The Big Dogs of Philippine Agribusiness

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In a prior article on agribusiness, I wrote that Philippine agribusiness as an industry is “dead in the water” because small farms are inefficient and the cooperative form of business management is very weak. Cooperatives lack the clear accountability and profit incentive that corporations thrive on.

The article did not consider the major “name” players in the marketplace: Del Monte and Dole, for instance. We learned from contributor Cha that San Miguel (a Cojuanco/Ang company) and First Pacific Co. Ltd (Pangilinan ) are ramping up to compete for palm oil production.

First Pacific is exploring farm opportunities through Indofood Agri Resources out of Indonesia. San Miguel is partnering with Kuok Group out of Malaysia. Kuok owns the largest palm-trading company in the world. San Miguel is focused on 19,000 hectares of stripped land in Davao del Norte. That is a huge project comparable to Del Monte’s main pineapple acreage at about 20,000 hectares.

These are global competitors and companies like Dole, Nestle and First Pacific are predominantly based outside the Philippines. The Philippines simply provides the growing fields.

We have other large SPONSORS of growers as well. Where do snacks companies get their products? Where does Greenwich Pizza get its peppers and onions? Where does Jollibee get its chicken? Where does Century get its tuna? The ranch and farm plantations supporting these large chains are undoubtedly huge, and operate behind the scenes.

There are large businesses seeking to organize cooperatives and growers in such a way as to form healthy pipelines of products. AsiaPro (cooperative) and Agrinurture (packager) are leaders in working with growers.

Finally, we have the large landowners, like Hacienda Luisitas, that managed to get through the CARP division of farmlands with their land pretty much whole. This is a tough group to identify because they are private. But somebody is putting plants in the ground.

Here is a good, quick one-page overview of troubled Philippine land reforms. From the same paper, here’s a study of why the coconut industry went south. The report these pages were taken from is getting somewhat outdated, having been written in 1991 by Ronald E. Dolan, but may be of interest to readers for the detailed and straightforward look at many aspects of Philippine history. For sure, we can discover that agriculture has been in considerable turmoil. Here is the Table of Contents for the entire paper.

This discussion will break large-scale Philippine agribusiness players into the following categories:

  • Large predominantly Filipino-owned food growers and packagers.
  • Large predominantly foreign-owned food growers and packagers.
  • Large, integrated cooperatives,
  • Large food packagers,restaurants and supermarkets.
  • Large landowners.
  • Large tycoons who COULD get into foods if they wanted to, but currently don’t plow in that field.

A listing of food companies with a place on the Philippine Stock Exchange is also provided, along with a recap that designates the handful of prominent people who keep their companies rich and farmers poor.

I would offer up the caveat that the information pulled together is anecdotal and perhaps not complete. There is no master-list of food companies or land-holders in the Philippines. Indeed, some information is hard to get at. For example, private companies such as Dole Philippines, a wholly owned subsidiary of Dole Foods in the United States, reports no financial information. So consider this blog a starting point, perhaps, or simply a discussion paper. We can draw lessons from it, for sure. And we will.

Large Filipino-owned food growers and packagers

These companies are huge players the Philippine food production and packaging business:

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Young sugar cane

  • Lucio Tan Companies. Lucio Tan is a Chinese entrepreneur who made it big time in the Philippines. He directs a lot of businesses and many of them grow or get stuff from the ground, from the farms. Here are his food-related companies: (1) Foremost Farms Inc (hogs), (2) Lotte Philippines (confectionaries), (3) Asia Brewery, Inc. (beer), (4) Tanduay Distillers, Inc. (alcoholic beverages), and (5) Fortune Tobacco Corporation (cigarettes).
  • San Miguel Companies. San Miguel, under the direction of Eduardo M. Cojuanco and Ramon S. Ang, is undergoing a dramatic transformation from essentially a beer and foods company to a conglomerate in infrastructure development, power, foods and beer. Food subsidiaries and partnerships are major brands and operate primarily in the Philippines: Pure Foods Products, Monterey Meats, and Magnolia Chicken.  Hormel  is a “partner” . . . all with products sourced from Philippine growers and farmers. Beer is made of grains, so San Miguel sources theirs from somewhere. Where is a bit of a mystery. But there may be a reason the company’s infrastructure development includes ports and graineries near ports. San Miguel owned a large chunk of Del Monte from 2008 to 2010, then sold it to finance diversification. One element of the diversification is into palm oils, where partner Kuok is looking for a large growing field.
  • NutriAsia CompaniesThe quiet tycoon who owns most of NutriAsia is  Joselito Campos. It is perhaps simplest to divide his huge holdings into two parts: (1) sauces (Datu Puti, Papa and many more), and (2) Del Monte Philippines. The Del Monte stake was raised when NutriAsia bought out San Miguel’s portion of Del Monte a few years ago; Del Monte employs about 4,000 workers. About 70% of the Del Monte’s assets are in the Philippines. Net income in 2012 was US $460 million. About 21% of Del Monte’s stock is traded on the Pacific Stock Exchange.
  • Gokongwei Holdings. See food packaging companies, below (Universal Robina and Robinson’s Supermarkets).

