Pestel (unsummarized for EFE MATRIX):

Increase advertising for Private Brands

‘How should we respond to the growth of

private label brands?’
By: Ardy Roberto, Dr. Ned Roberto- @inquirerdotnet
Philippine Daily Inquirer / 11:20 PM November 01, 2012

Q: We hope you won’t mind if we don’t identify ourselves. We

believe you’ll easily understand the reason after you’ve read our
request for your Marketing Rx.

We’re one of the many national brands who are also suppliers to
the country’s top and largest private label brand. Our concern is
very real. At the start, we agreed to be a source and supplier but
after several years, we’re having serious second thoughts. The
volume of orders from the private label brand has increased so
much to the point that a given order often gets in conflict with our
production priority for our own national brand. Also, because of,
or maybe along with this extraordinary rise in its purchase order,
this private label has been eating our national brand’s share of
business in the retail stores, which own this private label brand.
In the Philippines, what is the largest and also the first private label
brand? In the retail trade community, this is known to be SM Bonus.
First of all, at an SM supermarket, there are about 40,000 to 60,000
products, or SKUs [shelf keeping units] on its shelves depending on the
supermarket’s size. We were told that some 1,000 or more of these
items carry their store brand name, SM Bonus. The range of products
under this store brand has gotten to be very extensive and includes:
(1) personal care products;
(2) canned goods;
(3) packaged snacks;
(4) laundry aids;
Q: We hope you won’t mind if we don’t identify ourselves. We believe
you’ll easily understand the reason after you’ve read our request for
your Marketing Rx.
We’re one of the many national brands who are also suppliers to the
country’s top and largest private label brand. Our concern is very real.
At the start, we agreed to be a source and supplier but after several
years, we’re having serious second thoughts. The volume of orders
from the private label brand has increased so much to the point that a
given order often gets in conflict with our production priority for our own
national brand. Also, because of, or maybe along with this extraordinary
rise in its purchase order, this private label has been eating our national
brand’s share of business in the retail stores, which own this private
label brand.

In our ongoing critical review of this side of our business, we’ve been
gathering expert opinions and suggestions. We have high regard for
your column and wish to request for your advice as a marketing and
brand management expert.
How should we respond to this growth of private label brand without
alienating our good relationship with its owner and at the same time
assuring our continuing availability in its stores?

A: We should start with some basic clarifications. First is to have a

common understanding of what a private label brand is. Learning what
other names it’s known by is a convenient and common way toward that
understanding. A private label brand is also known as “a store brand,” “a
retailer’s own brand” or “an in-house brand.”
In the Philippines, what is the largest and also the first private label
brand? In the retail trade community, this is known to be SM Bonus.
First of all, at an SM supermarket, there are about 40,000 to 60,000
products, or SKUs [shelf keeping units] on its shelves depending on the
supermarket’s size. We were told that some 1,000 or more of these
items carry their store brand name, SM Bonus. The range of products
under this store brand has gotten to be very extensive and includes:
(1) personal care products;
(2) canned goods;
(3) packaged snacks;
(4) laundry aids;
(5) pet-care products;
(6) fresh meat; and
(7) poultry.

What’s the driver for its increasing purchases by shoppers? The key
purchase motivator among shopping consumers is low price. An SM
Bonus brand retails at 15 percent to 30 percent cheaper than leading
national brands.
How come SM has succeeded in enlarging this shopper segment and in
dominating it? SM has scale. It’s probably no exaggeration to say that it
has scale of Titanic proportion.

As a food retail group, SM consisted of (as of 2009) a total of 83

establishments made up of 26 SM supermarkets, 19 SM hypermarts, 26
Savemore stores and 12 Makros.

SM reported that in 2009, these 83 establishments accounted for 58

percent of total retail sales, and 77 percent of total net income.
“Earnings” reached P3.1 billion in 2009, up from P2.2 billion in 2008.

Research has shown that the growing sales productivity of private labels
comes from a growing market segment of mostly price-conscious
shoppers across all socio-economic classes. These shoppers want
high-quality products at lower prices. You cannot expect to satisfy this
shopper priority value in all products. This is realistic to satisfy in those
products encompassed by the SM Bonus product range.

Consider, for example, personal care products, packaged snacks and

laundry aids. Do you remember how local lower-priced brands like
Eskinol found it relatively easy to participate in the personal care
products? Price-conscious shoppers found Eskinol as serving just as
well what they wanted from even well-known imported brands. Or recall
what happened in the packaged snack category. Its barriers to imitation
were so low that the cheap but tasty “Boy Bawang” was able to gain
entry and own a good market share. Or recollect how two local lower-
priced detergent brands, “Champion” and “Pride,” took on the No. 1 and
the No. 2 competitive positions at the height of our recession in 2009
and 2010. The economy and sub-economy price segmenting strategy
has been also the pivotal market entry and market staying strategy of
the private label, house brands.

