magnolia - full report

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San Miguel Corporation: THE MAGNOLIA GROUP

Section II: Organizational Growth Opportunities

2.1) Environmental Opportunities

Social-Cultural Force

Consumers indicate that they buy the product in order to satisfy their impulse urge of ice

cream. Despite the impulse urge to buy ice cream, consumers take a number of things into

consideration such as occasion/purpose, taste/flavour, fondness and refreshment.

2.2) Distinctive Competencies

Market Share Leadership

Since it was first founded in 1890 and incorporated in 1913, San Miguel Corporation

manufactured, distributed, and sold food products, beverages, packing products and animal feed

throughout the Philippines and since then, became the largest publicly held food and beverage

company. In 1993, it was rated number 27 in the top 100 emerging market companies and even

generated 4% of the country’s gross national product and contributed to 7% of the government’s

tax revenue. In 1925, San Miguel bought the trademark “Magnolia” when it purchased a small

ice cream plant in Manila, and that is how they started becoming a leader in that market. At the

time, Magnolia was the only dairy manufacturer that had its own dairy farm and that provided a

number of advantages for them in terms of producing its product. This meant that they were able

to dictate their supply and never had problems with any supplier. This also meant that their 3

major line offerings (Bulk Ice Cream, Single Serves and Soft Serve ice cream- with wide variety

in each one) were being managed to Magnolia’s own requirements. With 77% market share,

Magnolia was indeed the market leader. With interesting from foreign companies and continued

competition domestically, Magnolia now had to find ways to maintain their dominance and

continue being the market leader in the Philippines.

2.3) Success Requirement

Magnolia’s success requirement is to maintain its competitive dominance in this rapidly

changing industry where barriers to entry include strong brand loyalty, large capital

requirements in manufacturing, selling and distribution and strong economies of scale.

Magnolia also needed to focus on the consumer buying force (impulsive buying), expansion of

capacity to meet market demand, and attaining international quality standards.

BMR 3134 – STRATEGIC MARKETING

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2.4) SWOT Analysis

SWOT Analysis

SWOT Analysis Framework of Magnolia.

Internal Factors Strengths Weaknesses External Factors Opportunities Threats

Management Economic Marketing Competition Manufacturing Consumer

R&D Technology Finance Legal/Regulatory Offerings Industry/Market

Structure

Internal Factors

i. Strengths

Management- has done a great job in keeping Magnolia ahead of its competitors and we can

see that from their 77% market share. By first acquiring a dairy farm ( one of the most

advanced and modern in Asia) and having a product line of 3 offerings, Magnolia was able

to establish itself as a market leader and made it difficult for its competitors to keep up.

Magnolia with its extensive geographical spread is able to ship from different various

locations unlike its competitors who only ship from Manila. As thus, inclement weather does

not pose a threat to maintaining a steady flow of products to consumers. In that regard, it

shows how well management has done.

Marketing- In terms of marketing, Magnolia communicated their products to the consumers

very well. Through, trade promotions (raffles with prizes for example), consumer promotions

(“buy one get one free”, free gift items with minimum purchase) and advertising (media and

free signage), Magnolia was able to get its brands awareness up to where they wanted and

therefore that is why we see the strong market presence.

Manufacturing-This is one of the key reasons why Magnolia is a market leader. Magnolia

manufactures and distributes its products. With the added advantage of a dairy farm and

having a vast geographical spread, Magnolia dictates its supply to consumers and guarantees

that all of the requirements of its 3 product lines are met. With 6 manufacturing plants


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already, Magnolia had already started making major capacity expansion plans by the

beginning of 1993 that was expected to double the current capacity.

R&D- In an industry that demands constant innovation and diversification, Magnolia. has

made sure that it has kept ahead of its competitors because of its extensive research to predict

market trends and even to some extent, become trend-setters as well. By providing different

flavours and carrying out research to find out what consumers like, Magnolia has been able

to become so dominant in the market.

Finance- Due to their strong market position and low manufacturing costs, Magnolia has

ensured that its finances are maintained well and this can clearly been seen at how well

they’ve been able to expand their offerings and manufacturing plants within the Philippines.

Offerings- Due to constant innovation and research, Magnolia has made sure that it

constantly offers the customer something different. Their broad product line and different

flavours constantly mean that consumers get satisfied at the variety of options.

External Factors

ii. Opportunities

Economic- Consumer spending is not bad and there’s potential for more growth. The

impulsive buying guarantees that consumers are willing to spend on Magnolia’s ice cream

and the different purposes and occasions mean that ice cream is a product that can be bought

for different reasons and as thus more beneficial to Magnolia.

