$20 oil no longer a mirage as world confronts 12-year low

THE WORLD mostly ignored Ed Morse 11 months ago when the head of commodities research at Citigroup said oil could drop as low as $20.

Anheuser Busch InBev SA, which agreed to buy SABMiller PLC for $100 billion plus, has been seeking potential bidders for Grolsch and Peroni, sources close to the process told Reuters last month.

The two foreign firms are selling the popular beer brands to win clearance for the merger of Anheuser-Busch and SABMiller, according to reports.

“Yes, [we will] join [the] bid,” SMC President and Chief Operating Officer Ramon S. Ang said in a mobile phone message yesterday.

Shares in SMC — the parent firm of San Miguel Brewery, Inc. (SMB) — added P8 or 15.38% to close at P60 each on Wednesday.

San Miguel will go up against other foreign suitors, including Asian brewers Asahi Group Holdings Ltd. of Japan and Thai Beverage PCL of Thailand, for the beer brands, according to foreign media reports citing people familiar with the situation.

<b>“REACHED ITS PEAK”</b><br>A dominant force in the local beer market, SMC is moving to buy the well-known beer brands at a time when the country’s biggest brewer is seeking new sources of growth.

“San Miguel is on expansion mode and that makes sense because it has reached its peak domestically,” Astro C. del Castillo, managing director at First Grade Finance, Inc., said in a telephone interview.

SMB controls roughly 90% of the beer market, said Luis A. Limlingan, business development head at Regina Capital Development Corp, but noted that consumer preferences are changing.

“The domestic market is getting more sophisticated,” Mr. Limlingan said in a mobile phone message.

“We are seeing a change in preferences and the market is looking for other options.”

San Miguel’s plan to bid to buy “established” beer brands is “no longer surprising” since that will accelerate its expansion.

Mr. del Castillo said: “You now have companies like Emperador, Inc. of Andrew Tan buying foreign companies overseas. That was a bit surprising because mabilis (it was done in haste).”

“With San Miguel, this is not surprising since it has long been expanding globally,” he added.

SMB is adopting a multi-beverage strategy to capitalize on the faster growth pace of the non-alcoholic beverage segment that will add 30% to revenues in the next five years, Mr. Ang had said in May last year.

SMB is partnering with its key shareholder Kirin Holdings Co. Ltd. of Japan to introduce new non-alcoholic beverage products — including soft drinks — in the Philippines. It has acquired nearly P400 million worth of assets non-alcoholic beverage assets of sister firm Ginebra San Miguel, Inc.

SMB’s net profit grew by an annual 6% to P9.97 billion in the nine-months through September. Consolidated revenues rose 4% to P58.8 billion on higher domestic beer sales.

Led by Mr. Ang, the country’s largest food and beverage company started an aggressive diversification program in 2007 that saw the conglomerate make a series of acquisitions in attractive growth sectors such as infrastructure, fuel and oil, energy, telecommunications and banking.