Mary’s Rice Trading Mary's Rice Trading is engaged in retail and wholesale nice businesses, Recen it lost two Major Corporate accounts, one of which it had served for almow thie years Nicole Lopez is trying to find out how these two accounts had bey Mismanaged. In addition, several forced to cut down their budget allotie, for rice incentives to employees Opportunities, however, exist in the new restauran in the Ortigas and Greenhills areas firms we Author: Ma. Cenezita $. Concepcion, Salvador B. Corpus and Austin Ledesma Discipline: Marketing Industry: Rice trading Issues: Business marketing, relationship marketing, industry analysis Setting: Philippines, 1999 Level of Difficulty: Undergraduate/MBA Case Number: 4-1999-04 Teaching Note: 4-1999-04T “Prepared under the supervision of Dr. Ben Paul B. Gutierrez, Associate Professor University of the Philippines, as a basis for class discussion. The case is not designed to illustrate effective or ineffective handling of managerial situations. Company and names of the owners have been changed for confidentiality. The Graduate Program Trust Fund supported the writing of this case study. rr I 1 May 1999, Nicole Lopez was facing the challenge of expanding the number of corporate customers of their family-owned and managed rice-trading business. After more than 30 years in the industry, Mary's Rice Trading (MRT) had established a reputation of selling quality rice and providing excellent service at very competitive prices. The company sold about 90,000 sacks of rice in 1998, an increase of about 12 percent from 1997 Rodrigo Lopez, Nicole’s father and the company’s co-founder, believed in the steady demand for rice from the corporate buyers, specifically restaurants Rodrigo predicted that as suburban Filipinos have little time to cook, they are going to increase their patronage of restaurants. Indeed, during the period 1982-1997, the National Statistics Office has recorded an increasing wend for food consumed outside the home. Since MRT offers high quality rice and of Services at competitive prices, Rodrigo was very confident that the number & their corporate accounts would dramatically increase, 128Mary's Rice Trading = 129 However, despite Rodrigo's optimistic forecast, Nicole was alarmed that chey were beginning to lose some of their larger accounts while only getting a handful of small new accounts. Company History Mary’ Rice isa rice-trading firm established in 1968 by Rodrigo Lopex and his wife Mary. An entrepreneur at only 21 years old, Rodrigo already had a great amount of experience in the industry since he started working for his mother’s rice trading business in 1950. Rodrigo had always been bullish in the business of selling rice. “Most other businesses come and go, have high points and then low points, but the food industry will always be a good business because people need to eat. And rice will always be a staple for Filipinos.” This was Rodrigo’s business philosophy. The couple started with a small stall in Capitolyo, Pasig with only one employee. Their business was initially retail with most of their customers coming mainly from the residents in the area. But as the business grew they were able to acquire trucks to deliver larger quantities to other rice retailers, restaurants, hotels, hospitals, and companies that provided rice subsidies (Exhibits 1 and 2). At one point their list of clientele included all of the major hotels in Metro Manila. But due to their strict account receivable policy of 30 days, they had to drop most of these hotels, as the industry average for settling such accounts was 90 days. This strict receivable policy, which was well below the industry standard, was due to the company’s desire to have better control of their cash flows and to maintain competitive prices (i.e. shorter credit terms meant lower prices). Organizational Structure and Operations Like most small family businesses, chere was no formal organizational Structure in MRT. While Rodrigo and Mary continued to manage the business, they were now assisted on the marketing side by their children, Peter and Nicole. The two siblings had helped out in the store since they Were kids. Peter was a Commerce graduate from the University of Santo Tomas (U.S.T,), while Nicole, a Business Administration graduate from the University of the Philippines (U.P), is completing her MBA — he company also employed a staff of 9 workers: delivery drivers and? hargadors. MRT had a modest fleet of 3 trucks with a capacity Sacks per trip.130 © Cases on Marketing Management in the Philippine Setting The store was open seven days a week (i.