SWOT Matrix
Strengths
Opportunities
1. Strong overall economy
growth at 6.2% and industry
growth reported at 7.9%
2. Increasing Social Media and
Internet Penetration
Filipinos
3. Filipinos Drinking Culture
4. Recycling Waste
5. Water Conservation and
Treatment
6. Growing demand for beer
products in other parts of the
world, especially in North
aAmerica
Weaknesses
1. Strong and popular brand portfolio
supported by high quality products
2. Widespread availability of SMBs
products and Proximity of Production
Facilities to Consumer Markets
3. Size and scale of operations
4. Maintains a strong cost leadership
position
5. Experienced Managers
6. Expansion of Coverage Area
7. Revenue and volume growth of 18%
and 12.09%, respectively
8. Market leadership with a high market
share of 95.6% and economies of
scale
1. Capture a large portion of the industry
growth (S1,O1)
2. Market Development - Expand to
areas currently underserved (S1, S2,
of S7, S8, O1, O3, O6)
3. Product Development Introduce new
products and packages (S1, S3, S5,
O1, O3)
1. Sales are price elastic
2. The companys business and sales are
affected by seasonality
3. Dependence on trademarks and
proprietary rights
4. Reliance on Third Parties
5. Changes in the dealership and its own
workforce
6. Tarnished reputation
7. Product Cannibalization
8. Losing international assets
1. Market Penetration- Increase Product
Visibility Through Promotions and
Persuasive Selling and Trade Incentives
(W1, W2, W4, O2, O3)
2. Use segmented pricing strategy (W1,
W2, O1)
3. Maximize growth opportunities by
expanding internationally and offer
more diversified products that match
the culture and taste of prospective
foreign markets (W6, W8, O6)
Threats
1. Availability and Volatility 1. Aim to achieve economies of scale and 1. Vertical Integration-Backward Integration
of Prices of Raw Materials implement returnable bottle system (S4, (W1, W2, W4, T1, T2)
2. Risks of inability to meet T1) 2. Horizontal Integration (W1,W2,W3, T2,
surges in demand and 2. Establish an Extensive and Efficient T3, T5)
shortages Distribution System Coverage (S2, T2) 3. Expand to countries with lower excise
3. Entry of new and existing taxes (W1, W2, T4)
domestic and local
producers of other alcoholic
beverages which are close
substitutes to beer
4. Philippine laws and
regulations, such as the
imposition of higher excise
taxes Political and social
Instability
5. Changes in consumers'
preferences or purchasing
power
6. Labor disruptions
7. Ability of the largest
shareholders to influence
corporate actions
8. Possible disagreements
among the parent company
and joint venture partners
Strategies

Strengths-Opportunities (SO)

Capture a large portion of industry growth

With the consistent growth of the food and beverage industry

paired with the strong and popular brand portfolio of San Miguel
Brewery, it could gain competitive advantage by using this strength
to match said industry growth.

Expand to areas currently underserved (Market Development)

The companys market share, reported at 95.6%, has been

significant since its inception. The companys market dominance
coupled with its brand quality and popularity, San Miguel Brewery plans to increase its sales
further by serving those markets which it holds only less than 95% share. In addition, the company
also aims to achieve sales growth by increasing its share of the broader alcoholic beverage
segment. This could be done by taking advantage of the consistent industry growth with one of the
companys most successful products, Red Horse. The company plans do so by focusing on regions
and localities in which hard liquor sales are higher Red Horse being a low-cost high-alcohol
beverage. Furthermore, the company could maximize its growth potential by entering into new
markets especially those located in North America where there is a signification of growth in
demand for beer products.

New Product and Package Introduction (Product Development)

To increase customer interest and overall market size, as well as address the needs of an
increasing fragmented market, San Miguel Brewery should introduce new products and improve
packaging. The company aims to pursue packaging innovations and capitalize on the market trend
towards convenience packaging.

Strengths-Threats (ST)

Economies of Scale and Returnable Bottle System

With the issue on the availability and volatility of raw

materials prices and increase in other production costs,
economies of scale in research and development, distribution,
and managerial and marketing functions could be achieved by
San Miguel Brewery due to the size and scale of its operations as
well as the wide availability of its product offerings thereby providing the company with an
advantage in terms of reduced costs. The Companys returnable bottle system helps keep the price
of its beer products affordable. With the high retrieval rates achieved under the system, bottle
usage is maximized before bottles are replaced. Under this system, the Company is able to achieve
a 95% average retrieval rate for its bottles, which substantially reduces its packaging costs.

