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Staying ahead of the game
AS THE only son among six siblings, Lance Gokongwei always felt a responsibility to join the family business and eventually take over.
The gears of succession for the Gokongwei-controlled Philippine conglomerate JG Summit Holdings have been shifting into place over the past few years. Mr Gokongwei last year became chief executive of JG Summit Holdings, and the plan is for him to become chairman when his uncle James Go steps down.
Mr Gokongwei's father is billionaire John Gokongwei Jr, 92, whose rags to riches journey is emblematic of a generation of Filipino-Chinese businessmen the likes of Henry Sy of SM Investments. By dint of hard work, tenacity and an unquenchable entrepreneurial drive, the elder Mr Gokongwei built a sprawling business empire from a single corn starch factory in 1956. He became chairman emeritus in 2001, and in 2016 announced his retirement from that position as well.
Today, JG Summit is one of the largest listed companies in the Philippines with a market capitalisation of 473.8 billion pesos (S$12.2 billion). It boasts a food business, chemicals, airline, bank and even telecommunications and power generation. The elder Mr Gokongwei's fortune is estimated at just over US$5 billion by Forbes, making him the third wealthiest man in the Philippines. In Singapore, JG Summit makes its presence felt through its 37 per cent stake in United Industrial Corp (UIC) and in the food business through the ubiquitous Jack & Jill potato chips, among others.
THE younger Gokongwei says he cannot recall whether there was a "direct conversation" with his father about his role as successor. "But I do know that I was trained (for this). In an entrepreneurial family, the separation between family and business is often unclear. Often, you have discussions with friends who are also business partners or customers. I was constantly exposed to that growing up."
"When I was at university, my father was already not young. He had me when he was 40. When I graduated at 21 I felt a responsibility to come back. It was not a difficult decision."
He adds: "My job is to ensure the company continues to succeed and grow from a much higher base, for decades to come. I'm just a steward here. I hope the business remains in family hands ... But I'm not playing safe. I hope I can be a bold, courageous and entrepreneurial steward."
By now, Mr Gokongwei's career in the group spans more than three decades, starting from the time he graduated with a summa cum laude from the University of Pennsylvania in 1987, where he acquired a double degree in finance and applied science. He joined the food group Universal Robina Corp as a manager in 1988. By 2002, he was named JG Summit president and chief operating officer.
He has made his mark. At Universal Robina, for example, he spearheaded a regional expansion which includes acquisitions in New Zealand and Australia, as well as a joint venture with Japan's Calbee in premium potato chips, and with Danone in flavoured drinks.
UNDER his watch since 1997, Cebu Pacific, the Philippines' upstart budget airlines, has had a remarkable run in defiance of naysayers when it started with just five aircraft and 360,000 passengers in 1996. It is today the Philippines' largest airline. In 2018, its fleet numbered 65 aircraft with an average age of 5.1 years. Between 2018 and 2022, it expects to take delivery of another 41 aircraft. It set a target of 22 million passengers in 2018; as at the third quarter of 2018 it flew just over 15 million. As the pioneer no-frills airline, its innovations include e-ticketing, web and mobile check-in and online booking, among others.
The food and airlines businesses account for more than 73 per cent of JG Summit group revenues and about 54 per cent of Ebitda.
Mr Gokongwei is keenly aware of the need for constant reinvention. "Business has changed quite a bit since our father's days. In those days the hardest part was raising capital, but it was very clear who the competition was and what the opportunity was. Entrepreneurs become successful by meeting unmet customer needs. Today, we're operating from a much larger base. We have capital, resources and a good corporate reputation. But as the world becomes more complex, you don't know where the next competition or disruption will come from. Originally, it was globalisation, but now there are many additional risks - digital, regulatory and consumer behaviour, which is changing very quickly. I guess the key is to be adept and adaptable."
"We want to be the foremost Philippine- based business group that operates in the region, serving a growing and more confident Asian middle class. The four pillars that enable us to do this are - first, to streamline the way we work so we become much more simple, speedy and agile. Second is to build up digital capabilities. Third is sustainability in the use of resources and nurturing our corporate reputation. And fourth is recruiting, developing and retaining people.
"It's all a work-in-progress. What was good enough five or even just two years ago is no longer good enough. The bar always changes, and that's what scares me. In terms of where we stand, I think I'd rate us a two or three out of 10. But what excites me is that we're doing fairly well being number two to three out of 10. What if we can bring this up to eight or nine? Ultimately there has to be recognition that we can be a positive force for change. We need a willingness to face reality and aspire to be better."
To be sure, navigating change is a challenge. "We've had success in the last 30 or even 60 years. But we need to be humble and even paranoid enough to realise that the issues and opportunities are changing. The practices that brought us success so far may not bring us success in the future. In making that pivot, going too fast is dangerous. Too slow and we fall behind. How do you manage the pivot while retaining the original values and principles that made us successful in the first place?"
Digital is a particular area of focus, and in this respect JG Summit's sheer size gives it an advantage, thanks to a deep well of customer, supplier and merchant data. The firm is making inroads. Just last year, its magazine business Summit Media folded its print titles in favour of digital-only. Summit Media boasts a number of lifestyle titles including Cosmopolitan and Esquire. It claims to be the Philippines' leading digital lifestyle network, with 20 million unique monthly visitors clicking onto 15 websites.
ITS partnership with Hong Kong-based Oriente is an eloquent epitome of the group's mantra to "Make Filipino Lives Better". Last year, the Oriente Express partnership launched Cashalo, a mobile application that provides on-demand access to loans, targeted at the largely unbanked population. Mr Gokongwei believes this is an area that meets a real need, an alternative to moneylenders and pawn shops. More recently, it also launched a digital credit service Cashacart.
"In the Philippines, only 26 per cent of people have bank accounts; 3 to 4 per cent have credit cards. Most people go to a money lender or pawn shop, but that's asset-based lending. What kind of desperate need must you be in to be willing to pay 20 per cent a month? We lend for as low as 4 per cent; it's a game changer for the underserved and unbanked. Our mantra is to be inclusive."
Cashalo's current lending rate is 4.5 per cent a month.
He takes particular pride in the inroads carved by Cebu Pacific. "We changed the way people travel. People still come up to me and say, "Lance, thank you. I could never afford a vacation before, and now I can do it. A helper would say, I could never afford to go home, but now I can for my kids' birthday. Those instances motivate me the most." W