San Miguel Pure Foods (SMPF) is the largest producer and exporter of poultry in the Philippines, as well as a market leader in various branded businesses in the agriculture sector. With the recent visit of halal inspectors from the UAE to South Luzon and Cotabato in Mindanao, there is talk of opening up a large halal facility. Inside Investor met with SMPF President Rita Palabyab to learn about the poultry giant’s experience in the Middle East and what makes Japan the top export market.
Q: What are SMPF’s top products and what makes you a leader in the Philippine agriculture sector?
A: Sixty per cent of sales for SMPF come from three different agro-industrial groups: poultry, feeds and meats; branded businesses, such as processed meats, coffee and dairy; and flour. SMPF is the Philippines’ leading poultry producer with a market share of over 40 per cent, and the second largest player isn’t even engaged in export.
“SMPF is the Philippines’ leading poultry producer with a market share of over 40 per cent, and the second largest player isn’t even engaged in export.“
Poultry revenues have increased about 9 per cent in the past three to four years. Poultry sales in 2012 came to P30 billion. SMPF has 3,700 employees, with 2,900 in the Philippines and the rest in Vietnam and Indonesia.
Q: Which of these products does SMPF export and what are your largest markets?
A: About 95 per cent of our poultry exports go directly to Japan because we offer value-added products and cost-competitive labour. However, there are other components that make poultry production more expensive here, such as the cost of broilers, which put us under Brazil in terms of cost competitiveness. We were able to acquire the Japanese market because Thailand was tarnished more by the avian flu scare in 2003.
The two segments engaged in export are poultry and our branded businesses, which records higher sales to the Middle East than poultry. A ban on Philippine poultry to the UAE was only lifted in late June, which may change this. A recent visit to our halal poultry slaughterhouses in Tiaong, Laguna and Lucena City, and to a halal-certifying entity in Cotabato by halal inspectors from the UAE means that they are preparing to look for private buyers and SMPF is the only company they have seen so far. The ban was lifted because the Philippine government was able to convince the UAE through G2G negotiations that the ban had no grounds and was only implemented because of a scare of the avian flu, which never affected Philippine poultry.
“A recent visit to our halal poultry slaughterhouses in Tiaong, Laguna and Lucena City, and to a halal-certifying entity in Cotabato by halal inspectors from the UAE means that they are preparing to look for private buyers and SMPF is the only company they have seen so far.“
For the Middle East, we currently export to Kuwait, which gets our halal-certified chicken-based hot dogs, corned beef and frozen whole chickens. Overseas Filipino workers (OFW) are the largest buyers of our corned beef and chicken-based hot dogs in that region, which is why the opening of the UAE to our products would be great for sales because there are 800,000 OFWs.
Q: Are there any prospects for regional expansion?
A: We have an operation in Vietnam that has feeds, hog farm and processed meats, but they are not doing that well because hog prices have been below cost. China recently closed the door on Vietnam and since then hogs have flooded the local market. We are looking at few acquisitions and we do want to expand in the region but cannot release this information at the moment. SMPF’s Indonesia operation involves processed meats and joint venture with Subaindah; all the products are halal. Bakso, a kind of meatball, is the top seller.
Q: What portion of SMPF’s sales are composed of the halal market?
A: All poultry produced in Mindanao by SMPF is halal, and this makes up about 10 to 15 per cent of our poultry sales. In addition, two of our Luzon poultry slaughterhouses are halal-certified.
Q: What Islamic bodies compose the Philippine halal market?
A: While there are a number of Islamic groups that can certify facilities for halal, the Islamic Dawah Council of the Philippines (IDCP) is the most active (they even have their own magazine), but it is not yet recognised by the National Commission on Muslim Filipinos (NCMF), a governmental agency charged with promoting halal in the country. There are nine other organisations undergoing re-accreditation by the NCMF. SMPF has been dealing with IDCP, which is recognised in the GCC. In Mindanao, we use two or three other certifying bodies.
Q: What is the extent of SMPF’s operations in Mindanao?
A: Our SMPF used to have an export plant in Mindanao, but it was too costly to ship to international markets because we had to bring it to Manila first. Therefore, all the plants involved in export are located in Luzon. SMPF has about 7 poultry slaughterhouses in Mindanao, where we have been consolidating some of the smaller plants.
SMPF began operations in Mindanao in 1996. Today in the ARMM we have a distribution facility in Cotabato, but no plant. We are looking to build a halal facility there for the first time. For this facility there is talk to ban the act of stunning animals for halal certification. To our knowledge, Brunei is the only country that has banned stunning.
Q: The Philippines has issues with intrusions on private land. What measures does SMF take in protecting agricultural assets, especially on Mindanao?
A: SMPF has never had a problem with security in any of our operations, but it is really a matter of choosing location. There are of course peaceful places in Mindanao and there are dangerous parts as well.