Technology- As we have seen in recent times, technology has become a big part of society

today. As times goes on, Magnolia may want to incorporate more technology into the

manufacturing to reduce production and labour costs.

iii. Threats

Competition- Despite their strong position in the market, Magnolia has to be very weary of

the threat that the competitors pose. With foreign companies such as Nestle, Haagen- Dazs

and Mars interested in the chance to move to the Philippines, Magnolia might find itself

fighting with stronger brands from abroad. With a number of competitors domestically such

as Selecta, Coney Island, and Presto, Magnolia has been able to fight them off with all three

sharing a market share of less than 30% all together.

Consumer- With growing interest from more recognizable brands abroad, consumers may

be swayed to buy from them and this could very well hurt Magnolia in terms of market

share.


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Legal/Regulatory- In terms of legal rules and regulations, the barriers of entry are quite high

as certain rules and regulations make it quite hard for foreign investors to enter the market

making life much easier for Magnolia. With the country encouraging more foreign investors

though, it may soon change and Magnolia might itself competing with foreign companies for

market share.

Industry/Market Share- Like I mentioned before, Magnolia has been doing quite well with

its domestic competitors by having a market share of 77%. This means that they are the

dominant brand in the market. In recent times though, foreign companies threat to come in

and compete with magnolia, putting their dominance at risk.

Marketing Mix Analysis

a. Product Strategy

Magnolia is very much considered as product-orientated. Looking at the market, you get to

understand why such a product requires a lot of innovation and constant improvement. By

providing frozen desserts and snacks on 3 product lines (on wide variety), Magnolia have to

keep coming up with new ideas (flavours, etc.) to stay ahead of its competitors. Magnolia

who also believe in research, are able to predict trends and even become trend-setters

themselves by finding out what consumers like and supply that to them.

b. Pricing Strategy

The pricing strategy implemented by Magnolia is price skimming. Magnolia was the

Philippines’ first and only name in ice cream and frozen confections and as such, made sure

that it became a market leader even as other competitors were coming up. Due to its early

dominance, Magnolia placed its prices higher than competitors because they knew that

consumers were still going to be able to buy their products due to its strong position in the

market.

c. Channel Strategy

In terms of channel strategies, Magnolia has a vast geographical spread other than its

competitors who ship from on Manila. Magnolia has a diary farm (one of the most modern

and advanced in Asia) as well as 6 manufacturing plants that with expansion plans will be

able to double Magnolia’s production capacity. 60% of Magnolia’s products are sold

through retail stores, 30% through food outlets and the remaining percentage through other

means.


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d. Communication Strategy

In terms of communication, Magnolia uses 3 types of activities to communicate their

products. Through, trade promotions (raffles with prizes for example), consumer promotions

(“buy one get one free”, free gift items with minimum purchase) and advertising (media and

free signage), Magnolia was able to get its brands awareness up to where they wanted and

therefore that is why we see the strong market presence. In recent times with the introduction

of social media a lot more companies have started using them as platform and Magnolia has

as well.


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Section IV : Budgeting

4.1) Financial Budget

THE MAGNOLIA GROUPPro Forma Income Statement

Year (in Million) 2016 2015 2014

Sales 99330.59 94600.56661 90095.78

Marketing Expenses

Advertising

TV Ads 1102.5 1050 1000

Radio 551.25 525 500

Website 500 500 500

Print Ads 330.75 315 300

Total 2484.5 2390 2300

Sales Promotion

Sample 1653.75 1575 1500

Demonstration 2756.25 2625 2500

Total 4410 4200 4000

Total Marketing Expenses 6894.5 6590 6300

General and Administrative ExpensesDepreciation on building and

equipment 1788 1788 1788

Labor 603.4647 615.7803 628.3473

2391.465 2403.7803 2416.347

Total Contribution 90044.63 85606.78631 81379.43

Less: Fixed Costs 29799.18 28380.16998 27028.73


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Net Profit before (income) Tax 69531.42 66220.39663 63067.04

We estimate the Fixed cost will be 30% of Sales

We estimate the Net Profit increase by 5% every year

Labor Cost will readuce by 2% every year due to the advance of technology(On Appendix)


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4.2) Special Budget

Magnolia marketing Plan InputsMagnolia "Going" Marketing Spending (2014 Nov - 2016 Nov)

