This year with the pandemic still raging on, the Philippines experienced two surges in COVID-19 cases. The first was from the end of March to April, while the second was in September, from the highly-contagious Delta variant. With this situation, many of us spent 2021 in our homes on lockdown, which covered about a quarter of the year in total. These mobility restrictions led to limited operations in our malls and hotels, affecting Robinsons Land Corporation (RLC), and weak travel demand which continued to challenge the performance of Cebu Air, Inc. (CEB).

Sources:
Inflation: https://psa.gov.ph/statistics/survey/price/summary-inflation-report-consumer-price-index-2012100-december-2021
Oil: https://www.indexmundi.com/commodities/?commodity=crude-oil-dubai&months=60
Exchange rate: https://www.bsp.gov.ph/statistics/external/day99.aspx

Apart from continued restrictions and quarantine measures in place, headline inflation rose to 4.5 percent in 2021, up from only 2.6 percent the year before, driven by increases in food, housing, health, transport, and restaurant services. As global economies started to open up, the rise in the demand for oil outpaced supply, leading to price volatility. Combined with strong peso depreciation beginning the third quarter (Q3), this meant a significant increase in input costs for our businesses, particularly Universal Robina Corporation (URC), JG Summit Olefins Corporation (JGSOC), and CEB.

Fortunately, this year we started to see green shoots of recovery. Gross domestic product (GDP) growth turned positive again starting Q2, up from a five-quarter negative streak. Full-year GDP growth reached 5.6 percent, exceeding the expected growth rate of 5.1 percent. In addition, the rollout of the national vaccination program gives us hope for accelerated sequential recovery, with around 49 million individuals fully inoculated as of December 31, 2021. As a result, cases dropped significantly and remained low in the fourth quarter (4Q) pre-Omicron.

The pandemic not only had economic effects, but also became a turning point for the way people live, consume, and work. This year, we saw the continued acceleration of digital, with even more Filipinos becoming digital consumers for the first time. Businesses likewise shifted online, with e-commerce gross merchandise value (GMV) soaring since the start of the pandemic. The workforce has also changed significantly, with focus on work-life balance, flexibility, and well-being becoming increasingly important after a year of work-from-home and hybrid arrangements. Lastly, the pandemic highlighted the importance of health, with more consumers now making health and wellness a priority.

These key trends coupled with the pandemic’s economic effects presented a challenge, but also an opportunity for JG Summit to recalibrate our strategy and portfolio. Our major portfolio moves this year are as follows: