This Study Resource Was: San Mig Coffee

SAN MIG COFFEE
San Mig Coffee is a brand of coffee products under San Miguel Super Coffeemix, Inc. which is a
subsidiary of San Miguel Purefoods Company Inc. It has sustained a market share of almost 2% (5th) of
the coffee market in the Philippines since its introduction in 2005. Over the years, the company
introduced multiple variants and made marketing efforts in hopes of boosting sales and be able to
establish customer following in Philippine instant coffee market. However, it has failed to capture a
bigger chunk of the growing instant coffee market in the Philippines. The goal of this paper is to
analyze the situation of San Mig Coffee in the local coffee market and be able to provide marketing
recommendations for this brand.
The Industry
The Philippines was once a large coffee exporter, but the industry collapsed at the start of the 90s due
to coffee rust hitting the Philippine shores. In addition, insect infestation destroyed virtually all the
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coffee trees in Batangas—a major producer of coffee (Philippine Coffee Board). However, research
done by Duke University Center on Globalization, Governance and Competitiveness (Duke CGGC)
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which aimed to examine the Philippines’ position in the global coffee industry claimed that by 2010,
rising incomes swelled demand for coffee. The research showed that the Philippines has become one
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of the world’s largest importers of soluble coffee and is projected to be the second fastest growing
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coffee market between 2015-2020 (Euromonitor, 2016). The research further showed that there is a
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strong local demand which is influenced by at least two changes that reflect both regional and global
trends within the industry:
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1) By volume, Filipino demand has been driven by increased consumption of instant coffee,
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particularly amongst younger generations who favor the convenience. This is a marked
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trend in the Asia-Pacific region in general, where economic growth has boosted
disposable incomes, and tea-drinking countries are increasingly acquiring a taste for
coffee.
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2) Wealthier Filipinos have supported the emergence of a specialty coffee sector,

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particularly in major urban areas. Global brands such as Starbucks, the Coffee Bean & Tea
Leaf and UCC have established wide networks in the country while smaller, independent
coffee shops are also emerging. These features reflect the rise of the specialty and
premium coffee segment and café culture that has swept global markets.
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Demand for instant coffee has been shifted to Asia because the instant coffee industry has been
steadily losing market share to fresh coffee in more mature market such as the US. US domestic
consumers prioritizes “premium” coffee. Instant coffee now only accounts for 7% of their market
(Euromonitor, 2016). In addition to increased consumer awareness on taste, the emergence of fresh
coffee pods has enabled consumers to benefit from the same convenience but with higher quality.
Instant has thus shifted to Asia, where coffee consumption is still in its relative infancy and instant is
used as an inexpensive way to draw in new drinkers. Key emerging markets are expected to be an
important source of growth for the industry, with China, Indonesia and the Philippines expected to
add US$1.5 billion in new sales in the next five years (Euromonitor, 2016).
For businessmen who wanted to advantage of the shift in market, apart from expansion, innovation
was an important factor. Products such as 3-in-1 mixes and micro-ground varieties were therefore
introduced to the market. Consumers easily take to the liking of 3in1 coffee as it offers convenience.
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Modern day’s busy lifestyle means that time is saved by consuming 3in1 coffee mix instead of coffee
prepared by other means. In some cases where consumers do not regularly drink coffee, it might even
be more economical to purchase 3in1 coffee mixes rather than buying instant coffee, creamer and
refined sugar separately and make the coffee mix themselves.
Super Coffeemix
San Miguel Super Coffeemix Co., Inc. - is a 70%-30% joint venture between SMPFC and Super
Coffeemix Manufacturing Ltd (SCML) of Singapore, which started commercial operations in April 2005
by marketing its 3-in-1 regular coffee mixes in the Philippines. Since then, SMSCCI has introduced a
good number of products which include sugar-free line of coffee mixes, 100% Premium Instant Black
Coffee, 3-in-1 flavored coffee mixes and coffeemix with cereals. Competitors and competing brands
in the coffee mix segment are Nestlé (Nescafe), Tridharma Marketing Corp. (Kopiko), URC (Great
Taste), and Goldshine Pharmaceuticals, Inc. (Jimm’s). In the first half of 2009, a pro-health line of
coffee mixes was launched to be included in SMSCCI’s list of products.
In 2015, SMSCCI’s business has been affected by intense competitive pressures. New product launches
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and restructuring of sales and distribution organization were done to improve performance.
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Meanwhile, the coffee business, under the San Mig Coffee brand, focused on its core products and
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realized revenue growth of 24% for its Sugarfree variant in 2015.
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In September 2016, the company launched a new variant called San Mig Barako 3-in-1. The
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product launch was heavily supported through television advertising, which helped position the
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variant as a strong coffee for consumers who needed an instant energy boost. Notwithstanding
the increased competitive pressure from major players, the Coffee business under San Miguel Super
Coffeemix Co., Inc. (SMSCCI) registered revenue growth of 2% as various marketing campaigns and
the positive response of the market to its new product helped to increase volume versus last year.
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The Markets
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According to Kantar Worldpanel, coffee has become the Filipino’s staple beverage as seen in its
consistent sales growth. According to its latest report, 93% of Filipino homes buy coffee mixes at least
once a week and is spending P30 out of every P100 they spend on beverages. Filipinos are said to be
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buying coffee products close to twice per week or about 81 times a year. Additionally, the data noted
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that heavy coffee buyers are more biased towards 3-in-1 mixes. They buy close to three times a week
or 126 times in a year and spend P28 in each shopping trip.
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The ongoing coffee craze in the country fuels the competition among manufacturers as they try
to strengthen brand equity among consumers and increase their sales. The growing competition
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in instant coffee mixes has encouraged manufacturers to implement cost-containment strategies

