University of Southeastern PhilippinesIndustry Analysis In Partial Fulfillment of the Requirements For BA 215 Environmental Analysis Submitted by: DIANNE MARIE O. SAMANTE Submitted to: PROF. REMEGIO GABUYA October 11, 2013 TABLE OF CONTENTS Page EXECUTIVE SUMMARY…………………………………………………… 3 INTRODUCTION …………………………………………………………… 4 CHAPTER I: ALASKA MILK CORPORATION COMPANY VISION & MISSION…………………………………… 5 COMPANY BACKGROUND………………………………………… 7 COMPANY HISTORY & MILESTONES…………………………… 9 BOARD OF DIRECTORS………………………………………….. 11 MANAGEMENT TEAM…………………………………………….. 12 CORPORATE SOCIAL RESPONSIBILITY….……………………… 18 MARKETING………………………………………………………. 20 PRODUCTS………………………………………………………… 21 STRATEGIC ALLIANCES………………………………………….. 24 CHAPTER II: PEST ANALYSIS………………………………………….. 25 CHAPTER III: PORTER’S FIVE FORCES…………….…………………. 30 CHAPTER IV: CONCLUSION…………………………………………….. 35 REFERENCES…………………………………………………………….. 36 CHAPTER I EXECUTIVE SUMMARY The study aimed to provide an industry analysis of the Alaska Milk Corporation, a consumer food company, with focus on its dairy/milk products under the non-alcoholic beverage industry with the use of PEST Analysis and Porter’s Five Forces. The Alaska Milk Corporation (AMC) has been operating since 1972 through Holland Milk Products, Inc. (HOMPI). AMC has three (3) principal lines of business, namely, liquid canned milk (i.e., evaporated and sweetened condensed milk), powdered filled milk and UHT/Ready-to-Drink (RTD) milk (i.e., fresh, low-fat and chocolate-flavored), and UHT/Ready-to-Use All-Purpose Cream. The company has been promoting the value of health and nutrition with its brand line “Sa sustansya’t lasa wala pa ring tatalo sa Alaska” for its affordable products. AMC holds a dominant position in the liquid canned milk category following the acquisition/licensing in 2007 of the liquid canned milk brands of Société Des Produits Nestlé S.A. Furthermore, AMC has partnered with Royal Friesland Campina NV in 2012 with plans of upgrading manufacturing facilities in the Philippines to increase production and allow introduction of more products. Nonetheless, competition in the industry is high with Nestle Philippines, Inc. dominating the drinking milk sector for 2012 and 2011 at almost 60% drinking milk value sales. due to the large customer base the industry could be attractive for firms to enter. competition is high making it difficult for new firms to enter the industry.INTRODUCTION The food and beverage industry in the Philippines was expected to grow between 5% and 10% in 2012 due to the demand in health food and beverages with consumers becoming more health conscious. . drinking milk products is expected to grow at over 3% in 2013. Given that there are already established firms in the industry. Moreover. Nevertheless. strategic advertising and popular consumer products. there are other players in the industry that are marking their own niche such as the Alaska Milk Corporation particularly for the dairy or milk drink category. This allows a wider customer base for companies to target and a larger market segment to capture. Inc. Drinking milk products is expected to reach a market size of over 52 billion by 2017. Nonetheless. Nestle Philippines. has shown to be the leader in the drinking milk sector of the beverage industry with around 60% share of the market segment due to brand loyalty. We aim to provide our partners the best and most efficient service.ALASKA MILK CORPORATION VISION 1Is to be a leading consumer foods company with a diversified portfolio of consumer food brands and products that are market leaders in their respective categories. making use of leading edge technology to ensure timely product availability and accessibility. We will respond to the call to deliver higher quality nutrition to every Filipino home. We strive to know and understand our customers fully to bridge the gap between what they need and what we can give.Ultimately. the consumers whom we serve the level of satisfaction with our products become our final judge and jury. mindful of our task to be responsive to the ever changing and growing needs of our consumers.Customer relationship is an integral part of building the Alaska business. . We will develop new products and identify market opportunities. MISSION Product Development. Quality.We will continue to build on the strengths and competitive attributes of the ALASKA brand and develop its full marketing potential. We are committed