2014 Sarap Sample Strama

Ateneo Graduate School of Business

A Strategic Management Paper for SARAP

Submitted to Professor Hilda Teodoro

Submitted by Your Name July 1, 2014

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Table of Contents EXECUTIVE SUMMARY

4

1 INTRODUCTION

6

2 RESEARCH DESIGN AND METHODOLOGY

7

LIMITATION OF THE STUDY

8

3 VISION/MISSION

9

4 EXTERNAL ENVIRONMENT

15 15

4.1 ECONOMIC FORCES 4.1.1 Less but Frequent Purchases of Goods by Consumers

15

4.1.2 Decrease in Food Expenditure at the Expense of Other Commodities

15

4.2 SOCIO-CULTURAL, DEMOGRAPHIC, AND ENVIRONMENTAL FORCES

15

4.2.1 Significant Distribution of Households in Visayas and Mindanao areas

18

4.2.2 Fast-paced Lifestyle Calls For ‘Quick And Easy’ Dependable Solutions

19

4.2.2 More Women are Joining the Work Force and Becoming More Independent

21

4.2.2 Still ‘Low’ Dish Penetration of Packaged Soups in Regularly Cooked Soupy Dishes

22

4.2.2 People are Becoming More Health Conscious

23 21

4.3 TECHNOLOGICAL FORCES 4.3.1 Increasing use of the Internet

23

4.4 POLITICAL, GOVERNMENTAL & LEGAL FORCES

24 24

4.4.1 Political Instability 5 INDUSTRY AND COMPETITIVE ANALYSIS

26

5.1 INDUSTRY ANALYSIS

23

5.1.1.Growth of the Flavorings Category whilst the Packaged soups

23

5.1.2. Lack of Differentiation Amongst Cooking Aids Brands

26

5.1.3. Versatility Proposition of Competitors

27 28

5.2 PORTER’S 5 FORCES ANALYSIS 5.2.1 THREAT OF NEW ENTRANTS

28

5.2.2 BARGAINING POWER OF BUYERS

29

5.2.3 BARGAINING POWER OF SUPPLIERS

29

5.2.4. THREAT OF SUBSTITUTES

30

5.2.5. RIVALRY AMONG COMPETITORS

30

5.3 COMPETITIVE PROFILE MATRIX

31

5.4 COMPETITORS

37 39

5.4.1 Misan Corporation

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5.4.2 Yummy Philippines, Inc

39

6 EXTERNAL FACTOR EVALUATION MATRIX

41

7 INTERNAL ASSESSMENT

45 45

7.1 CULTURE 7.1.1 Values

45

7.1.2 C ORPORATE S PIRIT

45

6.1.3 PROFITABILITY

39

6.1.4 GROWTH RATES

39 46

7.2 MANAGEMENT 6.2.1 M ANAGEMENT S YSTEM

46

6.2.2 S TRATEGY

46

6.2.3 O RGANIZATION

47

6.2.4 SYNERGY AMONG THE SM GROUP OF COMPANIES

43 48

7.3 MARKETING 7.3.1 P RODUCT

48

7.3.2 P RICING

48

7.3.3 M ARKET D ISTRIBUTION

49

7.3.4 C HANNEL P RIORITIES

49

7.3.5 Good Customer Marketing Standards

51

7.3.6 Excellent Market Research Capability

51 51

7.4 FINANCE 7.4.1 Liquidity

52

7.4.2 L EVERAGE

53

7.4.3 A CTIVITY

53

7.4.4 P ROFITABILTY

53

7.4.5 G ROWTH

54

7.5 OPERATIONS

54

7.6 RESEARCH AND DEVELOPMENT

54

8 INTERNAL FACTOR EVALUATION MATRIX (IFE MATRIX)

56

9 STRATEGY FORMULATION

61

9.1 THREATS-OPPORTUNITIES-WEAKNESSES-STRENGTHS (TOWS)

61

9.2 STRATEGIC POSITION & ACTION EVALUATION MATRIX (SPACE)

62

9.3 INTERNAL-EXTERNAL (IE) MATRIX

64

9.4 GRAND STRATEGY MATRIX

65

9.5 GE MCKINSEY MATRIX

66

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10 SUMMARY OF MATRICES & ANALYSIS

67

11 QUANTITATIVE STRATEGY PLANNING MATRIX

69

12 PROPOSED STRATEGY

71

12.1 STRATEGIC OBJECTIVE

71

12.2 MARKET PENETRATION

72

12.3 MARKET SEGMENTATION

72

12.4 STRATEGIC POSITIONING

73

13 ACTION PLANS AND PROGRAMS

74

14 STRATEGY EVALUATION AND CONTROL

75

14.1. BALANCED SCORECARD

76

15 STRATEGY MAP

78

16. PAST AND PROJECTED FINANCIAL STATEMENTS

79

REFERENCES

83

APPENDIX

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Executive Summary This strategic management paper aims to develop a viable strategy for the Sarap packaged soups business retail business in the Philippines. The global brand ‘Sarap’ first came into the Philippine market in 1972, with packaged soup cubes as its pioneering and flagship entrant in this high-potential Asian market. Sarap is a relatively familiar brand known not just for packaged soups but for Sinigang mixes, liquid seasonings, recipe mixes, powdered flavorings, packed soups and pasta as well. To date, packaged soups is the biggest contributor in volume and value amongst the products in the Sarap portfolio. With 90% market share in a Php 2 billion market, Sarap cubes revenue in 2004 is estimated at Php1.6 billion and still managed to grow by 7% with an estimated Php1.7 billion sales in 2005. However, the packaged soups category is experiencing flat growth and has reached its maturity at the dawn of powdered flavorings. The brand’s strategic objective is to defend the relevance of packaged soups by positioning it as ‘best for soupy dishes’ whilst establishing its presence and leadership in the powdered flavorings segment. With the use of several strategic management tools, it was identified that it is best to employ market penetration. It was established through Project Pinoy that the market for packaged soups still has a lot of room to grow, especially in soupy dishes where only 12% of all soupy dishes is penetrated by packaged soups. By utilizing brilliant marketing, campaigns on soup can help arrest a possible decline in the packaged soups category. Other opportunities identified through the study apart from aggressive marketing campaigns behind packaged soups are deemed to be necessary to realize and expedite the achievement of the brand’s objective: •

On product distribution, improving the Sarap portfolio to be able to cater to downline channels via direct servicing.

•

On geographies, valuing the Visayas and Mindanao regions as a separate entity from that of Luzon and GMA for reasons that the cultures and taste preferences are so distinct in itself creating a world of possibilities for the business.

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•

On consumer purchasing habits, developing lower cash outlay products as an answer to a growing economic reality.

Simultaneously, other efforts on master brand activations and company-wide initiatives are deemed to be necessary as it can assist Sarap address growing direct and indirect consumer concerns such as: •

The health factor in the use of cooking aids or any convenient, ready-to-eat, easy-to-prepare commodity is addressed by Sarap’s thrust on Vitality.

•

Certification of all cooking aids as ‘good for you’ products.

•

Differentiating the Sarap brand from competition or other food brand with a relevant and aspiring proposition that consumers will be able to connect to.

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1 Introduction A viable strategy for the Sarap packaged soups business in the Philippines is what this strategic management paper aims to develop. The global brand ‘Sarap’ first came into the Philippine market in 1982, with packaged soups as its pioneering and flagship entrant in this high-potential Asian market. Sarap is a big player in the packed soups category. Through Sarap’s diverse portfolio, it has established itself to be market leader in several categories and has always been referred to as a respectable brand in the categories it plays in. Sarap packaged soups remains the undisputed market leader in the packaged soups category with an estimated market size of Php2 billion. With over 90% market share, Sarap packaged soups revenue in 2004 is Php1.6 billion and still managed to grow by 7% with Php1.7 billion sales in 2005. The packaged soups category is considered to be one of the core categories since not only does Sarap packaged soups stand for the category in itself but it is also very profitable and is able to support other adjacent categories in the Sarap portfolio. Sarap packaged soups are available in various retail channels nationwide supermarkets, groceries, market stalls and sari-sari stores. It is sold at a very affordable price of Php 9.50 per shell box (box of 2 packaged soups) and Php28.00 per pantry box (box of 6 packaged soups). Sarap has an estimated 500 direct hire employees working in different functions in head office whilst there are a thousand or so working in the different factories of Sarap’s 3rd party manufacturers and outsourced agencies.

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2 Research Design & Methodology The construction of this paper needed several facts and information which were obtained primarily through public and private sources alike. The websites of the following government agencies were accessed to get the necessary and pertinent information needed as references for this study: §

National Statistics Office – www.nso.gov.ph

§

Bangko Sentral ng Pilipinas – www.bsp.gov.ph

§

Department of Trade and Industry – www.dti.gov.ph

§

National Economic Development Authority – www.neda.gov.ph

§

Securities and Exchange Commission – www.sec.gov.ph

M e t h o d o lo g y Summary of Frameworks, Tools, Activities and Outputs for this Strategic Management Paper Framework Tools Activities Output Ten Essential Components of a Mission statement

Porter’s Five Forces Model David’s Functional Analysis

David’s Matching Tools

David’s Matching Tools

Mission Statement Evaluation/Formulation External Factor Evaluation (EFE) Matrix Competitive Profile Matrix (CPM) Internal Factor Evaluation (IFE) Matrix Internal-External Matrix (IE) TOWS Matrix SPACE Matrix Grand Strategy Matrix Quantitative Strategic Planning Matrix (QSPM)

General Environment Analysis

Mission and Vision Statements Opportunities and Threats

Industry Analysis

Implementing Strategies Norton and Kaplan’s Balanced Scorecard

7

Company Analysis

Strengths and Weaknesses

Strategy Formulation

Objectives and Strategies

Prioritization of Strategies

Recommended Strategies

Market Segmentation and Product Positioning Strategy Evaluation and Control

Action Plans Proforma Financial Statements Performance Measures

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Other research tools made available through Sarap were also used such as: §

Global Market Research Advisor

§

Global Market Research Retail Audit

§

Global Market Research Homepanel

§

ATP (Advance Tracking Program)

§

The Sarap Story (to quote brand values and corporate spirit)

§

Project Sarap – In-House Monitoring Study

L im it a t io n s

This strategic management paper is limited to the packaged soups business of Sarap Foods.

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3 Vision & Mission Amidst stiff competition in the fast moving consumer goods industry of cooking aids, Sarap’s commitment is most evident in its continued desire to perfect its business where it is currently playing a major role as a market leader in the packaged soups category.

3 .1 C u r r e n t V is io n a n d M is s io n S t a t e m e n t

3 .1 .1

V is io n

To be a Homemaker’s Best Friend.

3 .1 .2

M is s io n

With the help of our cooking aids, she is able to integrate her two desires: to nourish her family and nurture her relationships. She is able to create joyful, nutritious meal experiences. Through the meal she creates, she can make an impact on relationships with people around her to suit her personal agenda. She becomes an inspired cook and also an accomplished woman. This 2-fold “Daily Victory” renews her feeling of personal accomplishment and self-worth.

3 .1 .3 R e v i e w o f t h e C u r r e n t V is io n a n d M is s io n S tate m e n ts Sarap’s vision is currently designed as a brand capsule where it is succinctly described as such for a very targeted subject – the woman. It may be clear and compelling enough to refer to a ‘unifying focal point of effort’ since ‘cooking’ is considered to be a mundane household chore that is most often than not associated with the woman, especially in the Philippines.

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Vision C r it e r ia 1. Vivid image

E v a lu a t io n

no

2. Realistic

no

3. Aspirational

yes

To be a Homemaker’s Best Friend

However, as far as the vision is concerned, it seems to lack the aspirational yet realistic angle that is to inspire and move the team as one since it is stated in a manner of activity portraying not only commitment but conviction to do its part in realizing a dream. This is good in so far as marketing is concerned but as a business, it should be further enhanced to embody more meaning for all stakeholders. Similarly, the mission is reflective of the brand’s commitment as to what it can and will do. However, it doesn’t quite capture what the business is about in totality. If evaluated using the criteria of designing a mission statement, it would only be able to satisfy several components:

C r it e r ia

1. Customers

2. Products & Services

3. Markets 4. Concern for Survival, Growth & Profitability 5. Technology 6. Philosophy 7. Self-Concept 8. Concern for Public Image/ Nation Building

E v a lu a t io n

yes

With the help of our cooking aids, she is able to integrate her two desires: to nourish her family and nurture her relationships. She is able to create joyful, nutritious meal experiences. Through the meal experiences she creates, she can make an impact on relationships with people around her to suit her personal agenda. She becomes an inspired cook and also an accomplished woman.

yes

With the help of our cooking aids, she is able to integrate her two desires: to nourish her family and nurture her relationships. She is able to create joyful, nutritious meal experiences.

no no no no no yes

This 2-fold "Daily Victory" renews her feeling of personal accomplishment and self-worth.

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9.Concern for Employees 10. Nation Building

no no

Revised Vision and Mission Statements

3 .1 .4

V is io n

To be the most relevant and preferred cooking aid brand in the Philippines.

3 .1 .5

M is s io n

It is our reason for being to provide our customers nourishment and nurturing through joyful meal experiences created with 'The Sarap Effect', which makes a difference in the lives of Filipino people. Through Sarap's heritage and credibility, our cooking aids has earned its place as an established and delicious brand preferred in both retail and wholesale markets nationwide. By providing adequate training and a great professional working atmosphere ensuring commitment amongst our employees, we can further improve total business for all our stakeholders and sustain our presence. We are committed to continue studying and understanding evolving demands through research in order to continuously develop solutions to our customers needs for the changing times.