to remain price competitive, and thus maintain a positive performance at the expense of instant
standard coffee. Additionally, hot drinks and tea maintain positive growth at present, thanks to
the rise in health awareness of consumers. All these trends contribute to the availability of
market for coffee mixes.
Single-serve Coffee Drinkers

Coffee being among the top beverages consumed in single servings have the advantage of being
distributed in sari-sari stores. The leading brands in these categories, such as Nescafé, Kopiko,
Great Taste, Energen and Bear Brand Busog Lusog, are not only prominent in large supermarkets,
but also in sari-sari stores. A recent trend among leading brands is the manufacture of twin packs-
- coffee mix packaging of two single-serve packs linked in one pack. This is in response to the
price consciousness of consumers, while also offering convenient preparation. Notably, Brillo, a
fresh coffee brand, launched a single-serve pour over coffee to appeal to consumers seeking
high quality coffee, but who also want convenient preparation. Similarly, Nestlé entered the tea
category by launching two instant tea variants, Nestea Milk Tea Hokkaido and Nestea Milk Tea
Wintermelon, which are available in single-serve packaging. These developments may encourage
more coffee and tea brands to follow suit, and thus may further drive single-serve consumption
across the hot drinks industry.
Premium Coffee Drinkers

The proliferation of cafés and full-service restaurants that offer high quality coffee has
encouraged at-home consumption of fresh coffee. The increasing demand for high
quality coffee has benefited manufacturers, as some consumers are willing to pay a premium to
upgrade their coffee experience. Some consumers want to upgrade their coffee consumption
while maintaining convenience of preparation, and this trend led to premiumization in single-
serve coffee. In 2017, Nestlé Philippines extended Nescafé Gold and launched
premium coffee mixes with flavors similar to the coffee offerings in coffee shops.
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Health Conscious Coffee Drinkers
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With the rising health awareness of consumers, they have gravitated further to products that
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they perceive as not only delicious, but also a healthy option for them. The Philippines is not a
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traditional tea drinking nation; however, the image of tea as being naturally healthy has
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supported value gains in tea. Black specialty tea and green tea were particularly dynamic
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categories, as some variants of brands like Golden Leaf, Lipton and Twinings have incorporated
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premium flavors that consumers are increasingly seeking. Players in other hot drinks were also
sought to position their products as delicious and healthy. For example, the top two brands in
other plant-based hot drinks, Energen and Bear Brand Busog Lusog, are not only positioned as a
delicious breakfast option, but also as a source of nutrients. Another example of driving sales
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through a health positioning is seen with Milo Nutri-Up, which is targeted at adults who have
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active and fitness-oriented lifestyles.

