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  • 3.1 Definition of Industry

The bakery industry is made up of a variety of types of bakeries, Plant Bakeries, which are large companies, using automated production lines to produce large quantities of products. Craft Bakeries are small to medium sized firms producing a wide variety of products using a mix of machinery and hand craft skills. In-store Bakeries are located within supermarkets and vary in the amount they produce. The industry has gone through many changes due to the use of new technology.

Bread is considered to be a staple food along with other traditional Filipino favorites such as rice, crackers and other cereals. It has been considered as a food for breakfast, or for snacks. It is also considered to be a food for convenience that is tasty and healthy for the consumers. Bread manufacturers in the Philippines are very vulnerable when it comes to inflation which makes setting prices more challenging for the businesses due to price sensitivity of the consumers that enables them to look for alternatives. Apart from that, increase in price might lead to decrease in sales.

  • 3.2 Marketing Mix

3.2.1 Product

Most countries with developed economies, as well as a number of developing countries, have strong bakery industries. Bakeries provide necessities to the population in terms of bread and cake products. Almost every household relies on the consumption of staple products such as

bread, and so the baking industry is able to thrive with this large, reliable demand. Bakeries require skilled bakers as well as other employees to serve customers, meaning the industry provides significant employment opportunities. Many people in their later teen years take up apprenticeships in bakeries to learn the trade. And with the arrival of foreign bakeries like Bread Talk is soon followed by Tous de jour slowly the foreign companies reach the Filipino masses. With these the competition increases as the foreign companies brings new product to the Philippine market.\ Large-scale bakeries produce more variety of products to cater to their many customers, so they can give a lot of options for their customers. From loaf bread, pastries, biscuits, etc. It creates a competitive advantage for the seller, as customers view these products as unique or superior.

  • 3.2.2 Price

Price is the amount of money expected, required, or given in payment for something. The bread industry is a very competitive market. Almost all of bread products are almost in the same range. The prices of the bread are nearer to the purchasing capacity of an average Filipino. A product which is of higher price range than its competition will lose market share because the goods are undiversified.

  • 3.2.3 Promotion

Sales promotion activities are the primary method of competition among wholesale bakers. One of those is Discount goods and service, where bakery business promotes their products and service. Another promotion bakeries use is personal selling, where they have

moving carts and goes to different location. While multi-plant firms‟ uses media advertising, events, and sponsorships to promote their products and services nationwide. Another promotion bakery business uses is sponsoring an event to contribute a cause while connecting to members of the community.

Since in the Philippines are dominated by small scale bakery, they usually don‟t use

promotion to increase their market share. Only Large scale bakeries can advertise their product but still they use it less because they mostly rely on their distribution to reach their customers.

3.2.4 Distribution Channel

Distribution and delivery of bread from plant bakers is a complex operation, with multisite operators often concentrating the production of different lines at individual bakeries, needing inter-company trucking for full distribution of products. Most plant bakeries retain their own delivery fleets and drivers, with some smaller companies using contract or franchise delivery for areas over a certain distance from their manufacturing facilities. In recent years, there has been an increased emphasis on just-in-time (JIT) delivery, ensuring that the product is delivered to the customer at the right time and in fresh condition.

The multiple grocers dominate retail distribution, taking the major share of the wrapped- and-sliced bread market and, more recently, the ISB market. Craft bakers have had their share eroded by both the multiple retailers and the convenience sector, including forecourt retailers and symbol groups. As well as selling wrapped and sliced bread, the latter have also adopted bake- off techniques to sell crusty bread and bakery products, putting them in direct competition with the craft sector.

3.2.5 Customer/Target Market

As a staple item for Filipinos, bread played an important part in the price wars between

major retailers, which used the product as a „loss leader‟, selling it at below cost rice in order to

attract customers. Due to the nature of the industry, it offers goods and services regardless of age, gender, nationality and social standing. Its products and services are also from different price points to allow budget conscious customers to avail its goods and services.

Companies in the bread industry have segmented the market by their income or by their economic status and family size, and its variety of products is designed to cater to different segments of the market. The target markets primarily for bread industry are the housewives, defined as the person responsible for household grocery shopping. In this industry, it is common that under a bakery, there are different varieties of bread, cakes, and pastries are available.

3.2.6 Competition

The supermarket industry has been consolidating, and as that has happened, some have formed their own bakeries. Larger chains have the resources to take some of their baking operations in-house, including “fresh-baked” goods.

The major players in the industry are the following:

3.2.6 Competition The supermarket industry has been consolidating, and as that has happened, some have formed

Marby Food Ventures Corp.

3.2.6 Competition The supermarket industry has been consolidating, and as that has happened, some have formed

Walter Bread

Porter’s Five Forces 3.2.6. a. Rivalry among Competitors-MODERATE

The industry is characterized by many small bakeries, but there has been a recent trend towards consolidation and economies of scale. Businesses compete on price, quality, differentiation, relationships with key suppliers and their distribution channel.Some of the competitor are by low priced confectionery producers which are small family-run businesses whereby producing bread that are sold in the neighborhood which called small-scale production

for the local market. There is only little business, which produces large scale productions like, Marbys, Walter Bread, Lemon Square, Gardenia, Red Ribbon etc.

  • 3.2.6. b. Potential for New Entrants-HIGH

In these high competitive industry, there are a lot possibility that new competitor enter to the industry. Indirectly, new entrants to industry will lead threat that might decreasing level of customer loyalty and will be highly competition in between. Capital requirement for investment in bread industry in purchasing those raw material and machinery before the entrant could begin selling the product. In additional, certain market share need to be capture for the new entrant before it could reap the necessary economies of scales to allow it with rival firm.

