University of Southeastern Philippines

Industry 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

INTRODUCTION

CHAPTER I: ALASKA MILK CORPORATION

COMPANY VISION & MISSION

COMPANY BACKGROUND

COMPANY HISTORY & MILESTONES

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: PORTERS 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
Porters 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 sustansyat 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
Socit Des Produits Nestl 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.

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. Moreover, drinking milk
products is expected to grow at over 3% in 2013. Drinking milk products is
expected to reach a market size of over 52 billion by 2017. This allows a wider
customer base for companies to target and a larger market segment to capture.
Given that there are already established firms in the industry, competition is
high making it difficult for new firms to enter the industry. Nevertheless, due to
the large customer base the industry could be attractive for firms to enter.
Nestle Philippines, Inc. 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,

strategic

advertising

and

popular

consumer

products.

Nonetheless, 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.

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.

MISSION
Product Development- We will continue to build on the strengths and
competitive attributes of the ALASKA brand and develop its full marketing
potential. We will develop new products and identify market opportunities,
mindful of our task to be responsive to the ever changing and growing needs of
our consumers.
Customer Service- Customer relationship is an integral part of building the
Alaska business. We aim to provide our partners the best and most efficient
service, making use of leading edge technology to ensure timely product
availability and accessibility. We strive to know and understand our customers
fully to bridge the gap between what they need and what we can give.
Quality- Ultimately, the consumers whom we serve the level of satisfaction
with our products become our final judge and jury. We are committed to deliver
high quality milk and other consumer food products from production to
consumption. We will respond to the call to deliver higher quality nutrition to
every Filipino home.

People- We recognize that our people, the Alaska Team Members, are one of
our most important assets and we are committed to promote their safety and
welfare. Their wealth of experience, ideas, dedication and strong work ethic lay
the foundation for the Companys continued success. It is our goal as much as
it is theirs, to pursue and reach their full potentials through continuing
education, training, and skills-enhancing programs. We challenge each
individual by proving the opportunity to contribute to the Companys
endeavors.
Profitable Growth- Growth that creates values for our shareholders is
paramount. 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.
Social Responsibility- 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.

quality

of

the

COMPANY BACKGROUND
Alaska Milk Corporation (AMC) products were first manufactured in the
Philippines in 1972 through Holland Milk Products, Inc. (HOMPI), a
partnership

between

AMCs

former

parent

company,

General

Milling

Corporation (GMC), an industrial food company with interests in flour, feed

and soy been milling, and a Dutch dairy company, Holland Canned Milk
International B.V. HOMPI initially manufacture liquid canned filled milk
products, (evaporated and sweetened condensed milk) and eventually expanded
to manufacture powdered milk and ultra-heat treatment (UHT) milk products
division up until AMCs spin-off and incorporation as a separate and
independent corporate entity in 1994. Shortly after its incorporation, Alaska
Milk Shares were listed in the Philippines Stock Exchange in 1995.
It has consistently maintained its leadership in the canned liquid milk
category (evaporated and sweetened condensed), thus, paving the way into
growing Alaska into a mega-brand by competing in the powdered, ready-todrink, and creams market. In 2007, AMC further expanded its liquid milk
portfolio by licensing Carnation and Milkmaid from Nestle and acquiring
Alpine, Liberty and Krem-Top. This development led to AMCs move to a
dominant position in the category.
Apart from growing its core business, AMC endeavors to diversify and
explore opportunities in related consumer product categories. In March 2012,
Alaska Milk Corporation announced its partnership with Royal Friesland
Campina, the fifth largest dairy company in the world.
AMC

is

committed

to

providing

affordable

nutrition

to

Filipino

households, ensuring high quality standards across product lines. To promote

brand Alaska and a healthy lifestyle, AMC heavily invests in sports with its
ownership of the 14-time champion professional basketball team, Alaska Aces

in the Philippine Basketball Association (PBA) while maintaining the Alaska

Power Camp, a sports development program involving youth team sports like
basketball and soccer and the organizing of the Alaska Football Cup, the single
largest football tournament in the Philippines. Over the last two (2) years,
Alaska is also the title sponsor of the Iron Kids triathlon in the Philippines.
Today, Alaska is still best known for its tagline Sa sustansiyat lasa,
wala pa ring tatalo sa Alaska. (In nutrition and taste, nothing beats Alaska)