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The Middle Class

The rising middle class that is supported by improving economic and employment conditions is,
however, spurring demand for more premium products, particularly in coffee and tea.
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Premiumization in coffee and tea will prove to be an important source of growth, particularly
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given the expected decline in instant coffee. As the disposable incomes of consumers rise, they
will be more willing to upgrade their hot drinks consumption, thus supporting the growth
of coffee and tea brands at higher price points. To maximize the opportunity of improving
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economic indicators, consumer segmentation is key to sustain the growth of players in hot
drinks, as the rising middle class is causing a shift in consumer preferences. New product
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launches, effective above-the-line and below-the-line marketing efforts, and effective routes to
market are key strategies for manufacturers to benefit from the gains in the industry.
The Product
San Miguel Super Coffee Mix has slowly grown its product portfolio since its launch of San Mig
3-in-1 in 2005. The key differentiator of the company is its coffee mixes with health and wellness
options, especially since the sugar-free coffee mixes of the company dominate reduced-sugar
coffee mixes.
As of this year, San Miguel Super Coffee Mix has 7 variants available in the retail market.
• San Mig Super Coffee Regular 3-in-1 • San Mig Fastbreak
Coffeemix – Original, Mild, Strong, Extra
Strong
• San Mig Super Coffee Sugar Free 3-in-1

Coffeemix – Original, Mild, Strong, Extra
Strong • San Mig Super Coffee – Barako
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• San Mig Super Coffee – Dos
• San Mig Super Coffee Super Packs – • San Mig Coffee 100% Premium Instant
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Super, Brown, White, Chococino Coffee

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Over the years, San Mig Coffee has used above the line marketing strategies backed by its financially-
abled mother company, San Miguel Corporation. It hired A-list local celebrities like Piolo Pascual and Anne
Curtis to endorse its products. Pascual and Curtis are both admired for their healthy lifestyles as evidenced
by their fit bodies. The company also named a Philippine Basketball Association team after this coffee
brand—the San Mig Coffee Mixers. This team performed as one of the dominant teams in the league from
2012 to 2014. Among its achievements is a very rare grandslam victory during PBA’s 2013-2014 season.
To achieve a grandslam, a team must emerge as champions for all three conferences held in a year.
Despite its assertive marketing strategies, its value share in the market was not impressive. With a
value share of 1% within hot drinks in 2016, the company ranked fifth, reflecting the dominance of
multinationals, particularly in coffee. It had consistent value sales growth, but its slower rate of
growth compared with other market players resulted in a reduction in its value share of hot drinks
over the last two years of the review period.
The company targets middle-income consumers, especially those who are health-conscious. The
company has introduced sugar-free coffee mixes and others such as San Mig Coffee White and San
Mig Coffee Barako, yet the player has not achieved wide distribution through sari-sari stores. The
availability of its products through mainly modern retail outlets reinforces that the company does
not target lower-income consumers.
The company operates in the mature category of coffee. In addition, the company is facing strong
competition from leading brands of instant coffee mixes that are well distributed and heavily
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promoted. Thus, without adapting to the changing dynamics of instant coffee mixes, the company
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will continue to grow only slowly.
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Competition
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The instant coffee mix has the biggest share of the coffee market at 89.37% of the market. The top three
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competitors garner 89.6% of the coffee market as of 2017. They are Nescafe, Kopiko, and Great Taste.
San Mig Coffee ranks fourth at 1.7% followed by Blend 45 at 1.7% to round up the top five.
San Mig Coffee and their competitors have their products sold primarily as single-serve coffee packs sold
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in tens and thirties. Another option is the twin pack usually sold in fives. There are multiple flavor
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variants offered in the market. The original 3-in-1 flavor, the creamier white variant, the brown sugar
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variant, and the strong black variant. Going over the popular variants are other flavors offered by
individual brands. Like for Nescafe, they offer variants with milk, berry and chocolate flavors. Great
Taste also offers variants with muscovado, caramel, chocolate, and white chocolate. Moreover, Nescafe
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and Great Taste along with Blend 45 offer the traditional instant coffee and decaf options. There is also
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a special sugar free variant offered by San Mig Coffee and Great Taste. Lastly, a premium product is
offered by Nescafe under the Gold label offering espresso, macchiato, and cappuccino. Kopiko also
offers the cappuccino variant as well as a special low acid variant.
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Pricing in general are close to each other.

