CHAPTER I

INTRODUCTION

Tanduay Distillers, Inc. (the Company) was incorporated in the Philippines as

Twin Ace Holdings, Inc. (Twin Ace) on May 10, 1988. The Company is a wholly

owned subsidiary of LT Group, Inc. (LTG) formerly Tanduay Holdings, Inc. (THI) and

it is the oldest among the subsidiaries of LT Group and carries with it the distinction

of being one of the biggest brands in the distilled spirits category with a 99% share

in the rum category. It is primarily engaged in, operates, conducts and maintains the

business of manufacturing, compounding, bottling, importing, exporting, buying,

selling or otherwise dealing in, at wholesale and retail such goods as rum, brandy,

whiskey, in and other liquor products; and any and all equipment, materials,

supplies used and/or employed in or related to the manufacture of such finished

goods. It sells its products in the domestic market mainly through its major

distributors. The principal office of Tanduay Distillers Inc. is located at address Km.

43 National Highway, Barangay Sala, Cabuyao, Laguna.

Tanduay Distillers Inc. major markets are mainly in Visayas and Mindanao

regions since these areas are the main producer of sugarcane molasses. Sales by

volume in the Visayas and Mindanao regions accounted for approximately 59% and

62% of TDI’s gross sales by volume, respectively. Sales by volume in Metro Manila

and Luzon accounted for 6% and 8% of TDI’s gross sales by volume, respectively.

The core consumer base for its products are lower-income consumers in the

standard and economy markets with the industry approaching maturity, major

1
players compete by adopting a product portfolio that caters to shifting consumer

preferences.

Tanduay Distillers Inc. served more than 117,000 points of sale throughout

the Philippines through eleven (11) exclusive distributors, who in turn may work

with a large number of sub-distributors. TDI has generally maintained good

business relationships with its distributors since 1988. As of December 31, 2015,

TDI’s distributors operated 75 sales offices and 61 warehouses located throughout

the Philippines. TDI employs in-house sales staffs that provide general

administrative support to TDI’s distributors. TDI’s products are transported from

the production facilities to distributors’ warehouses by third party transportation

companies for the account of the distributors.

Asset, Revenue, and Profit of Tanduay Distillers Inc.

Table 1.1

Year 2015 Year 2014 Year 2013

16, 17,029,386,97
Asset 17,041,248,400
918,096,854 4
12,020,516,84
Revenue 12,117,345,129 10,539,843,345
4

Profit 423,140,782 99,287,307 187,644,098

2
Products

Rhum

3
4
Brandy

5
Gin

6
Vodka

Whiskey

7
Flavored Spirit

Product List
1. Ban De Vendange Red Wine
2. Barcelona Brandy Solera Especial
3. Boracay Rum Cappuccino
4. Boracay Rum Coconut
5. Boracay Rum Melon
6. Boracay Sunrise White Cane Spirit
7. Boracay Sunset Golden Cane Spirit
8. Chardon Blanc White Wine
9. Compañ ero Brandy Blend
10. Compañ ero Light Brandy Blend

8
11. Cossack Blue Pure Spirit
12. Cossack Currant Flavoured Spirit
13. Cossack Melon Flavoured Spirit
14. Cossack Vodka
15. Cuvee De La Californie White Wine
16. Embassy Whiskey
17. Gin Kapitan
18. Gin Kapian Light
19. Ginebra Especial Traditional Gin
20. Ginebra Lime Flavoured Gin
21. Ginebra Pomelo Flavoured Gin
22. Mardi Gras Vodka Schnapps Choco Mint
23. Mardi Gras Vodka Schnapps Mango Orange
24. Premium Dry London Gin
25. T5 Light Rhum
26. Tanduay Cocktails Blue Mai Ta
27. Tanduay Cocktails Margarita
28. Tanduay Cocktails Mojito
29. Tanduay Cocktails Strawberry Daiquiri
30. Tanduay Extra Strong Rhum
31. Tanduay Gold Asian Rum Imported
32. Tanduay Silver Asian Rum Imported
33. Tanduay Gold Asian Rum Export Blend
34. Tanduay Silver Asian Rum Export Blend
35. Tanduay Select
36. Tanduay Philippine Rhum
37. Tanduay Rhum 65
38. Tanduay Rhum Dark
39. Tanduay Rhum Dark Gold Seal 5 yrs
40. Tanduay Rhum ESQ Dark
41. Tanduay Rhum Light
42. Tanduay White Premium Rhum
43. Velvet Liqueur Mocha
44. Velvet Liqueur Piñ acolada
45. Velvet Liqueur Strawberry
46. Vino Agila

9
 CHAPTER II
RESEARCH DESIGN AND METHODOLOGY

The purpose of this section is for the readers to understand what different

research methods will be used in this strategic paper and how the researcher will

gather data, either primarily or secondarily. References gathered will be discussed

in completing the strategic paper.

