IV. MARKET SITUATION ANALYSIS

1. Macro-environment

Chocolate drinking in the Philippines dates back in the Spanish colonial times and that chocolate were introduced by the Aztecs to the Filipinos during the Manila-Acapulco trade. As time went by there has been a lot of changes with chocolate drinks in the Philippines. Today, a chocolate drink is no longer just powdered there are ready-to-drink. Its no longer plain chocolate; different flavors were now incorporated with it. We are also more health conscious than before that we are now checking the nutrient content of everything we buy. And of course, the convenience of eating and drinking is also very popular today that there are several kinds packaging from the market that we could see every time we went to the grocery. And lastly, chocolate drinks are no longer just available during cold season. It is now available in hot or cold. Be it powdered or ready-to-drink. And be it plain chocolate flavor or a 3-in-1 drink.

A. Political-LegalTable 4.1Political-Legal Macro-Environment

FactorImplicationEffect on proposed product

Implementation of the law about informing consumers about nutritional value[footnoteRef:1](Republic Act No. 8976) [1: www.gov.ph]

With the implementation of the said law, all the food and beverage will now have a printed nutritional content on its entire product. Therefore, an increase in the awareness of the consumer buying food and beverage would be noticeable.The food fortification law will inform the entire consumer about the content of the product. Therefore, it will encourage more consumer to buy the product because of they would now see the vitamins and minerals present in the product.

House Bill 4021 or the proposed Healthy Beverage Options Act of 2014[footnoteRef:2] [2: www.philstar.com]

Healthy Beverage Options Act of 2014 will increase the demand for healthier drinks to be offered in the market. This would also increase the number of health conscious consumer.This will result for the parents, students and other consumers as well to prefer the product for it has health benefits and will encourage them to start a healthy living life.

Increased tax on soft drinks proposed[footnoteRef:3] [3: http://www.mb.com.ph/increased-tax-on-soft-drinks-proposed/]

When there will be an increased tax on soft drinks, there will be a probability that consumers will change its preferred drink. Consumers may choose to drink healthy drinks.Therefore, there would be an increase in demand for healthier drinks which would also affect the consumption of the product.

Republic Act no. 8976 -The Philippine Food Fortification Act of 2012Since the government promotes the right to health of the people, according to Section 6, Manufacturers of processed food or food products shall include on the label a statement of "nutrition facts" indicating the nutrient(s) and the quantities of said nutrients added in the food. Consumers will now have information about the food they eat or the beverage they drink. It would help them recognize the products which has a bad effect on them or would suffice the needed vitamins.

House Bill 4021 or the proposed Healthy Beverage Options Act of 2014It is a bill where in selling of soft drinks will be ban in schools. Banning soft drinks may prevent the children from harmful substances. Soft drinks comprise a lot of sugar, artificial sweeteners, caffeine, phosphorus and carbon acids, which have dangerous effects on the body. The bill seeks to impose a fine of P100, 000 on schools and officials who may violate the said law. Healthy Beverage Options Act of 2014 will help to increase the demand for healthier drinks to be offered in the market. Aside from it, it would minimize the growth rate of diabetes, obesity, tooth decay, etc. in the Philippines.

Increased Tax on Soft Drinks ProposedThe bill will impose a 10-percent ad valorem tax on soft drinks and all sweetened beverages which gained support from other sectors such DOH or Department of Health, Department of Finance (DOF) and other academic experts. Soft drinks are unsafe drinks which may harm our kidneys and can cause diabetes. It contains ingredients called aspartame and caramel coloring which has a negative consequence in out body. This bill will not only help the consumers from getting away from the soft drinks but also increase the demand on healthier products.

B. EconomyTable 4.2Economic Macro-Environment

FactorImplicationEffect on proposed product

The countrys annual headline inflation slowed down to 4.4 per cent in June.[footnoteRef:4] [4: www.census.gov.ph]

Possible the same selling prices from last year. Due to inflation the market will opt to maintain the price the same as beforeSince they would still offer the same prices for the product there might be no effect to the product.

Rising global prices for cocoa for this period.[footnoteRef:5] [5: http://www.ft.com/intl/cms/s/0/849650f2-f7b5-11e3-b2cf-00144feabdc0.html]

With the increasing price for cocoa, prices of cocoa based products might increase as well. This will have an effect on the price of the product.The Ovaltine is based in cocoa, there might be an increase in the price which would affect the demand of the product which would result to decrease in demand.

