V.

BRAND SALES PERFORMANCE REVIEW

1. Sales Mix

Table 5.1
San Miguel Purefoods Inc. Business Segment Revenue 20171
SMPFC Business Segment Percentage Value in PBillions
Agro-Industrial 66.85 76.50
Feeds
Poultry
Fresh Meat
Branded Value Added Business 26.88 30.00
Processed Meat 83 25.01
Cheese 10 3.03
Spread 0 0.13
Biscuit 3 0.82
Ice Cream 3 1.01
Milling and Food Service 4.57 5.10
Totals 100.00 111.60

San Miguel Purefoods Inc.’s consolidated annual report had shown the

performance of their brands for the year 20172. One of the most diversified businesses

in the country, SMPFC is managing 4 different business segments: Agro-Industrial,

Branded Value Added Business, Milling and Food Service. Figure 5.1 shows the

different segment and its contribution to SMPFC.

Among the business segments, SMPFC has most of its income generated

through their Agro-Industrial business segment (66.55%) which handles their feeds,

poultry and fresh meats. Feeds was able to maintain its growth by delivering superior

product and expanding its distribution channel. The business was able to benefit from

the favorable price of the raw material thus allowed to have better operational efficiency

1 Packaged good 2017 (Europeanmonitor)

2 San Miguel Purefoods Compnay Inc: Nurturing Foods 2017 Annual Report
saving3 production cost. In the Fresh Meat segment, brands present here are Monterey

Fresh Meats and Magnolia Chicken which recorded strong sales due to high volume

and favorable selling price. The brand was able to offer the fresh meat through free

delivery straight to their homes and offer products that are all natural free from

chemicals just like their brown eggs.

The branded Value Added

business follows with about 27%

contribution to the whole income by

SMPFC.4 With their product lines in

processed meat, cheese, spread, biscuit

and ice cream the company is

continuously growing utilizing innovation,

creative brand building and strengthening

distribution. Among the new products

ABBREVIATED CONTENT. FIGURES ARE FICTITIOUS.

3 Packaged Food: Europeanmonitor From Trade Sources/National Statistics

4 Europeanmonitor: San Miguel Pure Foods Co Inc In Packaged Food (Philippines) April 2016
 Table 5.2
Magnolia Inc. Subsidiary of SMPFC Sales Mix in Year 20175
Magnolia Product Category Percentage Value in PMillions
Dairy 92 11,592
Butter and Margarine 64 9,035
Cheese 24 3,032
Milk 4 549
Ice Cream and Frozen Dessert 8 1,006
Totals 100 12,598

Digging deeper Magnolia Inc. is one of the subsidiaries of SMPFC, this business

unit has contributed 11.29% of the SMPFC’s revenues which has an estimated value of

P12.5 billion.6 Among the products sold in the SBU are dairy such as butter and

margarine, cheese, milk, and ice cream. Magnolia Inc. has been generating sales more

from the dairy segment, collectively contributing 92% where 64% came from the butter

and margarine segment with a value of more than 8 billion pesos. In the consolidated

annual report presented by SMPFC to their stakeholders, no specific value was listed

for their subsidiaries, instead divided it by business segment. Magnolia Inc. falls under

the Branded Value Added Business which mentioned the significant contribution of the

dairy industry including butter margarine and cheese.

ABBREVIATED CONTENT. FIGURES ARE FICTITIOUS.

5 Europeanmonitor: Magnolia Inc In Packaged Food (Philippines) November 2017

6 Europeanmonitor: Butter And Margarine In The Philippines August 2018
 Table 5.3
Butter and Margarine of Magnolia Inc. Subsidiary of SMPFC Sales Mix in Year
2017
Butter and Margarine Brand Percentage Value in PMillions
Star 56 4,496
Magnolia Gold 27 2,198
Dari Cream 11 857
Baker’s Best 3 261
Butter Cup 3 224
Totals 100 8,035

Butter and margarine

segment is where Magnolia

Gold comes, Magnolia together

with its mother company, San

Miguel Purefood, looking at the

wide product portfolio was able

to tap different segment.

