De La Salle University Graduate School of Business

GARDENIA BAKERIES

Executive Summary

Gardenia Bakeries Philippines is currently the market leader in the bread and wheat industry, commanding comfortable shares of 65% and 90% respectively. Its product quality and wide distribution network, coupled by massive advertisement, catapulted the Gardenia into a household name, allowing it to be the top of the mind brand. Catering both the needs of upper and the price-conscious markets, it has since dominated the market, with the other major players trailing behind.

Gardenia Bakeries’ mission includes eventually venturing into beverage products to complement its bread product line. Its unparalleled distribution network allows it to easily penetrate market and filter down its products to each Filipino home. Production-wise, it has committed itself in providing fresh bread all over the country, as evidenced by the fresh investment made in 2010 via new plant in Mactan to reach other parts of Visayas and Northern Mindanao.

Although global market price remains stable and holidays on tariff allow purchase of input materials such as flour, sugar, milk and fuel at low prices, Gardenia products are particularly vulnerable to inflation, hence any price changes affect the margins of the company. However, since bread is an easily substitutable food, bargaining power is in favor of the consumers. Nevertheless, despite the increase in prices, consumption of bread continuously increased over the past years. Importation and exportation of the same likewise have steadily been growing.

Philippines, is considered among the next 11 economies, believed to have the high potential of becoming the next largest economies. This and the country’s large pool of working class citizen possess growth opportunities for Gardenia.

Situation Analysis

1.0Statement of the Problem

Given its essentially secured position as the market leader in the bread industry in terms of shelf space, market coverage and share, what strategies and marketing efforts should it implement to maintain, if not bolster, its market share.

2.0Market Summary

Gardenia Bakeries Philippines’ target market is mainly the middle class whose selling point is to quality, affordability and convenience. As of 2010, the middle class accounts for almost a quarter of the total population of the

country. Social mobility in the Philippines is also considered to be one of the more dynamic in Asia.

Meanwhile, consumer spending on bread has been continuously growing. However, it should be noted that the price sensitivity of the target market not only allows brand switching offering similar products, but also cross-over to alternatives like rice, crackers and other cereals.

3.0SWOT Analysis

Strengths

1. Perceived superior quality products (freshness and taste, awards)2. Wide coverage and distribution, and top the line production (extensive

territorial distributors; 6,000 loaves per day)3. Ability to make rapid expansion4. Supported by a conglomerate with proven market success (QAF Group)5. Growing flank product lines6. Multi-awarded company

Weaknesses

1. Limited availability/penetration to lower-end market (sachet economy)2. No stand-alone stores

Opportunities

1. Growing economy and rising middle class2. Improvement on market coverage and distribution

Threats

1. Convergence of competitors2. Bargaining power of retailers3. Inflation and tariff4. Global economic crisis

4.0Competition

Direct Competitors

1. Julie’s Bakeshop2. Goldilocks Bakeshop3. Generic bakeshops that are easily accessible4. Other bread manufacturers able to penetrate retailers

Indirect Competitors

1. Rice2. Crackers3. Pasta4. Other alternatives to bread as merienda or staple food

5.0Product Offering

Started at production level of 2,000 loaves per day in 1998, Gardenia has since enjoyed an unprecedented growth in both sales and market share. The continued patronage of the market and weak competition has allowed it to expand its production to at present of 6,000 loaves per day and product line to more than 30 products.

Gardenia’s main value proposition is its product quality and superior taste, tapping the need of market on ensuring freshness, reliability and availability, allowing the company to peg its products slightly higher than the other players.

The recent heightened consciousness of the Filipino market on health created an opportunity for Gardenia to bank on its product quality to associate itself with healthy living.

A detailed list of the products is attached hereto as Annex A.

6.0Distribution

In terms of distribution, Gardenia Bakeries, Inc. is by far, the widest nationwide. Its use of territorial distribution logistics complemented its delivery containers to cover most of Luzon and parts of Visayas and Mindanao. Recently, to penetrate the base of the income pyramid, Gardenia launched Gardenia Pedicart to allow door-to-door delivery of goods.

Marketing Strategy

1.0 Objectives

The group believes that Gardenia Bakeries’ objective should be expansionary, given its current standing in the market. A market leader can maintain, grow and protect its position in the market by employing strategies focused on the following: (a) acquire new customers, (b) encourage more frequent usage, and (c) find new uses of product.

2.0 Strategies

New users can be in the form of new customers. Gardenia Bakeries, with its sound financial position and affiliation, would allow it to either set up a new plant in Mindanao area to capture the underserved area. Not only would it create jobs, this strategy would also allow Gardenia to minimize intermediaries, enabling better inventory and logistics control.

Meanwhile, to capture non-users such as those who rely on rice, crackers, cereal, corn or any readily-available food, Gardenia should craft and organize marketing efforts to create a desire for the products. Dedicated salesmen should be assigned on this particular project to facilitate feedback mechanism. One example of creating a desire is by engaging the services of celebrities which the target market can highly associate themselves with. For increased/more frequent usage, Gardenia can find creative ways on how to stretch use of its products, stepping out from its usual bread as sandwich or merienda image.

To defend its market share from “cottage” bakeshops as well as the emerging franchise like Julie’s Bakeshop, Gardenia should further strengthen its Gardenia Pushcarts to enable improved penetration on grassroots level. This, or Gardenia, if it would like to maintain its current branding and market image, can establish a new company that would specifically cater the underserved market, reminiscent of Jollibee’s Mang Pepe.

On the other hand, behemoth conglomerates like San Miguel Group, Gokongwei Group, or similar group that has the financial capability to develop and distribute products to compete head-to-head with Gardenia should also be considered. Gardenia should be mindful of any business dealings that might prelude this to make pre-emptive counter-measure strategies. To protect its position in the market, Gardenia should reinforce market’s association with the product. Citing years of relationship since 1997 would send a message to the consumers of the continuing commitment of the company in ensuring quality food in every table, freshness in every bite. Years of uninterrupted dominance in market would give Gardenia the advantage over the new entrants.

Finally, diversification of products could also be an alternative. Entering the beverage or bread spread industries, while risky, would serve as flankers to the core product line of Gardenia Bakeries.

3.0 Market Research

Sustained market research is often necessary to ensure that all product developments are attuned to the needs of the target market. Understanding the needs results in a more concerted marketing efforts and proper segmentation and positioning of products. The changing preference and desires of customers continuously shape and reshape the market profile. Even for market leader like Gardenia Bakeries, relaxing is luxury. Market research not only gives feedback mechanism but also sets the foundation for appropriate control measures.

Financial and Control