One of JoeAm’s points in favor of large agribusiness is the efficiency of wealth-building. This 2012 article itemizes some San Miguel Pure Foods initiatives to pare costs. This is an example of the drive for wealth that the Philippines needs.

Who is growing all the foods? We don’t have names for the growers. Growing is done primarily under contract, privately, and there are thousands of suppliers. Here is the San Miguel’s Magnolia Chicken contract growing application. And the Monterey Meats hog contract growing application. Presumably something similar exists for grains and other crops, however, those examples have avoided your trepid inquirer.

Large foreign-owned food growers and packagers

We have three of note:

  • Dole Philippines. US based Dole Food Company “Dole sources bananas, fresh pineapples, asparagus, mangoes, papaya and other fruits and vegetables from the Philippines . . . ” and other Asian countries. The Dole farming subsidiary in Davao is named “Stanfilco”. Dole has stood for years as a poster-child for bad corporate behavior among leftists and human rights critics. The parent company’s sales were US $7 billion in 2011; net income was only US $ 42 million, off of a loss in 2010. The company has received a purchase offer from  David H. Murdoch, who already owns substantial shares. Financial information about the Philippine operation is unknown at this point. It appears that the company employs from 15,000 to 20,000 permanent and temporary workers.
  • Nestle Philippines, Inc. Wholly owned subsidiary of Nestle S.A.  Brands include Nescafe, Nido, Milo, Nestea, Maggi, Bear Brand, Nestle and Purina. Manufacturing facilities in Cabuyao (Laguna), Cagayan de Oro, Lipa (Batangas), Pulilan (Bulacan) and Tanauan (Batangas). Markets throughout Asia.
  • First Pacific CompanyThe ownership of First Pacific is well known in the Philippines. The Manuel V. Pangilinan Companies are everywhere (telephone companies [Pacific Long Distance Telephone Company- PLDT, Sun, Smart], educational institutions, real estate and infrastructure development and mining). Hong Kong based First Pacific holds his investments in PLDT, Philex mining, Metro Pacific (infrastructure projects), and Indofoods. Indofoods is the farming company growing predominantly in Indonesia. It is likely to become a main player in the Philippines growing and exporting palm products. Therefore, it is akin to Dole, an outside company that will probably thrive on the rich Philippine soil. Sales of First Pacific in 2012 were just shy of US $6 billion. Net income was US $830 million.

Large, integrated cooperatives

JoeAm’s prior recommendation mentioned that one approach to building strength in Philippine agribusiness would be to get cooperatives under private, profit-making management. One cooperative comes close to this model:

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Contract growing

  • AsiaPro Cooperative  is the largest Philippine cooperative with membership of about 34,000 workers. The focus is on raising member efficiencies and profits through skill-enhancement and support. Operational structure is molded from “the best practices” of both corporate and cooperative models.
  • The Philippine Sugar Millers Association, Inc. “PSMA is a non-profit association of sugar millers which promotes “the development of the sugar industry through increased efficiency, productivity, and sustainability in a socially-responsible environment. Current membership consists of 16 mills which produce 78% of the total Philippine sugar production.”

Food packagers, restaurants and supermarkets

These are companies that deal foods to consumers. They have tremendous clout in the Philippine marketplace because they buy in huge quantities. They have choices: buy Filipino products or buy U.S., Asian or other imported products.