Having various brands in butter

and margarine alone proves its

statement. For many years, Magnolia was able to be the market leader in the Butter and

margarine segment. Star (56%) has the greatest contribution.7 A margarine of Magnolia

Inc. that is heavily marketed through different campaigns and informational

advertisements on how to use the product such as for cooking and for snacks, aside

from its marketing initiative, Magnolia star have different variants that suits the taste

depending on the consumer’s mood or preference: Classic, Chocolate, Vanilla, Sweet

Blend, Garlic. These products are available in different packaging sizes too depending

7 Packaged Food: Europeanmonitor From Trade Sources/National Statistics

on the occasion use of the product. Varying from 15g, 100g, 250 g, 1kg and 2kg.

Magnolia Gold follows which is more premium compare to other product. A pure butter

that caters to upscale market, Magnolia Gold has 4 different variants under its brand:

salted, unsalted, lite and spreadable. In the past few years, no innovation happened to

Magnolia Gold. Dari Cream refrigerated margarine follows followed by Bakers Best and

lastly Buttercup.

ABBREVIATED CONTENT. FIGURES ARE FICTITIOUS.

2. Product Offering, Selling Prices and Product Description

Table 5.4 Butter

Item Price Description
(Pesos)
Net Wt.
A pure and creamy butter freshly made from
225g
excellent quality butterfat and milk solids. It
P96.00
Magnolia Gold Butter has a natural buttery flavor adding superb
Net Wt.
taste and aroma to your favorite dishes.
100g
Available in Salted and Unsalted variants.8
P48.00
Made from a blend of high quality butterfat,
Net Wt.
vegetable oil, and strong butter flavor giving
Magnolia Butterlicious 200g
you the indulgent taste of butter that is both
P60.00
healthy and light on the pocket.9
Net Wt. Spreadable reduced fat butter that has 25%
Magnolia Gold Lite 200g less fat, 50% less salt, and 30% less
P110.00 cholesterol.10

8 http://magnolia.com.ph/products/magnolia-gold
9 http://magnolia.com.ph/products/butterlicious
10 http://magnolia.com.ph/magnolia-gold-lite
 Table 5.5 Refrigerated Margarine
Item Price Description
(Pesos)
Premium table margarine made from special
oil blends. It has provided generations of
Net Wt.
Filipino families with healthy and delicious
225g
food, making any simple dish, extra special.
P50.00
Perfect for bread spreads and other pastry.
Magnolia Dari Crème It comes in two delightful flavors: Dari
Crème Classic and Dari Crème Buttermilk.
Dari Crème is the number one refrigerated
Net Wt.
margarine in the Philippines, kaya naman
100g
ang Dari Crème and Pinipili ng
P30.00
Mapiling Ina.11
Net Wt. The healthier spreadable table margarine
Magnolia Dari Crème
200g that has 25% less fat, 50% less salt and free
Lite
P72.00 from cholesterol and trans-fatty acids.12
A practical and versatile margarine that
Net Wt.
enhances the flavor of any dish and baked
Magnolia Buttercup 225g
products with its sweet corn and butter
P36.00
taste.13
The best cake and cream margarine made
Net Wt.
Magnolia Baker’s Best from the finest quality oils and cake
225g
Margarine improver. The margarine that's best for
P46.00
baking.14