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Original 3-in-1 Products
Description Packaging (weight x qty) Price

San Mig Original 20gx10 51.00
San Mig Original 20gx30 (packed) 155.05
San Mig Dos Original 34gx5 twin pack 35.00
Nescafe Original Twin 34gx5 twin pack 38.00
Great Taste Original Twin 33gx8 twin pack 79.05
Product San Mig Nescafe Kopiko Great Taste

Standard 20gx10 51.00
Bulk 20gx30 155.05
Twin Pack 34gx5 35.00 38.00 49.41*
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Note: Items are compared with weights near each other. * - Simulated pricing to approximate quantity
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White Products
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Description Packaging Price
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San Mig White
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Nescafe Creamy White 29gx10 58.50
Nescafe Creamy White 50gx5 twin pack 45
Great Taste White Smooth and Creamy 30gx10 59.55
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Great Taste White Smooth and Creamy 50gx5 twin pack 45

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Kopico Blanca 30gx10 62.75

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Kopico Blanca 30gx30 (Pack) 185

Kopico Blanca Twin 52gx10 97.50
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Other White Products

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Great Taste White Smooth and Chocolatey 30gx10 59.10
Great Taste White Smooth and Caramelly 30gx10 58.50
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Great Taste Double White 40gx8 62.80

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Standard 28x10 56.20 58.50 62.75 59.55
Bulk 30gx30 185.00
Twin 50gx5 45 48.75* 45
Black Products

San Mig Barako 17gx10 60.00
Kopico Black 25gx10 53.00
Kopico Black (pack) 25gx10 (pack) 53.00

Standard 17gx10 60.00 53.00
Other Products
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San Mig Super Coffee Sugar Free 9gx10 (pack) 67.65
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The instant coffee products are majority sold in various retail channels such as supermarkets and
groceries, convenience stores and local sari-sari stores. To dig deeper we can look at a study by
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Euromonitor. The study below shows the retail distribution of coffee products by volume in 2017:
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% retail volume C
Store-Based Retailing 100.0
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- Grocery Retailers 100.0

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-- Modern Grocery Retailers 17.5

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--- Convenience Stores 0.9

--- Discounters 0.0
--- Forecourt Retailers 0.0
--- Hypermarkets 2.5
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--- Supermarkets 14.1

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-- Traditional Grocery Retailers 82.4

--- Food/drink/tobacco specialists 0.0
--- Independent Small Grocers 9.7
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--- Other Grocery Retailers 72.7

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- Mixed Retailers 0.0

- Non-Grocery Specialists 0.0
Non-Store Retailing 0.0
- Vending 0.0
- Homeshopping 0.0
- Internet Retailing 0.0
- Direct Selling 0.0
Total 100.0
From the table provided, the biggest individual component is the sari-sari stores under Other Grocery
Retailers with 72.7%. It is followed by Supermarkets at 14.1% and Independent Small Grocers at 9.7%.
This shows that accessibility to their nearby neighborhood store is the biggest contributor in driving
sales in the coffee market.
The company behind Nescafe, Kopiko, and Great Taste has the logistics and distribution capacity to
make their products available throughout the Philippines and reach even the sari-sari stores. San Mig
Coffee on the other hand focuses on the supermarket channel rendering it absent in the sari-sari store.
In supermarkets, the aisle dedicated to coffee products can be subdivided further into the following
categories. The instant coffee mixes make up majority of the space with around 2/3 to 3/4 of the aisle
space dedicated to it. Next is the instant coffee making up around a 20%. The remaining space goes to
creamer, ready to drink, premium and specialty coffees.
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In the instant coffee mixes space, around 30% is each taken by Nescafe, Kopiko, and Great Taste. It is
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adjusted depending on the supermarket market. Higher end supermarkets allocate greater shelf space
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for Nescafe while the lower end supermarkets allocate greater shelf space to Kopiko. The remaining 10%
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or even less goes to San Mig Coffee.
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The top three coffee brands spend heavily on advertising particularly in television with some radio
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commercials. They have a sizable advertising budget given their increased market share and sales
volume rendering San Mig Coffee at a disadvantage.
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The biggest market share in the instant coffee mix category is Kopiko. Its promotion is consistent
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especially on television. It has engaged the power of celebrities to reach out to the masses. For Kopiko
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Blanca, they use Aljur Abrenica, Iya Villania, Christian Bautista, and Marian Rivera as brand ambassadors.
Kopiko Brown is endorsed by Megan Young and Xian Lim. Kopiko Black is advertised but with some
unknown endorser.
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Nescafe has Daniel Padilla and Karla Estrada as the newest commercial endorsers for Nescafe Creamy
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White. Nescafe Blend and Brew’s last TV commercial endorser is Jericho Rosales. Their other products
use non celebrity endorsers. They also use radio commercial for their short music jingle of Nescafe
Creamy White. Great Taste on the other hand has John Lloyd Cruz as endorser for Great Taste White as
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well as their other variants.

