Philippines beer maker San Miguel in agribusiness joint venture with Shangri-La Hotel chain owner news
04 July 2008

The Philippines' biggest food and drinks maker, San Miguel, has joined hands with Malaysian tycoon and philanthropist Robert Kuok-owned Kuok Group that owns the Shangri-La Hotel chain, to jointly invest about $1 billion to develop a million hectares of idle land to help boost production of rice, corn, sugar and other crops in the Philippines, the world's argest rice importer.

This is the country's biggest corporate response to the food security - which has emerged as a serious issue all over the world -  though the programme will be run on commercial lines than philanthropic.

SMC, Kuok Group to launch US$1-B food security projectThe two described their joint venture as a "landmark move to address the critical issue of food security". San Miguel already dominates many segments of food and beverage market - it sells nine of every 10 beer bottles bought in the Philippines - and is looking for what it calls ''new engines of growth''.

Called ''Feeding Our Future'', San Miguel chairman Eduardo Cojuangco and Robert Kuok signed the agreement during the groundbreaking cermony for Shangri-La Hotel's fifth hotel in the Philippines yesterday. They are now expected to sign seperate agreements with four government agencies - Philippine's Department of Environment and Natural Resources (DENR), the Armed Forces of the Philippines (AFP), National Commission on Indigenous Peoples (NCIP), and National Power Corporation (Napocor) -  to allocate unused landholdings and reservations for the agribusiness programme.

San Miguel says once the land is alloted, they would then provide financial, technical expertise for the development and cultivation, and guarantee to buy all food products.

''Food security is a global issue. But here in the Philippines, we are feeling the effects even more. Often, when food crises happen, it is not because there is insufficient food supply, but because people do not have access to them,'' San Miguel's  president and chief operating officer Ramon S Ang, explained. ''In many parts of the world, including the Philippines, food prices have reached record levels. This is why many lower income families are no longer able to afford the kind of nutrition they need,'' he added.

''There are many factors that have led to the present crisis," Kuok, explained. "Urbanisation, changing diets in emerging economies, the use of crops to produce alternative fuels, the global rise in population, and climate change, have all put tremendous pressure on farm lands and are changing the face of farming,'' he said.

The skyrocketing prices of fossil fuels, which affects not only farming but also the transportation of goods, as well as the rise in prices of fertilisers, have also had a major impact on food supply and food prices,'' Kuok added.

San Miguel has been keen to shift emphasis to busineses with opportunities for operating on a larger scale like power generation or transmission and is prepared to invest  up to a tenth of its total assets or 35 billion pesos ($777.4 million / approximately Rs3,355 crore) in the next few years into new ventures.

Barely 10 days Cojuangco won shareholder approval to divest the company's domestic beer business at its AGM, telling them, ''We want to be in industries that have scale and will grow and we are determined to build leadership positions in key areas where important trends are driving future growth, not just for San Miguel but for the Philippines too.''

Shareholders also approved plans to raise authorised capital to 37.5bn pesos, and to issue 1.5 billion non-voting preferred shares, to raise money for the new ventures.

The divestment would mark San Miguel's biggest strategic shift in its 117 years, leaving analyst concerned over the company's future direction.

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Philippines beer maker San Miguel in agribusiness joint venture with Shangri-La Hotel chain owner