to deliver high quality milk and other consumer food products from production to consumption. Customer Service. and skills-enhancing programs. ideas. Social Responsibility.Growth that creates values for our shareholders is paramount. quality of the . dedication and strong work ethic lay the foundation for the Company’s continued success. training. We challenge each individual by proving the opportunity to contribute to the Company’s endeavors. are one of our most important assets and we are committed to promote their safety and welfare.We recognize our role in nation building by promoting the protection of the environment and taking part in various communitybuilding projects that help enhance and uplift the underprivileged and the marginalized sectors of our society. It is our goal as much as it is theirs. Their wealth of experience. Profitable Growth. We will deploy our resources on investment opportunities that are within our core competence and yield excellent returns relative to its risks and which are consistent with our growth objectives. to pursue and reach their full potentials through continuing education. the Alaska Team Members.People.We recognize that our people. (HOMPI). and creams market. AMC heavily invests in sports with its ownership of the 14-time champion professional basketball team. paving the way into growing Alaska into a mega-brand by competing in the powdered. AMC further expanded its liquid milk portfolio by licensing Carnation and Milkmaid from Nestle and acquiring Alpine. Alaska Aces . feed and soy been milling. (evaporated and sweetened condensed milk) and eventually expanded to manufacture powdered milk and ultra-heat treatment (UHT) milk products division up until AMC’s spin-off and incorporation as a separate and independent corporate entity in 1994. HOMPI initially manufacture liquid canned filled milk products.V. It has consistently maintained its leadership in the canned liquid milk category (evaporated and sweetened condensed). Alaska Milk Shares were listed in the Philippines Stock Exchange in 1995. and a Dutch dairy company. an industrial food company with interests in flour. ready-todrink. Apart from growing its core business. To promote brand Alaska and a healthy lifestyle. Holland Canned Milk International B. This development led to AMC’s move to a dominant position in the category. ensuring high quality standards across product lines. thus. Shortly after its incorporation. In March 2012. Inc. AMC endeavors to diversify and explore opportunities in related consumer product categories. a partnership between AMC’s former parent company. Liberty and Krem-Top. General Milling Corporation (GMC). the fifth largest dairy company in the world. In 2007.COMPANY BACKGROUND Alaska Milk Corporation (AMC) products were first manufactured in the Philippines in 1972 through Holland Milk Products. AMC is committed to providing affordable nutrition to Filipino households. Alaska Milk Corporation announced its partnership with Royal Friesland Campina. the single largest football tournament in the Philippines. Over the last two (2) years. a sports development program involving youth team sports like basketball and soccer and the organizing of the Alaska Football Cup. Alaska is also the title sponsor of the Iron Kids triathlon in the Philippines.” (In nutrition and taste.in the Philippine Basketball Association (PBA) while maintaining the Alaska Power Camp. wala pa ring tatalo sa Alaska. Alaska is still best known for its tagline “Sa sustansiya’t lasa. nothing beats Alaska) . Today. Ozaeta Chairman of the Board Juan B.BOARD OF DIRECTORS Antonio H. Villegas Independent Director Kees Gielen Director . Roberto F. Santos Vice Chairman of the Board Wilfred Steven Uytengsu Director Dr. De Ocampo Independent Director Peter van der Hoek Director Dr. Bernardo M. Engineering Services Ma. Executive Vice President & Chief Financial Officer Arnold L. Idian Vice President. Corporate Affairs . Sales Atty. Gamboa Assistant Vice President. Information Systems Fernando S. Rodriguez Director. Polido Vice President. Belen M. Marketing Francisco T.MANAGEMENT TEAM Wilfred Steven Uytengsu President & Chief Executive Officer Joselito J. Santiago A. Abad Vice President Accounting & Controller Aaron D. Plant Operations Thomas Nilsson Director. Yabut Assistant Vice President. Materials Management Alfredo B. Internal Audit Maria Joanna L. Fernando Vice President. Sarmiento. Fulton