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Among the competitors, San Mig Coffee ranks the lowest in terms of visibility due to its distribution
being limited to supermarkets. Moreover, not all supermarkets are able to carry the full range of San
Mig Coffee or even allocate a bigger space for them. Great Taste, Kopiko, and Nescafe has a high
availability across retail channels.
Nescafe is perceived as having a high price perception from premiumization of its products. They are
able to offer more unique variants. Great Taste and Kopiko are in the same price range targeting the
mass market. San Mig Coffee also has an expensive price perception due to the sugar free offering of
the product.
The challenge
Consumers are now seeking convenience that increase the sales of instant coffee mixes to the detriment
of instant standard coffee. Instant standard coffee has been losing ground over the years, registering a
volume sales CAGR rate of -0.7% between 2012 to 2017. Meanwhile, the instant coffee mix CAGR rate is
12.4% for the same period. The change in consumer preference shifted consumers to single-serve coffee
packs. Moreover, there has been an increased preference to twin packs as pricing is much lower while
having the same convenience factor that appeals to consumers. So these all bode well for the instant
coffee mix market.
And yet San Mig Coffee is in a very difficult situation, with Nescafe, Great Taste, and Kopiko cornering
the instant coffee mix market.
Nestle (Nescafe), Mayora (Kopiko), and Universal Robina (Great Taste) has a wide distribution channel
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throughout the Philippines. Their other main products, also fast-moving consumer goods, help drives
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economies of scale in distributing till the sari-sari stores. The top three brands are also able to get
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majority of the shelf space in the coffee aisle further making it difficult for others to compete or even
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enter. And while the San Miguel group of consumer foods companies has distribution logistics in place
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for its other products (Purefoods packaged and chilled meats and San Miguel beverages in particular),
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these may not translate effectively enough into coffee shelf space.
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Competitors of San Mig Coffee also have high advertising budgets and are regularly shown in television.
This helps them sustain or even grow their market share. San Mig Coffee is at a disadvantage as equity is
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low due to poor visibility.

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Finally, San Mig Coffee may have the perception of being more premium due to the offering of sugar
free variants with ingredient co-branding using Splenda, a popular but pricey artificial sweetener.
Nescafe is much perceived to be the premium segment, with its various premium product offerings
including Nescafe Gold and espresso beverages. Kopiko and Great Taste are in the same price position
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as it is much geared towards the mass market.

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SAN MIG COFFEE

2) Wealthier Filipinos have supported the emergence of a specialty coffee sector,

in instant coffee mixes has encouraged manufacturers to implement cost-containment strategies

Single-serve Coffee Drinkers

Premium Coffee Drinkers

active and fitness-oriented lifestyles.

The Middle Class

• San Mig Super Coffee Sugar Free 3-in-1

Super, Brown, White, Chococino Coffee

Pricing in general are close to each other.

Description Packaging (weight x qty) Price

Product San Mig Nescafe Kopiko Great Taste

Great Taste White Smooth and Creamy 50gx5 twin pack 45

Kopico Blanca 30gx10 62.75

Kopico Blanca 30gx30 (Pack) 185

Other White Products

Description Packaging Price

Great Taste Double White 40gx8 62.80

Product San Mig Nescafe Kopiko Great Taste

Description Packaging Price

Product San Mig Nescafe Kopiko Great Taste

Description Packaging Price

- Grocery Retailers 100.0

-- Modern Grocery Retailers 17.5

--- Convenience Stores 0.9

--- Supermarkets 14.1

-- Traditional Grocery Retailers 82.4

--- Other Grocery Retailers 72.7

- Mixed Retailers 0.0

well as their other variants.

low due to poor visibility.

as it is much geared towards the mass market.

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