A Practical Study on the Organization Culture of

SAN MIGUEL BREWERY INC.

A requirement for MGT 101 - Concepts

and Dynamics of Management

Aquino, Lawrence

Carangian, Gabrielle

De Mesa, Lissa Andrea

Porca, Antonette

Ugay, Jamielynne

February 2019
Company: San Miguel Brewery Inc.
San Miguel Brewery Inc. (SMB) is widely known for their alcoholic beverages like San
Miguel Pale Pilsen, San Mig Light, San Miguel Flavored Beer, Red Horse Extra Strong Beer
and non-alcoholic beverages namely, Cali, San Mig Cola, Berri Juice and many more. SMB
has six production facilities across the Philippines and operates one brewery each in Hong
Kong, Indonesia, Vietnam, Thailand and two breweries in China.

Technological Environment
SMB employs state-of-the-art brewing technology. Its highly experienced brew masters
and quality assurance practitioners provide technical leadership and direction to
continuously improve and maintain high standards in product quality, process efficiency,
cost-effectiveness, and manpower competence. Their technology and processes are
constantly updated, and new product development is ensured through continuing research
and development of beer and non- alcoholic beverages.
SMB also has a central analytical laboratory which is equipped with modern equipment
necessary for strategic raw materials analysis and validation, beer and non- alcoholic
beverage evaluation and new raw material accreditation. Specialized equipment includes
gas chromatography, atomic absorption spectroscopy, protein analyzer, and laboratory
scale mashing/ milling system for malt analysis.
Though these technological advancements help the company to produce more of their
products there are still risks that are inevitable in production. These are caused by
different factors including accidents, failure of equipment, interruption in power supply,
human error, natural disasters, and other unforeseen circumstances and problems.

Economic Environment
The San Miguel Brewery Inc. has about 3,000 employees which operates in six breweries
in the Philippines and in different sales offices located across the country.
According to the Annual Report released last April 2018, the SMB reached almost 260
million cases, surpassing last year’s volume by 13%. Strong volume growth was caused
mainly by positive economic conditions, along with effective marketing strategies and
integrated sales initiatives. Consolidated revenues rose 17% to P113,225 million. In
addition, strong domestic operations, coupled with the contributions of international
operations, pushed operating income up 15% to P31, 161 million, while net income rose
17% to P20, 711 million.

Legal/ Political Environment

The businesses and operations of San Miguel Brewery Inc. are subject to national and
local laws, rules and regulations governing several different industries in the Philippines
and in other countries where it conducts its business. They are also subject to various
taxes, duties, and tariffs. One specific example is the Republic Act 10351, or the Sin Tax
Reform Law which greatly affects the prices of alcoholic beverages which are the main
products of SMB. In addition, the Philippine government may periodically implement
measures aimed at protecting consumers from rising prices, which may constrain the
ability of the company to pass on price increases to distributors who sell its products, as
well as its customers. Implementation of any such measures could have a material adverse
effect on the business, financial condition and results of operations of the company.

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 The SMB also follows some environmental policies like wastewater management,
pollution control, and proper waste management. With these, the SMB made sure that they
invested some equipment that will provide a service that helps for a cleaner environment.

Natural Environment
SMB has many various environmental programs that ensure the safety of the natural
environment. First is the Coastal Resource Management which targets mangrove
reforestation, regeneration of marine resources and artificial reef installation. Second is the
Emission Profiling wherein they conduct stack emission sampling which measures the gas
emission of fuel combustion--ensuring compliance with the Clean Air Act. Third is the
Biogas Recovery wherein SMB breweries treat their wastewater employing the “anaerobic
biological process” which can produce methane gas, the cleanest gas in use today. The
aforementioned are only some of the main environmental projects of SMB, until now they
are still formulating and developing more way to help the environment.
A practice that SMB has been doing through the years is using returnable glass bottles,
aluminum cans and kegs. By the end of 2011, 95% of the glass bottles used were returned
bottles. The durability of the returnable glass bottles and plastic crates results in an
average of 60 cycles over a span of 10 years. This ensures lesser packaging costs and
therefore aids the company in making their products affordable.