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3 .1 .6 R e v i e w o f S a r a p ’s R e v i s e d V i s i o n a n d M i s s i o n S tate m e n ts

Vision C r it e r ia 1. Vivid image

2. Realistic

yes

E v a lu a t io n To be the most relevant and preferred cooking aid brand in the Philippines. preferred cooking aid brand in the Philippines.

3. Aspirational

yes

To be the most relevant and preferred cooking aid

yes

C r it e r ia

E v a lu a t io n

yes

It is our reason for being to provide our customers nourishment and nurturing through joyful meal experiences created with 'The Sarap Effect', which makes a difference in the lives of Filipino people.

2. Products & Services

yes

Through Sarap's heritage and credibility, our cooking aids has earned its place as an established and delicious brand preferred in both retail and wholesale markets nationwide.

3. Markets

yes

retail and wholesale markets nationwide

yes

By providing adequate training and a great professional working atmosphere ensuring commitment amongst our employees, we can further improve total business for all our stakeholders and sustain our presence.

1. Customers

4. Concern for Survival, Growth & Profitability

5. Technology

yes

6. Philosophy

yes

7. Self-Concept

8. Concern for Public Image/ Nation Building

We are committed to continue studying and understanding evolving demands through research in order to continuously develop solutions to our customers needs for the changing times. It is our reason for being to provide our customers nourishment and nurturing through joyful meal experiences created with 'The Sarap Effect', which makes a difference in the lives of Filipino people.

yes

Through Sarap's heritage and credibility, our cooking aids has earned its place as an established and delicious brand preferred in both retail and wholesale markets nationwide.

yes

It is our reason for being to provide our customers nourishment and nurturing through joyful meal experiences created with 'The Sarap Effect', which makes a difference in the lives of Filipino people.

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9.Concern for Employees

10. Nation Building

yes

By providing adequate training and a great professional working atmosphere ensuring commitment amongst our employees, we can further improve total business for all our stakeholders and sustain our presence.

yes

It is our reason for being to provide our customers nourishment and nurturing through joyful meal experiences created with 'The Sarap Effect', which makes a difference in the lives of Filipino people.

The vision and mission should be cascaded to the employees of Sarap by hanging posters of it in strategic locations in the office, making it part of the orientation and posting it on the website.

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4 External Assessment There are several external forces that affect the packaged soups industry. This strategic paper will establish these realities and make it more relevant by translating it in terms of opportunities and threats for the brand.

4 .1 E c o n o m i c F o r c e s 4.1.1 OPPORTUNITY : Less but Frequent Purchases of Goods by Consumers F ig u r e 1 : F r e q u e n c y a n d V o lu m e p e r T rip o f C o o k in g A id s

FREQUENCY 24

25 12

MSG

14 7

ROOTS

11

7

CUBES

12

FLAVORINGS

6

7

SINIGANG

3

3

PACK SOUPS

VOLUME PER TRIP 32 20

16

22

28

25

19

15

24

14 2

MSG (gm)

ROOTS (gm)

CUBES (gm)

YTD05

FLAVORINGS (gm)

SINIGANG (gm)

2

PACK SOUPS (pc)

YTD06

Source: Global Market Research Homepanel

Indicative of how difficult life is becoming, more and more, it can be observed that people are really trying to live on a day to day basis. Filipinos spend less whenever they shop or buy commodities. As much as possible only what they need for the day or for a short span of time is what they purchase. However, the frequency of which is increasing. They won’t mind going through the hassle of having to buy again especially once the need for it arises. Relative to the uptrend in the frequency, the quantity of what they purchase is lessening. In the case of Sarap, a ‘shell box’ has 2 packaged soups and it can be

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bought at Php 9.50. However, since 2005, the trend of purchasing just 1 packaged soup (11 gms) has more than doubled and this phenomenon would most likely continue on as traders are adjusting towards shoppers buying habits, selling by the packaged soup and more shoppers are moving towards this direction as well. F ig u re 2 : V o lu m e S h a re o f 1 1 g m s p u rc h a s e

VOLUME % SHARE

85 89 85 84 84 85 81 82 81 81 81 92 92 92 93 92 87 90 87 89 89 89

others 11GM

8

8

7

15 11 15 16 16 15 19 18 19 19 19 8 13 10 13 11 11 11

e

4w

4w

e

Ja n 3 Fe 0 2 0 4w b 2 05 e M 72 00 4w ar e 27 5 4w Apr 2 0 2 05 e M 42 a 00 4w y e 22 5 Ju 2 0 4w n 1 05 9 e 4w Jul 200 5 1 e A 7 4w ug 200 1 5 e S 42 00 4w ep e 11 5 O 20 4w ct 0 e 09 5 N 4w ov 20 0 5 e 0 D 6 4w ec 200 5 e 04 J 20 4w an 0 5 0 e J 1 4w an 200 6 2 e F 9 4w e b 200 6 2 e M 62 00 4w ar e 26 6 4w Apr 2 00 6 2 e M 32 00 4w ay e 21 6 Ju 2 4w n 1 006 8 e 4w Jul 200 6 1 e A 6 4w ug 200 1 6 e Se 3 2 00 p 10 6 20 06

8

Source: Global Market Research

Currently, there is no SKU that addresses a single packaged soup purchase. Only traders’ own the initiative of opening a shell box (2 packaged soups) or a pantry box (6 packaged soups) and sell by the packaged soup. The current strategy can demand a bit more effort from the trader but they do not mind selling in ‘tingi’ so as long as they are able to sell more. As a risk due to this phenomenon, Sarap’s sales may experience a slight dip since shoppers who are accustomed to buying a shell box may resort to buying just a packaged soup and this immediately cuts Sarap’s sales into half. However, this threat may also be seen as a golden opportunity because packaged soups in a smaller format is something that is prevalent in other countries and this just might be the solution to this rising phenomenon.

4.1.2 THREAT: Decrease in Food Expenditure at the Expense of Other Commodities

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From 1991 to 2003, family expenditures have been growing at a double digit rate per annum. If we look closely into this expenditure type, it can be drawn that food and housing is what families spend on the most – nourishment and shelter. However, unlike housing which is more stable in the 14% levels, +/-1%, food, specifically, food consumed in-home has decreased significantly at the expense of several expenditure types and shifting consumption from in-home to out-of-home. This is an indication of shifting behaviour or value wherein food is sacrificed for something deemed more important such as convenience, transportation and communication, personal care effects, and the like. T a b le 1 : D is t r ib u t io n o f T o t a l F a m ily E x p e n d it u r e b y M a j o r E x p e n d it u r e G r o u p

Expenditure Group

1991

1994

1997

2000

2003

Total Family Expenditures (in million pesos)

623

863

1413

1802

2005

Percent

100

100

100

100

100

Food

48.5

47.8

44.2

43.6

42.6

44.7

43.5

39.5

38.7

37.3

3.8

4.2

4.7

5.0

5.3

13.5

14.1

15.3

15.1

14.3

Transportation & Communication

5.4

4.7

5.6

6.8

7.4

Fuel, Light & Water

5.7

5.5

5.3

6.3

6.5

Education

3.0

3.7

3.7

4.2

4.0

Personal Care & effects

3.3

3.2

3.3

3.6

3.9

Other expenditures

1.9

1.7

3.0

2.9

2.9

Clothing, footwear & other wear

3.7

3.5

3.3

2.7

2.9

Household operations

2.7

2.6

2.3

2.3

2.2

Miscellaneous Expenditure

3.4

3.6

3.4

3.3

3.7

Special Occasions

2.4

2.6

2.4

2.4

2.5

Gifts & contributions to others

1.0

1.0

1.0

0.9

1.2

Households furnishings & equipment

2.4

3.1

3.3

2.7

2.8

Taxes paid

1.4

1.4

2.5

2.1

2.2

Medical care

1.8

2.3

2.2

1.9

2.2

Tobacco

1.7

1.4

1.3

1.1

1.1

Alcoholic beverages

1.0

0.9

0.9

0.7

0.7

Recreation

0.4

0.4

0.4

0.5

0.5

Food consumed at home Food regularly consumed outside the home Housing

Source: National Statistics Office

In other countries, eating out and the shift of home-cooked meals to easy-toprepare, ready-to-eat format defines in-home consumption. In the Philippines, though meals are important and is a big thing in so far as family members look

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forward to this occasion of eating together, it is an inevitable event that more and more people will be living a very fast paced lifestyle and time would just be so little to even have time to prepare and dine over a ‘home-cooked’ meal.

4 .2 S o c io - C u l t u r a l , D e m o g r a p h i c , a n d E n v i r on m e n t a l F o rc e s 4.2.1 OPPORTUNITY: Significant Distribution of Households in Visayas and Mindanao areas Given the statistics (Year 2000) below at 2.5% year-on-year growth rate, the Philippine population is currently estimated to be 85 Million with 16 Million households nationwide.

T a b le 2 : T o t a l P h ilip p in e P o p u la t io n ( Y e a r 2 0 0 0 )

Source: National Statistics Office

The Philippines is known for its’ 7,107 islands scattered all over the different regions of the country - Luzon, Visayas and Mindanao. It is quite evident that each region has its’ own distinct culture. However, it is also the very distinct differences in culture that make up what the Philippines is in itself.

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There are millions of Filipinos residing in each region and what clicks in one region most likely differs in another. There is an obvious culture that dominates over each and this makes each one ‘unique’ in its own right. With over 40% of the Philippine population in Visayas and Mindanao, there is a huge potential to make it big in these areas, just the way Luzon is being valued as the standard. However, if treatment for all regions is done in a national scale, it will not be appreciated as much in other parts of the country where it is very different (i.e. Visayas and Mindanao). Though there is the potential to be a big hit in the southern part of the country, one will only succeed if they are addressed in their own ‘tongue’, relating to them in their own ways. F ig u r e 3 : D is t r ib u t io n o f H o u s e h o ld P o p u la t io n b y R e g io n

% Distribution of Household Population by Region 24

24

21

20

21

22

21

21

14

13

1995

2000

Mindanao Visayas South Luzon North Luzon NCR

Source: National Statistics Office, Global Market Research

The different regions of the Philippines are evidently distinct from each other. Though one country, its culture is translated and brought to life ‘locally’. This is very much apparent in the different festivals, dialects, delicacies and the like of the local areas. Given this, there really is an opportunity for Sarap to look into each region as a distinct market in itself.

4.2.2 OPPORTUNITY: Fast-paced Lifestyle Calls For ‘Quick And Easy’ Dependable Solutions

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It is inevitable that as time becomes more scarce, people would tend to look for ‘solutions’ that would help them continue what they used to or even do more amidst time constraints. This need would then be answered best by products that are seen to hinge on convenience as a selling proposition whilst quality and affordability are also important considerations especially to the Filipino market. In the latest retail audit done by Global Market Research, on analyzing shopper’s behaviour and category trends, it was gleaned from the study that several categories are out performing others primarily because of the aforementioned ‘must haves’. F ig u re 4 : F o o d C a te g o ry T re n d s

FOOD TRENDS 2006 60

50

40

30

20

10

GROWING

SLIGHTTLY INCREASING

soft drinks

catsup

tomato paste

chocolate

ice cream

instant noodles

packaged water

biscuits

packaged soups

spaghetti sauce

lollipops

coffee mixes

spirits

baby food

flavorings

pet foods

tea drinks

yogurt

0

STABLE

According to the study, the reasons for the good performance of certain categories are due to the following: •

Introduction of new brands that come in convenient format and an affordable price allowed new users to get into the category or consumer needs are met.

•

Introduction of new flavors allowed current users to increase their range.

•

Downsizing as earlier mentioned in the growing trend of less but frequent purchases of shoppers/ consumers.

•

Promotional activities that drive purchase

The study was also able to determine that the 5 consumer benefits that drive product launches are as follows:

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•

Value for money

•

Vanity

•

Variety

•

Availability

•

Convenience.

Convenience is indeed a proposition that consumers will be vying for more and more since time is becoming scarce and the pressure of having to do what they used to or even more or better is definitely something people are worried about. This is also the case in cooking. There is less time to cook or room for error is no longer a luxury since every minute is valuable. But food is something that is said to be the glue that keeps the family together so it is very important that good food is served even if life has become extremely fast in a sense.

4.2.3 OPPORTUNITY: More Women are Joining the Work Force and Becoming More Independent Based from the National Statistics Office, the proportion of women in the labor force has increased and primarily because nowadays, dual-income households are becoming a common practice since sustaining a certain lifestyle has become quite a challenge. It has become normal for women to join the work force to help their husbands support the family, to earn and be independent altogether. Even the employment rate among women is said to be higher than the men and the age group of which is higher between 25-44 years of age. Probably because there is more to being a female - the available job would probably require the female gender or working attributes of that one. F ig u r e 5 : W o m e n in t h e W o r k F o r c e

The proportion of women in the labor force has increased

Employment rate among women is higher than men and half them are between 25-44 yrs old

LABOR FORCE % SPLIT BY GENDER

% FEMALE EMPLOYMENT by Age- as of 2006 Q2

38 38 38 38 38 39 39 39 38 39 FEMALE MALE

2006 Q2

2006 Q1

2005 Q4

2005 Q3

2005 Q2

2005 Q1

2004 Q4

2004 Q3

2004 Q2

2004 Q1

62 62 62 62 62 61 61 61 62 61

15-24 25-34 35-44 45-54 55-64 65 & Above

19 25 23 18 10 4

Source: National Statistics Office

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However, joining the work force does not excuse women from their roles at home which make it doubly hard for them to balance. To be a good wife and mother, she has to be able to keep up with the chores. Even if there is enough help around, it is still her who is responsible for managing everything. The typical household chores of a woman are to keep the house clean, do the laundry, to cook and a whole lot more. Cooking can be seen as a mundane household chore but this is where Sarap tries to come in and help. Whilst Sarap’s competitors say that the secret is in what you use therefore attributing it to their product, Sarap merely empowers the woman thereby branding itself as ‘A Woman’s Best Friend’. For Sarap, it is all about the woman.

