Filipinos like to drink. In particular, they like to drink beer. As the nation has prospered, so have its two rival beer producers, San Miguel Corporation and Asia Brewery. But now the competition is about to reach a new level, as Asia Brewery has partnered with Japan’s Asahi in a long-term distribution deal that could profoundly shake up the Filipino beer market.
Beer accounts for around 70 per cent of total alcohol consumption in the Philippines. The country achieved a GDP growth rate of 6.8 per cent in 2012, followed by 7.8 per cent growth in the first quarter of 2013. As Filipinos have enjoyed higher incomes and more jobs, they have had more disposable income to celebrate with, and beer sales have reached a historic peak that is projected to keep rising.
As for the competition between San Miguel and Asia Brewery, it has not been much of a competition at all so far. In 2011, 88 per cent of the domestic beer sold in the Philippines came from San Miguel, with Asia Brewery providing the remaining 12 per cent.
The reason for San Miguel’s market dominance is its much greater age and reputation. San Miguel opened its first brewery, the first in Southeast Asia, in 1890 and is currently one of the biggest beer producers in the world. It has such strong ties to Filipino culture that “San Miguel” is used as a synonym for “beer” in the Philippines. San Miguel’s advertisements feature the hottest young Filipino celebrities celebrating the Filipino way of life, and they have been all over television screens, magazines, and billboards for a very long time.
Asia Brewery, on the other hand, is a scrappy underdog that was started in 1982 by billionaire business mogul Lucio Tan. It steadily gained market share over the years but has been unable to mount a serious challenge to its much larger rival.
Now, after years of challenging San Miguel head-on, Asia Brewery has adopted a new strategy. The company partnered with Japan’s Asahi earlier this year in a long-term deal to distribute Asahi’s premium Asahi Super Dry beer in the Philippines. In return, Asahi will assist Asia Brewery in selling their beer and other products in Japan.
The prospects for both Asahi and Asia Brewery look promising. First of all, the Philippines is ripe for a new premium beer to be made widely available and fill a luxury niche that is underserved by both of the domestic brands. Secondly, access to the prosperous Japanese market could greatly boost Asia Brewery’s bottom line and allow it to expand and develop further in the coming years, both in the Philippines and abroad.
The executives at San Miguel must be wringing their hands.