Bernardo M. Villegas
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Instant Globalization

          As an independent director in the board of Alaska Milk Corporation (AMC), the largest milk company in the Philippines, I have been advocating for some time now that the company follow the example of such Philippine-based corporations like United Laboratories, San Miguel Corporation, Jollibee, and Liwayway Manufacturing (Oishi brand) in "going global."  As readers of this column are well aware of, I have been especially singling out the VIP (Vietnam, Indonesia and the Philippines) as constituting a vast consumer market approximating 500 million people that can hold its own against China and India as attractive investment sites for consumer-oriented enterprises from all over the world.  My advice was to globalize step by step:  first the VIP, then the other ASEAN countries, then the rest of Asia Pacific.  I was confident that sooner than later, my advice would be heeded, especially because the CEO of Alaska, Mr. Wilfred Steven Uytengsu, is one of the most globally minded executives in the Philippine business environment.  He is of Filipino-Chinese-American descent.  He spent his undergraduate years in the United States.  Mr. Uytengsu got his BS in Business (Entrepreneurship Program) from the University of Southern California.  Then he worked for a number years in finance in the U.S.  He has been one of the most active members of the Young Presidents Organization (YPO) and the World Presidents Organization (WPO).  There are very few places in the world he has not traveled to.  But most of all, in my interacting with him for close to a decade in the (AMC) board,  I have been impressed with  his sharp strategic insights into the global and regional environments in which his company operates.

          Little did I suspect that in one fell swoop, Alaska Milk Corporation would be globalized and would be part of a multinational enterprise that is already present in Thailand, Indonesia, Malaysia, China, Vietnam, India, Hong Kong and Singapore.  This "instant globalization" occurred when Royal Friesland Campina (RFC) recently increased its stake in Alaska from about 8.1% to 68.9% via a purchase of the shares held and controlled by the Uytengsu family, the founders and controlling shareholders of AMC.  In compliance with regulatory requirements, RFC will launch a tender offer for the remaining outstanding publicly traded shares.  With this merger and acquisition (M&A) move, AMC now becomes part of the leading dairy company in the Netherlands with sales of almost nine billion euros and with 19,000 employees operating in 25 countries.  I couldn't have imagined a faster way to globalize.  But that's the style of Fred Uytengsu:  strategic, focused, decisive, driven.  He gets part of his energy from being an outstanding triathlon athlete in the Philippines.  I am glad that he will be leading AMC for many more years to come.

          Under Fred's stewardship, ably guided by his late father Wilfred Uytengsu, Sr., AMC became the largest milk enterprise in the Philippines, competing head to head with   one of the largest food and beverage corporations in the world, Nestle.  One of AMC's signal accomplishments was actually to buy out some of the leading brands of Nestle. During the years I have been in the board, I have seen Fred, following the tradition of his father, lead a very able management team to achieve a strong growth for the company, consistent brand leadership in the liquid canned milk category and a strong and growing position in powdered milk.  It has also recently expanded into higher value-added milk products particularly in the Ready-to-Drink milk category.  The company employs over one thousand people and operates a manufacturing facility in San Pedro, Laguna.  As a tangible proof of the public's confidence in the management of AMC over the years, AMC's stock price increased by 53% compounded annually compared to the PSE index' 33% annual growth over the three-year period ending 2011.  The company's cash dividend yield averaged 5.4% during the same period.  In fact, Guy Speir, who founded and runs Aquamarine Fund in the U.S., wrote this testimonial:  "The Uytengsu family and specifically Fred Uytengsu have been phenomenal stewards of Alaska Milk for all of the company's stakeholders.  It has also been a spectacular deal for the outside investors.  In the case of Aquamarine Fund, under Fred's leadership, our return has been more than 5x.  Fred and the Uytengsu family are a credit to the Philippines."

          The international business community has taken note of this investment of a Dutch global company in AMC.  In an article that appeared in FinanceAsia (March 12, 2012), Lara Woznak wrote:  Much of the M&A activity we have seen so far this year has been Chinese and Japanese companies doing outbound acquisitions, but this $400 million deal, which is the biggest M&A transaction in the Philippines so far this year, represents a European company looking at Asia's potential--after having tested the water earlier by buying a smaller stake....From FrieslandCampina's perspective, it's a good deal--with this acquisition FrieslandCampina adds a young and increasingly affluent market of approximately 100 million consumers to its existing consumer base.  And it will strengthen FrieslandCampina's position in Asia, which is a strategic growth area for the dairy multinational...The company's consumer products international division also produces and sells dairy products in the Middle East and Africa (in particular in Nigeria and surrounding countries), and its annual global revenues will increase from approximately 2.5 billion euros to nearly 2.7 billion euros."

          FinanceAsia sees also great advantages for Alaska Milk: "...the deal enables the founding family to monetise its investment while at the same time makes the company a global player.  The deal will create the largest local dairy company in the Philippines (in terms of combined market share, according to Data monitor).  Nestle will have the second largest market share and San Miguel the third.  Observers add that the transaction will introduce new R&D and technology to the local system and will improve food safety and security of the milk processing.  Plus, the company will introduce value-added dairy products such as cheese and ice cream."  This assessment of FinanceAsia, widely read by foreign investors from all over the world, will go a long way in intensifying the new-found interest of multinational corporations in the Philippines, which up to recently has not be on the radar screen of foreign investors.  The timing of the Dutch investment in Alaska could have not been better.  The Philippine economy has reached the tipping point towards faster growth of 7% or more in its GDP in the next ten to twenty years.  The year 2012 is also a time for many European consumer-oriented products to take a closer look at the Asian emerging markets as Europe faces a long road to recovery because of the ongoing financial crisis affecting such countries as Greece, Spain, Italy, Portugal, Ireland and other European countries that used to offer lucrative consumer markets for investors.  FriedlandCampina will show the way to the Philippines to many of its fellow European enterprises.

          It is a win-win situation.  For Alaska, the partnership makes possible a host of opportunities in its operations.  FriedlandCampina brings with it a portfolio of dairy products ranging from raw material ingredients to valued added dairy products such as infant formula, cheese, butter, yoghurts, among others.  It will make possible the vision I always had of  Alaska:  to  distribute its products outside the Philippines, starting with the eight countries in which RFC already operates, with possible expansion into such virgin territories as Myanmar, Cambodia, Laos,  Sri Lanka and other Asia Pacific countries.  The CEO of Alaska actually confirms this favorable impact of the purchase:  "We expect this historical agreement to propel Alaska Milk to its next stage of growth and the products developed by FrieslandCampina will strengthen our position in all dairy categories.  The intended integration will provide Alaska Milk with access to an international dairy company.  It is a testament to our aspiration to bring our business and products regionally.