Demand and Supply Analysis

1.Demand and Supply Analysis

In the Asia Pacific region, chocolate sales are estimated at $3.9 billion. The Philippines
accounts for less than 3% ($111 million) of the total (Van Melle, Phils., 2013). These already
included sales in duty-free shops.
Moreover, in the 2014 Family Income and Expenditure Survey, spending on chocolates
and candies reached P3 billion with regular buyers from middle to high-income urban families.
The purchases usually surge during the holiday (i.e. Christmas) season.
Imports of chocolate confectionery were volatile during 2010 to 2014, peaking at 5,810
tons ($24.2 million) in 2010 and lowest at 3,670 tons ($15 million) in 2014.
Philippine Trade of Chocolate Confectionery, 2010-2014
(Volume in tons, Value in US$'000 - FOB for exports, CIF for imports)
IMPORTS EXPORTS
Year Volume Value Volume Value
2010 4,035 11,696 1,411 4,485
2011 5,810 24,200 1,356 4,273
2012 3,767 14,452 1,265 3,903
2013 5,542 20,060 161 524
2014 3,673 15,025 315 898
The US was the major source in 2010 with a 60% volume share. Other sources were
Australia and Malaysia.
These are the historical data in relation to the proposed project domestically and
abroad. As of now, there are no actual data that can be shown with regards to our local market
here in Cebu since there has never been any manufacturing business in the city to date.
2.Total Potential Demand
To support some of our estimates in determining the demand, the team conducted
some surveys and inquiries. These include the giving of questionnaires, interviewing sales staff
and inventory in charge, and researching on the internet.
Our surveys acquired information about some of the important questions with regards
to the project. One of these questions is a tool in determining the demand of chocolates that
will be manufactured in Cebu. This particular question is, Are you willing to buy locally
manufactured or Cebu- made chocolates? Out of the 300 chosen correspondents, only 278
answered seriously the question. There are 86% or 238 respondents answered Yes. The result
was used to determine the demand by multiplying 86% of the population of the target areas
which is 185,757. We were able to get an estimate demand of 159,751. In this note, the team is
able to know that there is a favorable demand of the proposed product.
However this information may be hypothetical and may not be totally relied upon. So,
we used the data we researched on the internet about the chocolate sales in the Philippines on
the year 2010 which is US$111 Million. We also used the census data of National Statistics
Office that shows the population of the Philippines and the City of Cebu and Municipalities of
Consolacion, Liloan and Mandaue City. We extract the ratio of the population these for areas to
the whole population of the Philppines and multiplied it with the 2010 Chocolate sales in the
Philippines. The computation can be seen below:
Chocolate Sales in Philippines (US$111MXP41) P

4,551,000,000.00

Target Areas
Cebu City

71,105
Consolacion

32,974
Mandaue City

51,462
Liloan

30,216
Total population of the target Areas (a)

185,757
Total Philippine Population (b)

76,498,735
Ratio [ (a) / (b)] 0.24%
Estimated Demand of Target Areas in Pesos P

11,050,903.09

With the above data, we were able to get an estimated demand in pesos. It is also and
ideal to get the demand in quantity. But basing on the data, it would be improper for us to do
so, because there is no exact information regarding the price ranges composing these demand
in pesos. And this figure does not represent specifically the target market that the proposed
project planned to cater. The target market is determined to be individuals with ages ranging
from 11 to 60 years old. But this data already give an answer as to whether there is a favorable
existing demand of chocolates which is the primary product of the proposed project.
3.Present Supplier/Competition
The anticipated competition are usually the US-imported chocolates in the market that
include Hershey's Kisses, M&M milk chocolates and peanuts, Mars, Three Musketeers, Snickers,
Milky Way, and Babyruth. Imports from Australia and Switzerland are Cadbury and Lindt and
Toblerone, respectively. Also in the market are Malaysian products such as Van Houten,
Gandour's Pik-One and Sahara. Those from Saudi Arabia include Tofiluk, Safari and Soudan.
In the Philippines our key players are Universal Robina Corp. One of the largest and
leading food companies in the country. URC Branded Consumers Foods Division manufactures
and distributes chocolates along with its instant coffee products, snack foods, candies, biscuits
and ready-to drink beverages. Commonwealth Foods, Inc. About 60% of sales come from
Manila and the remaining from the provinces. Serg's Products, Inc., the country's oldest and
Southeast Asia's first modern chocolate confectionery manufacturer. At present, its chocolate
processing plant has a capacity of 7 tons/day. Goya, Inc. Formerly the Philippine Cocoa
Corporation, it is now a subsidiary of Nestle Phils. Inc. It manages the confectionery business of
the latter since 1997. It has a wide target market and offers varied products, both imported and
local.
However, there exist an issue and a key concern which is the high input costs, i.e., sugar
and cocoa beans, which are imported, and packaging materials. The industry heavily relies on
imports since supply is scant. The increasing influx of imported chocolates is also a growing
challenge to the local industry. Further, these are aggravated by poor transport infrastructure,
which raises logistic costs. In a country with relatively low incomes, these can dramatically
affect demand.
In order to address these concerns, the industry must improve product quality through
product development, new investment and increase in production efficiency. Thus far, there
have been efforts to adopt computer aided-design and -manufacturing processes including bar
coding, thus, enhancing productivity.


E. Projected Sales
One of the competitive edges of the local manufacturers is the ability to cater to the
large low-income segment (about 70% of the 15 million households) with low-priced retail
packs. Thus, expanding product lines, improving distribution networks along with the growing
young population will drive demand in the years to come. However, growth will be moderate in
the next five years due to slow economic growth. At the same time, the industry competition
will continue to be intense.
The project forecasted a P 362,686.31 estimated annual sales revenues and an
estimated annual cost of sales promotion and marketing of P 159,000.00.