Establish an Extensive and Efficient Distribution System Coverage

San Miguel Brewery maintains a network of five local breweries that are strategically
located in the three main islands in the Philippines: Luzon, Visayas, and Mindanao. The company
also has breweries in different areas within the country such as Metro Manila, Mandaue City, San
Fernando, Pampanga, Valenzuela City, Bacolod City, and Negros Occidental. The proximity of
these production facilities to consumer markets allows the company to establish an extensive and
efficient distribution system to reduce the risks of not being able to meet unexpected surges in
demand and shortages of supply. Aside from this, this strategy would ensure that the beer is
freshly delivered to the customers at an optimal cost.

Weaknesses-Opportunities (WO)

Increase Product Visibility Through Promotions and

Persuasive Selling and Trade Incentives (Market
Penetration)

With the current market share reported at approximately

95%, the company can capture more of its existing
markets through tactical consumer promotions such as
flash promotions and special sales to social media fans,
and by engaging in persuasive selling and the use of trade
incentives to improve outlet penetration. Although the
company holds the Oktoberfest annually, it could further
increase product visibility by using current technological
advancement and the increasing social media and internet
penetration in the country to come up with eye-catching
ads at a lower cost.

Segmented Pricing Strategy

The companys products sales are price elastic in the Popular and Economy market,
composed of the lower and middle socio-economic sectors, while less price elastic for the Upper
Popular Market, composed of the more upscale sectors. In line with the economic growth of the
country whose GDP grew by 6.2% during the first quarter of 2017, the company plans to adopt a
segmented pricing strategy. This strategy aims to keep its products affordable to the lower and
middle-class consumers while increasing the prices of the companys new specialty brands
supported by image-building activities to strengthen their premium positioning and improve their
profitability.

Maximize growth opportunities by expanding internationally and offer more diversified products
that match the culture and taste of prospective foreign markets

San Miguel Brewerys subsidiary, San Miguel Hong Kong Ltd. Has suffered losses as a
result of a restructuring of South China operations. In order to recover these losses, San Miguel
Brewery can venture in other international markets, more specifically in North America, where
increasing demand for beer products has been evident. However, there will be a lot of factors to
consider in implementing this strategy such as competition in the international market and excise
taxes imposed in therein. But if this strategy becomes successful, San Miguel Brewery will not
only be able to recover losses but also redeem its tarnished reputation.

Weaknesses-Threats (WT)

Vertical Integration-Backward Integration

Since one of the threats currently faced by the company involves the availability and prices
of raw materials, San Miguel Brewery can integrate vertically in order for it to have control over
distributors, suppliers, and or competitors. More specifically, SMB can enter into backward
integration in order to ensure the availability of raw materials and to lessen disruption in
operations and avoid loss of profits for the same reason.

Horizontal Integration

Due to the entrance of international

breweries, there has been a fragmentation of sales in
the market. More competitors in the market would
mean lesser market share for San Miguel Brewery
and lesser market share would probably lead to
lower sales. Thus, the company has adopted the
horizontal integration strategy. Recently, Kirin
Holdings Company, Limited, an integrated
beverages company headquartered in Shibuya,
Tokyo, Japan, signed a share purchase agreement to
acquire 43.249% of San Miguel Brewery Inc. This
strategy will provide Kirin Holdings with increased
control over SMB, Inc.
Expand to countries with lower excise taxes

The excise taxes on beer and liquor are among those affected by the Sin Tax Reform
passed in 2012. For fermented liquors, the tax went up to P21 per liter from P19, for retail prices
not exceeding P50.6 and the levy increased by P1 for those with retail prices exceeding P50.6.
With this increase in excise taxes, San Miguel Brewery can expand or increase its sales volume in
countries with relatively lower sin taxes such as China, Germany, and India.

http://sanmiguelbrewery.com.ph/pdf/SMB_Bond_Prospectus.pdf

http://www.sanmiguelbrewery.com.ph/pdf/SMB-Annual-Report-%2817-A%29-pse.pdf