The decision to increase prices was caused by the peso devaluation that has raised the company's costs. San Miguel imports an estimated $120 million in raw materials a year. San Miguel also raised beer prices last year, due to the imposition of higher taxes, but was forced to rollback four months later because of a 24% drop in volume.
The beer-based conglomerate has been reeling from the financial crisis that hit Asia last year, forcing it to cut costs. It is currently undertaking a corporate- wide 50% reduction in expenditures.
Further compounding San Miguel's problem is its declining market share in the Philippines given an already mature market and the growing threat of competition from foreign brands. At the end of 1996, San Miguel's share of the beer market had declined to 79% from a high of 90% in the late 1980s.
Copyright February 1998, Crain Communications Inc.