11 http://magnolia.com.ph/products/magnolia-dari-creme
12 Ibid
13 Ibid
14 http://magnolia.com.ph/products/magnolia-bakers-best-margarine
 Table 5.6 Non-Refrigerated Margarine
Item Price Description
(Pesos)
Net Wt.
2kg
P469.50 A non-refrigerated margarine made from a
Net Wt. special blend of refined oils. It has no
1kg cholesterol and no trans-fat and is a good
P225.40 source of Vitamins A, B1, B2, B6, B12, D3,
Magnolia Star Classic
Net Wt. E, Folic Acid, Niacin and Iodine that helps
250g develop tall, healthy and stand out kids.
P66.10 Available in Classic, Sweet Blend, and
Net Wt. Garlic variants.15
100g
P29.45
The first non-refrigerated Lite margarine. It is
Net Wt.
purely indulgent, delicious and healthy
Magnolia Lite 200g
because it has 50% less salt and contains
P114.00
no cholesterol and trans fat.16

Table 5.7 Cheese

Item Price Description
(Pesos)
Net Wt.
950g A pasteurized processed cheese made from
P341.10 a blend of high-grade cheddar cheese and
milk solids. It has a mild flavor, a light yellow
Net Wt.
color, a soft and smooth texture, and
Magnolia Quickmelt 470g
excellent melting properties. It is the best
P184.00
cheese for baked and grilled dishes. Since it
Net Wt. melts easily and quickly, it is ideal for pizza,
185g baked pasta, gravies and sauces.17
P74.00
Net Wt.
A pasteurized processed cheese made from
Magnolia Cream Cheese 225g
soft, unripened, fresh cream cheese18
P156.00
A pasteurized processed cheese made from
Net Wt. high-grade cheddar cheese. It has a distinct
Magnolia Cheddar 185g cheddar cheese, easy to slice, cube and
P83.00 grate. It does not burn at normal baking
conditions.19

15 Ibid
16 http://magnolia.com.ph/products/magnolia-lite
17 http://magnolia.com.ph/products/magnolia-quickmelt
18 Ibid
19 Ibid
 Net Wt.
950g
P235.40
Net Wt. A pasteurized cheese made from mature
470g cheddar cheese and milk powder. It has
P117.70 vitamins A, B1, B2, D, Calcium and Milk
Magnolia Cheezee
Net Wt. proteins that helps kids grow healthy and
185g strong. Magnolia Cheezee is easy way to
P74.00 slice and grate.20
Net Wt.
100g
P41.00
Net Wt.
A practical cheese block, so affordable you
Daily Quezo 185g
can eat cheese every day.21
P34.00
Net Wt.
480g
P161.50 A pasteurized process filled cheese spread
made from high-grade cheddar cheese and
milk solids. It has vitamins A, B1, B2, D, Milk
Magnolia Cheezee Net Wt.
Proteins and Zinc Calcium that help kids
Spread 235g
grow healthy and strong. Available in
P79.50
Cheddar and Pimiento variants.22
Net Wt.
120g
P45.93
A pasteurized processed cream cheese
Net Wt.
Magnolia Cream Cheese spread made from soft, fresh cream cheese.
220g
Spread It has a rich creamy and mildly tangy flavor,
P139.50
smooth texture and creamy white color.23

ABBREVIATED CONTENT. PRICES ARE FICTITIOUS.

20 Ibid
21 http://magnolia.com.ph/products/daily-quezo
22 http://magnolia.com.ph/products/magnolia-cheezee-spread-1
23 http://magnolia.com.ph/products/magnolia-cream-cheese-spread
 2. Distribution Network

Figure 5.3 Distribution Channel of Magnolia

24

24 San Miguel Pure Foods Monthly Report

Distribution Methods of Products and Services 25

The Company sells its products to Luzon, Visayas and Mindanao through its own

sales force or SMIS and through strategically located partners/distributors/dealers all

over the country.

San Miguel Pure Foods Corporation utilizes various modes of distribution for its

products and services depending on the location and how its specific subsidiary/division

operates. Generally, they hire third-party logistics to provide services related to their

warehousing, transporting, and delivery of goods from their plants and warehouses to

their distributors/dealers, depots and meat shops or even directly to retails and

institutional customers.