4.2.4 OPPORTUNITY: Still ‘Low’ Dish Penetration of Packaged Soups in Regularly Cooked Soupy Dishes In the realm of cooking aids and dishes, packaged soups are said to be best for soupy dishes since a packaged soup format locks in the flavour of the broth that is crucial in every soupy dish base. Whilst it is also used in sautéed and saucy dishes, there are other cooking aids best positioned to work with these dishes. Project Sarap is a month long usage, attitude & image study with diary method conducted by Global Research for Sarap Philippines that looked into cooking aids in dish preparation in the Philippines. It was nationwide in scope with about 1,100 female respondents from class ABCDE, aged 25-45 years old, purchase decision makers and in-charge of cooking at home.

F ig u r e 6 : C o o k in g A id s P e n e t r a t io n in D iffe r e n t D is h T y p e s

SAUTEED 11%

OTHERS 7%

FRIED 31% SINIGANG 6%

The PENETRATION of packaged soups into Soupy dishes is just 12%

SOUPY 25%

SAUCY 20%

Source: Project Sarap

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The study reveals that out of all dishes prepared in a month, 25% are soupy and of which, only 12% has a packaged soup in it. If further quantified this would mean that out of a hundred soupy dishes, only 12 were prepared with a packaged soup. Hence, there is still a huge potential by increasing the penetration of packaged soups in soupy dishes. Probably, the most practical thing to do is to look into what kind of soupy dishes are actually being prepared and Sarap should increase the relevance of using packaged soups in these dishes so as to be made a part in the must haves in preparation of it.

4.2.5 THREAT: People are Becoming More Health Conscious With the increasing importance of living a healthy lifestyle, individuals and manufacturers alike are becoming more conscious about what constitutes a certain product. This growing concern about what is good for you does not necessarily mean one would have to do away with all unhealthy food since it would be extremely difficult and quite impossible too. Sometimes, there is a compromise between health and pleasure as properly described in Datamonitor’s debit and credit lifestyle article. D A T A M O N I T O R ’S V I E W : 1

•

I n b a la n c in g h e a lt h a n d p le a s u r e c o n s u m e r s a r e m o v in g t o w a r d s a d e b it s a n d c r e d it s life s t y le

Increasingly informed consumers have become more aware of the link between diet,

health,

well-being

and

performance.

However,

in

an

increasingly

individualized, high-paced and pressurized society, health intentions often collide with the need for moments of escape, reward and comfort. As consumers

become

more

informed

about

health

issues,

they

are

accommodating the conflicting needs in an increasingly calculating ‘debits and credits’ approach to their lifestyle.2 •

I n a d e b it s a n d c r e d it s w o r ld ‘o c c a s io n s ’ b e c o m e s k e y

Consumer behavior continues to polarize between a focus on functionality, convenience and health at more routine moments and pure uncompromising indulgence at special, escapist or reward occasions. As a result, it becomes 1

DATAMONITOR Market Analysis Experts Future Briefings Debit and Credit, Balancing health and pleasure 2 ibid.

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increasingly important to look beyond the traditional one-dimensional focus on ‘consumer groups’ and towards ‘consumer occasions’.3 For cooking aids, wherein MSG or sodium content are being watched out for, consumers would be pleased to know that manufacturers are conscious of the allowable dosage in every unit. There are several wellness campaigns from different manufacturers that would promote what is ‘good for you’. In the case of MSG, according to expert opinions on monosodium glutamate by Steve L. Taylor, Ph.D. and Susan L. Hefle, Ph.D. of the Food Research Allergy and Resource Program, Institute of Agriculture and Natural Resources of the University of Nebraska, Lincoln:

“MSG is a flavor enhancer that is added to many foods but which also occurs naturally. MSG is the sodium salt of one of the most common amino acids in the human body… MSG occurs naturally in virtually all foods.”4

4 .3 T e c h n o lo g ic a l F o rc e s

4.3.1 OPPORTUNITY: Increasing use of the Internet Internet usage in the Philippines has been growing rapidly although penetration rate still remains low. Statistics on the country’s Internet usage are important decision-making variables for the government and companies doing business in the Philippines. Companies in the cooking aids industry are able to create websites that give customers nutritional information as well as a variety of recipes that use their cooking aids to create nutritious and delicious meals.

4 .4 P o lit ic a l, L e g a l a n d G o v e r n m e n t F o r c e s 4.4.1 THREAT: Political Instability Because of its history of people power and various EDSA uprisings, the Philippines is considered politically unstable. Charges of graft and corruption are constantly

3

ibid DATAMONITOR Market Analysis Experts Future Briefings Debit and Credit, Balancing health and pleasure 4

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being hurled at the current government and while the president controls the congress the possibility of impeachment though distant still looms over her. The extent of graft and corruption throughout the government poses a threat to multinational companies like Sarap who import many of the ingredients.

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5 Industry and Competitive Analysis 5 .1 I n d u s t r y A n a ly s is 5.1.1 THREAT: Growth of the Flavorings Category whilst the Packaged soups Category is Flat The packaged soups industry is Php 2 Billion in size. According to Global Market Research’s Advisor, the packaged soups market has been experiencing a slight setback as far as category growth is concerned, primarily because of the shift of the growth to the flavorings category which is currently Php1 Billion in size and is growing aggressively. F ig u re 7 : B a s ic S e a s o n in g s C a te g o ry G ro w th

Soup and Flavorings Category Growth Jan 2005 – Jun 2006 Category Sales

250,000,000

0% MAT Growth

200,000,000

150,000,000

+68% MAT Growth 100,000,000

50,000,000

Jan Feb Mar 2005 2005 2005

Apr May 2005 2005

Jun Jul Aug 2005 2005 2005

Sep Oct 2005 2005 Cubes

Nov Dec Jan 2005 2005 2006

Feb Mar 2006 2006

Apr May Jun 2006 2006 2006

Flavorings

Source: Global Market Research Advisor

The aggressive and rapid growth of flavorings is really a huge threat to the packaged soups industry, especially to Sarap who happens to be the market leader in packaged soups and happens to be a third player in the powdered flavorings category.

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F i g u r e 8 : F la v o r in g s B u s in e s s S iz e in t h e P h ilip p in e s

Source: Global Market Research Advisor

With a flavorings market rapidly growing and a packaged soups category that is flat, flavorings might sooner or later overtake the packaged soups market and this is not far from happening since it has already happened in other countries, where powdered flavorings were able to overtake the packaged soups business as far as market dominance is concerned. This event might also happen in the Philippines. In fact, the very phenomenal birth and aggressive growth of flavorings into the market mimics exactly what transpired in other countries. However, unlike the Philippines who sees this coming, other countries did not have any hunch of what was happening to their basic seasonings business. This is a similar threat being faced by the Sarap packaged soups business in the Philippines but with the familiarity of this occurrence, it is able to ready itself to defend its market leadership in the packaged soups category.

5.1.2 OPPORTUNITY: Lack of Differentiation Amongst Cooking Aids Brands In the minds of consumers, there is the need to reinforce branding and communication since differentiation amongst existing cooking aids brands is weak. Though there has been a lot of work done to help consumers distinguish which is which, there still lies the opportunity to really dominate and furthermore, own the category in the minds of our consumers by a single-minded strong brand proposition.

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5.1.3 THREAT: Versatility Proposition of Competitors Appropriate for any kind of dish and suitable for everyday cooking needs are versatility characteristics that competitors, both Misan and Yummy want to own in the minds of consumers. Whereas Sarap’s strategy is focused – packaged soups for soupy dishes and flavorings for meatiness, criteria is very distinguished from the rest and this is evidently shown when consumers are able to associate Sarap with these characteristics. F ig u r e 9 : B r a n d I m a g e P r o file

Source: ATP (Advance Tracking Program)

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5 .2 F i v e F o r c e s o f C o m p e t i t i o n M o d e l

Threat of New Entrants LOW

Bargaining Power of Buyers LOW

Rivalry among Existing Com petitors HIGH

Bargaining Power of Suppliers LOW

Threat of Substitute Products HIGH

In evaluating the Sarap Philippines packaged soups retail business using the five forces of competition, it can be said that there is no middle ground in this category. Primarily because of the complexity, there is low threat from new entrants, whilst both buyers and suppliers have low bargaining power. The real and bigger threats are those that come from substitute products and somehow, from existing competitors as these are one in the same companies that manufacture both commodities. This is also probably the same five forces evaluation of any fast moving consumer goods product such as the packaged soups.

5.2.1 Threat of New Entrants: Low Entering into the packaged soups business would require huge capitalization because not only does it entail some sort of technology that can actually transform all the ingredients into a ‘packaged soup’ but the whole production line that would eventually yield the finished goods. Also, other corresponding support that it would require to ensure success in bringing it to market would also mean more investment and resources.

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A new entrant would be competing with the big players, well-entrenched into the market and are actually brands of stable multinational companies such as Sarap, Yummy and Misan. Given this, it only means that the players in the market are well aware of their position vis-à-vis existing players in the industry. They are able to manage competition and the market may be considered as ‘sizeable’, measurable or for the market leader, Sarap is able to confidently say that they are the market. However, it may also run the risk of underestimating new players to come in and give them a run for their money.

5.2.2 Bargaining Power of Buyers: Low Most consumer goods products have the liberty to ‘design’ their brand mix without limitations or subject to the mercy of buyers as long as it is sound enough. By ‘sound’ it simply means that the mix is designed for the right target consumer and this is most evident in the 4 P’s of marketing – product, price, place and promotion. However, for a consumer goods product such as Sarap, the inputs of buyers are still held important. This is most evident in the way it values feedback for a product that is just about to be brought to market, a product that is already out and doing very well and most especially for a product that is on the rocks. The danger with this is that if buyer’s inputs, customers and consumers alike are taken for granted, the brand mix put together just might be ‘off’ as far as filling in the gap or answering a consumer need is concerned.

5.2.3 Bargaining Power of Suppliers: Low Regional sourcing is enjoyed by brands that are managed by multinational companies because these companies have the muscle to put together volumes from several countries all over the world and use it as a leveraging factor to get the best deals from the supplier or country from anywhere in the world. Given this worldwide phenomenon brought about by free trade, it makes it easier and cheaper for the manufacturer to acquire the raw materials and other supplies it needs to produce the finished goods where it is cheapest then produce it in the

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market that would also be wisest in terms of cost and regulations which then yield the finished goods that will be shipped and sold to the different markets all over the world. In the traditional buying practice by manufacturing companies, they are able to have and sustain partnerships with their suppliers. Partnership may be in terms of the bargain price given to them and other non-monetary terms as well such as customer service, the sharing of the same vision, and the like. This is quite difficult or it becomes more challenging given that the suppliers in the new world are separated by bodies of water. Hence, the relationship becomes purely supplierprincipal in nature.

5.2.4 Threat of Substitute Products: High Every consumer product should always innovate and want to be better not only because it is a promise it has made to its consumers the moment they brought their product to market but there is the reality that substitute products will always try to make customers switch to a cheaper or better alternative. It can be said that the packaged soups business is ‘under-attack’ by the powdered flavorings category. This new player is a big threat since it is aggressively growing and eating up into the shares of the packaged soups market. When this happens, value lost is a risk that the packaged soups market is faced with because it means there is not much differentiation in terms of ‘usage’.

5.2.5 Rivalry Among Existing Competitors: High With the whole competitive activity of stealing shares from competitors, the very existence of competition motivates all players to be the best there can be in the category. Continuous improvement is definitely an advantage that consumers can expect from their leading brands since battling with other big players in the category is an everyday reality that every brand wakes up to. Sarap’s dominance in the category is something that is very much valued and watched out for by the brand management team. In a high-heat category such as packaged soups, brand switching is not a farfetched possibility since this is a very vulnerable category. Vulnerability in the

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sense that once one stops making noise or buzz in media or on-ground, further aggravated by competition, shares are sure to be at risk. The fact that Sarap is always present above-the-line or running some activity instore, shows it wants to always stay top of mind amongst consumers. Women refer to it as their ‘best friend’ in cooking. Oftentimes, it is part of their ingredient list and this is because Sarap has always reminded women about the value of Sarap packaged soups. This place however can and will be easily foregone if competition such as Yummy and Misan, both two big and very able players decide to give Sarap a run for their money. At the end of the day, all these are brands that claim to be the best and say that they have the ability to deliver the results. It only takes a consumer to try and experience it once for them to decide what brand to continue purchasing. Also, losses cannot only be quantified for current markets but for possible new category entrants as well.

5 .3 C o m p e t i t i v e P r o fi l e M a t r i x ( C P M ) C R IT IC A L S U C C E S S F A C T O R S

1 2

Product Quality & Performance Effective Sales Distribution

Wt

S a ra p Rating Score

M is a n Rating Score

Yum m y Rating Score

0.30

4

1.20

2

0.60

3

0.90

0.20

3

0.60

2

0.40

1

0.20

3

Market Acceptability

0.15

4

0.60

1

0.15

2

0.30

4

Brand Management

0.10

4

0.40

2

0.20

2

0.20

5

Customer Loyalty

0.15

3

0.45

2

0.30

2

0.30

6

Pricing

0.10

2

0.20

4

0.40

3

0.30

TOTAL

1

3 .4 5

2 .0 5

2 .2 0

Note: weight score: 0.0 (not important) to 1.0 (very important) Rating score: 4= major strength, 3= minor strength, 2= minor weakness, and 1= major weakness

In determining competitive superiority of the players in the category, the following critical success factors have been identified: 1. Product Quality & Performance: The true measure of a brand’s commitment to

deliver what the consumer expects because products are bought or in marketing they say brands are ‘hired’ to answer a need. Hence, the utmost consideration for

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a product’s success is its ability to play the part which is mirrored in its quality and performance. •

Sarap packaged soups was able to garner market leadership primarily because

of product quality and performance. In several consumer tests, it does not fail to deliver the best ‘broth savouriness’ results vis-à-vis competitors and so it got a score of 4. •

Yummy packaged soups is a far second player in the packaged soups category.