Director. Jr. Javier Assistant Vice President. UHT Operations Reycelle M. Alaska began caring for the Filipino family by providing quality milk products for good nutrition and health. it has shown its caring in other ways: through programs that promote sports development.HISTORY In 1972. Now in 2012. campaigns that foster good values among children and product innovations aimed at enhancing the Filipino’s health and welfare. Since then. . It is this commitment to the Filipino that has made Alaska a leading brand. as Alaska looks forward to the next 40 years. the mission of nourishing Filipino dreams grows stronger than ever. starts local production of Alaska Evaporated Filled. and wins awards of excellence in advertising. 1987 Alaska Powdered Filled milk 80g pouch. Sweetened and Chocolate Sweetened Condensed Milk Alaska liquid milk achieves brand leadership Alaska launches the "One-on-One" campaign featuring basketball star Cisco Oliver and Michael the Alaska boy. in its latest advertising campaign. the country's professional league. Inc. Alaska launches advertising campaign to encourage use of Alaska liquid milk in food preparations. man" and "Wala pa rin tatalo sa Alaska" beceme two of the most memorable advertising lines of all time. Alaska expands its product line to include Powdered Filled Milk 1977 1982 1985 Alaska features Asia's "Sprint Queen.MILESTONES Holland Milk Products. today's fastest selling size is introduced. "Galing mo. 1986 Alaska Choco is introduced in the market. Alaska improves labels to suit the changing times. 1972 1973 1976 The "One-on-One" campaign is extended to feature the sports soccer and tennis." Lydia de Vega. 1989 . Alaska obtains a franchise in the Philippine Basketball Association. "Galing mo. The Alaska team turns ten and becomes repeat champion of the PBA Governor's Cup. Alaska liquid milk exceeds P1B annual sales and maintains its position as market leader. NCAA.Alaska Powdered Filled Milk surpasses P500 M mark annual sales. 1994 1993 1995 . 1993 1993 1994 "Lakas-Alaska" campaign with Johnny Abarrientos kicks off. Alaska team bags the Governor's Cup title in the PBA Third Conference. Alaska team wins its first championship title in the PBA Third Conference. Alaska strengthens its commitment to sports development by supporting the intercollegiate league. Alaska starts its sports development program for school children through Power Camp. Mom" campaign with the Lastimosas is launched. 1990 1991 1992 Alaska launches publicservice campaign promoting good values among Filipino children using its basketball team. Alaska signs a strategic alliance with NABISCO as their exclusive distributor. 1998 1998 1998 Alaska Powdered Filled Milk re-launches as "Lakas Nutribuilder" Alaska Aces wins 2003 PBA Invitational Cup. and created their own sales force. PBA Centennial Cup and PBA Commissioner's Cup Alaska Aces composed majority of the RP Team to SEA Game in Bangkok Acquires distribution of Quaker Oats Sharon Cuneta becomes the Alaska Liquid Milk celebrity endorser. Alaska Aces wins PBA ALL-Filipino Cup. . Together. they generate over P28B in annual sales. 1995 1996 1997 Alaska acquired ATCI. Alaska Liquid Milk has maintained brand leadership. Alaska launches "Drink Your Milk" campaign with Pops Fernandez and her kids. Alaska Milk launches Alaska Crema All-Purpose Cream 2001 2003 2003 Alaska Milk Corporation is listed as public corporation.Alaska celebrates twenty-five years of bringing nutrition into your homes. a distribution company. And Powdered Filled Milk has become a major player. Alaska Yoghurt Drink Alaska Yoghurt Drink extends its line. 2008 2008 2008 2008 2009 2009 2008 The Entrepreneur Of The Year was founded in the United States by professional services firm Ernst & Young in 1986 to recognize the achievements of the most successful and innovative entrepreneurs worldwide. Available in four flavors: Available in four flavors: Strawberry. extends its line. and Orange. .. new look of Alaska look of Alaska Choco. 