Gearing for the Future: Aboitiz Group clears path for Great Transformation

Gearing for the Future: Aboitiz Group clears path for Great Transformation

This is a story of a long, storied journey and it begins somewhere between the heart of a Basque-born seafarer and the glittering Suez Canal.

It begins in the 1870s, a time of love and war; of tumultuous nights and changing tides; of a deposed queen and a reluctant prince; of conquest for thrones and besieged territories–from the Franco-German War in Europe to the Gilded Age of America.

It was indeed a time that influenced those who lived through that epoch; Paulino Martin de Aboitiz y Mendazona, the Basque-born teenage merchant, was no exception. Amid changes that were sweeping through Europe including the Glorious Revolution in his home country, Spain, Paulino embarked on a journey through the Suez Canal to reach Philippine shores. He arrived in Ormoc in the southern province of Leyte in 1870s, a time when this Asian country was bustling with foreign merchants who spearheaded the country’s export economy at the time.

Abaca: The thread of the Aboitiz conglomerate

Back then, the Philippines’ most important export was abaca, also known as Manila hemp, a fibrous crop with superior strength and durability under water. Paulino established a lasting legacy in a country that was away from his homeland. Little did he know then that abaca would become the seeds–or more appropriately–the thread that would lead to the creation of the Aboitiz Group, one of the country’s biggest conglomerates today, now under the leadership of Sabin Aboitiz, a fourth-generation member of the Aboitiz clan. Indeed, the story of the sprawling Cebu-based Aboitiz conglomerate traces its roots to Paulino’s journey — more than 100 years in the making, amid good and bad times; war and victory; amid crises and celebrations and through generations and generations of Filipinos.

Today, over-a-hundred-year-old Aboitiz Group is among the country’s biggest players with core businesses in power through AboitizPower; banking through Union Bank of the Philippines; property through AboitizLand, infrastructure through Aboitiz InfraCapital; food through Pilmico and Gold Coin; construction through Aboitiz Construction; and the youngest business unit leading Data Science and Artificial Intelligence of the Aboitiz Group, Aboitiz Data Innovation.


The Great Transformation

Fast forward to 2022.

Now, as the Philippines transitions into a post-pandemic economy and into a new government, the Aboitiz Group likewise continues its journey to a modern and transformative future.
The over-a-hundred-year-old conglomerate is gearing up to thrive in a new business landscape following two-years of the COVID-19 pandemic.

Aboitiz Group president and CEO Sabin Aboitiz said the way forward now is through a “Great Transformation,” highlighting the value of responsibility that is nurtured among all of its team members and being open-minded to more possibilities. He said the way to thrive in a new business landscape is having a “renewed entrepreneurial mindset,” and embarking on continuous investment in the hypergrowth of its team members in an enabling and inclusive work environment.

“As leaders, we have a responsibility to our team members and the entire organization to transform the way we think in order to transform the company into a greater one,” Sabin said during the 2022 Aboitiz Leaders Conference (LeadCon) held last February 10. He emphasized the need for “a transformed organization.”

“It is clear-minded about the need to constantly change and pivot without being told to do so, because that transformational value is already instilled in you. We have to believe in it in order to instill it. When everyone thinks the same, then you have a fully and holistically transformed organization,” Sabin also said.


The Early Years

Indeed, Aboitiz’s story is as colorful as its beginnings but each Aboitiz leader of his time was guided by the core values that were present since the beginning — perseverance, agility, honor and integrity and determination. During Paulino’s time, Manila hemp was the country’s largest export product, distributed to navies and trading companies all over the world at a time when the fates and fortunes of countries played out at sea. Upon Paulino’s arrival in Leyte, a fellow Basque born merchant, Gregorio Yrastorza, employed him to be a captain of one of his vessels. As fate would have it, Paulino would meet and marry his employer’s daughter, Emilia. The couple wed in 1880 in Ormoc and had 10 children: Guillermo, Anita, Antonia, Ramon, Carmen, Dolores, Vidal, Paulino, and Luis. One son, Francisco, died in early childhood.


Muertegui y Aboitiz
Paulino took up his father-in-law’s trade and became a well-established merchant, transporting and distributing abaca and other commodities to Cebu. In 1901, the enterprising family man partnered with Jose Barainca Muertegui, another Basque abaca dealer, to form Muertegui y Aboitiz.


