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The Billionaire Series: John Gokongwei Jr.

The Billionaire Series: John Gokongwei Jr.

Here is John Gokongwei Jr.’s speech during the 20th Ad Congress last 21st November 2007.

Before I begin, I want to say please bear with me, an 81-year-old man who just flew in from San Francisco 36 hours ago and is still suffering from jet lag. However, I hope I will be able to say what you want to hear…

Ladies and gentlemen, good evening. Thank you very much for having me here tonight to open the Ad Congress. I know how important this event is for our marketing and advertising colleagues. My people get very excited and go into a panic, every other year, at this time.

I would like to talk about my life, entrepreneurship, and globalization. I would like to talk about how we can become a great nation.

You may wonder how one is connected to the other, but I promise that, as there is truth in advertising, the connection will come.

I was born to a rich Chinese-Filipino family. I spent my childhood in Cebu where my father owned a chain of movie houses, including the first air-conditioned one outside Manila. I was the eldest of six children and lived in a big house in Cebu ‘s ForbesPark. A chauffeur drove me to school everyday as I went to San Carlos University, then and still one of the country’s top schools. I topped my classes and had many friends. I would bring them to watch movies for free at my father’s movie houses. When I was 13, my father died suddenly of complications due to typhoid. Everything I enjoyed vanished instantly. My father’s empire was built on credit. When he died, we lost everything-our big house, our cars, our business-to the banks. I felt angry at the world for taking away my father, and for taking away all that I enjoyed before. When the free movies disappeared, I also lost half my friends.

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On the day I had to walk two miles to school for the very first time, I cried to my mother, a widow at 32. But she said: “You should feel lucky. Some people have no shoes to walk to school. What can you do? Your father died with 10 centavos in his pocket.” So, what can I do? I worked.

My mother sent my siblings to China where living standards were lower. She and I stayed in Cebu to work, and we sent them money regularly. My mother sold her jewelry. When that ran out, we sold roasted peanuts in the backyard of our much-smaller home. When that wasn’t enough, I opened a small stall in a palengke (market). I chose one among several palengkes a few miles outside the city because there were fewer goods available for the people there. I woke up at five o’clock every morning for the long bicycle ride to the palengke with my basket of goods. There, I set up a table about three feet by two feet in size. I laid out my goods-soap, candles, and thread-and kept selling until everything was bought. Why these goods? Because these were hard times and this was a poor village, so people wanted and needed the basics: soap to keep them clean, candles to light the night, and thread to sew their clothes. I was surrounded by other vendors, all of them much older. Many of them could be my grandparents. And they knew the ways of the palengke far more than a boy of 15, especially one who had never worked before. But being young had its advantages. I did not tire as easily, and I moved more quickly. I was also more aggressive.

After each day, I would make about 20 pesos in profit! There was enough to feed my siblings and still enough to pour back into the business. The pesos I made in the palengke were the pesos that went into building the business I have today. After this experience, I told myself, “If I can compete with people so much older than me, if I can support my whole family at 15, I can do anything!” Looking back, I wonder, what would have happened if my father had not left my family with nothing? Would I have become the man I am? Who knows? The important thing to know is that life will always deal us a few bad cards. But we have to play those cards the best we can. And WE can play to win! This was one lesson I picked up when I was a teenager. It has been my guiding principle ever since. And I have had 66 years to practice self-determination. When I wanted something, the best person to depend on was myself. And so I continued to work.

In 1943, I expanded and began trading goods between Cebu and Manila. From Cebu, I would transport tires on a small boat called a “batel”. After traveling for five days to Lucena, I would load them into a truck for the six-hour trip to Manila. I would end up sitting on top of my goods so they would not be stolen! In Manila, I would then purchase other goods from the earnings I made from the tires, to sell in Cebu. Then, when World War II ended, I saw the opportunity for trading goods in post-war Philippines. I was 20 years old. With my brother Henry, I put up Amasia Trading, which imported onions, flour, used clothing, old newspapers and magazines, and fruits from the United States.

In 1948, my mother and I got my siblings back from China. I also converted a two-story building in Cebu to serve as our home, office, and warehouse all at the same time. The whole family began helping out with the business.