2006 2006 2007 2007 Alaska Milk Corporation introduces Alaska Yoghurt Alaska Milk Corporation Drink. President and CEO of Alaska Milk Corporation. was named the 2007 Entrepreneur OF The Year Philippines.Alaska signs a strategic alliance with Hershey International to acquire license for Hershey Ready-To-Drink milk Alaska signs an agreement with Kellogg's Re-launches Alaska Evaporada and Condensada 2004 2005 2006 New looks for New Evaporated looks for Alaska Alaska Evaporated and and Sweetened Condensed Milk Sweetened Condensed Milk Alaska and Nestle Alaskaon and Nestle Agree Sale and Agree on Sale Licensing ofand Licensing of Canned Milk Business Canned Milk Business WILFRED STEVEN UYTENGSU. Strawberry. a ready-to-drink milk introduces Alaska Yoghurt naturally fermented with Drink. Alaska Milk Alaska Milk Corporation Corporation introduces the new introduces theChoco. a ready-to-drink milk good bacteria which help naturally fermented within good proper bacteriadigestion. Blueberry. Green Apple. which help in proper digestion. and Orange. JR. Blueberry. Green Apple. the world's leading and most popular basketball association. 2010 2010 2010 .Alaska Milk re-launches Alaska Choco! and Alaska Sweet Milk! with a new look. Alaska Milk hits P10 Billion mark in revenues Alaska Powdered Milk Drink introduces the 33g puch. Tambuli) Alaska brings IronKids to the Philippine youth sports programs Alaska Milk signs a three-year partnership contract with NBA. NBA Program. through its Jr. a pack size for single-served consumption 2009 2009 2010 Enters a new category with Krem-Top Coffee Creamer Alaska Aces celebrates its 25th year as a PBA team Alaska Football Cup turns 15 2010 2010 2010 Advertising campaigns win awards in effectiveness & societal values ( Araw Awards. Launch of Alpine Sterilized Milk Alaska Value Line's Summerap Campaign won Gold for Best Innovative Campaign in Tambuli Awards VP for Marketing Blen Fernando won the Tambuli Awards CMO of the Year 2012 2012 2012 Alaska announces its partnership with Campina Alaska Celebrates its 40th Year anniversary 2012 2012 . Laguna because it has been the home of AMC’s manufacturing plant since 1972 and is Alaska’s turn to give to the residents who welcomed them into their municipality.CORPORATE SOCIAL RESPONSIBILITY The company partnered with Gawad Kalinga and the Municipality of San Pedro. In addition. Long after the last brick has been laid. supplies raw materials and assists in the marketing and sales of the community’s finished products. Barangay San Vicente. . Laguna. Programs such as furniture and bag-making and Alaska-enriched yema. Now. Alaska Milk will continue to support its adopted community assuring them not only of a “roofed” community but also a brighter future. AMC also paved way for livelihood opportunities. Alaska believes that providing decent homes and livelihood programs marks the beginning of the transformation of a person. Laguna in order to construct 100 homes in the six-hectare relocation site in Bayan-bayanan. More than a Roof Located in Bayan-Bayanan. Alaska provides trainings. polvoron. The village will be the new home for some of the municipality’s squatters. the Alaska Gawad Kalinga Village shelters more than 120 families. a family. and a community towards progress and development. The company chose San Pedro. and pastillas products were introduced to the community. San Pedro. These fundamental values develop character and are necessary attributes for success as much as good health and proper nutrition. through the ALASKA POWER CAMP. Children’s Hour is a non-profit organization that raises funds through the power of one hour. AMC is one of the first companies to join Children’s Hour campaign and has been recognized as one of the Top 20 contributors Alaska Milk looks forward to a continuing partnership with Children’s Hour in “making the world a better place. . Alaska’s Sports Development Program. Since 1999. and total development in the form of grants. Children’s Hour Alaska Milk Corporation and Children’s Hour have enjoyed a shared mission and a long collaboration in creating a brighter future for Filipino children. one hour at a time. which taps individuals to donate one hour worth of their salary once a year to programs committed to the welfare and development of Filipino children.” Alaska believes that sports play an important role in instilling the values of discipline. is a vehicle to get the youth to develop their skills in basketball and football. nutrition. hard work. Alaska Milk Corporation has formed ties with Children’s Hour as well.To promote good nutrition for kids. shelter. These funds are then deployed to carefully selected projects that help children in the areas of education. protection. Company employees and even Alaska Aces players and coaching staff are invited to donate a percentage of their salaries to the fund. team