From Leyte to Cebu
Six years later, hoping to gain better control of the transport of their abaca, the two business partners invested in a 128-ton motor vessel. Paulino’s second son, 20-year-old Ramon started learning the ropes of his father’s business as a warehouseman for Muertegui y Aboitiz in Palompon, Leyte. Having a vessel allowed Muertegui y Aboitiz to collect abaca from farmers across Leyte at a faster pace and deliver the product to a bigger clientele in Cebu. As the 20th century unfolded, Paulino’s business flourished and strengthened as strongly as the buff-colored abaca they produced.


G. y R Aboitiz

Later on, Paulino’s son Ramon and his older brother Guillermo expanded into other businesses, setting up a company called G. y R. Aboitiz, which distributed liquor, rice, tobacco, and other general merchandise to Samar and other areas. After Paulino died in 1912, Ramon took over his father’s position at Muertegui y Aboitiz and eventually bought out Jose Muertegui’s shares a few years later. The dissolution of the company Paulino co- founded allowed second-generation Aboitiz family members to come into their own.
To consolidate the family businesses, a partnership called Viuda e Hijos de P. Aboitiz was established. Its main shareholders were Paulino’s widow, Emilia, and all their children.


Aboitiz & Company

Aboitiz & Company Ramon consolidated the businesses and together with his brothers Guillermo and Vidal, along with a Portuguese businessman Arnaldo de Silva, formed Aboitiz & Company (ACO) in February 1920. However, at the time, which was just after World War I, times were hard and market prices of abaca plummeted due to decreased demand. The new company teetered on the edge of bankruptcy. Ramon, who was in Spain when his brother Vidal told him of the company’s dire situation, took over the reins of the company. Ramon refused to give up. Guided by his “Palabra de honor”, he borrowed money from banks and friends – giving only his word as commitment to pay back his debts.

“The biggest fortune I have is my word and reputation. Money can be lost and can be recovered but once your name and reputation is lost, one’s word is worthless and one is truly finished,” Ramon said.


Don Ramon rebuilds the family fortune

It took many years but the determined and hardworking Don Ramon, who had become the family’s new patriarch, was eventually able to lift the company from near dissolution and rebuild its fortunes. Soon enough, he recognized the importance of diversification to ensure the success and perhaps the longevity of a business.

Thus, ACO moved from distributing abaca, copra, and other agricultural produce to selling chemicals, construction materials, industrial equipment, and car parts in the mid-1900s. The company also tapped into businesses that would complement their existing ones, and ventured into sugar plantations and milling, electricity distribution, financial services, oxygen plants, cold storage facilities, wood preservation, and bus transport, among many others.

Investments were also made in power through Cotabato Light and Power Company in 1935 and in Davao Light and Power Company in 1946; financing, agri-food production with the Ormoc Sugar Company in 1929 and a sardine plant in 1938.


From Abaca to shipping
In 1952, ACO created a shipping department, the Aboitiz Shipping Corporation (ASC), transforming inter-island sea travel in the archipelagic country. When the 1990s came, a holding company called Aboitiz Equity Ventures (AEV) was set up to manage the Aboitiz Group’s various joint ventures and subsidiaries. The next step was taking AEV public in 1994, successfully raising P4.2 billion in proceeds. This enabled the company to grow further. Infused with new resources and renewed energy, AEV was able to realize its goal of becoming a major national player, investing in key growth areas. At the same time, it realized that it had to redefine its focus and stick to its core businesses. Enrique “Endika” Aboitiz Jr. served as president of ASC from 1990 to 2010. In 1990, the fleet of fast and luxurious liner SuperFerry was launched. AEV bought out its partners’ shares in WG&A in 2002 and was later renamed Aboitiz Transport System Corp. The Eva Macapagal Super Terminal, the new home of the SuperFerry, was also opened. The Aboitiz Group decided to sell its transport business in 2010.


Never fall in love with your business

Don Ramon once said, “never fall in love with your business.” This principle was first practiced when, in the 1930s, ACO started to loosen its hold on its abaca business and began shifting its attention to more relevant industries. This became the guiding tenet behind the company’s difficult decision to let go of its transport business; for many decades, Aboitiz was almost synonymous with shipping. Thus, fourth generation member Erramon Aboitiz, ACO and AEV president and CEO from 2009 to 2019, said, the conglomerate came up with a focused strategy and identified which companies to expand. The rest, as they say, is history.


Another chapter

This year, 2022, the Aboitiz’s story continues with a whole new chapter in its long, colorful history as it is set to sail on becoming the first Philippine techglomerate. What started as a humble abaca business is now one of the country’s biggest conglomerates. Come to think of it, that simple leaf fiber may well be the perfect metaphor to the Aboitiz Group and its storied journey — long, enduring and exceptionally strong. #


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