What about the future? Let’s see how private label brands have succeeded
in its market penetration in the developed countries.
 According to a 1994 A.C. Nielsen data, it is in Switzerland, where the
top three retailers’ house brands have the highest market shares in total
retail sales of 41 percent unit share and 80 percent in value share. It is
in the US and Canada where the top three retailers’ house brands have
the lowest market shares: 18 percent unit share and 17 percent value
share in the US; and 21 percent unit share and 25 percent value share
in Canada.
One of the undeniable market implications here is that private labels
had effectively entered the retail market and will continue to enlarge its
market participation. This has the potential to grow to as much as 80
percent of the total market value just by its top three house brands! The
AC Nielsen report also showed that private labels give larger margins to
retailers. That means that house brands are here to stay.
So as a national or mass-market brand, what should you do? How
should you respond? Our Marketing Rx is this. Stay with your
competitive advantage in the premium price segment where you belong.
Continue harping on your quality advantage but making sure that you
also continue kaizening that quality. At the price that your private label
principal is paying, give your principal the commensurate quality for their
house brand. This way, your principal will find it revenue-rewarding as
well as profitable to stay with you as its house brand supplier. That’s the
win-win solution to your situation.
Increase advertising for Private Brands

“Private brands are a major part of 7-Eleven’s strategy,” said

Sean Thompson, the retailer’s senior director of
merchandising and a key member of its private brands team.
“Our organization is fully aligned that expanding our private
brand offering is a key component of our future growth.”

Reference: Canning. (2015, September 25). Behind the Scenes of 7-Eleven’s

Store Brand Process. Retrieved from https://csnews.com/behind-scenes-7-
elevens-store-brand-process
Increase advertising for Private Brands

Retailer power and private label growth

Steady march of private label
Retailers are competing directly with those brands with their own private label offerings.

In the US, for example, private label accounts average nearly 23% of unit sales and just over
18% of dollar sales, according to Symphony IRI Group's annual review of the consumer products
sector for 20102. In other highly developed markets, private label share is even higher, the UK
and Germany for example.

However, recession recover has affected consumers spending habits. Overall, across consumer
products goods categories, private label's share of unit sales fell by 0.5 percentage points in
2010, according to Symphony IRI, although its share of dollar sales increased by 0.2 percentage
points.

Yet, we don't expect this dip to signal the end for private label spending.

Private label share is the highest in the grocery segment. Retailers there plan to increase market
share.

Historically, private label penetration has been lower in emerging markets than in the developed
world. However, it is set to increase as global retailers with their own brands move to emerging
markets.

Reference: Eleven risks for consumer products companies - 7. Retailer power and private label
growth. (n.d.). Retrieved from http://www.ey.com/gl/en/industries/consumer-products/eleven-
risks-for-consumer-products-companies---7--retailer-power-and-private-label-growth

Markets in Visayas and Mindanao

Philippine Seven steps up

expansion after robust 2017
results
Published February 5, 2018, 10:00 PM

After opening 318 new stores in 2017, Philippine Seven Corp. (PSC), the
exclusive local licensor of global C-store chain 7-Eleven, announced it was
stepping up its momentum with more strategic franchising initiatives as part of
its aggressive expansion plan.

As it embarks for long-term profitability and strong leadership this 2018, PSC,
with a C-store fleet now pegged at 2,285, is targeting to open 375 new stores in
various strategic locations this fiscal year.

Areas up for expansion include Region 2 (namely Isabela, Tuguegarao, Nueva

Vizcaya and also Mindoro). For Visayas, PSC will be starting expansion in
Leyte, Tacloban, and the rest of Eastern Visayas. In Mindanao, the company is
planning to open stores in Surigao Del Sur and Norte and Sultan Kudarat.

“This year’s plan for Visayas and Mindanao is to open 75% franchise stores.
Also, we have formulated a new franchise offer, the FC3, which is a lower
investment compared to our existing franchise package. From R3.5 to R5-
million investment, we came up with the new franchise package which is
around less than half a million,” revealed Francis Medina, Business
Development Unit Head.

Via the FC3 package, the company is targeting to have “a franchise ratio from
54% to 60%.”

“Our FC ratio is still more than half of our total stores. As of 2017, we already
started converting some of our company-owned stores to franchise-owned. This
year, we are planning to fully launch the FC3 to the public and we are expecting
a heavy traffic of inquiries from there. The new program requires a full time
store operator that will be hands on with store operations. Also, applicants will
undergo 3-5 months of operations training,” he further stated.