The two Gokongwei family holdings could be joined, I suppose, with Gokongwei placed in the major Philippine player listing above.

  • Agrinurture Incorporated Food packaging with an activist agenda, in that Agrinurture helps farmers succeed by providing loans, seeds, fertilizers and pesticides as a part of the contract purchase agreement.
  • Universal Robina Corporation Food packaging. Part of the huge investment portfolio of John Gokongwei, Jr, which includes real estate, cellular and airlines (Cebu Pacific).
  • Jollibee Foods Corporation. Fast-food restaurant chain with 750 stores in the Philippines. Filipinos eating really, really fast and fat. 2012 sales 71 billion pesos; net income 3.7 billion pesos.
  • Robinsons Supermarkets  Part of the Gokongwei family holdings. 72 outlets as of 2013.
  • SM Supermarkets Part of U.S. based Supervalue, Inc. 38 SM supermarkets and 82 Savemore grocery outlets in 2013.

Here’s a description of why Agrinurture’s approach is constructive:

  • “With improved rural infrastructures, these distribution companies [like Agrinuture] are willing to take the risks inherent to farming, thus helping to improve the incomes of farmers and farm workers. The same guarantee is also being given by large corporations like San Miguel Corporation and Nestle in the purchase of such farm products as corn, cassava, and coffee.”

Large landowners

This is the big mystery that emerges from this analysis. The huge agribusiness firms do very little of the primary growing. They rely upon product supplied by independent growers, or growers under contract. Who the landowners are remains largely unknown, other than that one peculiar and controversial case:

  • Hacienda Luisita6,435-hectare sugar plantation estate. Controversial for its ties to the Aquino family and President Cory Aquino’s part in land distribution to workers. Controversial as well for the 12 deaths that occurred in a confrontation between protesting workers and security police in 2004.

I suppose it is telling that the landowners, now mainly small-scale operators after divisions of farms impelled by Marcos and C. Aquino administrations, remain nameless.

Large tycoons who COULD get into foods if they wanted to

Here are the richest players in Philippines right now who have no food or farming interests.

  • Ayala Corporations: retail, real estate, banking, telecommunications, water infrastructure, renewable energy, electronics, information technology, process outsourcing.
  • Henry Sy: retailing, real estate, hospitality, banking, mining, education including healthcare services.
  • Enrique Razon: shipping, gaming, publishing.
  • David Consunji: RE, mining.

Food Processing firms traded on the Philippine Stock Exchange

Recap of the Main Players

These are the men who keep their companies, and families, rich whilst Philippine farmers toil under the midday sun for peanuts. No, not the food.

  • Lucio Tan
  • Eduardo M. Cojuanco
  • Ramon S. Ang
  • Joselito Campos
  • John Gokongwei, Jr
  • Manuel V. Pangilinan (pending)

Here are the dominant foreign companies who suck profits out of the Philippines, and enjoy the fruits of the peanut pickers.

  • Dole Food Company
  • Nestle N.A.

Now I have not turned socialist, just cynical. These men and companies do many good things for the Philippines. But they are into profits, not compassion.

The gap between the poor and the profitable is huge in the Philippine, and I would argue that these men have failed by not figuring out how to bridge that gap. The gap exists. They exist. They are failures in the sense that they have great power but have not made much progress to cure the main ailment in the Philippines.

And I would argue that the leftists are just as failed, indeed completely bankrupt, offering up destruction or failed social models as solutions. They chase money out of the Philippines. They don’t bring it it.

The Take Away

The third and final agribusiness article I’ll write will explore this income gap further. Let me suffice it to say for now that agribusiness in the Philippines suffers from the following flaws:

  • The Philippine growing model is weak. Laws keep land holdings small and many farms fail. Inefficiency is built into the model. Expertise (e.g., finance, nutrition, marketing) is locked out.
  • The Philippine business model is weak. Cooperatives lack strong management and clear accountability. They are ripe for abuse.
  • The laid-back Philippine work ethic does not innovate or solve problems. People work laboriously. But not always productively.
  • A system of entitlement keeps profit, and the profit motivation, out of the farms to stay with the processors and packagers.
  • A few dominant companies run by a few dominant families rule Philippine agribusiness. They have not bridged the gap between poor farm workers and rich businessmen.

