History Ginebra San Miguel, Inc.

(), a majority-owned subsidiary of ________, is engaged in the manufacture and sale of alcoholic and non-alcoholic beverages. The Company was formed on July 10, 1987 as the legal entity for the acquisition by _____ of the production assets of an existing liquor production company that had been in operation since 1902. Today, the Company operates three liquor bottling plants, which are located in the following areas: (1) Mandaue City, Cebu; (2) Sta. Barbara, Pangasinan; and (3) Cabuyao, Laguna. The Company utilizes external toll manufacturers to produce liquor products in Pampanga, Laguna, and Quezon. Among its subsidiaries are (1) Distileria Bago, Inc., a distillery that converts sugar cane molasses into alcohol with its plant located at Bago City, Negros Occidental, which became a wholly-owned subsidiary of ________ in 1996; and (2) Agricrops Industries, Inc. (AII), which was incorporated in 2001 as a wholly-owned subsidiary of _______ to primarily engage in the production of cassava-starch milk, an alternative raw material for the production of alcohol. As of December 31, 2010, AII has not yet started commercial operations. To fast-track entry into regional markets, GSMI entered into a Share Purchase Agreement (SPA) with the Thai Life Group of Companies (the Seller) for the purchase of 40% ownership of the outstanding shares of C.N.T. Wine and Liquor Company Limited (CNT), a limited liability company organized under the laws of Thailand. CNT possesses a license in Thailand to engage in the business of manufacturing alcohol and manufacturing, selling and distributing brandy, wine and distilled spirits products both for domestic and export markets. Also, on the same date, ______ and the Seller entered into a Joint Venture Agreement (JVA). The JVA established the terms and conditions regarding the ownership and operation of CNT and the joint control rights, obligations and responsibilities of _______ and the Seller, as

stockholders. In November 2004, GSMI incorporated Ginebra San Miguel International Limited (GSMIL) and subsequently assigned its rights and obligations under the SPA and the JVA to _____, including its rights to purchase 40% ownership of the outstanding shares of CNT. The acquisition of CNT was completed in December of the same year. CNT was later renamed Thai San Miguel Liquor Co., Ltd. (TSML). On June 29, 2007, GSMI incorporated GSM International Holdings Ltd. (GSMIHL), a wholly owned subsidiary in Thailand. GMSIHL, with certain other entities, holds 50% of the shares of Thai Ginebra Trading Co., Ltd. (TGT), a joint venture company with V. C. Property Company Limited. TGT will function as the selling and distribution arm of TSML. On August 27, 2008 and September 11, 2008, respectively, GSMI incorporated Global Beverage Holdings Limited (GBHL) and Siam Holdings Limited (SHL) as wholly owned subsidiaries. GSMI increased its investments in TSML and TGT from 40% to 44.9% through GBHL and SHL, respectively. On January 27, 2012, the Company purchased 100% of the total outstanding shares of East Pacific Star Bottlers Phils Inc. (EPSBPI), a corporation principally engaged in the manufacture and bottling of alcoholic and non-alcoholic beverages. EBSBPI has bottling facilities in Cauayan, Isabela and in Ligao City, Albay. The acquisition will forge synergies with the Companys on-going operations and provide additional capacity for the contemplated expansion plans of the Company.

Background Information The Group emerged stronger in 2010, as it took advantage of general improvements in the economic environment that empowered domestic consumers and boosted confidence and

prospects. The groups flagship brand, Ginebra San Miguel, gained an even stronger following among core liquor drinkers as innovative, barangay based-activisions, notably Ginuman Na, complemented with the aggressive Bida and Toast thematic campaigns, were successful in sustaining patronage on the brand. GSM Blue also remained the liquor brand of choice among the dynamic youth demographic, as continuing initiatives, such as Blueniversity and Flair Idol, that ingrain a mixed drinking culture among the youth were successful in creating excitement for the entire mixed drink category for the youth. This, together with the implementation of the two waves of price increases in the domestic liquor segment, chiefly drove the increase in revenues from 2009. Gains in volume, as well as elevated alcohol and packaging material costs, contributed an increase in cost of sales which enabled gross profit to rise from 2009. In 2011, the Emperador Distillers Inc., one of the major competitors of the Company, introduced to the public their new liquor product branded Emperador Light. It is the first low alcohol by volume (55 proofs) brandy in the Philippines. The mass-market brand targets young professionals as the Emperador Distillers Inc. tries to expand its consumer base. This penetration of new product into hard liquor industry has resulted to the decline of sales of many brewery companies including the GSMI. GSMIs Gran Matador experienced a large decrease on its demand, as a result, having greater amount of inventory stocks; hence, higher costs of inventory (e.g. holding costs, warehousing costs, etc.). This event causes the Company to reduce its operations; thereby, affecting various accounts. The Company faced a challenging year in 2011, owing to a highly competitive market and weak demand for liquor products. Domestic liquor sales volumes were affected by intense competition and the change in consumer preference for lighter alcoholic beverages. Thus, revenues dropped by 33% from 2010. Decrease in consumer demand despite the increase in

costs of raw material containers and excise taxes resulted in a 32% decrease in cost of sales. With the said movements in revenues and cost of sales, gross profit decreased by 39%.