2.1 Research Design

In this research, the researcher used historical and descriptive method.

Descriptive method will represent and define the characteristics of the company for

the past few years in the industry, historical method, on the other hand, will help the

readers understand the things that have happened in the previous years and how it

affected and will affect the company in the long run of its existence. The researcher

will gather information and other data to fully know the company’s performance in

the previous years and its current position in the liquor industry. It will also be

focusing on how their actions are being done on the needs, desires, and wants of

their customers, distributors, and their employees. This will be used as an

alternative or ideally for a better strategy in the future. The researcher will also use

the company’s financial statements to analyze the different factors and aspects

affecting the performance of the company.

10
2.2 Data Gathering

The researcher obtained information through the annual reports of Tanduay

Distillers Inc. and its three major competitors – Emperador Distillers Inc., Ginebra

San Miguel Inc., and San Miguel Brewery. These are, along with the corresponding

financial supplements, other definitive information system, and other disclosures –

incorporate the area of research. Additional information was also gathered through

the reports from online articles and previous researches. The Philippine National

Statistical Coordination Board (NSCB), Euromonitor, and Philippine Statistics

Authority (PSA) provided statistical data about economic and liquor industry

growth, including other relevant and corresponding elements to the alcoholic

beverages. The book of Strategic Management by Fred David served as the basis for

every chapter. These have all become necessary to enumerate the key performance

indicators of Tanduay Distillers Inc. making it as a measurement to accelerate the

evaluation of the corporation.

2.3 Scope and Limitation

This research will only discuss about the liquor industry in the Philippines

and the products and services of the leading liquor manufacturers present in the

country. This research will only focus on the top three immediate competitors of the

researcher’s strategic business unit – Tanduay Distillers Inc., such as the Emperador

Distillers Inc., Ginebra San Miguel Inc., and San Miguel Brewery. The researcher

gathered limited information regarding the company; therefore, the researcher has

mostly relied on the information from the annual report of the company. For

11
financial performance indicators, the research will only cover reports in years 2013

to 2015 of TDI.

12
 CHAPTER III

EXTERNAL ANALYSIS

This chapter presents the external analysis of the industry where the

company operates, specifically on political, economic, social, technological,

environment, and legal. Also, this chapter will show the opportunities and threats

present in the industry.

GENERAL ENVIRONMENT

3.1 POLITICAL

3.1.1 Corruption in Government

According to Panos Mourdoukoutas (2017) of Forbes.com, President Rodrigo

Duterte’s death squad did not kill the corruption in the Philippines. It only killed the

freedom and democracy of the country as well as the economic growth and equity

market of the Philippines. The Philippines also ranked down 6 notches in the 2016

Corruption Index country ranking published recently by Transparency

International. Apparently, the investors are concerned about the political and

economic future of the country and the President’s toll on the dispute between the

Philippines and China had been affecting the Philippine’s stocks.

The issue of the Philippines against corruption is never ending and the

impact it has on the economy of the country is alarming, as the win against

corruption would mean prosperity and development for the country, also raising its

status from being a third-world country. Local and foreign investors have a great

interest not just on the country’s economy but also the country’s government, as it is

13
a great indication for the country’s well-being. If the investors ever find that the

government of the country is corrupt, it will surely affect their investment decisions

because it will be a determining factor for their businesses’ operations. With the

issue of corruption in the Philippine government still unsolved, many investors and

investments are still averse and thus affecting the whole economy and the

industries as well, as the road for gaining more profit and credibility is through the

globalization of the industries here in the Philippines. Liquor industry will be greatly

affected as they have already expanding their name ad products outside the country,

and with the help of their investors, they will achieve their growth in and out of the

country.

Analysis: This factor is relevant to the liquor industry for reasons that it will

affect investment decision of local and foreign investors but this still cannot be

considered as a threat as there is little to none news or documentations stating this

as a factor for not investing.

Figure 3.1

14
Retrieved from:

https://www.forbes.com/sites/panosmourdoukoutas/2017/01/26/dutertes-

philippines-is-getting-more-corrupt/#58fc75145a7f

3.1.2 Peace and Order

In an article published on February 24, 2017 in Manila Bulletin website,

Foreign Affairs Secretary Perfecto Yasay Jr. said that the Philippine government is

doing its best to improve peace and order in the country for it to be a haven for

tourists and foreign investors. Despite the changes made in the country for the

achievement of peace and order, British Ambassador Asif Ahmad pointed out that

these changes are negatively affecting the Philippines to which Yasay opposed to

stating that there are side effects and downside to the change they are trying to

achieve, but the government is trying to manage it so that it will not overpower and

overshadow the positive effects the change in the government has.