In 1957, at age 31, I spotted an opportunity in corn-starch manufacturing. But I was going to compete with Ludo and Luym, the richest group in Cebu and the biggest cornstarch manufacturers. I borrowed money to finance the project. The first bank I approached made me wait for two hours, only to refuse my loan. The second one, China Bank, approved a P500,000-peso clean loan for me. Years later, the banker who extended that loan, Dr. Albino Sycip said that he saw something special in me. Today, I still wonder what that was, but I still thank Dr. Sycip to this day. Upon launching our first product, Panda corn starch, a price war ensued. After the smoke cleared, Universal Corn Products was still left standing. It is the foundation upon which JG Summit Holdings now stands. Interestingly, the price war also forced the closure of a third cornstarch company, and one of their chemists was Lucio Tan, who always kids me that I caused him to lose his job. I always reply that if it were not for me, he will not be one of the richest men in the Philippines today. When my business grew, and it was time for me to bring in more people- my family, the professionals, the consultants, more employees- I knew that I had to be there to teach them what I knew. When dad died at age 34, he did not leave a succession plan. From that, I learned that one must teach people to take over a business at any time. The values of hard work that I learned from my father, I taught to my children.

They started doing jobs here and there even when they were still in high school. Six years ago, I announced my retirement and handed the reins to my youngest brother James and only son Lance. But my children tease me because I still go to the office every day and make myself useful. I just hired my first Executive Assistant and moved into a bigger and nicer office. Building a business to the size of JG Summit was not easy. Many challenges were thrown my way. I could have walked away from them, keeping the business small, but safe. Instead, I chose to fight. But this did not mean I won each time.

By 1976, at age 50, we had built significant businesses in food products anchored by a branded coffee called Blend 45, and agro- industrial products under the Robina Farms brand. That year, I faced one of my biggest challenges, and lost. And my loss was highly publicized, too. But I still believe that this was one of my defining moments. In that decade, not many business opportunities were available due to the political and economic environment. Many Filipinos were already sending their money out of the country. As a Filipino, I felt that our money must be invested here. I decided to purchase shares in San Miguel, then one of the Philippines’ biggest corporations. By 1976, I had acquired enough shares to sit on its board. The media called me an upstart. “Who is Gokongwei and why is he doing all those terrible things to San Miguel?” ran one headline of the day. In another article, I was described as a pygmy going up against the powers-that- be. The San Miguel board of directors itself even aid for an ad in all the country’s top newspapers telling the public why I should not be on the board. On the day of reckoning, shareholders quickly filled up the auditorium to witness the battle. My brother James and I had prepared for many hours for this debate. We were nervous and excited at the same time. In the end, I did not get the board seat because of the Supreme Court Ruling. But I was able to prove to others-and to myself-that I was willing to put up a fight. I succeeded because I overcame my fear, and tried. I believe this battle helped define who I am today. In a twist to this story, I was invited to sit on the board of Anscor and San Miguel Hong Kong 5 years later. Lose some, win some. Since then, I’ve become known as a serious player in the business world, but the challenges haven’t stopped coming. Let me tell you about the three most recent challenges. In all three, conventional wisdom bet against us. See, we set up businesses against market Goliaths in very high-capital industries: airline, telecoms, and beverage.

Challenge No. 1: In 1996, we decided to start an airline. At the time, the dominant airline in the country was PAL, and if you wanted to travel cheaply, you did not fly. You went by sea or by land. However, my son Lance and I had a vision for Cebu Pacific: We wanted every Filipino to fly. Inspired by the low-cost carrier models in the United States, we believed that an airline based on the no-frills concept would work here. No hot meals. No newspaper. Mono-class seating. Operating with a single aircraft type. Faster turn around time. It all worked, thus enabling Cebu Pacific to pass on savings to the consumer. How did we do this? By sticking to our philosophy of “low cost, great value.” And we stick to that philosophy to this day. Cebu Pacific offers incentives. Customers can avail themselves of a tiered pricing scheme, with promotional seats for as low a P1. The earlier you book, the cheaper your ticket. Cebu Pacific also made it convenient for passengers by making online booking available. When we started 11 years ago, Cebu Pacific flew only 360,000 passengers, with 24 daily flights to 3 destinations. This year, we expect to fly more than five million passengers, with over 120 daily flights to 20 local destinations and 12 Asian cities. Today, we are the largest in terms of domestic flights, routes and destinations. We also have the youngest fleet in the region after acquiring new Airbus 319s and 320s. In January, new ATR planes will arrive. These are smaller planes that can land on smaller air strips like those in Palawan and Caticlan. Now you don’t have to take a two-hour ride by mini-bus to get to the beach. Largely because of Cebu Pacific, the average Filipino can now afford to fly. In 2005, 1 out of 12 Filipinos flew within a year. In 2012, by continuing to offer low fares, we hope to reduce that ratio to 1 out of 6. We want to see more and more Filipinos see their country and the world!