The Company’s Outbound Logistics Group centrally manages and directs the

warehousing, hauling, and delivery activities of the third party logistics. This is done to

maximize their utilization of haulers/truckers that cater to the needs and requirements of

their value-added businesses, namely: Magnolia, PF-Hormel, SMMI’s retails flour line

and SMSCCI. The value-added businesses, through SMIS, likewise utilize the services

of the distributors for the marketing of their products to tertiary channels such as sari-

sari stores and market stalls.

In their Poultry and Fresh Meats business, they maintain a sales force to handle

the selling of their products to major accounts like supermarkets, hypermarkets and

meat shops to ensure that their product is available at all times. They also engage their

third party distributors to handle the selling of their products to groceries and wet

25 San Miguel Pure Foods Weekly Report

markets.

San Miguel Mill’s Inc. relies mainly on its dealers for the marketing and selling of

flour to major biscuits and noodle factories, and bakeries. On the other hand, their

Feeds business largely depends on its strategically located distributors nationwide.

ABBREVIATED CONTENT.
 VI. BRAND FINANCIAL PERFORMANCE REVIEW

1.Historical Income Statement

Figure 6.1
SL AGRITECH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Year Ended December 31
(In Thousands)

2016 2017 2018

Net Sales
2,552,208,495 3,336,750,855 3,498,791,361
Less: Cost of Sales
-1,528,159,216 2,179,021,887 2,259,820,541
Gross Profit
1,024,049,279 1,157,728,968 1,238,970,820
Less: Operating Expenses
-458,075,254 -527,965,593 -712,240,634
Income before Income Tax
459,099,206 510,205,409 509,289,229
Less: Income Tax
-108,383 -979,749 -627,378
Income after Income Tax
458,990,823 509,225,660 508,661,851

ABBREVIATED CONTENT. FIGURES ARE FICTITIOUS.

Figure 6.2
 DONA MARIA
(A wholly-owned subsidiary of SL AGRITECH CORPORATION)
STATEMENTS OF INCOME
For the Year Ended December 31
(In Thousands)

2015 2016 2017

Net Sales P7,764,792 P8,739,510 P9,476,069
Less: Cost of Sales 4,897,890 5,216,539 5,625,877
Gross Profit 2,866,902 3,522,971 3,850,192
Less: Operating Expenses 1,979,326 2,369,941 2,557,616
Income before Income Tax 887,576 1,153,030 1,324,230
Less: Income Tax 264,479 351,465 394,103
Income after Income Tax P623,097 P 801,565 P 930,127

ABBREVIATED CONTENT. FIGURES ARE FICTITIOUS.

2. Horizontal Analysis

Figure 6.3
DONA MARIA
(A wholly-owned subsidiary of SL AGRITECH CORPORATION)
STATEMENTS OF INCOME
HORIZONTAL ANALYSIS
For the Years Ended December 31

2016-2017 2017-2018

NET SALES
30.74% 4.86%

LESS: COST OF SALES

42.59% 3.71%

13.05% 7.02%
GROSS PROFIT
15.26% 34.90%
LESS: OPERATING EXPENSES
11.13% 17.96%
8.04% 35.97%
10.94% 11.07%
INCOME BEFORE INCOME TAX
30.74% 4.86%

LESS: INCOME TAX

42.59% 3.71%
13.05% 7.02%

NET INCOME
15.26% 34.90%
3. Vertical Analysis

Figure 6.4
DONA MARIA
(A wholly-owned subsidiary of SL AGRITECH CORPORATION)
STATEMENTS OF INCOME
VERTICAL ANALYSIS
For the Years Ended December 31

2016 2017 2018

Net Sales

100% 100% 100%

Less: Cost of Sales

59.88% 65.30% 64.59%

Gross Profit

40.12% 34.70% 35.41%

Less: Operating
Expenses

17.95% 15.82% 20.36%

Income before Income
Tax

17.99% 15.29% 14.56%

Less: Income Tax

4.25% 2.94% 1.79%

Income after Income
Tax

17.98% 15.26% 14.54%