Domestic EconomyAs of June, prices increase on food like ice, garlic, sugar, pork, chicken, eggs and ginger. According to Annual Inflation in Areas outside NCR (AONCR), in the case of non-alcoholic beverages index, slower annual growths were posted in the rest of the commodity groups.

Rising Global Prices for Cocoa for this PeriodThe price for cocoa has skipped to near three-year highs on the demand for chocolate across Asia. Over the past five years, demand of cocoa in Asia has increased to 29%. Chocolate industry is concerned on how to be able sustain the supply of cocoa. Products which have cocoa will be affected by this problem. Prices of cocoa based products might increase as well. This will have an effect on the price of the product.

C. Socio-culturalTable 4.3Socio-cultural MacroEnvironment

FactorImplicationEffect on proposed product

Due to their busy lifestyles, consumers want caffeine like coffee[footnoteRef:6] [6: www.euromonitor.com- Other Hot Drinks in the Philippines and Coffee in the Philippines]

With the fast change of lifestyle of the consumer, the coffee demand will surely increase which affect the chocolate based drinks. Informing the consumer that chocolate based drinks also contain caffeine would be noticeable. There might be a tough competition for coffee and chocolate based drinks.The consumer will then be comparing which among the two drinks will cater to their need to stay up late at night and still have energy to finish all their work would noticeable.

Consumers now prefer healthier drink.[footnoteRef:7] [7: www.euromonitor.com-Consumer Lifestyles in the Philippines and Tea in the Philippines]

Appearance of healthier drink would increase the competition in the beverage industry. This in return would affect the chocolate based drinks.Increasing the awareness of the consumer that chocolate based drinks are healthy as well should be improve still have a demand for the healthy living consumer.

Consumers stick to sachets.[footnoteRef:8] [8: MarketLine Industry-Hot drinks in the Philippines]

There will be a greater demand on small packs because it also fits the budget of the consumers and possible lesser demand on large packs.Since consumers prefer to buy smaller packs they most likely purchase the product. Hence, there will be an increase in sales.

Filipinos shifting from sari-sari stores to supermarkets[footnoteRef:9] [9: http://business.inquirer.net/133509/filipinos-shifting-from-sari-sari-stores-to-supermarkets]

Due to varying consumers behavior and rising growth of supermarkets, it may do some store promotions in which may help to increase the sales of beverage industry.

Filipinos buying less more often[footnoteRef:10] [10: http://www.rappler.com/business/8865-filipinos-buying-less-more-often-nielsen]

There might be a possible price war or other manufacturers will release sachets to be able to target the current and new market.

TV remains main source of product info[footnoteRef:11] [11: http://www.rappler.com/business/features/32721-what-influences-filipinos-decision-to-buy-products]

Commercials increased their brand preference.[footnoteRef:12] [12: http://www.rappler.com/business/features/32721-what-influences-filipinos-decision-to-buy-products]

3 out of 5 Filipinos suffer from Vit-D deficiency[footnoteRef:13] [13: http://www.philstar.com/health-and-family/2014/05/13/1322297/3-out-5-filipinos-suffer-vit-d-deficiency]

Because of the working conditions of the consumers, they will find healthy alternatives to supply their deficiency. Thus, healthier drinks would raise the competition in the beverage industry which would also affect the chocolate based drinks.

Due to their busy lifestyles, consumers want caffeine like coffeeDue to the increasing number of people working in BPO or business process outsourcing industry, the lifestyle of the consumers change and prefer to drink coffee to keep themselves wide-awake at night. Today, the coffee manufacturers are experiencing high demand from the consumers. Consumers should be informed that cocoa based drinks have small quantities of caffeine. Chocolate based or cocoa based drinks have better benefits as compare to caffeine based drinks. Too much caffeine can cause to hypertension, insomnia, early death and others.

Consumers now prefer healthier drink.Today, more and more Filipinos prefer to go to gym or enroll in any sports. Some practice on using organic and healthy products. All ages, now prefer to live healthy also because with the influence of the other sectors of the government specifically DOH or Department of Health. Some representatives of the government even proposed a bill to encourage the Filipinos to shift to healthy lifestyle.

