The Profitability of Beer Industry in the Philippines
Oligopoly refers to the market situation that would lie between pure competition and monopoly. It is characterized by small group of firms that control the market for a certain product or service. This gives these businesses huge influence over price and other aspects of the market.
This research focuses on the study about the two of the largest beer manufacturers in the Philippines ─San Miguel Brewery and Asia Brewery─ that participate in an oligopoly within the beer industry.
Beer is the most consumed alcoholic beverage in the Philippines and amounts for a 70% share of the domestic alcoholic drinks market in terms of volume. The beer business in the Philippines is seen to grow at an average of 3 percent per year within the next five years, reflecting a marked slowdown from 5.04 percent in the previous five. This translates to half a million hecto liters increase in volume sold from 16.5 million in 2010.
A study conducted by global beverage research firm Canadean Limited, used by San Miguel Brewery, Inc. in its recent bond offering showed in the past five years per capita sales of beer in the Philippines is 17 liters from 15 liters five years ago. That is why the Philippines became the third largest beer market in Southeast Asia, comprised of Vietnam, Thailand, the Philippines, Indonesia, Malaysia, and Singapore, and is the sixth largest beer market by sales volume in greater Asia.
Although beer is at the peak of its growth, there is still a bright outlook for the category as per capita consumption in the Philippines is still relatively low in comparison to other Asian countries. Players are anticipated to introduce new consumption occasions over the forecast period by participating in festivals across the country and organizing summer parties to further stimulate demand. Collaborating with on-trade establishments is also foreseen, offering promotions during happy hour to boost volume sales.
III. BACKGROUND OF THE STUDY
Determine how profitable companies such as San Miguel Brewery and Asia Brewery industries are.
Know how the oligopolistic competition of these companies affects price.
Identify who dominates the beer industry in the Philippines.
* Industry Background
Industry no. 1
San Miguel Brewery, Inc., a subsidiary of San Miguel Corporation, is the largest beer producer in the Philippines, with a market share of over 80% as of 2011.
The original San Miguel Brewery was founded in 1890 in Spain. Later renamed as San Miguel Corporation (SMC) in 1963, it has grown into one of the Philippines' largest business conglomerates with interests in alcoholic and non-alcoholic beverages, food, packaging, power, oil and telecommunications.
San Miguel is one of the largest in South East Asia. San Miguel owns many breweries including Anker in Indonesia and James Boag in Australia, as well making brandy and gin the also manufacture foods and Coca-Cola under license. Despite San Miguel's blue chip strength there still is plenty of room in the Philippine market for other brewers with Asia Breweries also being a top player in the Asian beer market and is possibly the Philippines second largest brewery. Output Description
San Miguel Brewery has five breweries spread across the country producing eight strong and popular beer brands: San Mig Light, Red Horse Beer, Cerveza Negra, Gold Eagle Beer, San Miguel Strong Ice, San Miguel Super Dry, San Miguel Premium All-Malt Beer and its flagship brand San Miguel Pale Pilsen.
Geographic Market and Strategic Behavior
The SMB distributes its products all over Luzon, Visayas and Mindanao. Also, the international beer operations also offer the Pale Pilsen and San Mig Light brands in the Hong Kong, China, Thailand, Vietnam and Indonesia markets and Red Horse in the Thailand...