July 18, 2018 / 6:55 AM / a year ago

Exclusive - San Miguel to invest $1 billion in new breweries as Philippine beer demand grows

MANILA (Reuters) - Philippines conglomerate San Miguel Corp (SMC.PS) is planning to invest at least $1 billion (£764.18 million) in the next two years to build 10 breweries inside and outside the country, senior company executives said on Wednesday.

Banking on strong consumer demand in one of Asia’s fastest growing economies, the maker of San Miguel Pale Pilsen and Red Horse beer is setting up eight breweries around the country, San Miguel President Ramon Ang told Reuters in an interview.

San Miguel is also looking to open its first production facility in the United States and build a second plant in Vietnam, Ang said.

“This is not for the volume growth. This is more to be able to produce locally, regionally for fresh beer, for better quality of beer because it is locally available and also lower logistics costs”, he said.

San Miguel is Philippines’ biggest brewer and its brewery business is partly owned by Japan’s Kirin Holdings Co Ltd (2503.T). It has six existing breweries in the country, and six across Asia.

Each of its new breweries would have an annual capacity of 1-2 million hectoliters (100-200 million litres) and would cost at least $100 million, San Miguel Chief Finance Officer Ferdinand Constantino said in the same interview.

At 10.6 litres per capita in 2017, beer sales in the Southeast nation of over 100 million people have much room to grow. They pale in comparison with Vietnam’s 43.7 litres, China’s 29.8 litres and Thailand’s 27.9 litres, data from statistics portal Statista showed.

Philippine beer sales are expected to grow by a fifth to $1.74 billion in 2021 from $1.44 billion last year, Statista data showed. Beer sales were $1.03 billion in 2010.

San Miguel, valued at $6.09 billion, has pursued an aggressive expansion over the past decade to bolster revenues, adding infrastructure, mining, petroleum and power assets to its core food and beverage businesses.

Founded as a brewery in 1890, San Miguel dominates its home base for beer. The beer business accounted for nearly 13 percent of the conglomerate’s net sales in the first quarter of 2018.

San Miguel is also on track to sell up to $3 billion worth of shares in its food unit in the fourth quarter despite recent market volatility, the executives said.

San Miguel shares were unchanged on Wednesday, but are up 22.7 percent year-to-date, bucking the 13 percent decline in the broader Philippines index .PSI, the worst performing bourse in Southeast Asia so far in 2018.

Reporting by Karen Lema and Neil Jerome Morales; Editing by Muralikumar Anantharaman

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