Consumers stick to sachets.Then before, Filipinos are fond of procuring small packs because of some reasons: affordability and practicality. [footnoteRef:14] Filipinos are known to be smart buyers and also the purchasing power of the Filipinos are not that high compare to other countries such as South Korea, United States and other developed countries. Sachets are practical to use because they do not need to find a container to put the remaining product. Some Filipinos consumed immediately consumed the product after they buy rather than stocking it. [14: http://www.entrepreneur.com.ph/business-ideas/understanding-the-filipino-s-unique-micro-repacking-mentality]

Filipinos Shifting From Sari-Sari Stores to SupermarketsSari-sari stores are already part of the Filipino culture. Currently, there are several supermarkets has been established which close to their homes. Because of the short distance of supermarket to home, consumers at this time find it more convenient to make frequent short trips. Supermarkets also offer what sari-sari stores can offer. Consumers can buy the products in micropackging or also known as tingi.

Filipinos buying less more oftenAccording to Nielsen, Filipinos visited grocery stores more frequent than last year, but bought fewer items. The report found that 45% of Filipinos went to supermarkets on a weekly basis in 2011, up from 30% in 2010. Nielsen Philippines managing director Stuart Jamieson said, "Consumers are decreasing their basket size in order to manage their available cash, shopping only as the need arises." There might be a possible price war or other manufacturers will release sachets to be able to target the current and new market.

TV remains main source of product infoAccording to a Nielsen online survey showed that advertising especially on TV strongly influences Filipino respondents preference for a brand. Television remains the main source of product information for Filipino respondents for items, such as cosmetic/skin care, food and beverage, personal care, health care/medicine, household product and home appliance.

Commercials increased their brand preference.

3 out of 5 Filipinos suffer from Vit-D deficiencyD. Technological

Table 4.4Technological Macro Environment

FactorImplicationEffect on Proposed Product

Tetra Pak announced the introduction of Tetra Top packaging12The introduction of this packaging will enable the consumers to appreciate the product more and in return will attract more customersThe new packaging will encourage more consumers to buy the product because of its design and the convenience that it will bring to the customers.

Tetra Pak and Fluxxion Announce Partnership to Jointly Develop Microfiltration Technology13The partnership of this two company, it will increase the processing capacity and still maintaining a high level of product quality for the customers.The new microfiltration system would be applicable to cheese and drinks products that would be space and cost efficient. Which in return could result to a much affordable price for the product

Food Fortification introduced by Food and Nutrition Research Institute (FNRI)14Food fortification is the addition of one or more micronutrients to food and drinks. With this addition, the product could match up with the current trend of delicious yet healthy drinks.The micronutrients that are added to the products were not produced by the body. It can only be found on the food and drinks that we intake. With this, the product would be healthier than before.

Emergence of Facebook, Twitter and other social medias.A possible increase in consumer awareness and word-of-mouth.With the introduction of the new product, posting it on different social media flat form would help in creating a buzz that would catch the attention of the consumer.

[footnoteRef:15] [15: http://www.interaksyon.com/business/46707/philippines-allots-p192-m-for-coffee-cacao-production-to-ride-on-mocha-trend12 http://www.tetrapak.com/ph/Documents/Fusion3-08.pdf/page913 http://www.tetrapak.com/ph/Documents/Fusion3-08.pdf/page1214 http://www.fnri.dost.gov.ph/index.php?option=content&task=view&id=689]

Tetra Pak announced the introduction of Tetra Top packagingThe primary function of packaging is to protect the product. We want the product to still be in its best condition even after the customer has purchased the product. With the new packaging of the product, the consumers will to have a packaging that is trendy and will represent the new Ovaltine. Because the product design will convey the quality, and taste of product this could increase the customers who will buy the product. Since it is easy to open, re-close and drink from the consumers, will surely be appreciating this new packaging.

Tetra Pak and Fluxxion Announce Partnership to Jointly Develop Microfiltration TechnologyThis Microfiltration Technology is said to be applicable to dairy and cheese products. The Ovaltine has milk content by using also this technology with a chocolate drink will extend its shelf-life which will be beneficial to us. Due to longer shelf-life, the product could be seen longer in the shelves by the customers unlike the other products. This could lead us to be the chosen products of customers who were keen on the expiration date of the products that they use.

Food Fortification introduced by Food and Nutrition Research Institute (FNRI)Many people lack the micronutrients that are needed by the body. These micronutrients are not produced by the body. Because of that, incorporating micronutrients in the products will make our product be part of the things to be considered by the customers. Being part of the choices that the customers will choose when buying drinks for them and their family can increase the number of customer as well as their consumption of the product because of the micronutrients we incorporated in Ovaltine.

