Why is a brewer buying an airline?

San Miguel is famous for its beer and is the Philippines major brewer. As well as beer it is a major food and packaging company and has recently been diversifying its interests.

It has now announced that it is going to buy a 49% stake in Air Philippines and Philippine Airlines for $500m.

 

 

So why would a brewer buy an airline?

The official explanation is that San Miguel is diversifying its interests and with tourist numbers to the Philippines expected to double by 2016 it makes sense to invest in the national airline.

But is there something even smarter going on here?

Most executives focus on their competition but maybe the executives at San Miguel have spent their time thinking about what businesses are complementary to their core food and drinks business.

They already have a 95% share of the beer market in the Philippines so the only way to grow is to increase the number of people in the country. Populations don’t change very quickly so the only real option to get growth is to bring more people into the country as tourists.

With rapidly growing China on their doorstep there is the potential for growing the tourist numbers significantly, and when those tourists visit they will spend their money on food and drink.

If San Miguel want to get more tourists into the country to drink more beer and eat more food then it makes sense for them to make sure that the country has a strong national airline to transport the tourists.

I am sure that San Miguel will hope that the airline business makes them money in the long run, but even if it doesn’t it is complementary to their core food and drinks business and will help the grow that.

What businesses are complementary to yours? It may not be the ones you first think of.

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