work and determination among the youth. AMC have participated in the Children’s Hour fund raising campaign. Alaska has a new seal of quality signifying a renewed vigor in providing its customers with the best and freshest products. But in the heart of consumers. active and sports-oriented lifestyle for the brand. the picture of a healthy and happy boy on the pack is still the most well-known brand symbol. This helped create an image of a healthy. Then and now. the brand has become highly associated with sports. It is assured in every pack of Alaska. It is caring. Alaska products were imported into the country. they proceeded to manufacture other products in the local plant. trustworthy and good for the whole family. Alaska Milk Corporation decided to produce one product locally – the evaporated filled milk. Alaska also provides emotional benefits to its consumers. quality has always been the brand’s topmost priority. Aside from being tasty and nutritious. Beyond its products. But in 1972. But all throughout. Alaska guarantees its customers that all products are made with the best ingredients and delivered to the market in top quality. This is encapsulated in the brand line “Sa sustansya’t lasa wala pa ring tatalo sa Alaska”. the company’s basketball team. No wonder millions have made Alaska milk products part of their daily life. Eventually. Then with the creation of the Alaska Aces.MARKETING Alaska is a milk brand that’s originally from the Netherlands. It embodies what Alaska is all about and the role it plays in the lives of consumers. For many years. . the brand has always stood for health and nutrition. Alaska is also highly affordable. Alaska introduces a new way to go crazy over milk — Alaska Choco! and Alaska Sweet Milk! Now with a new look. kids will surely love it. powdered filled milk and UHT/Ready-to-Drink (RTD) milk (fresh.PRODUCTS AMC has three (3) principal lines of business. to ensure the products’ quality. ALASKA YOGHURT DRINK The Alaska Yoghurt Drink is a ready-to-drink milk naturally fermented with good bacteria which help in proper digestion . namely. low-fat and chocolate-flavored). liquid canned milk (evaporated and sweetened condensed milk). and UHT/Ready-to-Use All-Purpose Cream. hygiene and longer shelf life. ALASKA CHOCO! and ALASKA SWEET MILK! ALASKA FRESH MILK ALASKA SLIM MILK ALASKA HI-CALCIUM NON-FAT MILK (Ready to Drink Milk) Alaska’s Ready-to-Drink milk products use the Ultra Heat Temperature (UHT) process combined with aseptic packaging. OTHER PRODUCTS ALASKA EVAPORATED FILLED MILK & SWEETENED CONDENSED FILLED MILK ALPINE STERILIZED ALASKA CREMA ALL-PURPOSE CREAM ALASKA CONDENSADA (Creamer) COW BELL CONDENSADA ALASKA EVAPORADA (Creamer) . ALPINE FULL CREAM MILK ALASKA POWDERED MILK DRINK ALASKA KREM-TOP COFFEE CREAMER ALASKA NUTRIBUILD 345 (Children’s Powdered Milk) LIBERTY CONDENSADA . which includes the Alpine. Milkmaid represents premium quality. Carnation has remained a strong brand nationwide and best known for its culinary usage and good recipes. Krem-Top. Its products have long been associated as the “cooking milk” and excellent ingredient for sweets and desserts. Milkmaid Full Cream Condensed Sweetened Milk . Carnation and Milkmaid brands. Alaska Milk holds a dominant position in the liquid canned milk category following the acquisition/licensing in 2007 of the liquid canned milk brands of Société Des Produits Nestlé S.A. for generations have been enjoyed by families through the uniquely sweet and creamy home-prepared treats and desserts.STRATEGIC ALLIANCES Today. Liberty.. Carnation Evap and Carnation Condensada Milkmaid. advertiser and retailers to health rules and regulations and standards of quality. R. No. The FDA’s main goal is to ensure the health and safety of food and drugs made available to the public through compliance of manufacturers. to include tax administration. traders and distributors are enjoined to revise their labels and labeling materials to reflect the Front-of-Pack (FOP) label for energy or calories following FDA Circular No. Food and Drug Administration (FDA). 