Selecta

SELECTA: Mixing the Right Ingredient for the Future

I. Brief Background

Selecta was unknown and a dying brand when RFM Corporation bought it in a bid to contest MagnoliaÐ'ÐŽÐ'¦s monopoly of the Philippine ice cream market. And when RFM Corporation bought Selecta in 1990, the company through its winning formula of high-quality, marketing innovation, modern production technology and strong distribution network was able to capture 39% of the ice cream market from 1% Nationwide after more than 2 years from taking over the ownership. With the increasingly intense competition as other competitors are jockeying for a larger share of the market, Selecta has to plan its growth and business strategy in the future.

II. Statement of the Issues

The issue in this case is what will be SelectaÐ'ÐŽÐ'¦s growth and strategic plans for the next 3-5 years to sustain its market dominance and protect or even increase its market share.

III. Areas of Consideration

a. Economic indicators

1. PhilippinesÐ'ÐŽÐ'¦ GNP is expected to grow by 5.8% in 1997.

2. Total family income is estimated to increase 18.1% annually.

3. Family expenditures showed a growth of 17.8% since 1994.

4. Spending on food consumption outside home was seen to rise from 4.2% to 4.7%.

b. BuyerÐ'ÐŽÐ'¦s behavior

1. 80% of Filipino consumers bought on impulse (they bought only upon passing an ice cream shop or scooping station, but without an intention to buy first)

2. 98% ate ice cream in the comfort of their home.

3. 70% of the time, ice cream was an afternoon snack.

c. Market

1. Per capita consumption, in gallons per person

1992 1993

0.23 0.20

With the decreasing per capita consumption, thereÐ'ÐŽÐ'¦s a need to spur demand through new market offering, advertisements and other marketing gimmicks. Otherwise, it will result to a fierce competition between the industry players.

2. Domestic ice cream market was 13.8 million gallons from 1991 to 1993 and worth estimated at P2.3-3 billion per annum.

3. Bulk ice cream comprised 86% of the industry to balance is frozen novelties.

d. Industry players (SWOT)

Player Strength Weaknesses Opportunities Threats

Selecta Ð'„X Ice cream that is a carabao-milk based (contains more fats than cowÐ'ÐŽÐ'¦s milk.

Ð'„X Strong in A,B and upper C market

Ð'„X Distinct packaging material using gold tin can vs plastic (this gives the product a premium look vs plastic containers) Ð'„X Noticeable only in major/key cities.

Ð'„X Distribution network.

Ð'„X Lower C and D income group.

Ð'„X Hotels, restaurants, food chains and other institutional accounts.

Ð'„X Wider distribution coverage.

Ð'„X Probable insufficiency of supply of carabaoÐ'ÐŽÐ'¦s milk.

Ð'„X Competitors are upgrading their facilities.

Ð'„X Entry of imported ice creams.

Ð'„X Entry of new industry players.

Magnolia Ð'„X First in the country to produced ice cream.

Ð'„X Magnolia was an established product with a strong distribution network and brand recall that was difficult to match.

Ð'„X Pioneered the development of tropical-flavored ice cream.

Ð'„X Company ice cream plants are ISO certified which is a seal for quality management systems.

Ð'„X Has won numerous prestigious awards such as Monde Seleccion

Ð'„X Extensively distribution network

Ð'„X Preferred choice of many 5-star hotels, fine dinning restaurants, food chains and sports and country clubs.

Ð'„X Ð'ÐŽÐ'§Cold ChainÐ'ÐŽÐ'Ё Management

Ð'„X War chest, availability of capital Ð'ÐŽV can easily deploy more freezers.

Ð'„X Continuously upgrading its facilities. Ð'„X Complacency - since they are the market leader for a long time and in some point in time monopolized the market.

Ð'„X Asia Pacific Market

Ð'„X Active advertising and merchandising.

Ð'„X Selecta shows that it can beat Magnolia in TV advertisements and merchandising.

Ð'„X Entry of new industry players.

Presto Ð'„X Claims value for money ice cream, priced lower than leading brands Selecta and Magnolia

Ð'„X Very strong in frozen novelties particularly ice cream bar Ð'ÐŽÐ'§TivoliÐ'ÐŽÐ'Ё

Ð'„X Member of the IICA, affiliation is beneficial in terms of access to information and developments in the ice cream industry Ð'„X Because it is low-priced consumers tend to believe it as an ice cream with lesser quality as compared to Selecta and Magnolia.

Ð'„X Plant capacity expansion

Ð'„X Wider distribution network.

Ð'„X Active advertising campaigns

Ð'„X Capitalize on the strength of its frozen novelties brand Tivoli.

Ð'„X Wider distribution coverage

Ð'„X Entry of low-priced brands.

Ð'„X Increasing