According to Medina, the company’s successful finish in 2017 was due to

consolidated efforts and solid execution of strategies.

Increased efficiency and constant elevation of customer shopping experiences

through great value product choices and service offerings also account for 7-
Eleven’s progress in the market. Another accomplishment of the company, he
added, is its milestone partnership which resulted to a 100th store under
Chevron-Caltex station.
“We touch base areas where our competitors are not present yet. We tie up with
logistical companies especially now that we are going into islands. Also, forging
partnerships with institutional accounts and developers is a must,” said Medina.

Taken altogether, Medina said these factors have produced profitable bottom-
line results for PSC.

“Despite the competition with other C-stores opening, we still managed to

continue expanding into new territories, study new areas with potential for C-
store concept. The company’s focus in 2017 was on aggressive expansion
nationwide, especially Visayas and Mindanao. For this year, we were already
able to open our first store in Bohol located in Panglao. It was opened last
May,” Medina stated.

Given the new challenges brought forth by the newly-implemented Tax Reform
for Acceleration and Inclusion (TRAIN) law and competition with existing and
new C-store market players, PSC is confident that, through continuous product
innovation and new partnerships, 7-Eleven will continue to attract prospective
partners.

“We are building momentum for our business by continually innovating our
products, especially our proprietary brands, and services to give greater value to
our patrons and shareholders. As of now, we are looking into venturing and
expanding our e-commerce usage to provide products and services to customers
in the most convenient way possible. They can already use CLiQQ APP as their
wallet to buy 7-Eleven products,” Medina said.

“PSC is also formulating our Store of the Future 3 design that aims to enhance
the 7-Eleven store image. We are forging new partnerships for new products
(we are enhancing our “Crisp Bites” products by building new satellite kitchens)
and services as well. Our digital strategy enhancement of Cliqq app and e-
commerce is also on our timeline,” Medina concluded.

REFERENCE: Philippine Seven steps up expansion after robust 2017 results.

(2018, February 5). Retrieved from
https://business.mb.com.ph/2018/02/05/philippine-seven-steps-up-expansion-
after-robust-2017-results/
Environmental recognition given by DENR (Supporting arguments)

Manufactures face a squeeze on several fronts

Retailers are putting pressure on manufactures in several ways:
 Rationalizing product ranges to reduce complexity
 Simplifying the shopping experience
 Freeing up shelf space for their own private label ranges
 Negotiating harder with consumer products companies to help achieve global customer
relationships (i.e., a single price for a product across markets)
 Pressuring supply chains to cut inventories
 Requesting sustainability information on products

Reference: Eleven risks for consumer products companies - 7. Retailer power and private
label growth. (n.d.). Retrieved from http://www.ey.com/gl/en/industries/consumer-
products/eleven-risks-for-consumer-products-companies---7--retailer-power-and-private-
label-growth

Loyal Coin

This Philippine Start-up is Building

the Loyalty Economy With
Cryptocurrency
Appsolutely’s blockchain powered LoyalCoin is set to unify
the $1.68 billion loyalty rewards industry
BY TRICIA V. MORENTE - 06 DEC 2017
PHOTO CREDIT: Getty Images

The thing with loyalty rewards programs is that they don’t always inspire loyalty.

And for a $1.68 billion industry, that’s quite a shame.

According to Philippine-based enterprise software services and fintech firm

Appsolutely, there are numbers that back up the dissatisfaction that consumers

have against most brands’ loyalty rewards programs. The average person would

have at least 10 reward cards for use at 10 different establishments — not

exactly ideal if you want to save space in your wallet. In the past year alone, over

65% of members of various loyalty rewards programs have switched to a new

provider.
“Customers are realizing [that] these rewards can be very limiting, and they

eventually stop seeing the value of the program,” relates Appsolutely CEO

Patrick Palacios whose company develops loyalty programs for such companies

as The Bistro Group, Family Mart, Toby’s Estate, and Bon Chon, among others.

“We realized that you can’t really use most of these loyalty programs outside of

their respective establishments so we were racking our brains how to solve this

problem,” he says.

Appsolutely’s solution, reveals Palacios, is to unify the disjointed loyalty rewards

industry using blockchain technology. Teaming up with peer-to-peer blockchain

developer NEM Foundation, Appsolutely recently launched its Loyal Platform,

Loyal Coin, and Loyal Wallet to consolidate the traditionally siloed loyalty industry

into the new “Loyalty Economy.”

