March 20, 2012
San Miguel Purefoods to build new grains terminal
San Miguel Pure Foods Co. Inc. will spend PHP2.5 billion (US$58.22 million) to build a bulk grains terminal in Mabini, Batangas in line with its strategy to control production costs and protect its margins.
In a statement, Purefoods said the facility, adjacent to its two flour mills, is slated to commence operations in the fourth quarter of 2013 and has a payback period of seven years.
Due to the terminal''s proximity to seaports, the company said freight costs for the flour and feeds milling operations are expected to significantly decrease.
As part of efforts to enhance productivity in raw materials use, Purefoods has started using cassava as an alternative to high-priced corn. It estimates that it has generated nearly PHP500 million (US$11.64 million) in savings last year with the substitution.
The company has contracted 50,000 hectares for cassava production equivalent to 200,000 tonnes per year. It hopes to double this supply within the next five years.
The company currently imports over 40 percent of its raw material needs, so achieving greater diversity in its sources reduces its risks, Purefoods said.
Aside from this, Purefoods has moved quickly to replace the meat production capacity lost by Purefoods-Hormel Co. Inc. in September 2009 when typhoon Ondoy (international name Ketsana) hit Metro Manila.
Much of the lost capacity has been recovered through a toll-packing arrangement and expansion of internal capacity.
Rationalization of low margin products reduced total stock keeping units by half, thereby improving margins and freeing up capacity, Purefoods said.
Purefoods expressed confidence that its strategies and initiatives, coupled with a young and growing population and a vibrant local economy, would ensure steady growth in revenues and earnings.
Purefoods managed to post a four percent rise in profit last year to PHP4.21 billion (US$98.10 million) in spite of sharp increases in raw material prices. Consolidated revenues climbed 13 percent to P89.6 billion.
Over the years, Purefoods has been able to maintain strong market leadership in many of the sectors in which it compete. These include non-refrigerated and refrigerated margarine (96 percent and 89 percent, respectively), hotdogs (49 percent), fresh meats (42 percent), poultry (41 percent), butter (44 percent), and feeds (41 percent).
Purefoods said basic meats, mainly pork and beef, accounted for 42 percent of the volume sold from large commercial farms and three percent of total volume sold nationwide.
Another product category where the firm has seen steady growth of market share has been in ice cream, which was relaunched in 2004 under the Magnolia brand. An increase in market share was achieved even with minimal marketing and advertising support.
Purefoods also accounted for 29 percent share of the jelly-based snacks, cheese (20 percent), flavored milk (nine percent), non-flavored milk (eight percent), and cooking oil (two percent).