BOARD OF DIRECTORS

Antonio H. Ozaeta
Chairman of the Board

Juan B. Santos
Vice Chairman of the Board

Wilfred Steven Uytengsu

Director

Dr. Roberto F. De Ocampo

Independent Director

Peter van der Hoek

Director

Dr. Bernardo M. Villegas

Independent Director

Kees Gielen
Director

MANAGEMENT TEAM

Wilfred Steven Uytengsu

President & Chief Executive Officer

Joselito J. Sarmiento, Jr.

Executive Vice President &
Chief Financial Officer

Arnold L. Abad
Vice President Accounting &
Controller

Aaron D. Fulton
Director, Plant Operations

Thomas Nilsson
Director, UHT Operations

Reycelle M. Rodriguez
Director, Materials Management

Alfredo B. Javier
Assistant Vice President,
Internal Audit

Maria Joanna L. Gamboa

Assistant Vice President,
Information Systems

Fernando S. Yabut
Assistant Vice President,
Engineering Services

Ma. Belen M. Fernando

Vice President, Marketing

Francisco T. Idian
Vice President, Sales

Atty. Santiago A. Polido

Vice President, Corporate Affairs

HISTORY
In 1972, Alaska began caring for the Filipino family by providing quality
milk products for good nutrition and health. Since then, it has shown its caring
in other ways: through programs that promote sports development, campaigns
that foster good values among children and product innovations aimed at
enhancing the Filipinos health and welfare. It is this commitment to the
Filipino that has made Alaska a leading brand. Now in 2012, the mission of
nourishing Filipino dreams grows stronger than ever, as Alaska looks forward
to the next 40 years.

MILESTONES

Holland Milk Products, Inc.

starts local production of
Alaska Evaporated Filled,
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; "Galing mo, man" and "Wala pa
rin tatalo sa Alaska" beceme two of
the most memorable advertising lines
of all time.

1972

1973

1976

The "One-on-One" campaign is

extended to feature the sports
soccer and tennis, and wins
awards of excellence in
advertising.

Alaska improves labels to suit the

changing times.
Alaska launches advertising
campaign to encourage use of
Alaska liquid milk in food
preparations.

Alaska expands its

product line to
include Powdered
Filled Milk

1977

1982

1985

Alaska features Asia's "Sprint

Queen," Lydia de Vega, in its
latest
advertising
campaign.
Alaska obtains a franchise in the
Philippine Basketball Association,
the country's professional league.

1986

Alaska Choco
is introduced in
the market.
1987

Alaska Powdered
Filled milk 80g
pouch, today's fastest
selling size is
introduced.
1989

Alaska Powdered Filled Milk

surpasses P500 M mark
annual sales.
"Galing mo, Mom" campaign
with the Lastimosas is
launched.

Alaska liquid milk

exceeds P1B annual
sales and maintains its
position as market
leader.

Alaska team wins its

first championship
title in the PBA
Third Conference.

1990

1991

1992

Alaska launches publicservice campaign

promoting good values
among Filipino children
using its basketball team.

Alaska starts its sports

development program
for school children
through Power Camp.

Alaska team bags the

Governor's Cup title
in the PBA Third
Conference.

1993

1993

1994

"Lakas-Alaska"
campaign with
Johnny Abarrientos
kicks off.

Alaska strengthens its

commitment to sports
development by
supporting the intercollegiate league, NCAA.

The Alaska team turns

ten and becomes repeat
champion of the PBA
Governor's Cup.

1994

1993

1995

Alaska celebrates twenty-five years

of bringing nutrition into your homes.
Alaska Liquid Milk has maintained
brand leadership. And Powdered
Filled Milk has become a major
player. Together, they generate over
P28B in annual sales.