It got a score of 3 only because in the absence of Sarap, it will be the go-to brand to fulfill the need for packaged soups especially in broth preparation. •

Misan got a score of 2 because though it is categorized to compete in the

packaged soups market its format is in powder form and the distinct qualities of a packaged soup versus powder are quite obvious which is why the whole ‘Sarap’ campaign of Sarap worked. 2. Effective Sales Distribution: The key to success for a consumer goods product

such as the packaged soups is availability in all channels. In the Philippines, downline channels such as sari-sari stores are very crucial. Whereas other channels such as supermarkets, groceries and market stalls also play a significant role for it caters to a different set of shoppers. In Global Market Research, effective sales distribution is actually measured by what they call Numeric In-Stock or NIS. With a given universe, it will give you data on how widely distributed your product is. Another tier of analysis on effective distribution is the Weighted In-Stock or WIS reading which will generate quantities in each distribution point. An indication of whether or not there is enough stock cover on-shelf or in the stock room. An account’s acceptability however greatly depends on offtake. This is sometimes referred to as secondary sales, our customer’s sales to their customers (our endconsumers). Indirectly, offtake is also indicative of shelf turnover, how often do retailers replenish their stocks on-shelves. No retailer would be willing to purchase products that are slow moving or worse, not moving at all because their shelves would be useless in terms of income generation. This may be the case for products that are not relevant, hence, do not fill in a need or in most cases the demand for

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that product is being monopolized by a bigger player as the case with Sarap packaged soups. F ig u r e 1 0 : N u m e r ic I n - S to c k T r e n d e d C o m p a r is o n b y C h a n n e l

Junichero Vane Blair

Source: Global Market Research Advisor

•

Sarap got the highest score because it dominates the market and is more often

than not present in all channels. In fact, if there was only one brand being carried by the trader, it would surely be Sarap. However, it only got a score of 3 because there are still opportunities for improvement as far as distribution is

concerned, most especially in downline channels. This is because of practical reasons - Sarap’s distribution strategy does not rely on direct distribution only to get its products in the stores of all of the accounts especially far-flung downline channels. Its distributor’s profitability is compromised beyond a certain proximity limit. Thus, Sarap had to explore other ways and means to get its products in the most crucial channels (i.e. sari-sari stores). Team Sari Sari is an in-direct distribution (IDD) strategy that caters to sari-sari store owners who prefer to buy their stocks from nearby groceries rather than being serviced directly by cash van sales. This solution does not only provide answers to Sarap’s distributors profitability dilemma but rather it was also able to give the sari-sari store owners the liberty to come and go or rather, purchase what they need and when they need it. Furthermore, since Sarap’s Team Sari Sari is targeted to a captured and relevant market (sari-sari store owners), they were able to design the whole program in such a way that it talks to them in a manner that would be clearly understood and appreciated. It was designed to be a free membership and earn points whenever you buy type of scheme. Thus, even the prizes for redemption are exactly what the sari-sari store owners want and need. This is a brilliant way to temporarily hold off the

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need to cover stores directly. However, there is still no substitute for direct coverage because it not only allows one to sell per se but rather, it also gives Sarap the edge to merchandise and to create partnerships with traders through our regular visits. Eventually, this is still the direction where Sarap distributors want to lead to as a key distribution strategy. It is just a matter of time or rather a strengthening of portfolio that needs to be done so that with every trip, it is well worth the distance because Sarap’s distributors would have sold a significant amount because most if not all the products they carry are relevant in the eyes of its traders or more importantly, to its trader’s customers, its endconsumers. •

Yummy packaged soups and Misan both got a score of 2 because though these

brands are carried by companies that also have the muscle or the capability to distribute, they lost against Sarap for the reality that oftentimes, trader’s have a limited budget and since Sarap is pretty much the category in itself or has the greatest demand, the trader would tend to just purchase Sarap. It still got a score of 2 because there are also some traders who would want to have at least 2 or 3 other brands apart from the market leader in their shelves to be able to also cater to customers of Yummy and Misan or for new customers, to give them a choice amongst the 3 category players. 3. Market Acceptability: An indication of a brand’s success is market acceptability.

It signals dominance and stronghold into the category. More importantly, market acceptability is also an indication of consumer trust in the brand. •

Sarap packaged soups is market leader in the packaged soups category with

over 90% market share it got a score of 4. •

Yummy packaged soups got a score of 2 because it is next to Sarap with an

estimated 8% market share. •

Misan has negligible share values at about 2% and so it got a score of 1.

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F ig u re 1 1: M a rk e t S h a re s ( P a c k a g e d s o u p s M a rk e t)

Junichero Vane Blair

Source: Global Market Research Advisor

4. Brand Management: A brand’s performance is highly dependent on the

marketing plan that companies design for it. Plans are dependent on company strategies. Not all plans are actually geared to succeed, some are designed to fail. As absurd as it may sound but brands, especially those that are part of a portfolio are managed to play a part in the bigger scheme of things or rather, to deliver not just brand targets but more importantly, business targets. Brands are a means to achieve and resources are allocated to do brand management. Whilst brand management may pertain to only managing a brand or a portfolio of brands, there are also ways on how to go about it especially given dynamic times, companies should be flexible enough to adapt to changing times versus traditional ways of doing things. •

Sarap is the biggest food brand and the packaged soups category is considered

to be the core category being managed under the Sarap brand. This is a highly valued brand and category so the company gives more than what it requires to ensure superb brand management. Given the new structure, Sarap got a score of 4. This is needed in order to compete. On people resources, the local Sarap brand management team or brand building team comprise of a group brand manager with several brand managers that manage the different categories of Sarap and a particular region as well. On packaged soups alone, it has a brand manager looking after the whole range and a dedicated resource looking after a specific variant for a specific region. In conjunction to this local structure, Sarap, being multinational in nature has brand development counterparts in the region who ensure that all details pertaining to the brand are tied-up to the global brand strategy.

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•

Yummy packaged soups got a score of 2 because the brand Yummy is just

managed as one of the many brands bulked together in the food and culinary milks business unit wherein there is a head leading the team, under him is the food group product manager who has respective managers for the different categories – meal solutions, flavor world, noodles, etc. Depending on the size of the category, assistant brand managers and executives are assigned. There is no marketing director, since each business unit operates on its own and reports directly to the CEO. This structure is unique but tends to be missing out on the opportunistic advantages that one category can benefit from another since the business units are separate entities altogether and the only point of reconciliation is already at the CEO’s level whose concern is too many. •

Misan got a score of 2 because the way the brand management team is

structured is still a bit on the traditional side though wisely integrated between sales (category) and marketing (section). These functions are supported by brand managers, assistant brand managers and brand assistants. The brand manager may directly report to the marketing manager in the absence of a section manager whose function directly relates with the end consumer whilst the category manager in the sales function coordinates directly with trade marketing for trader concerns. 5. Customer Loyalty: With the proliferation of all sorts of media and on-the ground

activities, loyalty is so easy to win and lose. Even though market shares are high and would seem to be stable enough, it still faces a lot of risk. It has been said that it is easier to make a customer stay because all you have to do is to keep them happy whereas, if you lose a customer, it would be more difficult to win them back or to look for new ones. •

Sarap packaged soups got a score of 3 for it is able to satisfy and retain its

customers. •

Yummy packaged soups has a following and so it got a score of 2 being second

player next to Sarap. •

Misan also got a score of 2 because interestingly enough, this player has a

niche market following and probably because of its product design, an Misan variant for a particular soupy dish. With this strategy, it was able to create and

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sustain its own market somehow different from that of what Sarap and Yummy currently caters to. 6. Pricing The only criteria where Sarap got a 2 rating is in pricing. Below is a

summary of competitive pricing for comparison: T a b le 3 : C o m p a ra tiv e P ric e L is t

B R A N D / D E S C R IP T IO N

P r ic e P e r C a s e I n c l. Tax (LPA T /cs)

P r ic e P e r P ie c e I n c l. Tax (LPA T /p c)

SRP (p er p c)

% T rad e M a r g in

A b s o lu te T rad e M a r g in

S A R A P (a s o f O c to b e r 2 0 0 6 ) SAR AP PACKAG ED SO UPS

PACKAGED SOUP 12X24X22 G

2,523.25

8.76

9 .5 0

8%

0.74

PACKAGED SOUP PANTRY 72X66 G

1,886.98

26.21

2 8 .0 0

7%

1.79

PACKAGED SOUP 12X24X22 G

2,345.88

8.15

9 .2 0

11%

1.05

PACKAGED SOUP PANTRY 72X66 G M IS A N (a s o f F e b 2 0 0 6 )

1,686.10

23.42

2 5 .5 0

8%

2.08

12%

1.12

9%

2.19

Y U M M Y (as of Feb 2 0 0 6 ) YUM M Y PACKAG ED SO UPS

M IS A N

PACKAGED SOUP 12X24X22 G

2,328.40

8.08

9 .2 0

PACKAGED SOUP PANTRY 72X66 G 1,678.20 Source: Sarap Foods Trade Marketing Group

23.31

2 5 .2 0

Sarap’s pricing is affordable but in comparison to its competitors, it is the most expensive, both for the trader and the consumer. For the same commodity, the trader would have earned more since the margins are bigger with Yummy and/ or Misan, whilst the consumer would have spent less. However, since Sarap has established its category superiority well enough, consumers are willing to pay a bit more for a trusted brand such as Sarap packaged soups and traders are willing to lose a few centavos compensated by volume sales.

5 .4 C o m p e t i t o r s There are 2 major competitors considered in the packaged soups industry and these are Yummy packaged soups manufactured by Yummy Philippines Inc. and Misan. However, posing as a huge threat to Sarap’s packaged soups business and market leadership more than its existing competitors in the category are

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flavorings, of which Misan is the market leader with 67% market share and Yummy is a far-second while Sarap ranks 3rd in this category.5 Whilst market shares indicate positions in the category, this is further defined by the growth registered by each player. Hence, not only is the category in itself expanding but the players, due to its own efforts as well also pose huge growth themselves. In terms of communication, it had become so difficult for consumers to tell the difference already since airwaves are bombarded by the same thing and hence creating enough jolt to really make the market react in a way that made the flavorings grow at a very rapid pace. In 2006 alone, there had been so many activities done by the 3 players both above-the-line and below-the-line, making competition stiffer than ever before and as a result, Sarap’s shares suffered in light of not just packaged soups but combined packaged soups plus flavorings. F ig u r e 1 4 : C o m b in e d P a c k a g e d s o u p s + F l a v o r i n g s S h a r e s o f E a c h P l a y e r

Combined Basic Seasonings Shares of Each Player Jan 2005 – Jun 2006

11

24

65

Source: Global Market Research Advisor

5

Global Market Research Advisor

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5.4.1 Misan Corporation In Misan’s company profile, it is said that their passion is to produce the best food seasoning in the world and make it available in every Filipino home. In 1962, Misan was locally produced. Misan Flavor Mix was launched in 1991. Today, Misan Philippines Corporation ranks as one of the top 200 corporations in the Philippines. Misan’s network has grown to 8 regions overseeing the operations of 31 sales stations and 9 depots. Misan’s slogan is associated with good food and good life.

5.4.2 Yummy Philippines, Inc. In Yummy Philippines, Inc 2005 corporate profile, it is said that Yummy is proud to bring the best food throughout the stages of Filipino consumer’s lives. When it started in the 1960’s, Yummy used to distribute several categories that are not necessary in line with food just to keep the company afloat due to strict government regulations on importation. In 1988, Yummy became a wholly owned subsidiary brand by Yummy SA. “Today, Yummy produces and markets products under some of the country’s well known brands. Its product range has expanded to include coffee, milk, infant nutrition, infant food, beverages, non-dairy creamer, food, ice cream and chilled dairy, breakfast cereals, confectionery, and pet care. Over time, Yummy’s quality and affordable products have become strong brands, number 1 or number 2 in their various categories, and a part of the Filipino way of life.” Competitive

rivalry

amongst

the

three

multinational

companies

is

very

professional. In fact, the dynamic activities and creative of which may be greatly attributed to the healthy competition that these players pose against each other. The very brands and the categories that are being considered in this study experiences the typical yet expected surprises in any competitive game.

Sarap despite being market leader experiences a lot of challenges mostly due to the Yummy and Misan’s expertise in the category. This puts more pressure to the leading brand because it cannot afford to slip in any way or else competition may do some drastic moves that may take away its reign and leadership.

Yummy being a far second player’s strategy is to not allow Sarap to monopolize the market. For years now, it has kept its packaged soups in the market despite

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the difficulty to grab share from Sarap. It has not had any massive campaign over packaged soups but through brilliant basics – availability in retail channels, it has established its presence. It also tries to be a strong player in other categories as a way to attack Sarap’s core business. They have been fairly successful with it with Sarap which has tremendously grown even faster than the whole category. Misan on the other hand is an Misan brand that is more of a niche market player.

This may be just 2% of the market now but it should be taken for granted as this is also how Misan started too. Knowing especially that Misan’s expertise is in savoury and cooking aids, it is a given that Misan very well knows this game.