¢. from 8 a.m. to 7 p.m. excepr on Sundays when they closed at 12 noon). The store is located beside two of their own warehouses with a toral storage capacity of 10,000 sacks. The stores business hours and the warehouse location allowed the company to make quick deliveries to clients spread over Metro Manila as well as “emergency deliveries” to restaurants (Exhibit 3). Usually, a delivery is made one or two days from the date of order. If the destination is within the vicinity of a 15. kilometer radius from the warehouse, the orders were delivered within the day. The company also followed a schedule preferred by their big clients (eg, restaurants). Rodrigo and Peter sometimes delivered the rice themselves when theit drivers were unavailable or when there were simply too many deliveries to make. In extreme situations, the company would also borrow the truck and the driver of Rodrigo's eldest son, Joseph, who established his own rice trading firm two years ago. On time and accurate (i.e. type and quality) delivery was Rodrigo’s main concern. He emphasized, “The customer can be very unforgiving when you mess up a delivery. One must remember that there are dozens of other rice traders eagerly waiting to service them.” While Rodrigo and Peter made deliveries, Nicole and her mom would be lefc to handle the store. Life in the store could be very hectic, especially in the morning. Although selling retail consumed a lot of time, this pare of the business still provided more than half of the revenues and could not be abandoned. Iris the Lopez couple's wish to keep the management and the marketing within the family. Not Alll Rice Are Created Equal Mary's Rice sells a wide variety of rice produced in the Philippines 2%4 Thailand. Their “bestsellers” are sinandomeng and dinurado, rice vatietis preferred by most of their corporate clients (Exhibit 4). Each market segmet® however, has its respective preference. For example, hospitals pref sinandomeng tice, while Chinese restaurants, semi aon R-60 tice. At tm the «, sop» . : Py would even get a “special” type of rice based on client's requitemé"™ ut this rarely occurs, ’ i ‘ht Kis not just a matter of offering the lowest price but rather the vigh rice 1 i i e. Price for the right rice, Restaurants are particularly selective about their The ‘ f important quality of a particular type of rice delivered is alsoMary's Rice Trading © 434 Over the year: erthe yar, the company has Maintained a handh Most of them have been supplying Maty’s Rice f = Th ns the owners are confident that the commodity hey ofr her cant : i : sistent in quality. Furthermore, the eet eae . couple nj every sack of rice has a net weight of 50 kilos eet © be assured that Some Japanese restaurants do not nen iris very expensive and at times hard ek Marketing Practices and Promotions In MRIs entire existence, it has yet ro implement any form of advertising and promotion other than at the point-of-sale. The company largely depends on personal selling and a bit on referrals. Referrals are usually rewarded an average of P4.00 for every sack sold to the referred customer. This could be quite significant because some corporate accounts generate 2,000 sacks a year in sales. Each member of the family is assigned a set of corporate accounts to, manage. However, as stated earlier, the development of new accounts is left to the capable hands of Peter and Nicole. The process of getting new accounts is fairly simple. Nicole calls up a Prospect, usually the owner of the establishment or the purchasing officer, and inquires if she can deliver some rice samples. Prospects generally accept this offer as they have nothing to lose and savings to gain. The samples usually depend on what was discussed but it usually consists of a kilo of the required and preferred rice variety. Sinandomengis very popular with companies. Nicole would then inquire two days later whether the prospect is interested. Rodrigo’s marketing strategy is to consistently follow-up on a prospect as inevitably, the Current supplier will make:a mistake, thus giving another trader the Pportuni the account. eee pay-off” is practiced in the industry, MRT does not believe in this practice as it feels that the quality of its rice, service, and competitive prices are enough reasons to convince the prospect to choose them. However, the company does give “small tokens” (e.g., food, small “mpany giveaways, etc.) once in a while. | Maintaining an account is very challenging and relationships are mainly “@nsactional. There are no contracts obligating customers to regularly buy a132 * Cases on Marketing Management in the Philippine Setting certain amount of rice in a given period. A corporate customer usually also maintains several other rice traders to supply his needs. In many cases, the customer simply reorders or changes supplier. Every month, the Lopezes call their customers and inquire if the establishment would be ordering in the coming month. The Lopezes will quote a price based on the prevailing market price. Prices can be very erratic based on the supply. However, after more than 30 years of experience, the Lopez couple has been able to foresee price fluctuations and stock-up accordingly so that they can continue to offer relatively low prices. As Nicole observes, “In many cases, the prices we quote our customers are lower than our competitors. The