December 12, 2011 – – Credit Rating and Investors Services Philippines, Inc (CRISP)announced today that it has reaffirmed its ‘AAA’ issuer rating on Tanduay Distillers Inc (TDI).
Tanduay’s ‘AAA’ rating represents CRISP’s credit opinion that reflects strongest capacity by borrower to repay debt obligations and a very low probability of default.
In assigning this rating, CRISP considered the following factors:
- Consistently strong financial performance. TDI’s 3rd quarter interim report this year reflected a higher net operating income of 15%, compared to last year’s 13%.
Over the years, TDI’s gross profit remained stable at over 20%, save for a medium dive in 2008 due to high input and energy costs. Robust sales volume and price increases, however, combined to mitigate the increases in alcohol prices and the cost of brand new bottles. During this year’s first 9-month period, gross profit stood at 25%, higher compared to last year’s 23%
During the last 10-year period, TDI’s sales revenues grew at around 7.7% annually while accelerating to 11% during the last 5 years. In 2010, TDI’s sales revenues of P11.5 billion has doubled its revenues in 2001.
- Solid brand equity. Tanduay’s 157-year old brand commands global name recognition. Established in 1854, Tanduay is a highly regarded producer of distilled spirits in the Philippines with international awards to its credit.
To preserve Tanduay’s brand history, TDI will restore its Quiapo plant as a Heritage Site to provide insight into a bit of the country’s life and culture since its founding in 1854.
- Firm market share. Tanduay commands 99.3% of domestic rum sales and holds the record as the second largest selling rum in the world, after Bacardi of Puerto Rico. Note that Bacardi is internationally sold while Tanduay is currently sold and promoted only in the Philippines.
Locally, Tanduay controls 34% of the total market for distilled spirits with a 9% annual growth rate. Tanduay holds a dominant position in the country’s two major islands, the Visayas and Mindanao, with a 76% market share that grows annually at an average of 12%
TDI has an extensive distribution network with exclusive distributors, sales offices and warehouses that serve 170,000 outlets nationwide.
This year, TDI introduced the Boracay Rum as part of its campaign to establish itself in the competitive Luzon market with product innovations and aggressive sales and marketing pitch. Two years ago, Asia Brewery, a sister company of Tanduay introduced Tanduay Ice through an arrangement where it pays royalty to Tanduay for the use of its name. Such move was intended to establish brand awareness and support among the younger segment of the market.
About the Company
TDI is a wholly owned subsidiary of Tanduay Holdings, Inc. (THI) engaged in the business of distilled spirits consisting of rum, wine, gin, vodka and brandy.
It has a total production capacity of 160,000 cases per day from four plants located in the country’s three major islands, with access to alcohol from its own distilleries in Luzon and Visayas.
TDI’s alcohol requirements are secured by its controlling interests in Asian Alcohol Corporation (AAC) and Absolut Distillers, Inc. (ADI) with a 95% and 96% ownership, respectively. AAC is located in a 10-hectare plant in Negros Occidental with a daily operating capacity of 130,000 liters of fine quality ethyl alcohol. Its other alcohol plant, ADI, located in Lian, Batangas has a daily operating capacity of 75,000 liters.
All of TDI’s plants are equipped with wastewater treatment facilities to neutralize waste from the bottling process and methane recovery systems to prevent emission of harmful gases.
Future international market plans
Tanduay’s international rum portfolio is being positioned to compete with Bacardi, the current market leader in the “standard market” which comprises 80% of the market. This includes brands in the $10-$19.99 per 750ml bottle segment.
Stable outlook: CRISP assigns a stable credit outlook for TDI’s issuer rating as CRISP continues to believe that TDI’s strong financial performance will continue on the back of a solid brand equity which has attained international name recognition after over 155-year presence and a firm hold on its domestic market share in distilled spirits.