Emergence of Facebook, Twitter and Other Social Medias

VII. STRENGTHS, WEAKNESSES,OPPORTUNITIES AND THREATS

STRENGTHSProductOvaltine has a lot of vitamins and minerals as compare to Chocquik and Swiss Miss

PriceAffordable as compare to MiloAs to compare to Milo, Ovaltine is more affordable. Ovaltine All-in-One 20 grams cost 5 pesos and Milo 20 grams cost 5.50 grams.

WEAKNESSESProductNo smaller pack

Price

PlacePoor when it comes to availabilityGrocery retailers like sari-sari stores (local traditional mom and pop stores) favor lower and middle income consumers because of their affordable offerings and proximity to buyers.[footnoteRef:16] Non-availability of Ovaltine in sari-sari stores have a large impact on sales. [16: Euromonitor-hot drinks in the Philippines]

PromotionNo recent TV Advertisement.The last TV advertisement released by Ovaltine was around 2007. It starred John Manalo showing how Ovaltine can help our bones to become stronger and think intelligently.

No celebrity endorser for the last few years.Milo has several celebrity athlete endorsers such as Jeron Teng, Kiefer Ravena and Chris Tiu. These endorsers helped the brand increased sales and more awareness.

OPPORTUNITIESProductRepublic Act No. 8976 - The Philippine Food Fortification Act of 2012Since the government promotes the right to health of the people, according to Section 6, Manufacturers of processed food or food products shall include on the label a statement of "nutrition facts" indicating the nutrient(s) and the quantities of said nutrients added in the food.

Consumers now prefer healthier drink or lifestyle.

Consumption of hot drinks, which are traditionally drunk in the morning, increased in frequency, especially among cities where longer work hours and time poverty is higher. The rise of the business process outsourcing (BPO) industry brought a change in the lifestyle of consumers who work at night.[footnoteRef:17] [17: Euromonitor-Hot drinks in the Philippines]

According to DOH or Department of Health (2013), there are 54 percent of deaths among Filipinos, with cardiovascular as the leading killer. Around 30 to 32 percent of non-communicable diseases (NCDs) involve people who are below 60-years-old. DOH release a project called Pilipinas Go4Health which also influences the Filipinos in choosing a healthier lifestyle. [footnoteRef:18] [18: www.philstar.com]

Stick to the sachets

Sachets and break-bulks, commonly called tingi, continue to be immensely popular among Filipino consumers, manifested in their purchase of top FMCG. Their lower per capita income compared to their Asian neighbors accounts for the dominance of tingi selling in the country. [footnoteRef:19] It should be noted that despite the savings associated with the purchase of bigger packs, Filipinos are concerned about the high cost to purchase the packs. [footnoteRef:20] [19: http://www.philstar.com/business-life/475037/shopping-styles-filipino-consumer] [20: Euromonitor-Hot drinks in the Philippines]

Healthy Beverage Options Act

It is a bill where in selling of soft drinks will be ban in schools. Soft drinks contain a lot of sugar, artificial sweeteners, caffeine, phosphorus and carbon acids, which have harmful effects on the body. It is the responsibility of the State to protect our children from exposure to harmful substances. HB 4021 seeks to impose a fine of P100,000 on schools and officials found guilty of violation of provisions of the law.

Higher tax on unhealthy food products

I will serve as an opportunity to chocolate drink manufacturers since the consumers will pay higher tax on unhealthy or junk food products.

Increased Tax on Soft Drinks Proposed

Food Fortification introduced by Food and Nutrition Research Institute (FNRI)

Filipinos buying less more often

3 out of 5 Filipinos suffer from Vit-D deficiency

PlaceFilipinos shifting from sari-sari stores to supermarkets

Boom in convenience store sector seen in the Philippines

PromotionEmergence of online campaigns

The Philippines tops the list with 93.9 percent of the nation reportedly signed up to Facebook[footnoteRef:21]Philippines ranked 10th in the list of countries with the most number of users on Twitter.[footnoteRef:22] Manufacturers of chocolate drinks and other brands belonging to other industry take this opportunity to raise awareness to their consumers. For instance, Milo invests in Facebook ads. Milo also has a Facebook page wherein they give updates about their activities like fun run and products. [21: http://asiancorrespondent.com/54475/philippines-named-the-social-networking-capital-of-the-world-indonesia-malaysia-amongst-top-10/] [22: http://technology.inquirer.net/15189/philippines-has-9-5m-twitter-users-ranks-10th]

TV remains main source of product info

Commercials increased their brand preference

THREATSProduct

Low growth in sales

From 2009 to 2010, AB Food and Beverages Philippines, Inc. had a -10.41% sales growth. -17.49% from 2010 to 2011, -9.30% from 2011 to 2012 and -62.49% from 2012-2013.High income loss

In 2009, AB Food and Beverages Philippines, Inc. had Php -52,931,332 income loss; Php -53,368,247 income loss of 2010; Php 79,222,704 total income of 2011; Php 25,368,327 total income of 2012 and Php -6,424,212 income loss of 2013.