That’s it for now. Catch next week’s wrap-up when we see if we can get two and two to add up right.

Eat well, m’lads and ladies.

Comments
22 Responses to “The Big Dogs of Philippine Agribusiness”
  1. edgar lores says:

    1. Wonderful research.

    2. I note a marked absence of government input in any form – incentives, subsidies, technology, etc. – except perhaps in the form of restrictions.

    2.1 Perhaps the most galling example of governmental abuse in this area was the sequestration of the coconut levy fund by Danding Cojuangco to purchase share holdings in the San Miguel Corp. The reverberations of this abuse are still ringing and will be heard for some time.

    3. As pointed out, a great weakness of the model is the failure to address the gap between businessmen, growers, providers, and consumers.

    3.1. There is little in the scheme of profit-sharing, although some large companies do have social responsibility and outreach programs.

    3.2. It is reported that Kris Aquino has paid more in taxes than any of the named businessmen. There is a logical explanation for this as the ranking is based on individual rather than business income, but Lucio Tan in particular has been tainted with tax evasion cases.

    4. There is something so ironic about the success of the Tan businesses and San Miguel. Their successes originally stem from producing products – beer, alcohol and tobacco – that are the subject of the Sin Tax Law. There’s nothing like a beer before sex and a smoke afterwards. But the damned Catholic influence will have you pay for the beginning and the end, and prevent you from enjoying the middle unless for the specific and pre-specified purpose.

    • Joe America says:

      4. 🙂

      You bring up a good point regarding matters of skulduggery among the oligarchs, of Cojuanco and Tan. I’ve just looking at it from the straight business standpoint: unimited size at the wealthy end and restricted size at the lower end, and we wonder why the income gap is so gigantic.

      That said, some of the big boys are working with their contract providers to give them some direction and assistance, so there is some “social” effort as you point out. But nothing innovative like the profit sharing you point out. Or incentives, that I’m aware of.

      The government budget mainly does fund restrictions rather than uplift. And it is a small budget not even keeping pace with GDP growth.

    • Joe America says:

      re 1., thanks. I actually did a little work for a change. . .

  2. Mariano Renato Pacifico says:

    We have food crises !!!! “The country is the 8th largest rice producer in the world, accounting for 2.8% of global rice production. However, the country is also the world’s largest rice importer in 2010. ” – WIKIPEDIA

    Philippines cannot even feed the entire left-over population. Thankfully, 12% of the workforce or population(?) are OFWing so they can eat rice abroad!

    Philippines lost its sugar and coconut industry. It also lost its prawn industry. As simple as garlic are smuggled in. Fishing industries has strong competition from unbridled Chinese poachers.

    These agri-industries are now replaced with producing more Filipinos for export abroad as rice-eating slaves. Philippines still have 28,200,000 reserve export-quality Filipinos waiting to age into the labor force. Of course, while they age in to become exportable commodity Philippines will still have to import rice to make them fit for OFWing.

    • Mariano Renato Pacifico says:

      All of the food processing firms traded in Philippine stock exchange are run by non-Filipinos by looks and ethnicity. They are Chinese and former colonizers while real tradiitonal-looking Filipinos are toiling under the sun. It appears, by fate and programmed by God, that Filipinos are born to be raised as natural slaves.

      • edgar lores says:

        I have often wondered why Filipinos do not have ‘vision’. Is it in our DNA? If it is, then does it explain the following:

        – The Chinese and Jewish acumen for business
        – The German trait for engineering excellence
        – The Russian and Italian penchant for organized crime
        – The black men’s ability in sport – basketball and boxing
        – Why white men can’t jump

        The standard answer is ‘culture’, but it really makes you wonder…

        • Joe America says:

          I’d guess it is culture in the way that education is structured, to bow to authority. I don’t get it, myself, the insistence within education to equate memorization with learning. I am confident that, given enough of the correct exercises, Filipinos could imagine and problem-solve with the best of the best. It is rather like dribbling a basketball. Do enough of it, and you get pretty good at it.

          That’s another thing, the basketball players hereabouts can dribble the socks off a ball. . . . but they can’t shoot a bank shot for sh*t. John Wooden would go nuts here. Showboat didn’t cut it with him.

