Serving the Nation 2019 ANNUAL REPORT ABOUT SAN MIGUEL FOOD and BEVERAGE, INC
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serving the nation 2019 ANNUAL REPORT ABOUT SAN MIGUEL FOOD AND BEVERAGE, INC. San Miguel Food and Beverage, Inc. (SMFB) is a leading food and beverage company in the Philippines. The brands under which we produce, market, and sell our products are among the most recognizable and top-of-mind brands in the industry and hold market- leading positions in their respective categories. Key brands in the SMFB portfolio include San Miguel Pale Pilsen, San Mig Light, and Red Horse for beer; Ginebra San Miguel for gin; Magnolia for chicken and dairy products; Monterey for fresh and marinated meats; Purefoods for refrigerated, prepared, processed, and canned meats; Star and Dari Creme for margarine; and B-MEG for animal feeds. We have three primary operating divisions— beer and non-alcoholic beverages (NAB), spirits, and food. The Beer and NAB Division, through San Miguel Brewery Inc., and Spirits Division, through Ginebra San Miguel Inc., comprise our beverage business. On the other hand, our Food Division, San Miguel Foods, OUR CORE VALUE is operated through a number of key subsidiaries such as San Miguel Foods, Inc., Magnolia Inc., and MALASAKIT The Purefoods-Hormel Company, Inc. We serve It is in this spirit that we will look after the welfare and the Philippine archipelago through an extensive interests of our stakeholders. distribution and dealer network and export our products to over 60 markets worldwide. We will delight our customers with products and services of uncompromising quality, great taste and SMFB is a subsidiary of San Miguel Corporation (SMC), value, and are easily within their reach. one of the largest and most diversified conglomerates in the Philippines. Originally founded in 1890 as a We will create value and provide fair returns for single brewery in the Philippines, SMC today owns shareholders’ investments. market-leading businesses in various sectors, including beverages, food, packaging, fuel and oil, We will work hand-in-hand with our suppliers and energy, infrastructure, property, and investments other business partners, helping them grow with us in car distributorship and banking services. SMFB is and assuring them of reasonable returns. a key business group under the San Miguel Group that is interwoven with the economic fabric of the We will develop and motivate our employees to Philippines, benefitting from, as well as contributing become best-in-class through cognitive and affective to, the development and economic progress of the programs, competitive compensation and benefits, nation. and diverse career growth opportunities. SMFB is listed on the Philippine Stock Exchange, Inc. We will improve the quality of life in the communities under the ticker symbol “FB”. where we operate. CONTENTS 3 We are San Miguel 8 Message from the Chief Operating Officers 16 Financial Highlights 17 Financial Review 21 Business Review 33 Corporate Governance OUR CORE VALUE 59 Financial Statements 2 2019 Annual Report In solidarity with the entire San Miguel Group, whose efforts have made a big difference to many Filipinos during this health crisis, we are reprinting here the message to stockholders of San Miguel Corporation Chairman and CEO Eduardo M. Cojuangco Jr. and SMC President and COO Ramon S. Ang from the SMC Annual Report. Eduardo M. Cojuangco, Jr. † Ramon S. Ang Chairman and Chief Executive Officer President and Chief Operating Officer San Miguel Corporation San Miguel Corporation † Eduardo M. Cojuangco, Jr. passed away 16 June 2020 San Miguel Food and Beverage, Inc. 3 We are San Miguel Fellow stockholders, The Philippines and the rest of the world are pressure, as employees from all parts of our experiencing unprecedented upheaval. In just a few organization responded to a rapidly evolving crisis. short months, we have learned, all too painfully, that COVID-19 does not discriminate. People of all Our actions were guided by values we’ve always races, gender, income, and geography are feeling its espoused—pakikiisa, bayanihan, pagmamahal sa impact worldwide. In the business world, virtually bayan at sa kapwa. We responded to the pandemic no company is untouched. Forecasts have been the only way we know how: with malasakit. upended, and business plans have become almost meaningless as we struggle to cope with not just the Ensuring Food, Power, Fuel Supply, health implications of the virus, but the necessary and Infrastructure Operations response to it—the enhanced community quarantine (ECQ) throughout Luzon, which had been extended Very little was disrupted in the way of being able twice, and the restrictions this placed on the day-to- to provide essential services such as water, power, day running of our business. fuel products, and food to Filipinos. We kept our expressways open as transport remained vital While there is much to discuss of our financial during the lockdown to keep healthcare and performance in 2019—detailed