quality of the rice is the same too. However, | believe that it is our excellent service which keeps our customers loyal.” Giving volume discounts is another marketing tool left to the discretion of each family member. However, the maximum discount possible is P20 pet sack. Part of Nicole's responsibilities is to personally collect the checks from some of their clients. Aside from security reasons, this also provides an excellent opportunity for her to get to know her clients better as well as to build rapport. The family members also try to patronize the restaurants of their customers as a form of reciprocal marketing, However, because of distance or food preference, not all of the restaurants can be patronized. Recent Concerns MRT recently lost one of its big accounts, Happy Foods, which would order 1,800 sacks a year. A few months ago, Happy Foods stopped ordering from MRT. Nicole tried to find out why, but unfortunately the purchasing manager simply said that they were getting rice from another supplier. Nicole tried to analyze how she may have mismanaged this account. The only possible reason she could think of is her inability to submit her price quotation with rice samples on time. Furthermore, due to her hectic schedule, she failed © give the purchasing manager a gift last Christmas. A major Makati hospital was another account Nicole was having problems with. MRT had been regularly supplying this hospital for almost 30 yoo"s The assistant purchasing manager of the dietary department stopped ordering from MRT and did not provide any specific reason for shifting to anothet rice trader. What was unusual for Nicole was the fact that the head of theMary’s Rice Trading * 133 dietary department, who had been a long-time business associate of Rodrigo, was shocked when she learned that the hospital had stopped urchasing a single grain of rice from Mary's Rice. Although not directly affected by the prevailing economic crisis, MRT had reasons to be alarmed. Several companies opted to downsize which resulted ina lower demand for rice for the rice subsidy. Furthermore, several firms were forced to reduce their budgets allotted for their rice incentive. For some companies that still granted rice subsidy, most of their employees now preferred toconvert their supply of rice into cash, Several other rice distributors complained that their sales went down as a result of the Asian crisis (Exhibit 5). The boom of new restaurants in the Ortigas center gave MRT several new customers over the past months. However, Nicole was very concerned that several of her bigger prospects that initially appeared very promising have yet to make an order. She would like to do more personal follow-ups but her tight schedule makes it impossible. She thought off coming out with advertisements in local publications such as the Village Voice (for the exclusive subdivisions and establishments in the Ortigas and Greenhills arcas). She wonders though if such promotions will generate the kind of customers MRT is trying to target. Study Questions 1) Describe the rice industry in the Philippines using Porter's Five Forces framework. 2) What opportunities are available to the company? How would the company exploit these opportunities? 3) Prepare a SWOT analysis for the organization. Summarize the two important issues that your marketing plan must address. 4) Mary’s Rice Trading lost two major corporate accounts for no apparent reason. Describe your strategies to win back these accounts. 5) Prepare a market plan for your target customer segmenv/s.134 Cases on Marketing Management in the Philippine Setting veer ars er Exhibit 1 Ten Prominent Corporate Accounts Name “J” Foods Corporation Max's Restaurant Makati Medical Center Goodah! Foodhouse Pax Merchandising Fil-Estare Realty AC Nielsen Research Group Club Filipino Soho Japanese Restaurant Sulo Hotel Nature of Business National hamburger chain Chicken restaurant chain Private hospital Filipino restaurant chain Rice distributor Property developer Survey firm Country club Fine dining Japanese restaurant 4-star hotelMary's Rice Trading * Exhibit 2 Mary’s Rice Distribution of Sales 135 Percentage Distribution of Customers to Sales Companies Household 25% 15% Resellers Restaurants 35% 25%136 * Cases on Marketing Management in the Philippine Setting Exhibit 3 Market Coverage ~ Metro Manila eN DY SY wv Pasig Proper Ortigas Center Greenhills Makati City Mandaluyong City Libis Taguig (C-5) Downtown ManilaMary's Rice Trading © 137 Types of Rice’ Offered and Pricing (As of September 1999) Type of Rice Price Range (Per sack) Sinandomeng Whole Grain Sinandomeng Special R-60 Laon Dinorado Wag-Wag San Jose C4 Jasmine Rice P900.00 - 1,000.00 P 800.00 - 900.00 P-900.00- 1,050.00 P 1,000 - 1, 200.00 P 1,150.00 P 700.00 - 820.00 P 1, 500.00138 * Cases on Marketing Management in the Philippine Setting Exhibit 5 1998 Monthly Rice Demand Trends (Typical Rice Trader) Estimated Monthly Demand (No. of sacks) Jan Fe Mar Ap May June Jul Aug