          • Mariano Renato Pacifico says:

            Education by Memory! Here is proof. The Filipinos can memorize verbatim biblical passages but cannot know how to apply it. They throw me “truth sets you free” but they are natural liars. “it is easier for a poor man to pass thru the eye of the needle” but wanted to get rich. “if someone throws a stone at you, retaliate with a piece of bread” not in the Philippines, they are totally dead.

        • The Mouse says:

          Filipinos: Mimicing people in singing.

          LOL

        • Attila says:

          My wife said that Filipinos have stronger sex drives than others and that is why the population is growing out of control. Silly comment but It may have some truth to it?

          • Joe America says:

            I relate it to the fact that there is still not a lot of electricity here, or that it is expensive. It gets dark, there is only one thing to do. Go to bed, sleepy or not.

    • Mariano Renato Pacifico says:

      Rice research at U.P. Los Banos never produced miracle rice for PHilippines but those foreigners, especially Thais, Cambodians and Japanese, get it. They produce more rice than Philippines.

      Philippine Military Academy graduates has never perfected coup-de-t’ats. They were all failures. But Thais that went to P.M.A. has had series of successful coup-de-t’ats.

    • Joe America says:

      Maybe the universities hereabouts ought to develop courses along the lines of : “How to breed, nurture, grow and market OFW’s for profit”.

      A new agribusiness line.

      Maybe San Miguel will set up a subsidiary, toss it off as an IPO, and we can all own shares.

  3. JosephIvo says:

    Agriculture here is flat, if I compare with my country there all is layered / specialized, e.g. for different crops you have specialized seed optimization firms, seed production firms, germination firms , growing farmers , auction houses, wholesales, distribution. All having their specialized suppliers of machinery, packaging, chemicals… all their own branch associations, marketing and sales organizations, lobbyists, links to the academe… with specialized banks for financing, insuring… Same for livestock. A free marked dominated by agro-banks.

    Here only the few very big have some of it, often specializing in one mono-culture, extracting on the supply side where nothing is organized, extracting at the marked side where they have monopolistic powers, let’s keep it the way it is. The gap between them and the average former has to stay enormous so nobody will try to challenge their monopolistic powers.

    • Joe America says:

      Yep, dead in the water flat. It is so incredible that the structure is such that the little guy goes broke and the big guys thrive. But I blame the leftists for a lot of that.

  4. Pamela T. Henares says:

    Very well researched and written, thank you. For me, the crux of this all is that the little man, the one who is “walang-wala” suffers the most. Not that he is blameless but his lot could be improved if he was given more regard and government puts its money where its mouth is. Government has so many grand programs (on paper) but nowhere will you find that after ‘training” and “lakbay aral” is there support (especially financial) for projects/businesses that will allow the little man earn well for himself and his family. If ever there is financing available, beaurucracy, paper works and super high interest rates make this unavaiiable for the small man.

    • Joe America says:

      The agricultural cycle is get loan, plant, grow, harvest, sell, profit, pay loan. I worked for a bank that did agricultural loans in the U.S. It is hard for the bank to make money because so many things go wrong in the plant, grow, harvest, sell part of the cycle. Some borrowers can’t pay the loan back. If a lender lends P100,000, and earns 20% annually on a crop planted 2 times a year, and one borrower goes bad, it takes 10 more loans for the banker to make up his loss. So all the paperwork involves crop insurance or other measures to make sure the money gets paid back. The smaller the farm, the more things can go wrong because of lack of skill and fall-back reserves, and the heavier the paperwork burden is, compared to profit made.

      It’s a problem everywhich way.

      • meryrose says:

        I leave it all to foreign people what is my country all about, one thing is enough i am a Filipino no matter what my country’s deficiencies its no place like what you can call yours, advance countries enjoy what you think we are i hope it provides you great fulfillment in your lives. thank you for the man who make efforts to this research its true that our country men are not driving our economy as much as those people mentioned ,well that’s the sad part.

  5. paul says:

    sir what do you mean by
    The Philippine growing model is weak. Laws keep land holdings small and many farms fail. Inefficiency is built into the model. Expertise (e.g., finance, nutrition, marketing) is locked out?

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