68. promote his general welfare and establish standards of conduct for business and industry. R. 7394. attributes and properties expressly authorized by law or incident to its existence. distributors. medical devices and household hazardous waste in the country.CHAPTER II PEST ANALYSIS POLITICAL Batas Pambansa Blg. to provide as much as possible an equitable relief to a greater number of taxpayers and to create a robust environment for business to enable firms to compete in regional as well as global market.A.Tax Reform Act of 1997: It is the policy that promote sustainable economic growth through the rationalization of the internal revenue tax system.Consumer Act of the Philippines: The policy that protect the interest of the consumer. drugs. No.The Corporation Code of the Philippines: A corporation is an artificial being created by operation of law. 2012-015.A. having the right of succession and the powers. cosmetics. For consumers to make informed choices all food manufacturers. and regulate the flow of food. The FOP labels are expected to be . 8424. monitor.The FDA has the authority to license. protect investors. No.A. enhance the democratization of wealth. rules and regulations such as the minimum wage order. minimize or eliminate insider trading and other fraudulent or manipulative devices and practices which create distortions in the free market. encourage the widest participation of ownership in enterprises. R. artists and other gifted citizen to their intellectual property and creation. 8293. No. An effective intellectual and industrial property system is vital to the development of domestic and creative activity to facilitate transfer of technology. and market access of products. inventors.part of the food processors’ educational and advertising campaign materials. Occupational Safety and Health (OSH) standards have to be properly observed to reduce hazards in the workplace. attract foreign investments. free market that regulates itself. . promote the development of the capital market. 8799 – Securities Regulation Code: The code is enacted to establish a socially conscious. particularly when beneficial to the people. ensure full and fair disclosure about securities. R.A. Human Rights Issues/Employment Laws: The Department of Labor and Employment (DOLE) ensures that policies and programs implemented in the aspect of labor and employment are observed to include human rights issues.Intellectual Property Code: The policy to protect and secure the exclusive rights of scientists. Trade Restrictions and Tariff: The Philippines is a member of the World Trade Organization (WTO) and Asia Pacific Economic Cooperation (APEC) and has made market access commitments under the ASEAN Free Trade Agreement (AFTA). in cooperation with the other environment-related agencies. continues to dominate the drinking milk sector in 2012 and to hold nearly 60% of the drinking milk value sales in 2011. . The Department of Trade and Industry (DTI) acts to intensify private sector activity in order to accelerate and sustain economic growth through trade liberalization and deregulation programs and policymaking designed for the expansion and diversification of trade both domestic and foreign.Waste Management Concern: The Environmental Management Bureau (EMB) implemented the following national environmental laws: PD 1586 (Environmental Impact Statement System) RA 8749 (Clean Air Act of 1999) RA 9003 (Ecological Solid Waste Management Act of 2000) RA 9275 (Philippine Clean Water Act of 2004) Department of Environment and Natural Resources (DENR) Administrative Order 2003-14 is a DENR partnership program with industries. ECONOMIC Competition: The Nestle Philippines Inc. aimed to support industry self-regulation towards improved performance. A market-based exchange rate will change whenever the values of either of the two component currencies change. A currency will tend to become more valuable whenever demand for it is greater than the available supply. Drinking milk products is expected to reach a market size of over 52 billion by 2017. The demand is highly correlated to a country’s level of business activity. Giving relevance to products and connect with consumers. . Use of marketing campaigns that keep cultural traditions alive such as small town fiestas and Santacruzan. (Source: Philippine National Dairy Authority) Exchange Rate: It is the value of one country’s currency in terms of another currency which is determined in the foreign exchange market. Rapidly expanding market for milk and milk products due to expanding growth of the population. gross domestic product (GDP) and employment level. Drinking milk products is expected to grow at over 3% compound annual growth rate (CAGR). Most trades are to or from the local currency. Availability and