Chairman
The US Army introduced the acronym “VUCA” almost 40 years ago to describe a more volatile, uncertain, complex, and ambiguous world. The events of the last few years have demonstrated all sorts of VUCA challenges to great effect, as we saw how unrelated events on distant continents can have far-reaching butterfly effects that resonate across our interconnected globe.
The boom from the reopening in 2022 was not expected to last. Entering that year, companies around the region saw significant optimism as pandemic controls were rescinded, mobility increased, and employment picked up. This was true not just in the Philippines, but throughout the developing world, where restrictions were harsher until the tail-end of 2021.
URC had to make tough choices and face some short-term pain, to ensure that our long-term growth would be sustainable and that our core foundation would be strong and resilient moving forward.
However, key input prices spiked due to the Russia-Ukraine conflict, country protectionism, and snarled supply chains being disentangled post-COVID. These in turn led to a rapid hyperinflationary environment, where surging costs began to swamp the wave of optimism. Most manufacturers felt the pain in their financials; URC definitely did, with the company’s cost base increasing by the tens of billions of pesos.
As such, the only feasible solution to moderate the surge was to increase prices. While operating savings continued to be delivered by the business units, much of the cost upcharges had to be passed on to our customers and consumers in the form of price increases, as we worked to keep our head above the rising tide of costs to ensure sustainability of the business.
As we entered 2023, we had to reflect on the direction the company would take. Our strong revenue growth from the prior year could not fully make up for shrinking margins, and while commodity prices were expected to trend downwards, a lot of volatility remained.
While I will let Irwin discuss our 2023 performance in his President’s message, know that decisions were not made lightly. URC had to make tough choices and face some short-term pain, to ensure that our long-term growth would be sustainable and that our core foundation would be strong and resilient moving forward.
Sustainability is more critical than ever in this VUCA world. The “return to normalcy” has not yet materialized, and volatility remains. As of March 2024, Philippine inflation is still hovering at close to 4%, on the upper end of the targeted range. Geopolitical tensions continue to wreak havoc on key global commodities such as oil. Climate change is leading to poorer harvests, with previously reliable crops facing their own supply challenges.
As I write this, cocoa has more than tripled in price to breach US$10,000 per metric ton on fears of crop failure in West Africa. Robusta coffee has reached historic highs on leaner harvests out of Vietnam, as well as concerns on Arabica supply given extreme weather conditions. And closer to home, the Philippines
annual sugar output was below 2 million tons for the 3rd straight year, as high temperatures due to El Niño have impacted sugarcane yields and quantity.
All of these have further highlighted that URC’s choice to focus on sustainable growth will be the key to long-term success.
It is apt that this is the year we are now transitioning our annual report into an integrated report, which includes the various ESG metrics we track. We have previously published standalone sustainability reports in the past (most recently in 2022), while also submitting data annually to the Philippine SEC. We now look forward to combining this with our yearly annual report, so we can share our progress on key focus areas that we believe are critical for our sustainable transformation.
VUCA may become the “new normal” for our dynamic world from now on. But strong, sustainable companies such as URC will succeed thanks to the resiliency of their
people. Guided by our Purpose, Values, and Ambition, our employees continue to strive to make the company a sustainable global enterprise of world-class talent, as we delight everyone with good food choices. This mission has not changed, no matter the environment, and for that I give thanks to my extended family of 13,171 URC employees. I look forward to the great things the company will accomplish in service of our customers, consumers, and communities.
Maraming salamat po.
Lance Y. Gokongwei
Chairman
While I will let Irwin discuss our 2023 performance in his President’s message, know that decisions were not made lightly. URC had to make tough choices and face some short-term pain, to ensure that our long-term growth would be sustainable and that our core foundation would be strong and resilient moving forward.
Sustainability is more critical than ever in this VUCA world. The “return to normalcy” has not yet materialized, and volatility remains. As of March 2024, Philippine inflation is still hovering at close to 4%, on the upper end of the targeted range. Geopolitical tensions continue to wreak havoc on key global commodities such as oil. Climate change is leading to poorer harvests, with previously reliable crops facing their own supply challenges.
All of these have further highlighted that URC’s choice to focus on sustainable growth will be the key to long-term success.
It is apt that this is the year we are now transitioning our annual report into an integrated report, which includes the various ESG metrics we track. We have previously published standalone sustainability reports in the past (most recently in 2022), while also submitting data annually to the Philippine SEC. We now look forward to combining this with our yearly annual report, so we can share our progress on key focus areas that we believe are critical for our sustainable transformation.
VUCA may become the “new normal” for our dynamic world from now on. But strong, sustainable companies such as URC will succeed thanks to the resiliency of their people. Guided by our Purpose, Values, and Ambition, our employees continue to strive to make the company a sustainable global enterprise of world-class talent, as we delight everyone with good food choices. This mission has not changed, no matter the environment, and for that I give thanks to my extended family of 13,171 URC employees. I look forward to the great things the company will accomplish in service of our customers, consumers, and communities.
Maraming salamat po.