Alaska signs a
strategic alliance with
NABISCO as their
exclusive distributor.

1995

1996

1997

Alaska acquired ATCI, a distribution

company, and created their own sales
force.
Alaska Aces wins PBA ALL-Filipino
Cup, 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.

1998

1998

1998

Alaska Powdered
Filled Milk re-launches
as
"Lakas Nutribuilder"

Alaska Aces
wins 2003 PBA
Invitational Cup.

Alaska Milk
launches Alaska
Crema All-Purpose
Cream

2001

2003

2003

Alaska Milk Corporation is

listed as public corporation.
Alaska launches "Drink Your
Milk" campaign with Pops
Fernandez and her kids.

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, JR., President
and CEO of Alaska Milk
Corporation, was named the
2007 Entrepreneur OF The
Year Philippines.

2006
2006

2007
2007

Alaska Milk Corporation

introduces
Alaska
Yoghurt
Alaska Milk
Corporation
Drink,
a ready-to-drink
milk
introduces
Alaska Yoghurt
naturally
fermented with
Drink,
a ready-to-drink
milk
good
bacteria
which help
naturally
fermented
within
good proper
bacteriadigestion.
which help in
proper digestion.

Alaska Milk
Alaska
Milk
Corporation
Corporation
introduces the new
introduces
theChoco.
new
look
of Alaska
look of Alaska Choco.

Alaska Yoghurt Drink

Alaska
Yoghurt
Drink
extends
its line.
extends
its line.
Available
in four
flavors:
Available
in four
flavors:
Strawberry,
Blueberry,
Strawberry,
Green
Apple, Blueberry,
and Orange.
Green Apple, and Orange.

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.

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, 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,
Tambuli)

Alaska brings
IronKids to the
Philippine youth
sports programs

Alaska Milk signs a three-year

partnership contract with
NBA, the world's leading and
most popular basketball
association, through its Jr.
NBA Program.

2010

2010

2010

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

CORPORATE SOCIAL RESPONSIBILITY

The company partnered with Gawad Kalinga and the Municipality of San
Pedro, Laguna in order to construct 100 homes in the six-hectare relocation
site in Bayan-bayanan, Barangay San Vicente. The village will be the new home
for some of the municipalitys squatters. The company chose San Pedro,
Laguna because it has been the home of AMCs manufacturing plant since
1972 and is Alaskas turn to give to the residents who welcomed them into
their municipality.

More than a Roof

Located in Bayan-Bayanan, San Pedro, Laguna, the Alaska Gawad Kalinga Village shelters more than
120 families. In addition, AMC also paved way for livelihood opportunities. Programs such as furniture
and bag-making and Alaska-enriched yema, polvoron, and pastillas products were introduced to the
community. Now, Alaska provides trainings, supplies raw materials and assists in the marketing and
sales of the communitys finished products.
Alaska believes that providing decent homes and livelihood programs marks the beginning of the
transformation of a person, a family, and a community towards progress and development. Long after the
last brick has been laid, Alaska Milk will continue to support its adopted community assuring them not
only of a roofed community but also a brighter future.

To promote good nutrition for kids, Alaska Milk Corporation has formed
ties with Childrens Hour as well. Company employees and even Alaska Aces
players and coaching staff are invited to donate a percentage of their salaries to
the fund.

Childrens Hour

Alaska Milk Corporation and Childrens Hour have enjoyed a

shared mission and a long collaboration in creating a brighter
future for Filipino children. Childrens Hour is a non-profit
organization that raises funds through the power of one hour.
These funds are then deployed to carefully selected projects that
help children in the areas of education, nutrition, shelter,
protection, and total development in the form of grants.
Since 1999, AMC have participated in the Childrens Hour fund
raising campaign, 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. AMC is one of the
first companies to join Childrens Hour campaign and has been
recognized as one of the Top 20 contributors

Alaska Milk looks forward to a continuing partnership with Childrens Hour in making the world a better
place, one hour at a time.

