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Vol. VI, No. 10      April 9 - 15, 2006      Quezon City, Philippines











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RP 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 Quezon City.

Pwede nang hindi bumili ng Selecta,” (You don’t have to buy Selecta), says Angie Castillo.

Low maintenance

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 royalty.”

Aside from using different raw materials, the factory is semi-mechanized, therefore lessening the cost of paying for more foreign, expensive machines, Angie said.

Medium-scale 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 of.

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 companies dominating.

Medium enterprises may have an advantage because of lower maintenance cost, but the big firms have other advantages.

“The 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 smaller denominations.

Profitable niche

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.

“If 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.

If this happens, Africa said that big firms would either start making these products, or buying out the medium-scale firms.

Using the back door

Africa 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 others.

In the 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 




© 2006 Bulatlat  Alipato Publications

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