China. San Miguel registers HK$16.9-m loss in Hong Kong operation

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San Miguel Brewery Hong Kong, a unit of conglomerate San Miguel Corp., registered a consolidated net loss of HK$16.9 million in 2015, a turnaround from a profit of HK$37 million in 2014, on lower volume due to the non-renewal of distribution agreements with Anheuser-Busch.

SMBHK said in a statement posted on its Web site the group’s consolidated revenues stood at HK$569.5 million, down 22 percent year-on-year.

“Overall sales volume of the company in the [Hong Kong] territory declined by 17 percent, mainly because of the slow demand in the on-premise sales channel partly due to lower tourist arrivals and the non-renewal of distribution agreements with Anheuser-Busch In Bev China Sales Company Limited and Anheuser-Busch InBev International GmbH & Co KG in 2014, as disclosed in a profit warning announcement last 25 January 2016,” SMBHK said.

Also contributing to the net loss were operating costs associated with the sales and marketing operations of the affected products, which were redirected and reinvested in the development of new, premium, specialty and craft brands.

The company said it signed up and develop a new stable of premium, specialty and craft brands in line with the company’s key business strategy of sustaining a broad and diversified portfolio of brands.

SMBHK earlier signed an agreement with Mahou S.A. as the exclusive distributor of Mahou Cinco Estrellas. It also started selling Angry Orchard Cider, Mac’s Great White, Samuel Adams Rebel IPA, Spitfire Kentish Ale, Whitstable Bay Blonde and Whitstable Pale Ale.

Kirin beer brands, which the company distributes exclusively within the territory, also continued to perform strongly, registering a 32-percent volume improvement over the previous year’s level.

SMBHK’s South China operations, meanwhile, posted double-digit improvement in consolidated sales volume over the previous year, with sales revenues up slightly.

Despite these improvements, South China operations registered operating losses compared with the previous year due to one-off gains in 2014.

SMBHK said it expects Hong Kong and South China operations in 2016 to significantly turn around by investing in the San Miguel brand and actively participating in the premium, specialty and craft beer segment to regain volume loss and market share.

“We will expand the wholesaler channel and make it a key component of the company’s going-to-market strategy in order to achieve broader distribution, higher volume and to generate distribution cost savings,” SMBHK said.

The company said it would strengthen the brand equity of San Miguel and Dragon brands and seek new areas of growth in the exports business.