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SelectaSelecta has captured the taste of the Filipinos since it challenged Magnolia’s domination of the bulk ice cream market in 1993. In 1990, it only had one percent share of the ice cream market. Since then it has become one of the leading brands in the ice cream industry. Selecta attributed its success to its management focus on upgrading product quality, providing logistics support, and giving proper marketing for the product to maximize its potential. It packaged and marketed ice cream in a manner that a consumer feels regarded for buying the product. Selecta capitalized on understanding the Filipino consumers, making this activity the center of all the work ---from manufacturing to marketing. Selecta’s management continued to believe that success is not destiny but a journey. With Magnolia and Nestle revitalizing its efforts and some foreign brands penetrating the local market, Selecta had to find ways to sustain market leadership and expansion. The Philippine Ice Cream Industry Ice cream is everyone’s favorite dessert. Ice cream is bought either for special occasions or everyday refreshment. It knows no seasons and moods: it is a happy product, more often taken as a reward for oneself for all sorts of reasons. The ice cream industry caters to a flavor conscious market. Although some are brand-loyal, most consumers look into, and discriminate among, available flavors. Those craving ice cream, when the flavor they like is not available, easily switch to another flavor and/or brand just to satisfy their craving. According to market research, 80 percent of Filipino consumers bought ice cream on impulse (they bought only upon passing an ice cream scooping station, but without intention to buy at first); 98 percent ate ice cream in the comfort of their home; and 70 percent of the time, ice cream was an afternoon snack. A report on consumer data for ice cream indicates its total market size as about Php6.5B in 2010, with 25% of Filipinos buying ice cream thrice a year. The leading players in the Philippines ice cream market are Unilever/RFM Corporation, San Miguel Corporation and Nestle S.A. Selecta, Magnolia and Nestle are the leading brands. Arce is also a popular brand. There are also foreign brands , and more recently artisanal brands. Four categories of ice cream based on the classification of Euromonitor are artisanal ice cream, take-home ice cream, impulse ice cream and frozen yogurt. The market for ice cream in the Philippines increased at a compound annual growth rate of 3.6% between 2004 and 2009. The take-home ice cream category led the ice cream market in the Philippines, accounting for a share of 63.6%.Consumption of ice cream in the Philippines was concentrated within the Greater Manila area between 2004 and 2008, with 60% of total volume purchased there. Products geared towards lower- and middle-income consumers have enjoyed recent success in 2009-2010. Nestlé embarked on the introduction of Nestlé Sorbetes which banks on the penchant of Filipinos for unbranded home made sorbetes. This brand competes through its lower-pricing strategy of Ps100 per 1.6 litres. Meanwhile, responding to warm acceptance from buyers, Selecta’s Wall' maintained the price of its Selecta 3-in-1 at PHP95 but increased volume by 33%. The proliferation of smaller companies offering lower-priced branded products in the market has been snatching sales from major brands especially in impulse ice cream. Other products such as icebergs (sundaes, fruit shakes) are also eating up into the ice cream market. Unilever/RFM the joint-venture between multinational Unilever and local company RFM Corp, maintains its lead in ice cream in the local market. The company’s share is expected to reach 49% in 2013, as it continued to push its Selecta variants both in impulse and take home ice cream. During 2012 and 2013 the company heavily promoted a new use for its Selecta Super Thick Ice Cream. Unilever RFM Ice Cream encouraged consumers to make ice cream cake using this bulk dairy ice cream variant. The company’s aggressive advertising campaign generated good interest amongst middle-income consumers, who excitedly tried to make their own ice cream cake. A distinctive feature of the ice cream market was its distribution system. Each ice cream brand carried exclusive outlets. Unlike other consumer products, ice cream requires freezers. Ice cream companies have to provide stores with freezers free of charge regardless of tore size. More freezers therefore correspond to a higher market share. Besides, selling ice cream was costly because of the electricity consumed. So normally, dealers, particularly the smaller ones were just content with carrying one brand. Apart from the addition cost of electricity, the space constraint also posed a problem in convincing them to carry a second, third or fourth brand. SelectaSelecta got its name from the Selecta Refreshment Parlor owned by Ramon Arce and his wife. The place served sizzling tenderloin steak and other popular American dishes. However people flocked to the parlor not for the meals but for its ice cream that came in three flavors: mantecado, macapuno and ube.The Selecta enterprise started in 1933 when Ramon Arce started pasteurizing carabao’s milk near his home in Novaliches where carabaos were abundant. Arce began selling and distributing fresh milk in bottles using the Selecta brand name to residences, restaurants and offices. Soon after, Arce and his wife, Carmen, would come up with their own ice cream recipe made from carabao milk. These products became the foundation of the family’s Selecta business, which later included the Selecta restaurants and bakery. The Selecta business was continued by Arce’s