Time Context

Point of View

Analysis SWOT Analysis STRENGTHS F Company has a strong global presence with its nearest domestic competitor being only half its size. F Company also has exceptional brand recognition. This strong brand recognition creates significant opportunities for the company and due to that; the company is able to generate more sales. F Company once reached its peak in the market when the consumers preferences were still high alcohol content beverages. F Company dominated the market due to its wide variety of products. More likely, the preferred drinks of the consumers are already offered. For this reason, the consumers will not be interested on the competitors products. Localized distribution helps the company to easily enter the market; thus, an ease on the part of the consumers because of its availability. The high affordability of the product allows the company to be patronized by the public as justified by its lower suggested retail prices compared to their competitors. Due to the companys marketing strategies, such as advertisements and promotional activities, consumers continue to appreciate their products;

thus, sustaining their competitiveness. And through aggressive market planning, F Company continues to take a step forward to recapture its target market once again.

WEAKNESS Having a variety of product as mentioned above is one of the strengths a company must focus on. But this will also contribute on the companys problem with advertising their products. Lack of innovation is another weakness for the company. The company produces new innovations only when their competitor increased sales because of introducing a new product innovation; thus, when they release an innovation in the market, their consumers would most likely stick on the first released product and would not want to take the risk on trying a new one. There is also an increasing price competition driven by too many competitors, which reduces the companys ability to increase revenue. One of the companys limitations includes the lack in its employees. The problem lies in the complexity of managing a relatively large area of business segment by a single supervisor. Appropriate and adequate actions to meet the needs of the areas governed may not be made. OPPORTUNITIES THREATS F Company is exposed to changes in the national economy. The implementation of excise tax is a problem that the company needs to focus on. Higher alcohol content will contribute to higher tax; being a burden to consumers since the cost in producing their product will increase thus, increasing its selling price. Hard liquors nowadays are already approaching its maturity stage. The consumers become health-conscious and prefer to have a sheer taste of beverages with lower alcoholic content. The great impact is shown on the drastic fall of their net income. The hard liquor industry is becoming an increasingly competitive sector. F Company is

attempting to differentiate itself; with new formats and new menu items. But other liquor industry is doing the same too and sometimes the competitors are the first one to introduce their product to the market. Admittedly, advertisements will make a big help in promoting the product, however, a threat shall arise when the recent requirements regarding the advertisement of other sin products is considered; where the consequences of constantly using the products will be shown together with the said form of advertisement.

STRENGTHS Wide variety of products Well-known and big company Lower suggested retail prices Localized distribution Strong brand recognition Marketing strategies WEAKNESSES Wide variety of products Lack of innovation Large area, few employees

THREATS OPPORTUNITIES Visayas and MindanaoMarket share Low alcohol Excise Health conscious Bawal na advertisement

Problem/ Opportunity Statement In F Companys 2011 audited financial statements, the company reported a net loss amounting to ____________. The problem of F Company for the period ended 2011 is the emergence of emperador light in the market. The management of F Company assumed that the sudden increase in the sales of the said competitor brand is just a fad and would not cause any long term sales problems for the company. The indifference of the management regarding the situation resulted to a decrease in its revenue for the year, further, incurring a net loss; a significant decline in its market share, and a decrease in the value of the firm.

Objectives (General and Specific) F Company should be able to: Improve their sales and report a net income for the current year 2012. Regain the portion of the total market shares that they lost during the year 2011

Targeted/ Segmented Publics Alternative Courses of Action ACA#1 F Company may launch new products that will compete with emperador light considering the competitors product pricing. Product differentiation is also an effective strategy to match the varying preferences of the customers.

ACA#2 Alternatively, the company may promote their products through massive advertisements such as commercials, billboards, consumer promos and localized raffles which consider the needs of a certain local community; all of which may encourage consumers to switch to F Companys products. ACA#3 The company may choose to innovate the existing products and make them in line with the current trend and more importantly, with the present preferences of the target consumer group.

Recommendation

Action Plans (Strategies, Tools, and Tactics) The F Company should hire more employees, enough to accommodate and give focus on the wide variety of products of good; thus, may provide the company the control for their products and perhaps the determination of the contribution margin provided by each product. The F Company must determine the benefits furnished by each product and make sure that these benefits always exceed the costs of producing it. This may result into not producing the product which does not satisfy the cost-benefit analysis. The F Company should continue to conduct studies regarding the changing customer preferences. This will ensure the company to still have the hold to each customer and might

prevent the company to experience a sudden change on its sales from the emergence of new competitors product. In a highly competitive market, heavy advertising and promotion are must. Thus, the F Company should focus on introducing or promoting their products through television commercials, posters, banners, and providing promos and raffles. The F Company should maintain an adequate amount of inventories. Producing a large number of inventories may prevent the stockout costs (costs of not meeting the demands of the customers), but then the consequence of this is higher costs of holding and carrying these inventories such as warehousing costs, property taxes, etc.

Financial Statement

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Industry Profile

References

Above the line national Below consumer promotion localized promo raffles Trade promo merchandises Penetration, awareness, trial generation, replacement Extension of products 30 15 5 seconds of commercials Logistics magdadala Sales - Penetration and availability Marketing - pricing promotion More than 30 days Inventory levels Stop production because of ample stock 80% market share sa North Phil ngayon 30 na lang Market shares- offtake or consumption consumer program promotion ongoing na iniilabas meron kaming product extension

Three months ung promo Computation wise, control-masyadong matagal ung cost - - - Factors sa promotion\ Objective penetration, brand matching-wine, brandy Consumer preference malinta-tsinelas, raffle Bangka - probinsya Consumer, trade, merchandising special event Survey trial audit,quarterly

Strategies Sell value Build brand equity Focus on the target customer segment