Rising global prices for cocoa

Cocoa prices have jumped to near three-year highs for chocolate across Asia.[footnoteRef:23] Chocolate drink manufacturers tend to deal with this factor and the manufacturers will think of another way in order for them to price the product affordable. [23: http://www.ft.com/intl/cms/s/0/849650f2-f7b5-11e3-b2cf-00144feabdc0.html#axzz3BH25SGPm]

VIII. SWOT MATRIX

Table 7.1SWOT MatrixStrengthsWeaknessesOpportunitiesThreats

ProductHas a lot of vitamins and minerals as compare to Chocquik and Swiss Miss

No smaller pack

The countrys annual headline inflation slowed down to 4.4 per cent in June.

Consumers now prefer healthier drink or lifestyle.

Stick to the sachets.

Fortification Act

Healthy Beverage Options Act

Higher tax on unhealthy food products

Increased tax on soft drinks proposed

Food Fortification introduced by Food and Nutrition Research Institute (FNRI)

Filipinos buying less more often

3 out of 5 Filipinos suffer from Vit-D deficiency

Rising global prices for cocoa

Due to their busy lifestyles, consumers want caffeine like coffee

High income loss

Low growth in sales

PriceAffordable as compare to Milo

PlacePoor when it comes to availability

Filipinos shifting from sari-sari stores to supermarkets

PromotionNo recent TV advertisement

No celebrity endorser for the last few years.Emergence of online campaigns

TV remains main source of product info

Commercials increased their brand preference.

XI. KEY SUCCESS FACTORS

The factor that greatly contributed to the achievement of Ovaltine is Customer Loyalty. For several decades, Ovaltine never departed the Philippine market. Some customers had already built their loyalty to the brand despite of the lack of promotional activities and innovations to the product. Ovaltine continue to serve the consumers by giving them minerals and calcium in line with their positioning statement, with Ovaltine power, Ovaltine!.

X. MARKETING OBJECTIVES

Through the proposed Marketing Plan, AB Food and Beverages Philippines Inc. (Ovaltine) aspires to achieve the following operational objectives:1. Achieve an incremental net loss after tax of not more than or equal to -P1.0 million by the end of calendar year 2015, as compared to -P 6,424,212 at year-end 2013.

XI. TOWS MATRIX

Table 11.1TOWS Matrix

Internal

ExternalStrengths1. Affordable as compare to Milo

2. Has a lot of vitamins and minerals as compare to chocquik and Swiss Miss

Weaknesses1. No smaller pack. 2. Poor when it comes to availability 3. No recent TV advertisement4. No celebrity endorser for the last few years.

Opportunities1. The countrys annual headline inflation slowed down to 4.4 per cent in June. 2. Consumers now prefer healthier drink or lifestyle. 3. Stick to the sachets.4. Fortification Act5. Healthy Beverage Options Act6. Higher tax on unhealthy food products7. Emergence of online campaigns8. Filipinos shifting from sari-sari stores to supermarkets9. Food Fortification introduced by Food and Nutrition Research Institute (FNRI)10. TV remains main source of product info11. Commercials increased their brand preference.12. Filipinos buying less more often13. 3 out of 5 Filipinos suffer from Vit-D deficiency14. Increased tax on soft drinks proposedSOMarket PenetrationEducating the consumers about the health benefits of Ovaltine through advertisements.(S2,O2,O4,O5,O6,O7,O9,O10,O11,O13,O14)WOProduct DevelopmentAvailability of small packs with healthier benefits which meets the taste of the consumer (W1, O1,O2,O3,O4,O6,O8,O9,O12,O13,O14)

Market PenetrationLaunch a TV Advertisement and endorsed by Ryzza Mae Dizon(W3,O10,O11)

Sponsor game shows which displays sportsmanship and smartness(W1,W3,O10,O11)

Place articles, updates and advertisements in social medias(W1,W2,O1,O7)

Availability of the proposed product should focus more in supermarkets (W1,W2,O8,O12)

Threats1. Rising global prices for cocoa for this period. 2. Due to their busy lifestyles, consumers want caffeine like coffee3. High income loss4. Low growth in salesST

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