Alaska believes that sports play an important role in instilling the values
of discipline, hard work, team work and determination among the youth. These
fundamental values develop character and are necessary attributes for success
as much as good health and proper nutrition. Alaskas Sports Development
Program, through the ALASKA POWER CAMP, is a vehicle to get the youth to
develop their skills in basketball and football.

MARKETING
Alaska is a milk brand thats originally from the Netherlands. For many
years, Alaska products were imported into the country. But in 1972, Alaska
Milk Corporation decided to produce one product locally the evaporated filled
milk. Eventually, they proceeded to manufacture other products in the local
plant. But all throughout, quality has always been the brands topmost
priority. It is assured in every pack of Alaska.
Beyond its products, Alaska also provides emotional benefits to its
consumers. It is caring, trustworthy and good for the whole family. Then and
now, the brand has always stood for health and nutrition. This is encapsulated
in the brand line Sa sustansyat lasa wala pa ring tatalo sa Alaska. Aside
from being tasty and nutritious, Alaska is also highly affordable. No wonder
millions have made Alaska milk products part of their daily life.
Then with the creation of the Alaska Aces, the companys basketball
team, the brand has become highly associated with sports. This helped create
an image of a healthy, active and sports-oriented lifestyle for the brand.
But in the heart of consumers, the picture of a healthy and happy boy on
the pack is still the most well-known brand symbol. It embodies what Alaska is
all about and the role it plays in the lives of consumers.
Alaska guarantees its customers that all products are made with the best
ingredients and delivered to the market in top quality. Alaska has a new seal of
quality signifying a renewed vigor in providing its customers with the best and
freshest products.

PRODUCTS
AMC has three (3) principal lines of business, namely, liquid canned milk
(evaporated and sweetened condensed milk), powdered filled milk and
UHT/Ready-to-Drink (RTD) milk (fresh, low-fat and chocolate-flavored), and
UHT/Ready-to-Use All-Purpose Cream.

ALASKA CHOCO! and

ALASKA SWEET MILK!
ALASKA FRESH MILK
ALASKA SLIM MILK
ALASKA HI-CALCIUM NON-FAT MILK
(Ready to Drink Milk)
Alaskas Ready-to-Drink milk products use
the Ultra Heat Temperature (UHT) process
combined with aseptic packaging; to ensure
the products quality, hygiene and longer
shelf life.

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.

ALASKA YOGHURT DRINK

The Alaska Yoghurt Drink is a ready-to-drink milk naturally
fermented with good bacteria which help in proper digestion

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

(Childrens Powdered Milk)

LIBERTY CONDENSADA

STRATEGIC ALLIANCES
Today, 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 Socit Des Produits Nestl S.A., which includes the Alpine, Liberty,
Krem-Top, Carnation and Milkmaid brands.

Carnation has remained a strong brand

nationwide and best known for its culinary
usage and good recipes. Its products have
long been associated as the cooking milk
and

excellent

ingredient

for

sweets

and

desserts.
Carnation Evap and
Carnation Condensada

Milkmaid, for generations have been enjoyed by

families through the uniquely sweet and creamy
home-prepared treats and desserts. Milkmaid
represents premium quality.

Milkmaid Full Cream

Condensed Sweetened Milk

CHAPTER II
PEST ANALYSIS
POLITICAL
Batas Pambansa Blg. 68- The Corporation Code of the Philippines:
A corporation is an artificial being created by operation of law, having the
right of succession and the powers, attributes and properties expressly
authorized by law or incident to its existence.
R.A. No. 8424- Tax Reform Act of 1997:
It is the policy that promote sustainable economic growth through the
rationalization of the internal revenue tax system, to include tax
administration; 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.
R.A. No. 7394- Consumer Act of the Philippines:
The policy that protect the interest of the consumer, promote his general
welfare and establish standards of conduct for business and industry.
Food and Drug Administration (FDA)- The

