: Good morning Sir Paul and BSA-3A, we are again the group 2 and we are about to present the

continuation of our report in Del Monte Company’s Value Chain Analysis. This time, we will be
going to talk about the cost approach in creating advantage in the market. So, before anything
else, we are first providing the company’s primary and secondary activities which are
respectively arranged according to its deemed importance. This arrangement is based on the data
provided by the Del Monte Philippines with regards to the order of their priorities. As we can
see,

: Therefore, we give the top priority in terms of costing to the company’s procurement activities,
this will be furtherly discussed by Ms. Katherine.
1. Procurement (Kat)

2. Inbound logistics. This includes Del Monte’s operation of storing their acquired raw
materials. For example, the fruits and vegetables harvested from their farms which will
be transported to their respective warehouse facility to sustain the freshness of the raw
products.

We can consider that this activity is also highly important since Del Monte are
driven and committed to their vision of providing their valued customers healthy products
and high-quality fresh produce. Thus, it is very critical for them to preserve the freshness
of the fruits and vegetables at the moment they are harvested from the field and to store
these raw materials in a temperature-controlled environment in order to avoid premature
ripening. Therefore, it implies that this activity must be prioritized in the allocation of
 cost because it is the root of the company’s competitive performance, if Del Monte fails
to ensure the quality of these raw materials, it will definitely have a negative domino
effect in the process of converting it into finished goods. Hence, it is better to prevent this
type of problem before starting the operations in order to avoid incurring additional cost
in making things right.

https://www.freshdelmonte.com/our-company/business-divisions/operations-and-
sales/

3. Operations. In this particular activity, it involves how Del Monte company manufactures
the raw materials it received into finished goods through their processing facility which
will then be the subject for distribution.

This activity is also highly significant for a manufacturing company like Del
Monte since it includes the main process wherein their respective sales depend on. If the
company have not been able to convert these raw materials appropriately and in the right
time, quality will then be surely sacrificed and if poor quality is produced dissatisfied
consumers and other stakeholders will follow. Thus, the company must allocate
reasonable budget that will effectively covers the cost of the direct labor and factory
overhead.

4. Human Resource (Kat)

5. Technology (Kat)

6. Outbound Logistics. The actions which are incorporated in this activity would be the
company’s method of transporting the finished products into the end users by the means
of distributing it to the company’s partnered marketing outlets such as groceries,
convenience stores and various restaurants.

With regards to this activity, it can be perceived to have moderate importance in

considering the cost allocation. The main concern is to ensure that Del Monte has enough
capabilities to transport or deliver the goods manufactured, this involves acquisition and
maintenance of delivery vehicles. In short, the company should guarantee that their
medium in transporting the products are in good condition and are always available in the
need for delivery. Consequently, the management should also consider strategies to
establish strong relationship with the distributor through various incentives that will
motivate and influence them to work hard that will help the company in marketing their
products.

7. Marketing and Sales. In here, the main activity is how Del Monte Philippines would
make their products appear and positioned in the minds of their prospects as the leading
 brand in the market. It usually involves intensive advertisement and different pricing
strategies including promos and discounts to encourage their customers to patronized
their products and ultimately, to influence brand loyalty.

This will also have a moderate importance in the cost allocation since as of now,
Del Monte have been perceived to be successful in establishing a strong brand in the food
industry which is evidently supported by the customers repeat purchases. According to
Del Monte Philippines corporate presentation in 2018, Del Monte enjoys leading market
shares specifically on (1) Canned Pineapple, 85% (2) Canned Mixed Fruit, 75% (3)
Canned and Tetra Ready-to-drink Juices, 83% (4) Tomato Sauce, 85% and (5) Spaghetti
Sauce, 41%. But although it is a fact that Del Monte holds a promising share in the
market, it still cannot rest on advertising their product and developing new products to
meet the customers’ needs, wants, and expectations. According to an online article
produced by Supermarket Perimeter, Del Monte keeps its brand strong by meeting ever
rising demand for fresh-cut products. Thus, continuous effort on reaching out towards
their target market will be constantly significant in sustaining their favorable position in
the industry. This is done through, creating unique commercials or advertisements that
will catch the attention and can be easily remembered by the prospects.

Cost Driver:
 Cost incurred on different forms of advertisements such as tv commercials, online
advertisements, billboards, etc.
 Various discounts and promos for the customers.

 https://www.delmontephil.com/hubfs/investors/results-and-reports/DMPI
%20presentation%2017%20May%202018.pdf
 https://www.supermarketperimeter.com/articles/5010-the-power-of-branding-in-
the-produce-category

8. Services. This include additional services offered by Del Monte Philippines to its key
stakeholders for example offering customized solutions based on the demand of their
partnered market outlet like fast food chains.
This will be considered to have a low importance in the cost allocation since Del
Monte focuses on the quality of the products that they offer. These services are just an
add-on to enhance customers satisfaction.

9. Infrastructure

: So now let us discuss the Del Monte’s cost drivers.

1. Quality Control Measures

As stated by Shukla in a business blog in 2016, quality is an important factor

when it comes to any product or service. With the high market competition, quality has
become the market differentiator for almost all products and services. Quality control is
essential to building a successful business that delivers products that meet or exceed
customers’ expectations. It also forms the basis of an efficient business that minimizes
waste and operates at high levels of productivity. Therefore, it is the primary cost driver
of a type of company like Del Monte since it is a manufacturing company that produces
processed foods and beverages, it is really significant for them to ensure that their goods
are prepared in a standard operation which will maintain the desired quality up until it
reached the end users. In addition, through continuously making effort in sustaining high
quality goods, repeat purchase and strong relationship with the customers and even with
the distributors will then be realized since they are satisfied.

2. Employee Benefits

Based on our readings about this company, Del Monte is really driven and
passionate to motivate and nurture their respective employees through giving them
healthy and stress-free work environment. They are fully committed to fundamental
human rights and strictly adhere to labor standards. The farm and production facilities
employ people from surrounding communities in the Philippines. Workers are paid above
average rates in the industry and are informed of the terms and conditions of employment
prior to their appointment. They undergo medical examinations annually and whenever
required. Child and forced labor and any other form of exploitation are not.

3. Changing Market Demands

As we have mentioned a while ago, Del Monte holds a large share of market in
their industry. Thus, the ever changing needs, wants and expectations of their valued
customers highly affects their decision making in allocating the cost in their business
activities since the goal here is the ultimate satisfaction of the customers with regards to
the product quality and the additional service that they can give. In this sense, the
company engages in different product innovation and differentiation to remain
competitive and surpass other brands.

4. Technological Advancement

To be able to innovate their product continuously and deliver exceptional

products and service to their respective customers, the company must invest to different
technological opportunities. One example of their promising technology called the Nice
Frozen Dry (NFD) that allows fruits picked at optimal ripeness to be frozen for up to
three years while preserving nutrients, structure, original properties and organoleptic
 characteristics. This technology has gained international acceptance, having won “Best
Product of the Year” in the foodservice category at the prestigious SIAL in 2014, and
FABI prize (Food and Beverage) for its revolutionary product from more than 2,000
companies at the National Restaurant Association or NRA Show in Chicago in 2015.
This technology foresees radical changes in food consumption habits, and advantages for
export and improved stock management.

5. Social and Environmental Responsibility