cost of ingredients such as preservatives and flavorings. Diversified portfolio of drinking milk products will allow companies to target different market segments. Less than 1% of the dairy requirement is produced locally. Raw Materials: Cost of raw materials can be a factor if the economy for certain materials are weak. 10% the following month is mainly due to lower cost of food.10%. Health Consciousness: The older generation generally is more health conscious and tends to consider nutritional factors among products. SOCIO-CULTURAL Age Distribution: The age factor is used when evaluating consumer choice.50% in July 2013 to 2. dieting has become a trend which forces the industry to create products under these consumer preferences.Inflation Rate: Inflation rate in August 2013 was at 2. Furthermore. . The younger generation is leaning more towards new and fun products. housing and transport. The decrease in the inflation rate from 2. Technological advancement help create new brands and product line to meet consumer preferences such as new flavors. Technology can help improve production efficiency.Social Media: The use of social media outlets (i. However. thus increasing productivity. The use of the social media lowers the cost of advertising while increasing the reach of its market segment. Facebook. TECHNOLOGICAL Automation: Technological advances increase the utility of employees and capital. tend to follow trends and fads. preferences and taste. high cost for new technology could also be a barrier to entry for new competitors. Consumer Choice: Endorsements. commercials and advertisements with the use of celebrities have become more important for the younger generation of patrons. Accessibility of social media through provides consumer awareness. brand identity and promotion. Instagram) has kept consumers directly connected to the products/brands. Twitter.e. Consumers. . particularly the younger generation.. sugar-free or diet sweeteners to meet the changing customer style. CHAPTER III PORTER’S FIVE FORCES Threat of New Entrants (+) Bargaining Power of Suppliers Competitive Rivalry Bargaining Power of Buyers (-) (-) (+) Threat of Substitution (-) . Thus. especially powdered milk. There are limited dairy processing facilities and milk delivery vehicles. Manufacturing process requires specialized equipment that over time will wear-out and need replacement. . The buyers are not aware of the need for additional information because all the information needed is provided. from engineering and packaging to food science and laboratory expertise. Switching products is easy and the price difference is very small given that the industry is very competitive.BARGAINING POWER OF BUYERS Consumers of milk beverage products are present in every household. it is difficult to simply switch suppliers. The country is a major global importer of dairy products. Australia is strongly positioned as the preferred supplier of milk powder of local processors. The products are not differentiated. Bargaining Power of Suppliers Suppliers to the industry represent a variety of disciplines. Drinking milk is considered a commodity. Customers are highly sensitive to the prices of products and are willing to change brands when prices get too high. The bargaining power of buyers is generally low given that milk is a commodity needed in every household. The bargaining power of suppliers is high leaving the industry with little choice to switch to alternative suppliers. New Zealand and Australia are the top exporters of milk and dairy products to the Philippines taking some 58% and 66% of total dairy import volume and value. the threat of new entrants in the milk beverage industry is low. . Customers are not likely to go for substitutes because brand name loyalty is a very strong competitive pressure in this industry. Government agencies have requirements that are for strict compliance. Consumers prefer healthy alternative and substitute products. Companies have extensive product lines such as low-fat or non-fat milk under the dairy product to still capture and cater to the preference of these different market segments. They also have direct supply and distribution channels setup. In consideration of the aforementioned factors. There are substitute products available for lactose intolerant consumers such as yoghurt.THREAT OF NEW ENTRANTS Existing firms have cost and performance advantage in the industry given that