FDA

has

the

authority

to

license, monitor, and regulate the flow of food, drugs, cosmetics, medical
devices and household hazardous waste in the country. The FDAs main
goal is to ensure the health and safety of food and drugs made available
to the public through compliance of manufacturers, distributors,
advertiser and retailers to health rules and regulations and standards of
quality. For consumers to make informed choices all food manufacturers,
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. 2012-015. The FOP labels are expected to be

part of the food processors educational and advertising campaign

materials.
R.A. No. 8293- Intellectual Property Code:
The policy to protect and secure the exclusive rights of scientists,
inventors, artists and other gifted citizen to their intellectual property
and creation, particularly when beneficial to the people. An effective
intellectual and industrial property system is vital to the development of
domestic and creative activity to facilitate transfer of technology, attract
foreign investments, and market access of products.
R.A. No. 8799 Securities Regulation Code:
The code is enacted to establish a socially conscious, free market that
regulates itself, encourage the widest participation of ownership in
enterprises, enhance the democratization of wealth, promote the
development of the capital market, protect investors, ensure full and fair
disclosure about securities, minimize or eliminate insider trading and
other fraudulent or manipulative devices and practices which create
distortions in the free market.
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, rules and regulations such as
the minimum wage order.
Occupational Safety and Health (OSH) standards have to be properly
observed to reduce hazards in the workplace.

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, in cooperation with the other environment-related agencies,
aimed to support industry self-regulation towards improved performance.
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).
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.

ECONOMIC
Competition:
The Nestle Philippines Inc. continues to dominate the drinking milk
sector in 2012 and to hold nearly 60% of the drinking milk value sales in
2011.

 Drinking milk products is expected to grow at over 3% compound annual

growth rate (CAGR).
Diversified portfolio of drinking milk products will allow companies to
target different market segments.
Drinking milk products is expected to reach a market size of over 52
billion by 2017.
Rapidly expanding market for milk and milk products due to expanding
growth of the population.
Use of marketing campaigns that keep cultural traditions alive such as
small town fiestas and Santacruzan. Giving relevance to products and
connect with consumers.
Raw Materials:
Cost of raw materials can be a factor if the economy for certain materials
are weak.
Availability and cost of ingredients such as preservatives and flavorings.

Less than 1% of the dairy requirement is produced locally. (Source:

Philippine National Dairy Authority)

Exchange Rate:
It is the value of one countrys currency in terms of another currency
which is determined in the foreign exchange market. Most trades are to
or from the local currency.
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. The demand is highly correlated to a countrys level of business
activity, gross domestic product (GDP) and employment level.

Inflation Rate:
Inflation rate in August 2013 was at 2.10%. The decrease in the inflation
rate from 2.50% in July 2013 to 2.10% the following month is mainly
due to lower cost of food, housing and transport.

SOCIO-CULTURAL
Age Distribution:
The age factor is used when evaluating consumer choice. The younger
generation is leaning more towards new and fun products.
Health Consciousness:
The older generation generally is more health conscious and tends to
consider nutritional factors among products. Furthermore, dieting has
become a trend which forces the industry to create products under these
consumer preferences.

Social Media:
The use of social media outlets (i.e., Facebook, Twitter, Instagram) has
kept consumers directly connected to the products/brands. The use of
the social media lowers the cost of advertising while increasing the reach
of its market segment.
Consumer Choice:
Endorsements, commercials and advertisements with the use of
celebrities have become more important for the younger generation of
patrons. Consumers, particularly the younger generation, tend to follow
trends and fads.

TECHNOLOGICAL
Automation:
Technological advances increase the utility of employees and capital,
thus increasing productivity. Technology can help improve production
efficiency. However, high cost for new technology could also be a barrier
to entry for new competitors.
Technological advancement help create new brands and product line to
meet consumer preferences such as new flavors, sugar-free or diet
sweeteners to meet the changing customer style, preferences and taste.
Accessibility of social media through provides consumer awareness,
brand identity and promotion.