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6 External Factor Evaluation Matrix (EFE) Key External Factors

W e ig h t

R a t in g

W e ig h t e d S co re

O P P O R T U N IT IE S

1-E

Less but frequent purchases of goods by consumers

0.05

2

0.10

2-SC

Fast-paced lifestyle call for 'quick and easy' dependable solutions

0.15

4

0.60

3-SC

More women are joining the work force and are becoming more independent

0.10

3

0.30

4-SC

Significant distribution of households in Visayas and Mindanao areas

0.10

2

0.20

5-SC

Still low 'dish penetration' of packaged soups in regularly cooked soupy dishes

0.05

3

0.15

6-C

Lack of 'Differentiation' amongst cooking aids brands

0.10

2

0.20

7-T

Increasing use of the internet

0.05

3

0.15

THREATS

1-E

Decrease in food expenditure at the expense of other commodities

0.05

2

0.10

2-SC

People are becoming more and more health conscious

0.05

2

0.10

3-C

Growth of the flavorings category

0.15

2

0.30

4-C

‘Versatility' proposition of competitors

0.10

2

0.20

5-P

Political instability

0.05

1

0.05

TO TAL EFE SCO RE

1 .0 0

2 .4 5

E=Economic, SC=Socio-cultural, P=Political, T=Technological, C=Competitive

O P P O R T U N IT IE S

1 - E L e s s b u t fre q u e n t p u rc h a s e s o f g o o d s b y c o n s u m e rs

Sarap’s rating of 2 is due primarily to the ‘dilly-dallying’ position it has consciously taken since it is one reality that they are not riding on just yet especially with the ‘tingi’ phenomenon growing and it clearly is a manifestation of downsizing in purchasing habits of basic commodities. It remains to be an opportunity because in

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other countries Sarap has had existing technology and capability to produce smaller SKU’s in the event that the management in the Philippines decide to get into the trend then it should not be a problem anymore. With a category that is flat and sales at risk, then a strategy such as this would most likely merit an increase in volume to make up for losses and even growth due to the downsizing trend.

2 - S C F a s t - p a c e d l i f e s t y l e c a l l f o r ‘q u i c k a n d e a s y ’ d e p e n d a b l e s o l u t i o n s

Sarap got a perfect 4 rating for this factor because the very products of Sarap sells convenience as a given apart from the functional benefits that come with the product.

3 - S C M o r e w o m e n a r e jo in in g t h e w o r k fo r c e a n d a r e b e c o m in g m o r e in d e p e n d e n t

With Sarap’s campaign on empowering women and the whole marketing strategy of positioning Sarap as a woman’s Best Friend, a high score of 3 is given them since it was smart for Sarap to talk to the woman and it obviously opens a lot of opportunities for the brand. However, consistency is key to make a campaign create an impact. Therefore, it is high-time for Sarap to consider improving their strategy on talking to the woman and this pertains to maximizing communications in all relevant mediums.

4 - S C S ig n ific a n t d is t r ib u t io n o f h o u s e h o ld s in V is a y a s a n d M in d a n a o a r e a s

Sarap is given a rating of just 2 because it is only recently that it has started to position itself to address regional differences and the recognition of VisMin potential is not yet given much importance as it should be. However, directionally, Sarap is headed to valuing the regions depending on its’ potential and the company is geared to even design products that would make it big in those regions.

5 -S C

S t ill lo w 'd is h p e n e t r a t io n ' o f p a c k a g e d s o u p s in r e g u la r ly c o o k e d s o u p y

d is h e s

As done in the past, Sarap will do a dish specific campaign to communicate that Sarap is best for that particular soupy dish. Knowing especially that it takes a couple of months with high campaign levels before a consumer can fully absorb the message that is being conveyed and would tend to show an upward trend in sales. With this as a strategy that is currently employed, Sarap got a rating of 3. However, there is still room for improvement for dish-specific campaigns. It should be done one at a time allowing the consumer to be more receptive and the campaign to be more effective for it to create a bigger impact to the business.

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6 - C L a c k o f 'D iffe r e n t ia t io n ' a m o n g s t c o o k in g a id s b r a n d s

A rating of 2 is what Sarap got since this very big and important marketing activity has temporarily taken a back seat not for the wrong reasons but rather, a comprehensive, well-thought of differentiation strategy is being developed. Once the brand is ready, it shall immediately bring this to the market and activate it in a way never done before. 7 - T I n c r e a s in g u s e o f th e I n te r n e t

Internet usage in the Philippines has been growing rapidly although penetration rate still remains low. Statistics on the country’s Internet usage are important decision-making variables for the government and companies doing business in the Philippines. Companies in the cooking aids industry are able to create websites that give customers nutritional information as well as a variety of recipes that use their cooking aids to create nutritious and delicious meals. Sarap was given a rating of 3 because its website is quite attractive with many recipes. THREATS 1 - E D e c r e a s e in fo o d e x p e n d itu r e a t th e e x p e n s e o f o th e r c o m m o d itie s

The brand can probably do an emotional campaign about the value of food to arrest the decline. This campaign is very much possible and interesting but something that Sarap has not yet ventured into so a rating of 2 is given the brand.

2 - S C P e o p le a r e b e c o m in g m o r e a n d m o r e h e a lt h c o n s c io u s

Sarap’s rating is at 2 since nothing has been done yet. However, with the vitality passport well on its way, it shall give the quality assurance consumers need.

3 - C G r o w th o f th e fla v o r in g s c a te g o r y

Though Sarap is also a player in the powdered flavorings category, it just got a score of 2 since amongst the 3 players in the industry it currently is the 3rd player. All its efforts are struggling to improve performance, hence shares. However, it is not enough. It needs more than what it currently has and is doing to be able to lessen the risks that is being posted by this huge threat.

4 - C ‘V e r s a t ilit y ’ p r o p o s i t i o n o f c o m p e t i t o r s

Sarap’s strategy does not entail claiming versatility, rather, it will be single-minded with its communication focusing a particular product to address a specific need. Therefore, it just got a rating of 2 since not much is being done regarding this external factor and this is deliberately by design.

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5 - P P o lit ic a l in s t a b ilit y

The extent of graft and corruption throughout the government poses a threat to multinational companies like Sarap who import many of the ingredients. Sarap was given a rating of 1 because as a multinational company its policy has been to stay clear of political influence and has not done anything about this threat.

C o n c lu s io n / S t r a t e g ic I s s u e s

In conclusion, with Sarap’s external factor evaluation garnering a score of 2.55 its position is middle ground since there lays a lot more opportunities yet to be realized and threats to be managed. While it is addressing the desire of people for quick and dependable solutions it needs to do more to grow the Visayas and Mindanao markets.

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7 In te rn a l A sse ssm e n t Likewise, there are several internal forces that affect Sarap’s status in the market. These are considered to be the brand’s strengths and weaknesses and it shall be established and considered to be as the foundation for the brand’s performance.

7 .1 C u l t u r e 7.1.1 Values Unlike most cooking brands in Asia whose focus is on the dish. Sarap focuses on the transformation and enhancement of ingredients. o

Sarap is about the creation of food, that appeals to the cook by enhancing her engagement in her cooking. Sarap speaks to the Asian woman in a way that conveys profound understanding and respect; Sarap speak to the soul, not the role.

o

It wants to show an empowered woman who can judge her own result context of a modern woman, cooking aid, transformation, enhanced effect, involvement, gratification, self-esteem.

So Sarap is very different from its competition on several levels, particularly in the way it portrays the woman who is cooking and the concrete level of the function of the product. All these set Sarap apart: •

They are traditional, Sarap is modern.

•

They compete with the cook, Sarap satisfies the cook.

All these differences are established to actively position Sarap against competitors and to establish what the brand’s values are all about.

7.1.2 Corporate Spirit O u r C h e fm a n s h ip

Our competence to create recipes, flavour and transformation is in our products. Our chefmanship rests on our 130 years’ cumulative experience in

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creating products containing perfectly blended natural ingredients and connecting to many cuisines in the world. T h e S A R A P e ffe c t

Sarap’s products transform ingredients through cooking in a way that can be experienced via the senses: tasting, seeing, smelling and feeling. This moment of transformation, is branded the SARAP effect.

7 .2 M a n a g e m e n t 7.2.1 Management System Sarap is a brand managed under Sarap Foods, a separate business unit from that of Home and Personal Care and Ice Cream. However, there are several systems that are shared across all business units as a discipline and as a Sarap standard in terms of ways of working. S T R E N G T H : E ffic ie n t b u s in e s s / b r a n d p la n n in g p r o c e s s

Sarap

being

a

multinational

company

is

operated

via

multi-faceted

disciplines that are rolling in nature. Weekly activities are all linked up together and cross functional teams are involved in different phases. This pertains to the operational day-to-day aspect of the business. This is different from how brands are managed especially for a marketing company such as Sarap. Its rolling calendar is not on a weekly basis but rather in a span of 18 months. There is more regional involvement since the very brands existing in the country such as Sarap are global in nature and strategies emanate from one brand key and is translated and brought to life locally.

7.2.2 Strategy The 3 key strategies being employed currently are as follows: •

Dish-specific campaigns – communicating clearly what the product is and what it is for is a strategy that seems to be doing the brand very well. Given that this has worked in previous campaigns (Pork packaged soups sa Monggo) and there

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are several campaigns (Beef packaged soups sa Nilaga & Fish packaged soups sa Fish Tinola in VisMin) currently running with that as a core strategy. Sarap should continue using this as a strategy in the future since it has deemed to be highly effective. The value of being single-minded and focused in its communication is that consumers are able to understand and appreciate what is being communicated in its entirety whereas if a lot of messages are being communicated, there lays the risk of being half understood and appreciated or worst, not at all. •

Woman Empowerment – by talking to the woman and establishing the reason for the brand’s being which is to address the woman’s needs hence, its brand capsule “A Woman’s Best Friend” does a lot of good to the brand and to the business. It is able to position itself in a way that understands its target market in a deeper, more holistic level rather than becoming just another consumer product waiting to be picked up from the shelves. This strategy is evident in all above-the-line and below-the-line activities of the brand.

•

STRENGTH: Regional Marketing – Sarap’s performance in every region varies and the categories that are delivering exceptional growth and suffering the most are also highlighted in area business reviews. It therefore made a lot of sense to position the brand team members to specific areas/ regions that are most relevant to the categories they are managing. Hence, apart from the category management role that is tasked to each individual, there is also a corresponding area management role that they would have to fulfil for the brand as well. o

Sinigang Brand Manager – North Luzon

o

Soups Brand Manager – Greater Metro Manila + Modern Trade

o

Flavorings Brand Manager – South Luzon

o

Packaged soups Brand Manager – Visayas & Mindanao

7.2.3 Organization S a ra p F o o d s M a n a g e m e n t T e a m

The foods executive committee comprise of the following: o

Foods Managing director, who also represents local marketing

o

Market Research manager

o

Media manager

o

Customer Development (Sales) manager

o

Human Resources manager

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o

Finance manager

o

Supply Chain manager

o

Corporate Development manager

S a ra p B ra n d M a n a g e m e n t T e a m

Regional marketing as a strategy with clearly defined roles for category/ area management is currently how the brand management team is structured apart from the group brand manager heading the whole Sarap brand building team.

7 .3 M a r k e t in g 7.3.1 Product A Sarap packaged soup is ‘Siniksik sa Sarap’ to give that perfect broth taste to your soupy dishes. It is made from real ingredients and choice spices. It comes in 6 variants: Chicken, Pork, Beef, Shrimp, Fish and Tamarind.

7.3.2 WEAKNESS: Pricing T a b le 3 : C o m p a ra tiv e P ric e L is t

B R A N D / D E S C R IP T IO N

P r ic e P e r C a s e I n c l. Tax (LPA T /cs)

P r ic e P e r P ie c e I n c l. Tax (LPA T /p c)

SRP (p er p c)

% T rad e M a r g in

A b s o lu te T rad e M a r g in

S A R A P (a s o f O c to b e r 2 0 0 6 ) SAR AP PACKAG ED SO UPS

PACKAGED SOUP 12X24X22 G

2,523.25

8.76

9 .5 0

8%

0.74

PACKAGED SOUP PANTRY 72X66 G

1,886.98

26.21

2 8 .0 0

7%

1.79

11%

1.05

8%

2.08

12%

1.12

9%

2.19

Y U M M Y (as of Feb 2 0 0 6 ) YUM M Y PACKAG ED SO UPS

PACKAGED SOUP 12X24X22 G

2,345.88

8.15

9 .2 0

PACKAGED SOUP PANTRY 72X66 G M IS A N (a s o f F e b 2 0 0 6 )

1,686.10

23.42

2 5 .5 0

M IS A N

PACKAGED SOUP 12X24X22 G

2,328.40

8.08

9 .2 0

PACKAGED SOUP PANTRY 72X66 G 1,678.20 Source: Sarap Foods Trade Marketing Group

23.31

2 5 .2 0

Sarap’s pricing is affordable but in comparison to its competitors, it is the most expensive, both for the trader and the consumer. For the same commodity, the trader would have earned more since the margins are bigger with Yummy and/ or Misan, whilst the consumer would have spent

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less. However, since Sarap has established its category superiority well enough, consumers are willing to pay a bit more for a trusted brand such as Sarap packaged soups and traders are willing to lose a few centavos compensated by volume sales.

7.3.3 Market Distribution In terms of geographic distribution of accounts, 47% of all accounts are in Luzon, 38% are in Visayas and Mindanao, with 19% contribution each. Greater Manila Area or GMA accounts for 15%.

