San Miguel to close its Hong Kong brewery

Philippine San Miguel Corp. announced that it will close its brewery in Hong Kong in September due to high production and operating costs.

The brewery, which is a subsidiary of the San Miguel Corp., Manila, started out as a greenfield plant in 1996 in the Northern Territories when Hong Kong was still a Crown colony. Its capacity was about 1.5 million hl of beer. Alas, the brewery never reached its full capacity. Even when it was built, the heydays of San Miguel in Hong Kong had long been gone. After several marketing blunders the brand had lost its clout and had become one among many brands which vied for the consumer’s attention.

Since the Millennium, San Miguel Brewery Hong Kong Ltd. has seen its losses rise - from USD 4.3 million in 2003 to USD 9.1 million in 2006 despite relatively flat revenues.

The closure of the brewery, which employs several hundred people, will incur significant one-off restructuring costs.

Already last year San Miguel, probably the biggest food and drink maker in south-east Asia, was in the news over the suspected closure of one of its two breweries in southern China. Reports in the local media speculated that the axe would fall on the Guangzhou San Miguel Brewery in Guangdong province, which failed to make a profit in 2005. A second brewery owned by the firm in the same province - San Miguel (Guangdong) Brewery – was to remain open as it had shown healthy growth following a marketing boost for the Dragon Beer brand.

Little did the market observers expect that San Miguel would end production at its Hong Kong plant and so suddenly.

However, it may come as a consolation to San Miguel that it is not the only one – albeit the last one – to close a brewery in Hong Kong. In the late 1990s Carlsberg shut down its brewery and relocated production to its brewery in mainland china because the land it sat on had accrued a much higher value than the brewing operation.