URC SEC / Annual Reports: 20040930 17-A | 2003 | 2002 | 2001 | 2000 | 1999 | 1998

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Universal Robina Corporation (URC) is one of the largest branded food product companies in the Philippines and has a growing presence in other Asian markets. It was founded in 1954 when Mr. John Gokongwei, Jr. established Universal Corn Products, a cornstarch manufacturing plant, in Pasig. The Company is currently involved in a wide range of food businesses, including the manufacture and distribution of branded consumer foods, production of hogs and day-old chicks, manufacture of animal and fish feeds, glucose and veterinary compounds, flour milling, and sugar milling and refining. The Company is the market leader in snack foods, candies, chocolates, biscuits, day-old chicks, and fish feeds.

The Company operates its food business through operating divisions and wholly or majority-owned subsidiaries that are organized into three core business segments: branded consumer foods, agro-industrial products and commodity food products.

Branded consumer foods (BCF), including our packaging division, is the Company’s largest segment contributing about 77.0% of revenues for the fiscal year ended September 30, 2003. Established in the 1960s, the Company’s branded consumer foods division manufactures and distributes a diverse mix of snacks, chocolates, candies, biscuits, beverages, noodles and pasta and tomato-based products. The manufacturing, distribution, sales and marketing activities are carried out through the Company’s branded consumer foods division, although the Company conducts some of its branded consumer foods operation through its wholly-owned or majority-owned subsidiaries and joint venture companies (e.g. Hunt-URC, Nissin-URC and Joyco-URC). The Company established URC-Packaging Division to engage in the manufacture of polypropylene films for packaging companies. The bi-axially oriented polypropylene plant (BOPP), located in Batangas, began commercial operation in June 1998. URC also formed Food Service and Industrial Division that supply BCF products in bulk to certain institutions like hotels, restaurants, and schools.

In 2000, the Company expanded its BCF business presence in Asian regional markets via investment in foreign subsidiaries in China: Tianjin Pacific Foods Co. Ltd., Shanghai Peggy Foods Co. Ltd., Xiamen-Tongan Pacific Foods Co. Ltd., Panyu Peggy Foods Co. Ltd. and URC Hongkong Co. Ltd. (formerly Hongkong Peggy Snack Foods Co. Ltd.); in Malaysia: URC Snack Foods (Malaysia) Sdn. Bhd. (formerly Pacific World Sdn. Bhd.) and Ricellent Sdn. Bhd.; in Thailand: URC (Thailand) Co. Ltd. (formerly Thai Peggy Foods Co. Ltd.); in Singapore: URC Foods (Singapore) Pte. Ltd. (formerly Pan Pacific Snacks Pte. Ltd.) and in 2002, in Indonesia: PT URC Indonesia. The Asian operations contributed about 19.3% of the Company’s revenues for the fiscal year ended September 30, 2003.

The Company has a strong brand portfolio created and supported through continuous product innovation, extensive marketing and experience management. Its brand is considered a household name in the Philippines and a growing number of consumers across Asia is purchasing the Company’s branded consumer food products. The Company’s agro-industrial products segment operates three divisions, which engage in hog and poultry farming (Robina Farms or “RF”), the manufacture and distribution of animal feeds, and glucose (Universal Corn Products or “UCP”), and the production and distribution of animal health products (Robichem). This segment contributed approximately 13.0% of the net sales in fiscal year 2003.

URC’s commodity food products segment engages in sugar milling and refining through its subsidiaries, Universal Robina Sugar Milling Corporation (URSUMCO), its division, Cagayan Robina Sugar Milling Corporation (CARSUMCO), and Southern Negros Development Corporation (SONEDCO), and flour milling through Continental Milling Company (CMC). In fiscal 2003, the segment contributed approximately 10.0% of aggregate net sales.

The Company is a core subsidiary of JG Summit Holdings, Inc. (JGSHI), one of the largest business conglomerates listed in the Philippine Stock Exchange. JGSHI has substantial interests in property development, hotel management, textiles, banking and financial services, telecommunications, petrochemicals, air transportation and power generation. In addition, JGSHI has significant interests in other sectors, including printing, and packaging.

Customers

None of the Company’s businesses is dependent upon a single customer or a few customers that a loss of any one of them would have a material adverse effect on the Company. The Company has no single customer that or based upon existing orders will account for 20.0% or more of the Company’s total sales.

Distribution, Sales and Marketing

The Company has developed an effective nationwide distribution chain and sales network that it believes provide its competitive advantage. URC sells its branded food products primarily to supermarkets, as well as directly to top wholesalers, large convenience stores and sub-distributors. The Company also developed the Grandslam Program, an innovative distribution scheme for downscale accounts, which enabled URC Philippines to solidify its presence in sari-sari stores and groceries, effectively locking out competitors in the consumer foods segment in the Philippines. URC’s branded consumer food products are distributed to approximately 33,000 outlets in the Philippines through its direct sales force, large-scale sub-distributors and independent business managers.

The branded consumer food products are generally sold by the Company either direct from delivery vans to small retail outlets or by traveling salesman to wholesalers or supermarkets, with delivery subsequently being undertaken by third party road carriers. Direct delivery sales are normally made on cash basis, while 15- to 30-day credit terms are extended to wholesalers and supermarkets.

The Company believes that its emphasis on marketing, product innovation and quality, and strong brand equity has played a key role in its success in achieving leading market shares in the different categories where it competes. The Company has dedicated substantial resources to advertising and promotion campaigns and market research. The Company allocates between 6.0% and 8.0% of branded consumer food sales for its advertising and promotion expenditures. The Company also conducts extensive research and development for existing and new products. In 1996, it completed a central research and development facility, manned by industry-renowned experts performing research on new product development, line extensions on existing products and improved production process and quality control.

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