7.3.3.1

WEAKNESS: Weak dominance in VisMin areas

Geographically, the VisMin areas show that there can still be opportunities for improvement as far as distribution is concerned. Especially in the Central East Visayas and Mindanao areas where NIS distribution is just half of total national. T a b le 4 : U n iv e rs e o f A c c o u n t s (Y e a r 2 0 0 3 )

T o ta l

SM

GS

SSS

MS

TOTAL P H ILIP P IN E S

5 5 6 ,7 3 8

824

4 ,9 5 0

5 0 9 ,3 4 5

4 1 ,6 1 9

1. GM A

8 4 ,6 9 2

288

961

7 9 ,7 7 9

3 ,6 6 4

2. Luzon

2 6 0 ,6 6 6

278

2 ,5 6 5

2 3 8 ,9 3 4

1 8 ,8 8 9

3 . V is a y a s

1 0 4 ,9 8 6

109

849

9 3 ,1 5 3

1 0 ,8 7 5

4 . M in d a n a o

1 0 6 ,3 9 4

149

575

9 7 ,4 7 9

8 ,1 9 1

Source: Global Market Research

7.3.4 Channel Priorities Packaged soups are actually available in all retail outlets. Retail outlets are defined to be those that sell 75% of their goods to end consumers. The different retail channels and its characteristics as identified by Global Market Research’s retail audit are as follows: •

Supermarkets (SM) – A large retail store which sells various commodities,

including food,

household wares and personal items, arranged in sections. It

has at least three check-out-counters (C.O.C) with cash registers, selfservice/push carts/ baskets are provided, at least 50% of the display area are grocery items, there are numerous gondolas and mass displays in the area

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which is usually air-conditioned and may have restaurants, refreshment parlors or food stalls. •

Grocery Stores (GS) - Sells more food items relative to other product lines,

presence of 1 or 2 cash registers, smaller than supermarkets, sells generally the same line of products sold in supermarkets, may or may not have checkout counters. •

Market Stalls (MS) - A sari-sari store inside and at periphery of a market

building. Market Stall X is another type of market stall, which is smaller in terms of value. •

Sari-Sari Stores (SSS) - Small neighborhood stores selling a wide variety of

food and non-food items. Goods are sold by the piece and often by the lowest possible quantity (“tingi”). Does not issue receipts to customers. Does not allow customers to pick things they want to buy - goods in display or in open shelves are beyond customer’s reach. Usually sells re-packed items, wherein owner breaks up manufacturer’s items into smaller units (e.g., cooking oil, sugar, soy sauce, vinegar, powdered detergents, sugar, etc.) Stores selling only nonpacked food item such as rice and cereals, fresh vegetables, fish and meat are not considered as sari-sari stores according to our definition. Sari-sari stores account for over 90% of the whole retail universe since these are easier to build and manage, as these are called to be “hole-in-the-wall” types of accounts. Whilst Supermarkets may only account for less than 1% of the universe, it contributes significantly in terms of sales for this industry and most likely for other goods as well.

7.3.4.1

WEAKNESS: Limited Reach In Downline Channels

By virtue of win-win partnership between Sarap and its’ distributors, profitability is kept well-managed in such a way that no activity is to be implemented if it will compromise profitability. Direct coverage has always been a challenge for Sarap, especially beyond a certain proximity wherein it does not make sense for a distributor truck to go the lengths to visit an account that would only purchase a small value or worst, none at all. Therefore, not until the portfolio of products of Sarap Foods for downline channels has been improved and chances of making a sale is bigger then that will only be the time when Sarap distributors will directly

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cover the downline accounts that are outside the coverage within workable proximity.

7.3.5 STRENGTH: Good Customer Marketing Standards The structure of Sarap’s customer development is set up in such a way that good service is provided to business partners and traders alike. Therefore, there are account managers dedicated to handle specific accounts or a set of accounts for modern trade whilst for general trade, there are customer development managers tasked to look after the distributors business. The make up of Sarap distributors customers are inclusive of several channels: SMMT (small and modern trade) accounts, public market stalls and sari-sari stores. For each channel, there are appointed channel and area channel champions to draw up and implement strategies accordingly.

7.3.6 STRENGTH: Excellent Market Research Capability Sarap’s commitment is to continue knowing its’ consumer best which makes market research integral to the brand operation. •

Global Market Research Advisor is provided to monitor shares, distribution performance, growth and many more other brand facts by area or by channel for any of the categories in our portfolio.

•

Retail audit monitors retail trends whilst Homepanel monitors household penetration of a given category or product..

•

ATP (Advance Tracking Program) monitors advertising effectivity, product and trial awareness.

•

Project Sarap and Sunshine are in-house studies that monitor dish penetration. It measures whether Sarap’s products are being bought and used by customers in relevant dishes.

7 .4 F i n a n c e B r a n d c o n t r ib u t io n t o t o t a l b u s in e s s is in c r e a s in g y e a r- o n - y e a r

Sarap packaged soups is a core business in the Sarap Foods portfolio. With over 90% market share in a Php2 billion market, Sarap packaged soups revenue in

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2004 is estimated at Php1.6 billion and still managed to grow by 7% with an estimated Php1.7 billion sales in 2005.

FINANCIAL RATIOS 1 L iq u id it y Current ratio = CA/CL Quick ratio = CA – Inv/CL 2 L e v e ra g e Debt–to-TA ratio = TLiab/TA LT Debt-to-Equity = LTD/Equity 3 A c t iv it y r a t io s AR turnover = Rev/AR Days Receivable = 365/AR turnover Inventory turnover = Rev/FGInventory Days Inventory FA turnover = Rev/FA

4 P r o fit a b ilit y R a t io s Gross Margin = Rev – CGS Oper exp % = Opex/Rev Oper margin = EBIT/Rev

ROA = NI/TA ROE = NI/SHE

5 G ro w th R a te s % Sales Net Income

2003

2004

2005

0.78 0.52

0.64 0.39

0.74 0.45

0.87 6.47

1.07 16.28

0.95 21.17

5.22 69 13.6 28 42.1

6.19 59 15.2 26 55.6

6.45 57 16.4 25 74.1

70.1% 55.6% 14.5%

72.3% 59.9% 12.4%

74.6% 60.9% 13.7%

17% 84%

18% 34.6%

17% 13.5%

8% 6%

9% 7.7%

7% 6.2%

7.4.1 Liquidity The company has low liquidity over the last three years as shown in its financial statements because it must maintains a reasonable amount of inventory to service its extensive distribution system throughout the Philippines. The liquidity ratios above show the companies’ ability to pay its debts as it comes due.

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The Current Ratio shows that in an industry such as Sarap’s, though the ratios are lower than a typical manufacturing firm’s, it can be sustained since it is evident in their inventory management process that they can move inventory and collect accounts receivables quickly. The Acid-Test (quick) Ratio shows that amongst the 3 brands, Sarap has better cash flow management.

7.4.2 Leverage The leverage ratios identify the level of debt of the different brands/ companies. It will mirror manner of financing of assets whether through debt or through equity. It will also show its ability to pay the debts it has incurred. The Debt-to-Equity and Debt-to-Capital Ratios show whether the business is financed by borrowings or by equity. The high Debt-to-Equity Ratio shows that much of the assets of Sarap is financed by borrowings, this position puts the company in a risky financial position but may be part of a longer term plan.

7.4.3 Activity The company’s accounts receivable turnover of 6.45 is close to the industry average. The Accounts Receivables (AR) Turnover Ratio shows that Sarap is not able to collect as fast as it should but it shows significant improvement as well from 2003 to 2005 as compared to competition who may have too restrictive credit policy and is easing up a bit probably to give way to sales. Lastly, the Inventory Turnover Ratio shows that Sarap is able to move its inventory faster than competition.

7.4.4 Profitability The Return on Equity (ROE) shows that huge profit was earned on the shareholders’ investment.

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The Return on Sales (ROS) or profit margin for the Sarap brand had been dramatic since it had achieved a 360 turnaround whilst Yummy is more consistently high and Misan is flat. The Return on Assets (ROA) shows that Sarap does a relatively good asset management job.

7.4.5 Growth rates Sarap has enjoyed a steady, continuous growth in sales and net income in the range of 6 to 9 per cent..

7 .5 O p e r a t io n s WEAKNESS:Outsourced Manufacturing All variants of Sarap packaged soups except for chicken are produced in Thailand. For several reasons wherein cost is also a part of, Sarap is better off by manufacturing packaged soups from Thailand as compared to other parts of the world, including the Philippines. For the chicken variant however, Sarap Philippines is tasked to commission a toll packer to manufacture it locally and this is primarily due to the avian flu scare wherein chickens are said to be the carrier of the avian flu disease and that it is very dangerous and deadly for human consumption. At the height of the avian flu scare, it was very difficult for Sarap to import the chicken variant. Hence, it was agreed that it is better if this variant were produced (sourcing

&

manufacturing)

locally

to

have

more

control

of

and

enough

precautionary measures are taken to eliminate the possibility of avian flu in the nation. With this setup, it takes a while for the stocks to arrive in the country, so much so that accurate forecast is critical to the business.

7 .6 R e s e a r c h a n d D e v e l o p m e n t STRENGTH: ‘Vitality’ passport to promote good for you products In line with Sarap’s thrust of adding vitality to life, meeting the everyday needs for nutrition, hygiene and personal care with brands that help people feel good, look good and get more out of life, the vitality passport is a gauge whether dietary guidelines on daily dosage nutrients are being met. Trans fat, saturated fat,

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sodium and sugar is kept within control. For every product, it is rated as better for you if all 4 are within acceptable levels of consumption. If there is at least 1 that is kind of within boundary, it is rated as just good for you. However, if at least one of the 4 is below acceptable levels then it is rated as informed choice. It is Sarap’s commitment to manufacture products that are healthy for you and all these are made to pass the vitality passport with flying colors. Whilst existing products that are not yet in better for you zone are undergoing reformulation for improvement in certain nutrient levels without sacrificing quality taste.

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8 Internal Factor Evaluation Matrix (IFE) W e ig h t

R a t in g

W e ig h t ed S co re

Efficient business/ brand planning process

0.20

4

0.80

2-M

Excellent market research capability

0.15

4

0.60

3-M

Good customer marketing standards

0.10

3

0.30

4-F

Brand contribution to total business is increasing year-on-year

0.10

3

0.30

Clearly defined roles for category/ area management

0.10

3

0.30

Vitality' passport to promote 'good for you' products

0.03

3

0.09

KEY INTERNAL FACTORS STREN G TH S

1-MT

5-MT 6-R

W EAKNESSES

1-M

Limited reach in downline channels

0.10

1

0.10

2-M

Weak dominance in the Visayas and Mindanao areas

0.15

1

0.15

3-M

Sarap packaged soups is regarded as expensive

0.02

2

0.04

4-O

Manufacturing of packaged soups is outsourced

0.05

2

0.10

T O T A L IFE S C O R E

1 .0 0

2 .7 8

C=Culture, MT=Management, M=Marketing, F=Finance, O=Operations, HR=Human Resources, I= Information Systems R=Research & Devt The details presented in the internal assessment were very informative in nature. The aspects discussed thoroughly were the ones that are deemed to be greater strengths and weaknesses of the company. These are the factors that are most influential to the brand and so the scores are given as such with the weight as a way to value impact to the brand and the rating as a way to measure company’s strengths and weaknesses whether it is major or minor. The internal factor evaluation for Sarap turned out as follows:

1 - M T E ffic ie n t b u s in e s s / b r a n d p la n n in g p r o c e s s

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Efficient planning is integral to every business. Nothing will be achieved if it were not planned well. There is high risk for error and miscalculation if companies or even individuals go about without having to plan. Companies nowadays have strategic management meetings that are regular in nature. It can be slated to happen monthly, quarterly or annually and is most of the time even coupled with business reviews to judge if previous plans were implemented, what worked and what is the best strategy to employ moving forward. Hence, because of the great importance of planning be it for the business or in this case, the brand, it got a weight of 20%. Since Sarap is strict in employing and implementing planning disciplines that are sure to take the business forward, it got a perfect score of 4. This is reflective of Sarap’s excellent management standards making it a major strength.

2 - M E x c e lle n t m a r k e t r e s e a r c h c a p a b ilit y

Companies’ competitiveness in the game is indicative of how well they know their business, so much so that they know what they are going to do, when they are going to do it and where. The ability to know is very valuable and sometimes, it is even one’s edge to get ahead in the game. Hence, because of its importance, it got a weight of 15% and the rating Sarap got is a high of 4 because in the recent years, Sarap Foods built their capability on market research with the foresight that the success of the future will really be hinged upon dishes since no cooking aid exists without the benefit of it being used in and for a dish which is called the ‘masterpiece’. Apart from the typical researches available through third-party agencies whose expertise is really on providing accurate and timely information to practically everyone in the industry, Sarap commissioned the creation of a study that is for their own use and these are called Project Ethno and Sunshine with Ethno as the first crack at getting dipstick indication of dish penetration whilst Sunshine is the monthly monitoring of which. With this, Sarap is able to craft marketing strategies accordingly thereby maximizing this strength.

3 - M G o o d c u s to m e r m a r k e tin g s ta n d a r d s

They say ‘Customer is King’ and by it a weight of 10% is given to this internal factor. With the current structure of customer development and the involvement of cross-functional teams, a rating of 3 is garnered by Sarap because operationally this has clearly been somehow a tried and tested strength.

4 - F B r a n d c o n t r ib u t io n t o t o t a l b u s in e s s is in c r e a s in g y e a r- o n - y e a r

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Amidst trying times, it makes it an even greater challenge to deliver when everything seems to be working against you, hence, a weight of 10%. If and when one is able to still meet expectations or even go beyond, it becomes an even greater glory. This is the story of Sarap for it was able to grow by 7% from 2004 and is positioned to grow even more and so a rating of 3 was given. In addition, Sarap packaged soups is really a core category which means it is very profitable in itself that it is able to fund its own operations and other categories that rely on it too.

5 - M C le a r ly d e fin e d r o le s fo r c a t e g o r y / a r e a m a n a g e m e n t

In the old world of marketing, brand managers only look after the welfare of their respective categories because the management of which is deemed to be their primary role. In sales, each area has a manager looking after the area’s sales performance in the bigger scheme of things. However, in the new world, marketeers and sales managers are no longer just responsible for their primary roles. To ensure success, the spirit of being one has to move the team. Hence, marketeers are now also concerned with how the brands are performing in terms of sales in the respective areas and sales managers are concerned with the performance of the brands in their areas as well apart from just sales. This is important, so much so that a weight of 10% is given to this internal factor. With the new regional marketing structure of Sarap in place, its brand managers are now tasked to look after the brand’s performance in their assigned areas. This restructuring is very appropriate therefore making it a strength, with a score of 3.