children after his retirement in 1950. By the 1970s, Selecta’s carabao milk based ice cream and fresh milk became available in supermarkets. Its milk was packaged in glass bottles while its ice cream was packaged in gold colored tin containers.In 1990, RFM Corp., owned by the Concepcions bought the Selecta brand from the Arce family and established Selecta Dairy Products, Inc. to take over the production of Selecta ice cream. Selecta was then far behind in the ice cream industry along with their competitors --- Presto, Sorbetero, and Coney Island. Under RFM ownership, the recipe of Selecta ice cream was improved and aggressively marketed, posing a serious challenge to then market leader, Magnolia ice cream. RFM also introduced its own Selecta milk products which were made from cow’s milk.RFM relaunched Selecta to target the A and B and upper C markets. With strict adherence to quality and RFM’s corporate philosophy, “to give nothing less than the consumer’s satisfaction and his money’s worth --- Selecta Dairy Products Inc. came out with its success formula: a winning combination of a high quality product, marketing innovation, modern production technology and a strong distribution network. In 1999, to complement its frozen novelties category and strengthen itself for competition, RFM teamed up with Unilever, the largest ice cream company in the world to form Selecta Walls Incorporated. The joint-venture proved to be a success and in 2000, Selecta defeated competition to become the national ice cream leader. Unilever is the world’s largest ice cream company with an annual turnover of €5 billion. Selecta went into the production of bulk ice cream and frozen novelties. Bulk ice cream, with around 30 flavors ranging from avocado, to ube constituted about 80 percent of the Company’s output. The Company’s line included Classic, Supreme, Indulgence, and Hershey’s Collection. A fifth category, Regional Flavors, was an innovative venture into the production of indigenous fruit flavors. The Company came up with frozen novelties and more than a dozen type of pops, cones, and sundaes. Frozen novelties constituted the remaining 20% of the company’s output. Selecta ice cream comes in different flavors. There are several variants, the Gold, Creations, Moo, Supreme, Classic, ice cream cones (Cornetto & Moo Cone) and ice cream stick Selecta also comes in several sizes: 3.4L, 1.5L, 800ml & 750ml for Selecta creations & supreme, and 1.8L & 750ml for Moo20. 7.In 1994, Selecta signed a three-year exclusive agreement with Fun Characters Inc. to use Walt Dsiney characters in promoting its ice cream products. This was part of an overall thrust to establish a stronger presence in the frozen novelties market. In the same year, Selecta signed a three-year licensing agreement with Hershey Foods International. The tie-up allowed Selecta to use Hershey’s popular brand names for its ice cream products. The company likewise entered into a three-year sponsorship agreement with Artrust Holdings, Inc., (AMI) in March 1995 under which Selecta-Hershey became the official ice cream of the part and the Company paid AMI fees over three years for certain advertising, publicity and marketing activities of the Enchanted Kingdom.Selecta ice cream’s primary target market are kids aged 5-14, belonging to the BCD market with a lifestyle of study, playing, and eating sweets in between, including ice cream if available. Family bonding has been a recent theme of Selecta TV advertisements, appealing to children and young teens’ need for belongingness. Fresh carabao’s milk from Bulacan, Nueva Ecija, and Pampanga were used in the production of Selecta Dairy products. The Company ensured that the local fruits met quality standards, otherwise Selecta sourced fruits abroad. Selecta ice cream sold at par with what the main competition offered. Its products area were available in shopping stores, supermarkets, groceries, and sari-sari stores. Selecta built its own scooping stations in selected areas. Selecta was more noticeable in the Greater Manila area and in some key cities in the country. Television was used as the primary medium in reaching the target markets backed up by print, merchandising and cinema. Campaigns included Chocollection, Classic Selection, Swirls and Twirls, etc.MagnoliaMagnolia was the first in the country to produce ice cream in commercial quantity. In January 1955, Magnolia introduced its Flavor of the Month (FOM) series with Swiss Mocah as the first FOM. Thus began the Filipino consumers’ monthly love affair with Magnolia. Until today, the Filipino consumer is treated to exciting flavor combinations month after month. Vloum-wise, Magnoila has thus far sold over 20 million gallons of FOM ice cream since its initial launching. Magnolia was the pioneer in the development of tropical flavored ice cream such as ube, macapuno, mango and durian. These flavors gained acceptance in the local market and were fast capturing the Asia-Pacific market as well. The Company’s ice cream facilities were the first ice cream plants in the Philippines to meet quality system standards set by the International Standards Organization (ISO). Magnolia- Nestle’s ice cream products have been recipient of awards from the prestigious Monde Selection in Brusseld, Since 1982, Magnolia-Nestle products have won 25 Monde Selection Medals.Magnolia-Nestle (MNC) was the result of the partnership forged in between San Miguel Corporation and the Switzerland-based Nestle S.A., the world leader in the food industry. Nestle brought to the partnership, its expertise in the field of consumer food goods, and a wide array of internationally acclaimed brands. Magnolia contributed its manufacturing infrastructure, nationwide distribution network, and