Socio-cultural Environment
Expertise in analyzing the underlying demographics of its present and future
consumers enables SMB Beer Group’s to innovate new products to the market and at the
same time ensure the demand of its pre-existing products. Consumer purchasing power
and consumer preferences are two of the key concepts needed to understand consumer
behavior however it must be noted that purchasing power and preferences may change
due to several factors including social trends or changing lifestyles. Another notable factor
is the growing concern about health effects of alcohol consumption brought about by bad
publicity.
To cater to the evolving lifestyles of its consumers as well as their varying
backgrounds and preferences, SMB has widened its horizons into offering new products.
Some of its varying brands include the original San Miguel Pale Pilsen, Red Horse Extra
Strong Beer which is formulated for consumers who enjoy a rich taste, San Mig light which
is fit for consumers who are looking for a lighter experience, San Miguel Flavored beer and
Cali which are flavored for consumers who want subtle beer. In addition, SMB also includes
non-alcoholic beverages such as Magnolia Health Tea, a ready-to-drink and instant
beverage for consumers on-the-go. Lastly, SMB has ensured convenience to its consumers
by using convenient packaging to attune to the fast-paced lifestyles of its consumers.

Global/International Environment
Supplementary to SMB’s vast accumulations in the Philippines, the organization also
has international brewery operations in China, Thailand, Hong Kong, Indonesia and
Vietnam. All aforementioned countries each have one brewery each with the exception of
China which has two. SMBIL Group’s marketing arm in Thailand is San Miguel Marketing
Thailand Limited (“SMMTL”) wherein all local sales are done. Meanwhile in Indonesia,
SMBIL subsidiary Jangkar Delta Indonesia (“JDI”) handles the distribution of products.

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SMBIL also has licensing agreements in Nepal and the UK and Ireland with Gorkha Brewery
and Shephered Neame respectively.
Raw materials needed for beer production are obtained through procurement
groups that are sourced from various countries. Hops and malted barley are amassed from
United States, Europe, China, India and Australia.
Consecutively, SMBIL also exports their products to numerous countries such as
Malaysia, Singapore, Japan and United States. 20% of the total beer sales of SMBIL were
accumulated from export sales in 2011. Moreso, it can be noted that SMBIL has ensured a
stable international market for its products.

Customers and Clients

The company set trendsetting marketing strategies to reach their customers and
clients. Their set of beverages can be classified to different target markets. One of which is
the premium beer type such as the San Miguel Super Dry, Cerveza Negra, and San Miguel
Premium All-Malt. These drinks attract sophisticated drinkers with its high quality of taste.
Second, San Mig Zero targets customers who are health conscious. Third, the San Miguel
Gold Eagle continues to sell mostly to customers located in regional markets. Fourth, Red
Horse Beer and San Mig Light attracts the mass who are ages eighteen years old and above.
Lastly, the Pale Pilsen and San Miguel Flavored Beer are purchased by those who are in
groups and parties and sold with high volume.

Competitors
San Miguel Brewery Inc.’s major competitor is AB Heineken Philippines Inc. that has a
joint venture with Asia Brewery Inc. and Heineken International B.V. The said competitors
also offer foreign and local beers ranging from strong alcohol such as Colt 45 to imported
Tiger and Heineken. They also offer flavored alcohol beverages namely Tanduay Ice which
has different flavors. On the other hand, SMB also has competition for non alcoholic
beverages such as Minute Maid, Zest-O, and Tropicana Twister. The SMBIL also competes
for both local and foreign brands such as Saigon Beer in Vietnam and Blue Girl in Hong
Kong. Nevertheless, the company still continues to expand as it produces new variants such
as draught variants in Thailand as well as in Vietnam and creates exclusive partnerships
with global producers of beverages in order to distribute their products globally.

Suppliers
The company has a list of contracts for the different suppliers locally and abroad.
The contract indicates the time period on which they will provide the raw materials
ranging from three to twelve months but contains renewal options as well.The suppliers
for the malt are Barrett Burston Malting Co. Pty. Ltd., Cargill Malt Asia Cofco Malt (Dalian)
Co.; Ltd., Malteurop, and Taiwan Hon Chuan Enterprises. On the other hand, corn grits are
supplied by Cagayan Corn Products Corporation, Lambayong MNLF Multi-Purpose
Cooperative, Limketkai Manufacturing Corporation, and RJJ Enterprises. The food starch is
produced by Binh Phuoc General Import Export Joint Stock Company and Chaodee Trading
Co., Ltd. Next, the packaging materials and cans are provided by Can Asia, Inc., San Miguel
Yamamura Asia Corporation, San Miguel Yamamura Packaging Corporation, Bangkok Can

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Manufacturing Co. Ltd., Baosteel Can Making Vietnam, Crown Beverage Cans Hong Kong,
and Pacific Can (Zhangzhou) Company Ltd. Finally, the fuel is distributed by SL Harbour
Bulk Terminal Corporation.

