How does a company become big—fast, beginning the second decade of the 21st century?
Three things. One, have a vision. Two, that vision must be about creating value for customers and your other businesses. Three and probably, the most important, execution must be brilliant, though not necessarily flawless.
I looked at the performance of the largest Philippines corporations in sales or revenues in 2014. Then, I looked back at their sales/revenues in 2010. These two years are important for marking milestones in many ways.
The year 2010 was a watershed. It marked the end of the nine-year presidency of Gloria Macapagal Arroyo and the beginning of the six-year presidency of Benigno Simeon Cojuangco Aquino III.
2010 was also the year the Philippines achieved its highest GDP (Gross Domestic Product) growth rate of 8.2 percent, the best in 36 years.
It was the year the Philippines’ major conglomerates and largest corporations redefined their goals and envisioned themselves to become even larger, more profitable, and more relevant, locally and globally, and to provide greater value to their shareholders by diversifying and reaching new scale and breadth. During 2010, many of the large corporations uncorked their growth strategies.
San Miguel Corp., for instance, wanted to be the first to reach the P1-trillion mark in sales. The oldest Philippine company, Ayala Corp., wanted to hit P20-billion profits a year within five years.
Between 2010 and 2014, SMC more than tripled its revenues from P246 billion to P788.47 billion, up 220 percent; SMC’s holding company, Top Frontier Investments Holdings, increased its sales nearly twelve-fold, from P66 billion to P782.42 billion, up 1,084 percent; and Petron Corp.’s sales more than doubled from P231 billion to P484 billion, up 109 percent. Per year, SMC’s revenues rose by a frenetic 44 percent average, Top Frontier’s by 217 percent, and Petron by 22 percent. This makes the San Miguel group the fastest-growing conglomerate in the Philippines. Nobody comes close.
These three—SMC, Top Frontier, and Petron—have a common denominator—Ramon S. Ang. He is vice chair and president of SMC, president and CEO of Top Frontier, and president of Petron.
From 2005 up to 2009, before Ang uncorked his massive diversification and acquisition program, San Miguel’s consolidated revenues were notching up annual gains averaging 6.4 percent.
An engineer by training and with a natural flair for strategy, RSA is today the most visionary and boldest of today’s tycoons and taipans. He combines audacity of visioning and brilliance of execution. He figured that getting the right mix of businesses would propel SMC to greater heights, profits, sustainability, and capability to make life better for most Filipinos.
In early 2009, Ang wanted that in five years, 70 percent of SMC’s total sales would come from new businesses; the other 30 percent from old businesses like beer, food, and packaging. That was done.
San Miguel turns 125 this year as the original Fabrica de Cerveza. Under the management of Chairman Eduardo Cojuangco Jr. and Ang, the company in the last decade has managed to reinvent itself. The San Miguel founded in 1890 is markedly different from the San Miguel of today.
SMC is the first of the old corporate majors to move into businesses like power generation (it became the largest power producer in Luzon, with 3,165 megawatts), power distribution (it acquired control of Meralco, briefly and now retails electricity at almost below cost or a third of Meralco’s price in Bicol and Central Luzon), petroleum refining and marketing (Petron has nearly 40 percent of the market; the saying that beer, which is largely water, and oil do not mix is not true); tollways (majority of tollways in Luzon); airports and ports, water (it will rehabilitate Angat Dam); mining, cement, and even telecommunications. Ang grew San Miguel by aggressive acquisitions, expansions, and diversification projects.
San Miguel has been so successful that other conglomerates followed in, belatedly, Ang’s footsteps. The likes of Ayala, Gokongwei, George Ty, and Manuel Pangilinan also went vigorously into infrastructure, tollways, and energy even while trying to remain dominant in their traditional core businesses. In telco, Ayala, PLDT and JG Summit have found to their chagrin that it is very much a mature business with growth in revenues in low single digits.
San Miguel has become so big it literally, and figuratively, fuels the progress of the nation. Its products and services make a significant difference in the lives of the people by meeting both their basic, human needs and their aspirational needs.
Other large conglomerates did not do as well as SMC in terms of annual average increase in revenues during the five-year period 2010 to 2014.
Lopez Holdings Corp. (formerly Benpres) of the Lopez family that owns stakes in ABS-CBN, Rockwell, construction and renewable energy showed an average increase in sales per year of 46 percent. Alliance Global Group Inc., the real estate, liquor, and fastfood conglomerate of Andrew Tan, grew sales at 36 percent per year; Ayala Corp. by 17.5 percent, SM Investments Corp. of Henry Sy Sr. by 10 percent, JG Summit Holdings of taipan John Gokongwei Jr. by 9 percent, and Philippine Long Distance Telephone Co. of Indonesia’s Salim group and Manny V. Pangilinan by 3.67 percent.
In the five years from 2010 to 2014, sales of SM Investments Corp. increased 109 percent (or 9.9 percent per year) from P184 billion to P275.7 billion; JG Summit by 45 percent (or 9 percent per year) from P129 billion to P187 billion; Ayala Corp. by 87.9 percent (or 17.5 percent per year) from P98 billion to P184.3 billion; PLDT by 18.35 percent (or 3.67 percent per year) from P144.45 billion to P170.96 billion; Alliance Global by 181.8 percent (or 36 percent per year) from P44.49 billion to P125.4 billion; Aboitiz Equity Ventures, by 42 percent (or 8.4 percent per year) from P83.74 billion to P119 billion; Lopez Holdings by 231 percent (42.6 percent per year) from P32 billion to P106.7 billion.
The moral of the story: To grow big—diversify, acquire, intensify. Go into businesses that directly affect the huge needs of the people, both basic and aspirational.