they already have large capital expenditures and economies of scale. Threat of substitutes is relatively high given that imported substitute products are made available with low switching cost taking more than 50% of the market share. THREAT OF SUBSTITUTES Customers would not incur much cost in switching to substitutes and easily find a similar product. Brand loyalty will make it difficult for a new player to enter. Majority of the companies have established brand identities. A large capital is needed in the manufacturing industry. Competitive rivalry is high for the milk industry with Nestle Philippines leading the drinking milk sector with a higher market share. The change in consumers’ taste and lifestyle would affect the market share and thus. appearance and appeal. Providing products for an economically diverse consumer base under brands that stand for quality and are trusted household names. raffle draws) to customers which can sway customers’ to choose a particular brand.e. Steady growth of local dairy production and processing.. companies would have to work on adapting and responding to these changes such as offering low-fat or fat free milk products. There are significant brand identities among the firms in the industry. Companies often provide incentives/promotions (i. There is a lack of product differentiation. Nestle Philippines increased its capacity to produce growing up milk for the local and the Association of Southeast Asian Nation (ASEAN) market. The only cost to switching would be a different taste. . which is why brand names are an important competitive edge for new businesses.COMPETITIVE RIVALRY The fixed costs act as a firm barrier to entry and can include costs for warehouses. Market shares in the industry are mainly taken up by imported products. The use of celebrities and famous personalities to endorse products. trucks and labor. Establishment of new processing facilities/plants in various parts of the country (Zambales. Isabela and Camarines Sur). Nestle Philippines continue to market its brand aggressively to maintain its leadership in drinking milk. There is no need for significant customer-producer interaction since customers purchase products based mainly on taste. Further. AMC will continue to expand and grow having established product lines in the drinking milk sector of the industry over the past 41 years of it being one of the leading industry players. it could be said that the industry is very competitive with a high threat of substitute products. the forging of alliances and expansion of product lines is an advantage for the company considering the tight competition with rival firms. . The brand loyalty of consumers is an advantage for the established firms such as AMC and Nestle Philippines. However. it would be difficult for new firms to enter the industry given that it is capital extensive and consumers are mostly brand loyal. Moreover. Inc.CHAPTER IV CONCLUSION In consideration of the factors affecting the beverage industry particularly the drinking milk sector as provided in the PEST analysis and Porter’s Five (5) Forces. the steady growth of AMC in pursuing its vision to become a leading company is attributed to its competitiveness in product development ensuring quality products that cater to the needs and meet the satisfaction of its consumers who is now becoming more health conscious. Inc. who have extensive product lines which may cater to the different market segment that is not captured by the dairy/milk beverage products. The growth in the milk beverage industry is steady over the years through technological advancement with the establishment of new processing facilities/plants in the country. increase in local dairy production and exportation of dairy products to neighboring countries by leading companies such as Nestle Philippines. ph/ http://www.net http://www. Dairy Situationer Competitive Issues in the Dairy Industry: The Pending DFA/NDH/Hood Transaction Labor Code of the Philippines Trading Economics A Brief on the Processed Food and Beverage Industry in the Philippines.gov.euromonitor.com/drinking-milk-products-in-the-philippines/report (December 2012 report) http://www.com/sites/daniellegould/2013/08/16/technology-will-drive-foodindustry-growth-finds-kpmg-survey/ .fda.REFERENCES National Dairy Authority. 2011 1http://www.lawphil.com/v2/ http://www.forbes.alaskamilk.
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