Porter’s Five Forces Affecting Industry Competition

1. Rivalry Among Existing Firms

○ SMB is facing a competition with another domestic company which is AB
Heineken Philippines Inc.
○ Other contenders, particularly craft breweries, have already hit the market.
○ In spite of being one of the top companies in the industry, SMB’s continuous
research and development will be an advantage.
○ Having non-alcoholic products allows SMB to cater to a larger market.
2. Buyer Power
○ Distributors are the main buyers of beverages. Bargaining power of buyer is
high when there are few distributors.
○ Aside from distributors, we also have retailers and consumers. Distributors
control their prices depending on the retailers and consumers’ preferences.
With the increasing interest on smaller brewers that offer new experience
and flavors, big companies like SMB have to do something to limit the
competition.
3. Supplier Power
○ Since there are multiple supplier for each resource we can assume that the
company has more control than the suppliers. The company can buy more
from a supplier that offers the same raw material for a cheaper price.
○ The renewal option indicates that the company is not highly dependent from
the suppliers.
4. Threat of New Entrants
○ New entrants give way to more competition by innovating new products and
services.
○ This puts pressure on the company as new entrants bring new capacity but
newbies still need work harder to be at the same level with large companies.

5. Substitute Products
○ Entertainment-wise there’s a lot of product and services that could be
considered as substitute (karaoke, coffee shop, food establishments, etc).
○ Alcoholic beverages produced by other companies also pose a threat to the
company.

Internal Environment— Organization Culture

Different Manifestations

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 Figure 2. San Miguel’s Current Figure 2. San Miguel’s Logo from
Logo 11111111111975 to 1999

● Symbol
Fostering the historical significance of a representation, La Fabrica de Cerveza de
San Miguel or the San Miguel Brewery, in the present period, continually retains its original
logo from the day the corporation is founded by a well-known Manila businessman, Don
Enrique Ma. Barreto. Asserted by a timeline digitally illustrated by Rappler in 2014 for San
Miguel’s 125th founding anniversary, the symbol presented in Figure 1, however stands as
the original logo, was replaced by a leaflet droplet logo exhibited in Figure 2 from 1975 and
lasted until 1999 to reestablish “the escudo”.
The San Miguel “escudo” seal, with its literal meaning of “shield” in Spanish, is a
symbol commenced to be carried by the corporation by the time it was granted a 20-year
Spanish Royal Grant of Authority to brew beer. In the sense of being the company’s
emblem, the logo portrays the withstanding corporate environment of SMB, thus, allowing
them to produce quality and consistent output through the years.
The logo has been associated with the corporation for a long time, given that it is
present from the day it produces 47,000 cases of lager beer up to this day in which it
contributes to 6% of the PH’s Gross National Product—”the country’s largest and most
diversified conglomerate.”
● Story
The most interesting story about San Miguel can be better comprehended by
directly quoting the article released by Inquirer.Net in 2016:
ON OCT. 4, 1890, Fabrica de Cerveza de San Miguel was inaugurated by Don
Enrique Ma. Barreto. In 1913, it was incorporated as the San Miguel Brewery Inc. The
brewery’s building was purchased as part of the Malacañang complex and a part of the
original building, the New Executive Building, now houses presidential offices. (para.1)
● Hero
“They are the batteries, the fuel, the A’s, and the jewel,” usually they are the people
on the top management, they are the heroes of SMB, according to Ms. Jocelyn Ugay, an
employee of SMB. As they exemplify the attributes of being a model in the company, they
are named as their heroes.

