Ice Cream Companies Compete vs MNCs by Lowering Prices
Summer is a time for ice
cream, as the hot weather tends to increase demand for this already
popular dessert. At this time, Philippine-owned enterprises compete with
their foreign counterparts by lowering their prices, the same strategy
they have adopted regardless of the season and weather.
By Trina Melissa Federis
Spouses Jun and Angie
Castillo, owners of the backyard ice cream company Gold Delight, said that
even if they cannot compete head-on with the large ice cream corporations,
they said that they are taking the large companies’ market away from them
by enticing the consumers with low-priced, high-quality products.
Gold Delight started
in Malabon in 1989 selling only ice buko (coconut). In 2000, it
became a full-fledged ice cream business selling ice cream on sticks, in
cones, cup, quart, and half-gallon containers. Flavors include avocado,
cheese, choco fudge, and choco peanut, among others.
The company has a
“backyard operation” literally, in the Castillo home on Kalayaan Avenue in
“Pwede nang hindi
bumili ng Selecta,” (You don’t have to buy Selecta), says Angie
Jun said that unlike
a multinational company, his business does not have to spend a lot of
money on salaries of executives, and there is “no shipping out of
Aside from using
different raw materials, the factory is semi-mechanized, therefore
lessening the cost of paying for more foreign, expensive machines, Angie
businesses such as theirs, she said, are not so much into promoting the
brand of their products, as their stores. Other medium-scale ice cream
companies include Arce Dairy, Big Scoop, Dan Eric, and Milko.
They admitted that
when it comes to distribution, the large companies are able to reach more
people through their advertising. However, they claimed that they have
saturated the communities within the vicinity of their stores.
Death by 2010?
Angie said that the
medium-scale business are not at all affected by the large companies, but
rather “kami ang may effect sa kanila (We’re the ones
affecting their business).“
They are, however,
affected by the rising cost of imported goods.
Much of their raw
materials are imported from countries like Poland and Australia through
distributors. They claimed that there is no local dairy industry to speak
Jun said that the
large ice cream companies, such as Selecta-Walls, Nestlé, and Magnolia,
will die out by 2010.
He said that the
medium ice cream enterprises will take over the market share because they
have invented the “all-weather ice cream,” or ice cream that one buys
whatever the weather or occasion. This is opposed to the “celebration”
ice cream, or the special albeit costly ice cream advertised as the
product to splurge on for special occasions. This is an allusion to the
common perception that ice cream sales are only fast during certain times
of the year.
Jun said that big ice
cream companies produce below their actual production capacity, because
there is little demand due to the high prices of their products.
On the other hand,
the production of medium-scale companies cannot satisfy the demand of the
market, because of their limited operations.
Not so peachy
Ibon economist Sonny
Africa warned that it is not as peachy as it sounds.
“In the history of
any economy, large-scale companies have never disappeared. It’s true that
there are individual large-scale companies that fold-up, but the trend in
a capitalist economy is always towards fewer and fewer firms grabbing ever
larger market shares—that is, towards big
may have an advantage because of lower maintenance cost, but the big firms
have other advantages.
economies of scale in production, where
producing more of the same product means that its unit price gets cheaper;
in distribution, getting (their products) to every corner of the
Philippines if they
wanted, and in marketing, they can afford to buy expensive tri-media
space,” says Africa.
He maintained that
the capability of these firms to adjust to market conditions should not be
underestimated. Big companies have shown how they are capable of adjusting
their prices to suit the consumers. He cited the strategy of Coca-cola
company when it came out with the P6-bottle called “Sakto” and the
mobile phone companies’ decision to sell mobile phone pre-paid load in
Africa said that it
is possible for medium-scale enterprises to survive only if the niche it
is carving out does not attract the attention of the large-scale ones.
it’s a profitable niche… it’s very likely that
these big firms will diversify their products to also capture the profits
from that small niche market. Big companies are always after profits and
if the opportunity is there, the only question for them is if they have
the capacity and it’s worth their while,” he said.
happens, Africa said that big firms would either start making these
products, or buying out the medium-scale firms.
Using the back door
said that such firms must not rely on their own individual abilities to
overtake multinational corporations, because it is not a matter of
managing the business well, but the kind of economic environment the
government is creating to support some businesses, and control or limit
end, even if the entrepreneurs of the medium-scale variety are sanguine
about their prospects for the next few years, if the government does not
support them, they will have to use the back door of the ice cream
industry for their backyard operations to continue. Bulatlat
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© 2006 Bulatlat
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