6 - R ‘V it a lit y ’ p a s s p o r t t o p r o m o t e g o o d fo r y o u p r o d u c t s

With the growing consciousness for what is good for the body amongst consumers, the pressure for manufacturers to produce products that are healthy continue to rise. However, since this does not really yet come on top of the must have list at the expense of convenience, pleasure, and so, it is weighted at 3%. With the Vitality passport being constructed in response to this and the conscious repair efforts that the brand is putting behind this initiative, Sarap gets a rating of 3, a strength that is still being developed.

1 - M L im it e d r e a c h in d o w n lin e c h a n n e ls

Availability is key and in the Philippines, sari-sari stores and other downline channels account for over 90% of the universe. This is highly crucial since this is the nearest point of contact to the consumer. Every street in every town might have at least one or two to cater to the residents in that road. Hence, it is given a

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weight of 10% for reasons that this is the primary sourcing channel especially for impulse purchases. With the limitation of direct reach by Sarap’s distributors with respect to profitability, a score of 1 is given, making it a weakness inspite of several efforts with indirect distribution but clearly understandable in light of true partnership between principal and the distributor. However, there simply can not be anything to replace the value of direct reach because apart from sales, there are other benefits such as merchandising, relationship building, and competitive intelligence amongst many others.

2 - M W e a k d o m in a n c e in t h e V is a y a s a n d M in d a n a o a r e a s

Clearly, the VisMin region has established itself to be a different being altogether from that of North Luzon, South Luzon and most especially GMA. For many years, Sarap has tried to replicate its successes in the Northern region of the country in VisMin. However, it was not a repetitive formula and the success remained to be a mere vision not because it is not a good plan but there are just certain differences that needed to be acknowledged. With over 40% of the country’s household population in VisMin, this is as stated earlier, a gold mine waiting to be discovered and so the weight of 15% to stress on the importance of this internal factor. However, Sarap just got a score of 1 because though there had been some efforts already with the current restructuring done to the brand team, this appeared to be an apparent weakness still because to make it big in VisMin, it indeed meant more than just addressing the lack of resources dedicated for the region but rather ‘walking the talk’ – hence, full support should be provided.

3 - M S a ra p p a c k a g e d s o u p s is r e g a r d e d a s e x p e n s iv e

In comparison to competitors, Sarap packaged soups appear to be the most expensive. However, since this does not cause much of a problem especially for those who have come to believe and stay loyal to the brand, a weight given this internal factor is just 2% and Sarap got a rating of 2 making it a minor weakness.

4 - O M a n u f a c t u r i n g o f p a c k a g e d s o u p s is o u t s o u r c e d

With this operational reality that Sarap packaged soups are produced in Thailand for several business reasons (except for the Chicken variant) and the pressure that accurate forecasting is a must to have sufficient stocks on hand, a weight of 5% is given this internal factor. This is a weakness in itself especially if preventive measures are not taken. It risks advertising without sufficient stocks on shelf or running sampling efforts that would deplete existing stocks meant for selling. However, with the relative experience of having to deal with this kind of business

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reality in the past, Sarap has the muscle and the experience to deal with it hence, a rating of 2 is given.

C o n c lu s io n / S t r a t e g ic I s s u e s

In conclusion, the internal factor evaluation for Sarap show that Sarap needs to draw on it strengths of efficient business planning process and excellent market research

to address it weakness in the Visayas and Mindanao regions. Its IFE

score of 2.78 reveals that Sarap is only doing slightly better than average internal position.

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9 Strategy Formulation 9 .1 T h re a ts - O p p o r t u n it ie s - W e a k n e s s - S t r e n g t h s STRENG TH S –S 1. Efficient business/ brand planning process 2. Excellent market research capability 3. Good customer marketing standards 4. Brand contribution to total business is increasing year-onyear 5. Clearly defined roles for category/ area management 6. 'Vitality' passport to promote 'good for you' products

W EAKNESSES- W 1. Limited reach in downline channels 2. Weak dominance in the Visayas and Mindanao areas 3. Sarap packaged soups is regarded as expensive 4. Manufacturing of packaged soups is outsourced

O P P O R T U N IT IE S - O 1. Less but frequent purchases of goods by consumers 2. Fast-paced lifestyle call for 'quick and easy' dependable cooking solutions 3. More women are joining the work force and are becoming more independent 4. Significant distribution of households in Visayas and Mindanao areas 5. Still low 'dish penetration' of packaged soups in regularly cooked soupy dishes 6. Lack of 'Differentiation' amongst cooking aids brands 7. Increasing use of internet

S O S T R A T E G IE S 1. Strengthen the selling proposition of Sarap packaged soups in the minds of customers & consumers thru ad campaign (S1, S3, S6, O1, O2, O3, O5, O6) 2. Own 'best for soups' as jobsto-be-done for buillion as a cooking aid (S1, S2, O2, O5) 3. Clearly differentiate Sarap from competitors (S1, S2, S4, S5, O6)

W O S T R A T E G IE S 1. Explore less cash-outlay products that will be a more viable selling proposition for downline channels (W1, O1) 2. Reinforce the superiority of packaged soups in terms of product quality and performance (W3, O2, O5) 3. Establish and reinforce brand presence and superiority in the VisMin areas (W2, O4)

T H R E A T S -T 1. Decrease in food expenditure at the expense of other commodities 2. People are becoming more and more health conscious 3. Growth of the flavorings category whilst the bullion category is flat 4. 'Versatility' proposition of competitors 5. Political instability

S T S T R A T E G IE S 1. Promote Sarap’s 'Vitality' campaign amongst consumers to create the awareness on 'good for you' products (S3, S6, T2) 2. Devise a 'defense' plan for the buillion category and an 'offense' plan for the flavorings category (S1, S2, S5, T3, T4)

W T S T R A T E G IE S 1. Create a viable 'trade story' to make products available in downline channels (W1, T1)

TOWS ANALYSIS

T O W S S T R A T E G IE S

M a r k e t P e n e t r a t io n

M a r k e t D e v e lo p m e n t

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P r o d u c t D e v e lo p m e n t

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9 .2 S t r a t e g ic P o s it io n & A c t io n E v a lu a t io n M a t r ix ( S P A C E ) X – AXIS In d u s try S tre n g th (IS ) 6 b e st, 1 w o rst

1 2 3 4

Low bargaining power of suppliers Significant growth potential given that there is still low packaged soups penetration into soupy dishes Packaged soups business is ‘under-attack’ by the powdered flavorings category Low threat of new entrants

6 4 2 4

IS A v e ra g e

4 .0 0

C o m p e t it iv e A d v a n t a g e ( C A ) - 1 b e s t , - 6 w o r s t

1

90% market share in the packaged soups category

-1

2

Superior product quality and performance

-1

3

Strong brand management

-2

4

Customer loyalty

-3

C A A v e ra g e

-1 .7 5

D ir e c tio n a l V e c to r C o o r d in a te X = I S A v e r a g e + C A A v e r a g e

2 .2 5

Y – AXIS F in a n c ia l S tr e n g th ( F S ) 6 b e s t, 1 w o r s t

1

Healthy gross margin

6

2

Revenue increase by 21% versus previous year

4

3

Highly leveraged business

1

FS A verag e

3 .6 7

E n v ir o n m e n t a l S t a b ilit y ( E S ) ) - 1 b e s t , - 6 w o r s t

1 2 3

Fast-paced lifestyle call for 'quick and easy' dependable solutions More women are joining the work force and are becoming more independent ‘Versatility' proposition of competitors

-1 -2 -6

E S A v e ra g e

-3 .0 0

D ir e c tio n a l V e c to r C o o r d in a te Y = F S A v e r a g e + E S A v e r a g e

0 .6 7

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FS C O N S E R V A T IV E

A G G R E S S IV E

5

4

3

* (2. 25, 0. 67)

2 1

CA

IS -5

-4

-3

-2

-1

0

1

2

3

4

5

-1

-2

-3

-4

D E FE N S IV E

C O M P E T IT IV E

-5

ES

Given all of the aforementioned financial strengths (FS), competitive advantage (CA), environmental stability (ES) and industry strength (IS) and the corresponding ratings and scores computed for each, the vector shows that it is in the aggressive quadrant. Sarap is in a position to utilize its strengths to take advantage of external opportunities and deal with internal weaknesses

and

external

threats.

Therefore,

the

corresponding aggressive strategies that can be used:

Market penetration Market development Product development Backward integration Forward integration Horizontal integration Related diversification Unrelated diversification

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following

are

the

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THE EFE TOTAL WEIGHTED SCORE

9 .3 I n t e r n a l- E x t e r n a l M a t r i x ( I E ) THE IFE TOTAL WEIGHTED SCORE IF E = 2 .7 8 E F E = 2 .4 5

STRO N G ( 3 .0 - 4 .0 )

AVERAGE ( 2 .0 – 2 .9 9 )

W EAK ( 1 .0 – 1 .9 9 )

H IG H ( 3 .0 – 4 .0 )

I

II

III

M E D IU M ( 2 .0 – 2 .9 9 )

IV

V

VI

LO W ( 1 .0 – 1 .9 9 )

V II

V III

IX

With the weighted scores computed as Sarap’s external and internal factors were evaluated in the Internal-External (IE) Matrix, it shows that it belongs to Quadrant V, an average hold and maintain quadrant wherein the 2 commonly employed strategies are market penetration and product development.

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RAPID MARKET GROWTH

Q U A D R A N T II

QUADRANT I

Q U A D R A N T III

Q U A D R A N T IV

SLOW MARKET GROWTH

STRONG COMPETITIVE POSTION

WEAK COMPETITIVE POSTION

9 .4 G ra n d S tra te g y M a trix

The Grand Strategy Matrix (GSM) is constructed based on competitive position and market growth. Relating this to Sarap whose competitive position is strong but with a market that is slow-growth, clearly, its strategy is that of quadrant IV. It can get into diversified programs that are promising enough to deliver growth. Some of the strategies that may be employed by a quadrant IV position are as follows: related diversification a n d u n r e la te d d iv e r s ific a tio n .

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9 .5 G E M c K i n s e y M a t r ix

The GE McKinsey Matrix (GSM) is constructed based on business strengthcompetitive position and industry arractiveness. Relating this to Sarap whose competitive position is strong and a strong industry attractiveness, its strategy is that of cell I. Some of the strategies that may be employed by a cell I position are as follows: intensive, integrative and diversification s t r a t e g ie s .

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10 Summary of Matrices & Analysis STRATEGY OPTION

TOW S

SPACE

GE

IE M

GSM

TOTAL

IN T E G R A T IO N S T R A T E G IE S

1

Forward Integration

1

1

2

2

Backward Integration

1

1

2

3

Horizontal Integration

1

1

2

IN T E N S IV E S T R A T E G IE S

4

Market Penetration

1

1

1

5

Market Development

1

1

1

6

Product Development

1

1

1

1

4 3

1

4

D IV E R S IFIC A T IO N S T R A T E G IE S

7

Related Diversification

1

1

1

3

8

Unrelated Diversification

1

1

1

3

D E FE N S IV E S T R A T E G IE S

9

Retrenchment

0

10

Divestiture

0

11

Liquidation

0

The summary above shows that based on the different matrices used to determine which strategy to employ the following strategies were suggested as it seemed to show potential given the current position of Sarap packaged soups in the Philippines. However, basing it on what the strategy is and considering the readiness of the brand or the company to pursue the given strategy, the evaluation below shall determine the top 3 strategies to be evaluated in the QSPM (Quantitative Strategy Planning Matrix).

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•

Market Penetration was suggested across all 3 matrices primarily because this

simply entails improving brand performance by being aggressive in utilizing greater marketing efforts. Sarap being a marketing company and Sarap being a known commodity, the name of the game is no longer about awareness but taking it a step further by increasing brand relevance making it more effective with its communication. Hence, this strategy seems to be one of the more viable ones and as quoted in the book, Strategic Management by David, p.

167- Market Penetration is an effective strategy if current markets are not saturated with a particular product or service or usage rate of present customers could be increased significantly. •

Market Development appeared to be a viable strategy in the TOWS and SPACE

matrices probably because this strategy entailed introducing existing products to new territories. Although Sarap packaged soups is found nationwide already, this can still be a key strategy especially that dominance in certain areas needs to be reinforced further. •

Product Development is the strategy employed if it entails improving or

modifying present products or services to increase sales and this strategy was suggested in the SPACE and IEM. As it is, Sarap packaged soups formulation is accepted because it delivers and fulfils the need. Given the comparative analyses done on all the possible strategies to implement, what seemed to be viable are the following: market penetration, market development and product development. Hence, these are the ones that shall be evaluated in the QSPM (Quantitative Strategy Planning Matrix).

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11 Quantitative Strategy Planning Matrix KEY FACTORS

Wt

M a rk e t P e n e t r a t io n

M a rk e t D evt

P ro d u ct D evt

AS

TAS

AS

TAS

AS

TAS

E x t e r n a l O p p o r t u n it ie s 1

Less but frequent purchases of goods by consumers

0.05

4

0.20

2

0.10

3

0.15

2

Fast-paced lifestyle call for 'quick and easy' dependable cooking solutions

0.15

4

0.60

2

0.30

3

0.45

3

More women are joining the work force and are becoming more independent

0.10

-

4

Significant distribution of households in Visayas and Mindanao areas

0.10

3

0.30

4

0.40

2

0.20

5

Still low 'dish penetration' of packaged soups in regularly cooked soupy dishes

0.05

4

0.20

2

0.10

3

0.15

6

Lack of 'Differentiation' amongst cooking aids brands

0.10

-

-

-

7.