in our management support systems running. With over 40,000 regular report—we first want to talk about the challenges employees, we have a responsibility to keep our we’re facing today, not just as a company, but as business in good shape so that we can help others a nation. who will almost definitely struggle to stay afloat. This crisis is sure to have a devastating impact on small Never in recent memory has any single event had businesses and wage earners whose hours, shifts, such a far-reaching impact and caused so much and operations have ground to a halt because of uncertainty. And while the quarantine has since been the pandemic. eased, uncertainty over the shape of our economic recovery will continue to be felt well beyond this year, At the start of the quarantine, one of the immediate and possibly the next. concerns was food security and supply. With the coronavirus stoking panic and driving people indoors, And yet, it’s always in these most trying of situations shelves were emptied and stocks of essential food that we find within ourselves a deeper sense of items were depleted. Work and public transportation purpose. For your management, the coronavirus stoppage and the closing of malls and restaurants, crisis and its aftermath will be remembered as only fanned fear. a lesson in the human capacity for grace under 4 2019 Annual Report Days before the ECQ was announced, San Miguel 63 non-profit organizations, and various units of the Foods took proactive steps to secure its inventory Philippine National Police (PNP) and Armed Forces of and supply chain. the Philippines (AFP). At each of our critical facilities, lean work teams Free flour from San Miguel Mills was distributed ramped up the production of poultry, fresh and through the LGUs to bakers’ associations, allowing processed meats, canned goods, flour, biscuits, small bakeries and businesses to manage costs and, coffee, and dairy products. Despite some difficulty at the same time, provide vitamin-fortified bread and early on, capacity in our food production facilities pan de sal to urban poor communities. hovered around 95% on average, allowing us to quickly replenish stocks and demonstrate our San Miguel Brewery, Inc. (SMB) donated drinking capability to provide sufficient food supply. water in cans. SMB’s logistical reach, combined with San Miguel Integrated Logistics Services, Inc.’s Food was not our only watch out. With virtually the (SMILSI) and Ginebra San Miguel Inc.’s (GSMI) own entire population of Luzon under lockdown, we made networks, allowed us to bring much needed help to sure that our power facilities were running efficiently, barangays and municipalities throughout the country. even as measures to save on fuel were put in place. Petron used its network of service stations to boost Despite the massive drop in vehicular traffic—up the Department of Agriculture’s (DA) “Kadiwa Ni Ani to more than 80% at our operating toll roads— at Kita” program, to help farmers sell their produce Petron Corporation and SMC Infrastructure kept our to consumers in Metro Manila. At the same time, the gas stations and expressways open, primarily to help DA helped us tap farmer-cooperatives nationwide ensure the efficient flow of essential goods, and to to secure our raw material requirements, and help serve our government and medical front liners. boost farm incomes. Protecting Vulnerable Families from Hunger Ensuring Employee Safety and Well-Being We mounted what has since become the largest San Miguel Foods became the hub for much of our food donation drive in our company’s, and quite relief efforts. To make sure that operations continued possibly, the nation’s history. Understanding early unhampered, we put in place measures for our on that hundreds of thousands of families who rely employees’ health and safety. on daily paid work would be the most vulnerable to hunger, we tapped partners in various sectors Offices and conference rooms were converted into to bring food donations to as many locations and living quarters for workers forced to stay in for communities possible. reasons of safety. Shuttle services were provided for our merchandisers, and bicycles were given to Through local government units (LGUs), non-profit employees who live close by. organizations, charitable institutions, and church- based groups, we distributed free food products to We provided protective gear and vitamins to boost over 200 locations nationwide. immunity, and gave incentives on top of regular pay. We sourced and distributed over 1.1 million With a workforce consisting of around 70,000 kilograms of rice, a staple in the diet of every Filipino employees, consultants, and partners, we have a family. Before the end of June, our efforts resulted huge impact on the lives of many. To this end, we in over P511 million worth of food given out to ensured that all salaries were continuously paid 173 LGUs, seven national government agencies, throughout the quarantine period, so our employees San Miguel Food and Beverage, Inc.