Challenge No. 2: In 2003, we established Digitel Mobile Philippines, Inc. and developed a brand for the mobile phone business called Sun Cellular. Prior to the launch of the brand, we were actually involved in a transaction to purchase PLDT shares of the majority shareholder. The question in everyone’s mind was how we could measure up to the two telecom giants. They were entrenched and we were late by eight years! PLDT held the landline monopoly for quite a while, and was first in the mobile phone industry. Globe was a younger company, but it launched digital mobile technology here. But being a late player had its advantages. We could now build our platform from a broader perspective. We worked with more advanced technologies and intelligent systems not available ten years ago. We chose our suppliers based on the most cost-efficient hardware and software. Being a Johnny-come- lately allowed us to create and launch more innovative products, more quickly. All these provided us with the opportunity to give the consumers a choice that would rock their world. The concept was simple. We would offer Filipinos to call and text as much as they want for a fixed monthly fee. For P250 a month, they could get in touch with anyone within the Sun network at any time. This means great savings of as much as 2/3 of their regular phone bill! Suddenly, we gained traction. Within one year of its introduction, Sun hit one million customers. Once again, the paradigm shifts – this time in the telecom industry. Sun’s 24/7 Call and Text unlimited changed the landscape of mobile- phone usage. Today, we have over 4 million subscribers and 2000 cell sites around the archipelago. In a country where 97% of the market is pre-paid, we believe we have hit on the right strategy. Sun Cellular is a Johnny-come- lately, but it’s doing all right. It is a third player, but a significant one, in an industry where Cassandras believed a third player would perish. And as we have done in the realm of air travel, so have we done in the telecom world: We have changed the marketplace. In the end, it is all about making life better for the consumer by giving them choices.

Challenge No. 3: In 2004, we launched C2, the green tea drink that would change the face of the local beverage industry — then, a playground of cola companies. Iced tea was just a sugary brown drink served bottomless in restaurants. For many years, hardly was there any significant product innovation in the beverage business. Admittedly, we had little experience in this area. Universal Robina Corporation is the leader in snack foods but our only background in beverage was instant coffee. Moreover, we would be entering the playground of huge multinationals. We decided to play anyway. It all began when I was in China in 2003 and noticed the immense popularity of bottled iced tea. I thought that this product would have huge potential here. We knew that the Philippines was not a traditional tea-drinking country since more familiar to consumers were colas in returnable glass bottles. But precisely, this made the market ready for a different kind of beverage. One that refreshes yet gives the health benefits of green tea. We positioned it as a “spa” in a bottle. A drink that cools and cleans- thus, C2 was born. C2 immediately caught on with consumers. When we launched C2 in 2004, we sold 100,000 bottles in the first month. Three years later, Filipinos drink around 30 million bottles of C2 per month. Indeed, C2 is in a good place. With Cebu Pacific, Sun Cellular, and C2, the JG Summit team took control of its destiny. And we did so in industries where old giants had set the rules of the game. It’s not that we did not fear the giants. We knew we could have been crushed at the word go. So we just made sure we came prepared with great products and great strategies. We ended up changing the rules of the game instead.

There goes the principle of self-determination, again. I tell you, it works for individuals as it does for companies. And as I firmly believe, it works for nations. I have always wondered, like many of us, why we Filipinos have not lived up to our potential. To be a truly great nation, we must also excel as entrepreneurs before the world. We must create Filipino brands for the global market place.

When we started our own foray outside the Philippines 30 years ago, it wasn’t a walk in the park. We set up a small factory in Hong Kong to manufacture Jack and Jill potato chips there. Today, we are all over Asia. We have the number-one-potato- chips brand in Malaysia and Singapore. We are the leading biscuit manufacturer in Thailand, and a significant player in the candy market in Indonesia. Our Aces cereal brand is a market leader in many parts of China. C2 is now doing very well in Vietnam, selling over 3 million bottles a month there, after only 6 months in the market. Soon, we will launch C2 in other South East Asian markets. I am 81 today. But I do not forget the little boy that I was in the palengke in Cebu. I still believe in family. I still want to make good. I still don’t mind going up against those older and better than me. I still believe hard work will not fail me. And I still believe in people willing to think the same way. Through the years, the market place has expanded: between cities, between countries, between continents. I want to urge you all here to think bigger. Why serve 86 million when you can sell to four billion Asians? And that’s just to start you off. Because there is still the world beyond Asia. When you go back to your offices, think of ways to sell and market your products and services to the world. Create world-class brands. You can if you really tried. I did.

As a boy, I sold peanuts from my backyard. Today, I sell snacks to the world. I want to see other Filipinos do the same.

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