The idea is to enable loyalty rewards members to convert their reward points into

the Loyal Coin digital currency which they can use to redeem rewards across

different merchants anytime, anywhere. Loyal coins are stored in the Loyal

Wallet which will be a hub of all transactions involving the rewards economy:

users may not only redeem rewards, but make online purchases, send money,

pay utilities, and even convert loyal coin into fiat or virtual currencies.

Powering Loyal Coin is NEM’s innovative blockchain technology, whose Proof-of-

Importance (POI) algorithm enables a merchant using LoyalCoin to monitor the

transaction patterns of customers and assign specific rewards to those utilizing

the platform frequently. Operating at 4,000 transactions per second, the NEM

blockchain provides industry-leading processing speeds that can now be

leveraged for transactions involving LYL. NEM’s blockchain technology also

grants Appsolutely the flexibility to retain control over aspects of the transaction

process for which protection of customer data and privacy is a top priority.

Reference: Morente. (n.d.). This Philippine Start-up is Building the Loyalty

Economy With Cryptocurrency. Retrieved March 07, 2018, from http://inc-
asean.com/editor-picks/philippine-start-building-loyalty-economy-cryptocurrency/
 THREATS
Competitive Market
INTERVIEW: PHILIPPINE SEVEN CEO ON WHY C-STORES ARE
SET TO BOOM

Planet Retail expects the Philippines to be among the world’s fastest-growing

retail markets over the next five years. Largely overlooked by international
retailers in the past, the country’s remarkable pace of development has prompted
the multinationals, particularly in the convenience sector, to take another look. As
part of our focus on Emerging Markets this quarter, Planet Retail talked to Victor
Paterno, President & CEO of Philippine Seven, operator of c-store market leader
7-Eleven, about the sector’s potential in the country and the unique challenges
retailers face.

With recent news of Japanese giant LAWSON planning market entry into the
Philippines c-sector, Circle K opening last year and FamilyMart and Robinsons
Retailed-owned domestic chain Ministop also intending to increase their
presence, 7-Eleven will face unprecedented levels of competition in the coming
years.

Reference: Interview: Philippine Seven CEO on why c-stores are set to boom.
(n.d.). Retrieved from https://www.planetretailrng.com/news-and-
events/interview-philippine-seven-ceo-why-c-stores-are-set-boom
Asian Convenience Store Market Outlook 2022 with 7-Eleven,
Family Mart, Lawson and Ministop Dominating - Research and
Markets Oct 03, 2016, 14:10 ET
The Asian convenience store industry has gained widespread popularity
under the garb of increasing disposable income and various value
added services provided by the modern retail outlets, replacing the
traditional unorganized retailers. Active participation of international
retailers, such as 7-Eleven, Familymart, and Ministop, and increasing
demand of convenient shopping has led to rise in the number of
convenience stores, thereby driving the Asian convenience store
industry. Convenience stores offer speed of service to time-starved
consumers who want to get in and out of the store quickly. These
shoppers recognize this channel of trade for its convenient locations,
extended hours of operation, one-stop shopping, grab-and-go food
service, variety of merchandise and fast transactions.

Although, 7-Eleven is the most popular convenience store player,

Lawson and FamilyMart are giving it tough competition in the Asian
market. Overall, the comprehensive research provides an unbiased
picture of the Asian convenience store industry to help clients
understand the market dynamics, and have a balanced outlook on the
potentials of the industry.

Reference: Markets, R. A. (2016, October 03). Asian Convenience Store

Market Outlook 2022 with 7-Eleven, Family Mart, Lawson and Ministop
Dominating - Research and Markets. Retrieved from
https://www.prnewswire.com/news-releases/asian-convenience-store-market-
outlook-2022-with-7-eleven-family-mart-lawson-and-ministop-dominating---
research-and-markets-300338051.html

PH retail scene remains upbeat

While many retail stores in the United States and elsewhere in the world
had been shuttered over the last few years, rendered obsolete by the
consumer’s growing preference for online shopping among other
factors, the Philippines meanwhile has been attracting a number of
major foreign brands to set up brick-and-mortar stores in the country.

Attractive destination
“The Philippine retail scene is set to have a more dynamic narrative
moving forward as the country is poised for further growth. As foreign
retailers continue to seek new growth markets, we anticipate the
Philippines to be one of the key focus markets by global brands within
the Asia Pacific region,” said global real estate advisor Cushman &
Wakefield.
In a report entitled, How Global Brands are Shaping the Metro Manila
Retailer Landscape, Cushman & Wakefield noted that the Philippines is
an attractive destination for global brands, underpinned by its solid
macroeconomic fundamentals and the rising disposable income of its
young population.

Reference: Remo, A. R. (2017, September 30). PH retail scene remains

upbeat. Retrieved from http://business.inquirer.net/237759/ph-retail-
scene-remains-upbeat