star) - May 27, 2016 - 12:00am