seven decades of unrivalled Filipino patronage. In 1996, San Miguel transferred its ice cream and milk businesses to a new company, Magnolia-Nestlé Corporation, a joint-venture with Nestlé. San Miguel retained ownership of the Magnolia brand since it was also being used by other San Miguel food products. In 1998, San Miguel withdrew from the Magnolia-Nestlé venture and a non-compete clause barred it from the ice cream and milk businesses for five years. Upon the expiration of the non-compete clause in 2004, San Miguel revived its ice cream and milk businesses through its subsidiary, Magnolia, Inc. On May 19, 2010, Magnolia, Inc. inaugurated its main ice cream production facility in Santa Rosa, Laguna. When Magnolia was relaunched by San Miguel, the ice cream division was renamed Nestlé Ice Cream.With increasing competition, Magnolia intends to make its products available in the neighborhood stores and major outlets, introduce a feedback mechanism that will help the corporation monitor the market; and employ new approached to selling. Magnolia is the preferred choice of several five-star hotels, fine dining restaurants, and food chains. Magnolia is sold in Guam, Taiwan through tie-ups and are exported to Japan, Hong Kong, Malaysia, Singapore, Dubai, and Kuwait among others.ArceThe Arce Family started Arce Dairy Ice Cream in January 1995 and in no time snatched 5% share of the ice cream market. It was initially available in Metro Manila but has expanded its dealership in Central and Southern Luzon. Dealers are mostly family friends and relatives who insisted their hand in selling products. The use of carabao’s milk was the trademark of Arce Ice Cream. Carabao’s milk contains considerably more fat than cow’s milk (9.65 % compared to 4.16%). To be called ice cream, a product must contain between 5-16 percent fat and Arce’s have a comfortable 10 percent. Among Arce’s products only the Super Deluxe and Super Special contain carabao’s milk. Special and regular ice creams have a milk base. The Especial Sorbete de Caro or “dirty ice cream” has a coconut milk base. The sherbets have a fresh fruit base. Arce has a lock on the AB market, but had more difficulty getting through to the CD market. This is actually in its pricing strategy. The Super De Luxe ice cream costs more than the competitors’ premium brands because buyers do not care about price. Arce plans to target the CD market by coming out strongly on a nation-wide scale. Part of its expansion would use the continuous method of production instead of the batch processing method.Foreign BrandsForeign brands include Hagen-Dazs, Dreyers Grand Ice Cream, Baskin-Robin. Dreyers was the first to penetrate the local markets. Hagen Dazs was the latest to come in. Owners of these brands claimed that they are not here to compete but only to expand the ice cream market with superior products. These brands belong to the super premium category and cater to the A market. What’s Next for Selecta The optimistic economic prospects in the Philippines set a positive backdrop for the growth of ice cream in the next five years. Research has shown that the consumption of products such as ice cream is tied to improvements in income, especially amongst middle-income consumers. It is expected that the more upbeat economy will support more frequent consumption of ice cream in the local market.The strategic moves of manufacturers in recent years helped to boost the consumption of ice cream in the Philippines. Leading brand Selecta was able to convince consumers to indulge in ice cream through the affordable price of its Cornetto brand, whilst its bulk dairy ice cream variant is positioned to promote family weekend bonding. At the same time, it also successfully launched the premium brand Magnum. On the other hand, competing brand Nestlé made products more affordable and accessible to middle- and lower-income consumers through the launch of SKUs which were priced lower than Ps100 per tub. These efforts came to fruition in 2013, as ice cream consumption was increasingly becoming a daily or weekly indulgence, instead of being a luxury reserved only for special occasions. Value proposition is an important criterion for dairy food purchases among middle-class that constitute the major share of total consumers. Given the positive trends in the Philippines economic growth scenario, the Selecta team has outlined some of the alternative strategies that the company could pursue: Sell more Selecta products. This strategy seeks to increase sales from Selecta products in its current markets. One component of this strategy is increasing the penetration of freezers to smaller outlets. It may involve increasing promotional efforts or incentives to get more consumers to but more Selecta ice cream. Develop more Selecta products: This strategy will increase sales by developing new or improved products for its current markets. Possibilities include developing more ice cream flavors and entering the lucrative frozen novelty segment. Enter new markets. The strategy seeks to increase sales by taking its existing products to new markets. For Selecta, this means expanding its distribution networks by entering more cities and towns where it is absent or even expand to the international market where there are large Filipino populations. Enter New Business Leveraging the Current Refrigeration Facilities. This strategy will increase sales by developing new markets where Selecta’s distinctive competencies can be exploited. Possibilities include marketing other food products that can use the freezer facilities of Selecta. Management faced the hard challenge of identifying strategic plans for Selecta in the medium term. ................
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