  • 3.2.6. c. Bargaining Power of Suppliers-LOW

Suppliers do not have much negotiating power in the bakery business due to the well developed markets for their products and the commoditized nature of what they are selling. Bakeries can be affected by price swings of the raw inputs, but the changes are a result of global supply and demand determinants rather than suppliers‟ negotiating power.

  • 3.2.6. d. Bargaining Power of Buyers-HIGH

Buyers of the bakery industry‟s products, such as supermarkets, grocery stores, hotel chains and convenience stores, are able to appropriate much of the industry‟s profit due to the large number of small bakeries that are all vying to find outlets for their products. As a result, buyers are able to command low prices and volume discounts. Only large players, such as Gardenia, Marby‟s, Walter Bread etc. have the power to level the playing field and achieve a more balanced share of the profits.

3.2.6. e. Potential Substitutes-MODERATE

Many substitutes exist for bakery products. Breakfast cereals, rice and potatoes are all viable alternatives and individuals can also make all of the baked goods they want at home. Bakeries rely upon price and convenience to keep individuals switching to a substitute or baking what they need at home.

3.3 Operation/Production 3.3.1 Process

3.2.6. e. Potential Substitutes-MODERATE Many substitutes exist for bakery products. Breakfast cereals, rice and potatoes are

Bread has been baked for hundreds of years, and the same basic process is still used by the baking industry today. The main ingredients are flour, yeast, salt, vinegar, vegetable oil, and water. From the delivery of the bakeries ingredients, they mix, divide and round their ingredients. Then checks their proper weight then moulds to put proof it. Then they bake it and remove it from their pan and cool it. Once cooled, it passes down the conveyor belt to be sliced (if needed) and bagged.



In the bread industry, the products they produce depend on what kind of bakery they are. For large-scale bakery, they produce more than 50,000 loaves of bread to cater their customers‟ needs. For small-scale bakery, they only produce to how many they have in their neighborhood.

  • 3.3.4 Quality

Quality goods and services are strategically important to the bread industry. Producing quality breads helps to maintain customer satisfaction and loyalty and reduce the risk and cost of replacing faulty goods. Bakeries can build a reputation for quality by gaining accreditation with a recognized quality standard, such as ISO 9001, published by the International Organization for Standardization.

Customers are satisfied if they receive quality products from the bakery but if the bakery can‟t provide their customers the quality they want, they will look for alternatives. Quality is essential to satisfy their customers and to retain their loyalty so they continue to buy from the bakery.

Quality helps to influence the bakery‟s reputation. A strong reputation for quality can be an important differentiator in markets that are very competitive. Poor quality or a product failure that results in a product recall campaign can create negative publicity and damage your reputation.

A company having an accreditation for their quality standard can be essential for dealing with certain customers or complying with legislation. Having accreditation gives prospects

confirmation of the bakery‟s ability to supply and produce quality products.

3.3.5 Technology

Since the bread industry is dominated mostly by small-scale bakery, they often use less advance technology in their machinery and equipment they usually use manpower rather than other machinery. Only large-scale uses big machinery and equipment because they are the ones that have larger distribution and more customers.

3.4 Industry Analysis Ratio 3.4.1 Total Asset






































Total assets of competitors are shown above with their corresponding percentage of the total assets of the industry.


Net Sales

Net Sales



Growth Rate


Growth Rate



























Net sales which tell us the market share of the competitors in the industry are shown above. The percentage total is also shown together with the industry growth percentage.


Net Income






Growth Rate


Growth Rate






























The net income of the competitors is shown in the table above.

3.5 Industry Trends

Baking has grown over the last century in the Philippines, from a relatively small industry to a large, popular industry. Initially, the island featured mainly independent bakeries that serviced cities and towns and provided employment to the local people. Nowadays, chain bakeries have increased the number of bakeries in the Philippines and have also lowered the prices of bakery products. Due to the increased demand for bakery products from the population in the Philippines, the baking industry has grown, leading to it providing greater employment opportunities both in the bakeries and in central management.

It is debatable as to whether or not bakeries will continue to thrive in today's modernized world. This is for the most part down to the rise in the power of supermarket chains. Many supermarkets now provide bread and other bakery products themselves - some even have their own bakeries in-store. This is bad news for independent bakeries who struggle to compete with the supermarkets; they are unable to provide the same level of convenience. That said, in most cases the quality of their goods is significantly higher than those sold in supermarkets. It remains to be seen whether the bakery industry will be able to survive when the major supermarkets have such great monopoly power.

3.6 Problems in the Industry

The rising flour and other ingredients to bake breads and transport prices have had effects across the entire food sector in the Philippines. The rising cost of flour, butter and sugar has forced the bakery to raise prices of each piece of bread. When gas prices increase, the cost of food is affected that cause shipment prices increase because distributors need to make a profit as well.

The impact of the recent recession has greatly affected every industry. Industries are linked to each other when one industry buys from another to produce its own products. Each industry in turn makes purchases from a different mix of other industries, and so on. Employees in all industries extend the economic impact when they spend their earnings. Thus, economic activity started by the baking industry generates output (and jobs) in hundreds of other industries, often in sectors and states far removed from the original economic activity

Philippine is an archipelagic country, where most places are scattered and with the business can‟t reach all the places. The business are having a hard time to reach different places in the Philippines since the product they are selling are perishable goods, if the experience any delay it can cost a lot to the business.