Mr. Eduardo M. Cojuangco

Chairman and CEO

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 Chairman, Executive Committee

Ramon S. Ang
Vice Chairman, President and COO
Member, Executive Committee

These men possess a strategic way of thinking that can help them unlock a certain
level of development, assess a critical condition, and prepare plans that are substantial in
management. They begin with the end in mind, and their vision inductively gather ways to
become successful. Those traits influence the employees to work better and strive harder
for the attainment of their organizational goals.
● Slogan

Figure 3. San Miguel’s “Samahang

Walang Katulad” Digital

Presented above (Figure 3) is a digital ad of SMB’s tagline, “Samahang Walang

Katulad”. It was then “Iba ang may Pinagsamahan,” and now revised to a better version, as
aforementioned, reassuring that a bond with San Miguel Beer is undeniably irreplaceable.
San Miguel Beer is the country’s most popular brew. For about 129 years now, it
gears up the idea of “barkadahan” sharing stories and strengthens connections with a
bottle of San Miguel Beer.
● Ceremonies
Through the collective efforts of the company’s management, the employees of SMB
would ensure that they will be involved with a lot of ceremonies in the company. Here are
the programs that promote welfare to the employees, directly from the official website of
SMB:
❏ Employee Relations
1. Sports and Recreation
2. Summer Outing
3. Songfest
4. Employee Service Awards
5. Monthly event allowing the employees to purchase various San Miguel
products at discounted prices
6. Christmas Tiangge
7. Annual Medical Examination
❏ Training and Development

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 1. SMB Training Infrastructure
2. Developmental Approaches

Culture and the Environment

The culture of SMB revolves around the idea of “SPICE” that stands with the core
value of the company:
S-ocial Responsibility
P-eople-Oriented
I-ntegrity
C-ustomer Delight
E-xcellence
These attributes are evidently practiced by every employee within the working area.
From a statement of Ms. Ugay, being part of SMB family means you have to deeply
internalize the characteristics to smoothly work in the company. Not only does the core
values contribute to the attainment of organizational goals, it also constitutes to a great
portion of the community inside the company.
Fast-paced are the companies very much eager towards success, and that is exactly
how SMB works. From the clerical works to the decisional works, everything is rigidly
processed. Generally, the organizational culture is much more focused on career growth
and development. The employees’ model are their leaders, and their leaders are brilliant,
and as to base the assumption to “domino effect,” visualizing the ambiance of the company
gives us a conducive environment for individual’s ability to express their capacity.
Always prepared to face the competitive setting of business, uplifted spirit and pride
to perform not just in the country but in the global setting, this is not just because of the
leaders, this is because of the entire company, the San Miguel Brewery Inc.

References

Ads Versus Time [ADVERT]. (2015). The Beer for all Season [Online image]. Retrieved
February 6, 2019 from http://adscorona.blogspot.com/2015/09/the-beer-for- all-
season.html

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Bilyonaryo. (2019). Richest Man in the Philippines [Online image]. Retrieved February 6,
2019 from https://www.bilyonaryo.com.ph/forbes_bilyonaryo/eduardo-
cojuangco-jr/

Bilyonaryo. (2019). Richest Man in the Philippines [Online image]. Retrieved February 6,
2019 from https://www.bilyonaryo.com.ph/forbes_bilyonaryo/ramon-ang/

Inquirer.Net. (2016). Did You Know: Fabrica de Cerveza de San Miguel. Retrieved
from https://newsinfo.inquirer.net/821452/did-you-know-fabrica-de-
cerveza-de-san-miguel

Logopedia. (n.d.). San Miguel Corporation [Online image]. Retrieved February 6, 2019 from
http://logos.wikia.com/wiki/San_Miguel_Corporation

Rappler, Inc. (2014). TIMELINE: A business 125 years in the making. Retrieved from
https://www.rappler.com/brandrap/better-world/65331-timeline-business-125-
years

San Miguel Brewery Inc. (2012). 2011 Annual Report. Retrieved from
http://www.sanmiguelbrewery.com.ph/pdf/17-
A%20%20SMB%20Annual%20Report%20for%20the%20year%20Ended%20Dece
mber%2031,%202011.pdf

San Miguel Brewery Inc. (2018). 2017 Annual Report. Retrieved from
https://www.sanmiguelbrewery.com.ph/pdf/SMB%20Annual%20Report%202017
.pdf

San Miguel Corporation. (2018). SMCGP Annual Report 2017(17-A). Retrieved from
http://smcglobalpower.com.ph/files/reports/17-
A/Letter_to_PDEx_4.16_.18_Form_17-A_vWebsite_.pdf

San Miguel Corporation. (n.d.). Our Company [Online image]. Retrieved February 6, 2019
from https://sanmiguelbrewery.com/index.php/our-company/