Year (in Million) 2016 2015 2014Advertising

TV Ads 1102.5 1050 1000Radio 551.25 525 500

Website 500 500 500Print Ads 330.75 315 300

Total 2484.5 2390 2300Sales Promotion

Coupons 1653.75 1575 1500Demonstration 2756.25 2625 2500

Total 4410 4200 4000Total Marketing Expenses 6894.5 6590 6300

We estimate TV Ads cost by 1000 Million per year with increase 5% per year We estimate Radio cost by 50 Million per year with increase 5% per year We estimate Print Ads cost by 30 Million per year with increase 5% per year We Estimate to build Official Website that will cost 150 Million for three years We Estimate Coupon and Demonstration Cost increase 5% per year(On Appendix)


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Section V: Marketing Audit

5.1) Strategic Aspects

As we studied the case we know that Magnolia offers dairy products such as ice-cream,

milk, cream, yogurt and some non-dairy products such as fruit juice. Magnolia was doing all

right but it can be better since more innovative new products, flavors, and packages were

expected by consumers. Magnolia’s competitors entered the market by a prestige and premium

image and having the wider offer of product choices. Magnolia lack of product line to get more

market share as it is only focus in dairy products. Diversification of products offered by

Magnolia is needed to get more market share and continue to dominate the dairy products

market in Philippine and compete with its competitors.

5.2) Operation Aspects

Based on the case, Magnolia was doing great in the product’s research and development.

Magnolia studied the consumer buying behavior of ice-cream and applied the result of the

research on its products, such as the product availability, visibility and desirability. This is the

key to success in the industry. As the market leader in the industry, Magnolia continues to

develop and improve the flavors, quality and packaging of its products to create new attraction in

the market.

5.3) Recommendations

We recommend that Magnolia can produce the chocolate energy bar like what Mars was

producing since Magnolia is a professional and leading manufacturer in dairy industry. With its

well reputation in the industry, the new product shall be accepted and get famous easily among

consumers. Other than that, Magnolia also can start to create its new product line such as

cookies, biscuits, carbonated drinks and energy drinks. This would help to expand its market

share in food and beverage industry and continue to dominate in other industry.

Moreover, Magnolia can collaborate with some fast food franchise such as McDonald’s and

KFC in order to supply these restaurants its dairy product. This can be a win-win situation

because Magnolia can probably gain more acknowledgement and market share from this

collaboration as people will start to purchase healthy dairy beverage while purchasing fast food

instead of carbonated drinks. Magnolia can introduce their healthy beverage such as Magnolia

Yoghurt Smoothie and Magnolia Low-Fat Milk to these fast food franchises. In this situation,

these fast food franchises will create a healthier image to consumers that change the consumers’

mind that beverages provided in fast food restaurant are always unhealthy and not bringing any

benefit to them.


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Section VI Latest Development

Magnolia

Nowadays, Korean pop culture or also known as K-Pop has definitely taken the world by storm.

Last few months has been crazy for the YouTube viewer because the phenomenal hit Gangnam

Style became the first video to reach a billion views. As of November 2013, Gangnam Style has

been viewed over 1.834 billion times on YouTube. Magnolia Ice Cream Group product manager

Jen Chang sees this phenomenal wave as chances to come out with new product offering. So,

last September, Magnolia has introduced to the market its new product offering which is

Korean-Inspired K-Pop ice cream bar (Image: 1) and it is not an ordinary ice cream bar because

it is smooth and creamy and also has a rich, fruity taste. This new product line is targeted at the

younger generation because of the crazy K-Pop phenomenal that’s happening now. Magnolia

also believe that Magnolia K-Pop is for anyone who is eager to try more contemporary ice cream

offering from a well-loved and trusted brand. Magnolia Launches K-Pop ice cream bar that

featuring strawberry, honeydew, banana and mango flavors.

(Image: 1)

Other than that, a few months ago Magnolia has also introduced their new flavors to the market.

First flavor is Mangoes & Cream that come with a quote “tropical temptation” (Image: 2).

Second flavor is Classic Caramel that come with a quote “trick and creamy naturally” (Image:

3).


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(Image: 2 & 3)

As for the latest promotion from Magnolia, they are giving free one or two boxes of Crispy

Wafer Cones (Image: 4) for every purchase of 1.5L or 3L tub of Magnolia Ice Cream.

(Image: 4)


magnolia - full report

Documents

market leader

magnolia groupsection

trademark magnolia

market demand

emerging market companies

impulse urge of ice

soft serve ice cream

small ice cream plant