CHAPTER III
PORTERS FIVE FORCES

Threat of
New
Entrants
(+)

Bargaining
Power of
Suppliers

Competitive Rivalry

Bargaining
Power of
Buyers

(-)

(-)

(+)

Threat of
Substitution
(-)

BARGAINING POWER OF BUYERS

Consumers of milk beverage products are present in every household.
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.
Switching products is easy and the price difference is very small given
that the industry is very competitive.
The buyers are not aware of the need for additional information because
all the information needed is provided.
The products are not differentiated.
The bargaining power of buyers is generally low given that milk is a
commodity needed in every household.

Bargaining Power of Suppliers

Suppliers to the industry represent a variety of disciplines, from
engineering and packaging to food science and laboratory expertise.
There are limited dairy processing facilities and milk delivery vehicles.
Thus, it is difficult to simply switch suppliers.
Australia is strongly positioned as the preferred supplier of milk powder
of local processors.
Manufacturing process requires specialized equipment that over time will
wear-out and need replacement.
The country is a major global importer of dairy products, especially
powdered milk.
The bargaining power of suppliers is high leaving the industry with little
choice to switch to alternative suppliers.

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. They also have direct supply and distribution channels setup.
Majority of the companies have established brand identities.
A large capital is needed in the manufacturing industry.
Government agencies have requirements that are for strict compliance.
Brand loyalty will make it difficult for a new player to enter.
In consideration of the aforementioned factors, the threat of new entrants
in the milk beverage industry is low.

THREAT OF SUBSTITUTES
Customers would not incur much cost in switching to substitutes and
easily find a similar product.
Consumers prefer healthy alternative and substitute products.
There are substitute products available for lactose intolerant consumers
such as yoghurt.
Customers are not likely to go for substitutes because brand name
loyalty is a very strong competitive pressure in this industry.
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.
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.
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.

COMPETITIVE RIVALRY
The fixed costs act as a firm barrier to entry and can include costs for
warehouses, trucks and labor.
Establishment of new processing facilities/plants in various parts of the
country (Zambales, Isabela and Camarines Sur).
Steady growth of local dairy production and processing.
There are significant brand identities among the firms in the industry,
which is why brand names are an important competitive edge for new
businesses.
There is no need for significant customer-producer interaction since
customers purchase products based mainly on taste.
Market shares in the industry are mainly taken up by imported products.
There is a lack of product differentiation.
The only cost to switching would be a different taste, appearance and
appeal.
The change in consumers taste and lifestyle would affect the market
share and thus, companies would have to work on adapting and
responding to these changes such as offering low-fat or fat free milk
products.
The use of celebrities and famous personalities to endorse products.
Providing products for an economically diverse consumer base under
brands that stand for quality and are trusted household names.
Companies often provide incentives/promotions (i.e., raffle draws) to
customers which can sway customers to choose a particular brand.
Nestle Philippines increased its capacity to produce growing up milk for
the local and the Association of Southeast Asian Nation (ASEAN) market.
Nestle Philippines continue to market its brand aggressively to maintain
its leadership in drinking milk.
Competitive rivalry is high for the milk industry with Nestle Philippines
leading the drinking milk sector with a higher market share.

CHAPTER IV
CONCLUSION
In

consideration

of

the

factors

affecting

the

beverage

industry

particularly the drinking milk sector as provided in the PEST analysis and
Porters Five (5) Forces, it could be said that the industry is very competitive
with a high threat of substitute products. However, it would be difficult for new
firms to enter the industry given that it is capital extensive and consumers are
mostly brand loyal. The brand loyalty of consumers is an advantage for the
established firms such as AMC and Nestle Philippines, 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, Inc. Moreover, 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. Further, the forging of alliances and expansion of
product lines is an advantage for the company considering the tight
competition with rival firms. 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.

REFERENCES
National Dairy Authority, 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, 2011
1http://www.alaskamilk.com/v2/

http://www.fda.gov.ph/
http://www.lawphil.net
http://www.euromonitor.com/drinking-milk-products-in-the-philippines/report
(December 2012 report)
http://www.forbes.com/sites/daniellegould/2013/08/16/technology-will-drive-foodindustry-growth-finds-kpmg-survey/