This story
was taken from Bulatlat, the Philippines's alternative weekly
newsmagazine (www.bulatlat.com, www.bulatlat.net, www.bulatlat.org).
Vol. VI, No. 10, April 9-15, 2006
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
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