Increasing use of the Internet

0.05

-

-

E x te rn a l T h re a t 1

Decrease in food expenditure at the expense of other commodities

0.05

-

-

-

2

People are becoming more and more health conscious

0.05

-

-

-

3

Growth of the flavorings category whilst the bullion category is flat

0.15

3

0.45

2

0.30

4

0.60

4

Versatility' proposition of competitors

0.10

3

0.30

2

0.20

4

0.40

5

Political instability

0.05

In te rn a l S tre n g th s 1

Efficient business/ brand planning process

0.20

-

-

-

2

Excellent market research capability

0.15

-

-

-

3

Good customer marketing standards

0.10

-

-

-

4

Brand contribution to total business is increasing year-on-year

0.10

-

-

-

5

Clearly defined roles for category/ area management

0.10

3

6

Vitality' passport to promote 'good for you' products

0.03

-

0.30

2

0.20

-

4

0.40

-

In te rn a l W e a k n e sse s 1

Limited reach in downline channels

0.10

4

0.40

2

0.20

3

0.30

2

Weak dominance in the Visayas and Mindanao areas

0.15

3

0.45

4

0.60

2

0.30

0.02

3

0.06

2

0.04

4

0.08

0.05

-

3 4

Sarap packaged soups is regarded as expensive Manufacturing of packaged soups is outsourced T O T A L A T T R A C T IV E N E S S S C O R E

3 .2 6

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2 .4 4

3 .0 3

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Rating score: 4= most acceptable, 3= probably acceptable, 2= possibly acceptable, and 1= not acceptable

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12 Proposed Strategy Given all of the evaluations and analyses done with Sarap’s internal strengths and weaknesses, as well as the external opportunities and threats, the strategies that shall be employed to pursue further progress is a mix of market penetration and concentric diversification.

1 2 .1 S t r a t e g ic O b j e c t iv e Since the packaged soups market has registered flat growth, Sarap puts itself in a defense

mode.

Being

market

leader,

sustaining

leadership

and

delivering

incremental business by increasing penetration into soupy dishes is definitely a big challenge to the brand. The strategic objective for the packaged soups business is stated as follows: “Grow sales by 10% year-on-year from 2006-2009” This is the summary statement of what Sarap will do to make this possible:

O n P r o d u c t s – P a c k a g e d s o u p s & F la v o r in g s

•

To reinforce the superiority of packaged soups in terms of product quality and performance

•

To strengthen the selling proposition of Sarap packaged soups in the minds of customers & consumers

•

To own 'best for soups' as jobs-to-be-done for buillion as a cooking aid

O n G e o g r a p h ic a l/ C h a n n e l D is t r ib u t io n & C o n s u m e r P u r c h a s e H a b it s

•

To create a viable 'trade story' to make products available in downline channels

•

To explore less cash-outlay products that will be a more viable selling proposition for downline channels

•

To establish and reinforce brand presence and superiority in the VisMin areas

O n P o s it io n in g - R e s p o n s ib le & S u p e r io r M a n u fa c t u r e r

•

To clearly differentiate Sarap from competitors

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•

To promote Sarap’s 'Vitality' campaign amongst consumers to create the awareness on 'good for you' products

1 2 .2 M a r k e t P e n e t r a t io n By employing this strategy, the Sarap packaged soups retail business in the Philippines should be more aggressive since the market has taken on a new frontier. Competition is made tougher with substitute products trying to eat up into the packaged soups territory. This can be done by reassessing the current marketing efforts being done and by being more creative and coming up with more hardworking and brilliant marketing techniques that will arrest the possible decline in the category. As identified in the course of this paper, increasing penetration into soupy dishes is a potentially big thing since currently, packaged soups is only at 12% of all soupy dishes. By bringing this to 20% in the next 5 years, it can bring tremendous incremental growth.

1 2 .3 M a r k e t S e g m e n t a t io n F i g u r e 1 7 : C o o k in g A id s P e n e t r a t io n in D iffe r e n t D is h T y p e s

SAUTEED 11%

OTHERS 7%

FRIED 31% SINIGANG 6%

The PENETRATION of packaged soups into Soupy dishes is just 12%

SOUPY 25%

SAUCY 20%

Source: Project Sarap

The market is currently segmented by dish preparation. For the bouillion, it is geared to penetrate the soupy dish market since there still a huge potential and it simply means making MSG users shift to packaged soups.

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1 2 .4 S t r a t e g ic P o s it io n in g

In terms of strategic position, Sarap would want to maintain its strong product quality. By being ‘A Woman’s Best Friend’, it has become a well loved brand because of its product quality. Sales distribution is half of what makes Sarap a success. Sarap’s market share is a good indicator of how well distributeded Sarap cooking aids are. It shows the market likes the taste, ease of use and convenience of Sarap products.

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13 Action Plans & Programs To achieve the strategic position for the brand Sarap, there has to be a couple of activities implemented, most of which pertain to housekeeping and the organization as a whole to realize Sarap’s vision to the most preferred cooking aids brand.

Activities

C o m p le t io n D a t e

1

Activate a platform that will differentiate and establish brand superiority for Sarap across all categories

Q1 2007

2

Implement 'My Choice' logos in all SKU's as an indication of 'good for you' certification

Q3 2007

3

Promote 'Vitality' as a companywide campaign

Q1 2008

4

Reinforce the superiority of packaged soups in perfect broth creation

Q2 2007

5

Create the awareness for Sarap Meaty Seasoning Mix by doing a massive campaign that includes activities that will induce heavy trial

Q1 2007

6

Improve portfolio of products for downline trade channels

Q2 2007

7

Develop trade story for downline channels

Q3 2007

8

Learn about the varying cultures that characterize Visayas and Mindanao

Q3 2007

74

E x p e c te d O u tp u t A trademark that will differentiate and distinguish Sarap from all other cooking aids Certified 'good for you' products with new look (packaging) An all year-round obtrusive ATL & BTL campaign that will characterize Sarap

"Best for Sabaw" campaign with specific soupy dishes being promoted A nationwide relevance building campaign that will allow consumers to acknowledge and appreciate Sarap's KMSM powdered flavoring for use in all their sauteeing needs Lower cash outlay products Increase in direct coverage of downline trade channels Position the Sarap brand in a way that the VisMin people may relate to it

Team R e s p o n s ib le

Brand Team

Supply Chain Teams Corporate Development & Brand Team Brand Team

Brand Team

Brand Team & Supply Chain Sales Team

Brand & Sales Team

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14 Strategy Evaluation & Control To measure the effectivity and success of the strategies put in place, certain evaluation and control measures are to be used to monitor implementation and progress.

1 4 .1 B a la n c e d S c o r e c a r d The Balanced Scorecard will serve as a quick reference with regards to the implementation of the aforementioned strategies; this shall enable decisionmakers to rationalize on which strategies are working best and which need more time or fail to deliver expected results. Hence, with this knowledge, they are in a better position to direct the company.

1 4 .1 .1

Financial Persp ective Financial Perspective G o a ls

M e a s u re s

C u rre n t

2005 Net Sales

Php 1.7 billion

1

Net Sales

2

Gross Profit

GP % vs. Net Sales

Gross Profit at 48%

3

Net Income

Income Statement

15%

75

T a rg e ts Grow by 10% year-on-year from 20062009 Gross Profit at 53% Grow from 15% to 20% by 2010

S a ra p

1 4 .1 .2

C ustom er Persp ective Customer Perspective G o a ls

1

Market Share

2

Regional Marketing

3

Downline Channels Shares

4

1 4 .1 .3

Positive Image

M e a s u re s

C u rre n t

Vol & Val % Shr - Global Market Research

90% market share

Vol & Val % Shr and Vol & Val Sales - Global Market Research Numeric InStock Distribution Global Market Research

Brand Health Check

T a rg e ts 92% for Packaged soups & Increasing Shares for Flavorings

55 % shares & net sales value

Increasing to 60% shares & net sales value

55% channel shares

Increase by 20%

2

nd

position among cooking aids

Lead position amongst all cooking aids brands as indicative of favorability

In tern al B u sin ess P ersp ective Internal Business Perspective G o a ls

1

GoodHousekee ping of product portfolio

2

Improve Product Portfolio

M e a s u re s Implementation of 'My Choice' logo in all products Numeric InStock Distribution Global Market Research

76

C u rre n t

T a rg e ts

40% of all SKU's in 2007

>50% of all SKU's in 2007

64

Increase by 20%

S a ra p

1 4 .1 .4

In n o vatio n & Learn in g P ersp ective Innovation & Learning Perspective 1

G o a ls Brand Platform Activation

2

Vitality Campaign

3

Regional Marketing

M e a s u re s ATP (Advance Tracking Program) Brand Communication Vol & Val % Shr and Vol & Val Sales - Global Market Research

77

C u rre n t

T a rg e ts

Awareness levels of 80%

Awareness levels of 90%

55 % shares & net sales value

Increasing to 60% shares & net sales value

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15 Strategy Map

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16 Projected Financial Statements (BE SURE TO ATTACH THE ACTUAL PROJECTED 3-YEAR FINANCIAL STATEMENTS) The following projected 3-year financial statements are based from derived historical performance of Sarap packaged soups taking into account the overall impact and evaluation of strategies. The assumptions and the impact of which on certain components of the financial projections are stipulated below:

3 - Y e a r P r o je c tio n o f S ta te m e n ts o f I n c o m e

The projected income statement shows that Sarap packaged soups retail business strategy is more on a defense as earlier stated with all of the action plans that have been formulated. Currently, 55% of all packaged soups sales are known to be used for soups. With a 12% penetration in soups, this can be valued at Php 961,419,085. Increasing penetration of packaged soups in soupy dishes to 20% would mean that the 55% contribution of soupy dishes would increase to 67% by 2010 and this can be valued at Php 1,602,365,141. Other usage of packaged soups will continue to contribute to the business but would be less acknowledging that there would be shifting to flavorings especially for sautéed dishes. Since the main source of growth would be on the 1-2 campaigns that will be implemented per year, the growth is assumed to be 7.33% year-on-year from 2006 to 2009. 2010 growth would be less as this would be the time to shift to a new strategy already. Also, in 2010, the company shall do a bit of clean-up as well before changing directions and plans. SKU rationalization, assessment of structure, and the like will be done to equip the brand better for the next challenge. In general, what can be gleaned from the projections is that it is healthy. As in any business, cost reduction is a continuing activity. This is brought about by the efficiency in regional sourcing wherein cost of sales was lessened and gross margins improved. Operating expenses is kept within standard, having learned from and experienced negative income in 2004 due to very high operating expense and not so good top line. In the projections, operating expense is kept within the norm of 70-75% levels. Good projections for non-operating income and expenses were also included given that the same level of interest expense will be availed and the strengthening of the peso will continue.

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3 - Y e a r P r o j e c t io n o f B a la n c e S h e e ts

The financial position that Sarap is projected to have in the balance sheet shows that about 60% or majority of the current assets would be cash, cash equivalents and trade receivables and a significant 28% would be provision for healthy stocks of inventory since manufactured goods of Sarap packaged soups would still be coming from Thailand, except for the Chicken variant which is produced locally. The valuation method used for inventory is weighted average cost. Prepaid expenses and other current assets are valued at 11% since this is a matter of policy for necessary warehousing costs, and the like. Total current assets account for 70% of total assets. The remaining 30% total assets are long-term assets. Property plant and equipment account for only a little over 60%, reduced significantly from 90% levels in 2003. This is primarily because all operations had been moved and will be maintained within the Paco, Manila vicinity for the next 5 years and logistics had been well-managed. Deferred income tax is a significant long-term asset contributing about 20% primarily because Sarap is a good tax payer. A provision for other assets that also benefit the company is valued at 10%. Similarly, majority of what finances the assets comes from current liabilities accounting for about 90%, of which, trade and other payables account for a significant 60%. Borrowings within the 5-year projection are reduced because the strategy that will be employed is to use the company’s retained earnings by funnelling it back to the company. Stockholders will be given a good deal that will allow them to enjoy their earnings on the 6th year.

3 - Y e a r P r o j e c t io n o f S t a t e m e n t s o f C a s h F lo w s

C a s h fr o m O p e r a t in g A c t iv it ie s

The day to day expenses of the organization are reflected in this portion, the following major components are as follows: •

After the net income, all of the non-cash expenses are added back such as depreciation and amortization, provision for adjustments in property, plant and equipment and gains on disposals of assets.

•

Allowances for spoils are also provided for as packaged soups remain to be a food commodity that under certain circumstances might not be best for consumption (i.e. direct sunlight, etc.).

•

Given that Sarap is also challenged with the new organizational structure, provision for restructuring is also budgeted for generously.

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•

As earlier mentioned, the strengthening of the peso will bring in forex gains.

•

Interest income is less in lieu of interest expense, due to more borrowings.

•

Increase in receivables is due to more sales.

•

Increase in inventory is due to increase in stock cover.

C a s h fr o m I n v e s t in g A c t iv it ie s

For the succeeding years, there would also be several capital expenditures and acquisitions that would impact the business, such as: •

Additional property and equipment for increased capacity.

•

Disposal of old and for replacement property and equipment.

•

Restructuring costs incurred by the business.

C a s h fr o m F in a n c in g A c t iv it ie s

Financing pertains to the loans and repayment of cash borrowed by the business. In the 5-year projection, it shows that: •

Notes payables will be paid year-on-year.

•

Work level 3’s and above of the local management team will be rewarded with a good share-based compensation plan.

For the next 5 years, the task for packaged soups is a matter of brilliant basics. The category being on a ‘defense’ mode shall be quite aggressive and swift with its moves well-hinged on the findings on this strategic management paper.

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