Peace and Order are what the Philippines need as the streets become more

dangerous and as the crime rates increase, also taking note of the extrajudicial

killings happening in every corner of the cities. Aside from curfews in different

barangays to prevent any crime related situations, to further achieve peace and

order of the communities would mean to tone down illegal and out of place drinking

of alcoholic beverages, as it is also one of the reasons for the casualties in every

community namely, drunk driving and havoc like illegal firing of guns and street

fights caused by drunk people. With the improvement of peace and order in the

15
country, the liquor industry will be affected, as the effects of drinking their products

mentioned above will be a hindrance to the peace and order of every community. It

would mean that drinking alcoholic beverages would be watched over as well as the

places for drinking to prevent any casualties caused by the liquors. Aside from the

benefits for the locals in the Philippines from the improvement of peace and order,

tourists and foreign investors will also be at peace in their time spending in the

country and boost their confidence in investing in the country.

Analysis: Peace and Order poses a great opportunity for the liquor industry

because if the peace and order in the country will improve, it will be a haven for

tourists and foreign investors, but this too, cannot be considered as opportunity yet

as this is still in the process and we have not yet achieved it.

Retrieved from: http://news.mb.com.ph/2017/02/24/ph-dedicated-to-improve-

peace-and-order-in-the-country-yasay/

3.2 ECONOMIC

3.2.1 Inflation settles at 1.8% for 2016

In an article published in Rappler on January 05, 2017, the holiday season of

2016 brought in the highest inflation for the year 2016 although it is still below

what the government has targeted. The full-year inflation of 2016 settled at 1.8

percent below the target range of 2 to 4 percent but still higher than 1.4 percent of

2015. The month of December alone for food inflation increased to 3.7 percent from

16
3.5 percent in November due to faster increases in the prices of bread, cereals, fish,

and meat. For non-food inflation, the transportation prices jumped from 0.5 percent

to 1.9 percent attributable to the increase in petrol prices as well as the recreation

and culture prices from 1.6 percent to 1.7 percent. The government now expects

inflation to be within the target range of 2 to 4 percent for the years 2017 and 2018,

taking into consideration higher oil prices as oil-producing countries decided to cut

oil production to almost 1.8 million barrels per day, pending petitions for electricity

rates adjustments, and strong domestic activities. However, crops that have been

damaged by typhoons Karen, Lawin, and Nina could lead to faster inflation in 2017

as the volatility of rice prices could affect the overall welfare of Filipino families as

they spent at least 20 percent of their income on rice.

The inflation that is expected to happen on commodity prices this 2017 will

surely have an impact on the industry of liquors aside from the increase of excise tax

imposed on their products because prices will have to go higher to compensate for

higher sin taxes imposed and the inflation contributed by volatile price changes and

natural causes that have happened in the country since the beginning of 2017.

Analysis: Inflation can be considered as a threat to the liquor industry as

prices will have to increase and will further push consumers to stop purchasing

products with high prices, but this cannot be a threat as the middle-class sector and

Gross Domestic Product rise because it would mean that despite inflation, people

are still able to purchase products with high prices.

17
Figure 3.2 Inflation

Retrieved from: http://www.rappler.com/business/157434-philippines-inflation-

december-full-year-2016

3.2.2 Tourist Arrivals in 2017

According to Mary Grace Padin (2017), 6.5 million tourists will visit the

Philippines this 2017 with the government’s efforts of air connectivity with other

countries. The Department of Tourism also targets 73.3 million domestic travels and

the government is eyeing a Php407 Billion and Php1.97 trillion revenues from

foreign and domestic tourists, respectively. The DOT’s Route Development Team is

also eyeing to launch more short-haul flights and flights to neighboring Asian

countries as secondary airports are increasing. Aside from travels within the

country and to other countries, more local spots are emerging as tourists are

looking for less traveled destinations to explore opening to more options and help in

the growth of local communities.

18
 With the emergence and popularity of travelling, Philippines’ economy will

be expecting a growth especially in the tourism department, as more foreign

tourists will come and thus boosting the local businesses here in the Philippines.

Foreign and Domestic travellers now often go to off the beaten path for more

adventure and experience that helps local communities in growing their businesses

and also improving the place to accommodate more tourists. This increase in foreign

and local tourists will be of big help to liquor companies as the Philippines is known

for being a fun country that is always on the go for any parties, which always include

alcoholic beverages. On-trade and off-trade channels are also the big factors for

Alcohol-selling making it always ready for purchasing. Foreign tourists also enjoy

coming here in the Philippines because of cheaper prices especially for alcoholic

drinks and would always make sure to buy one. Philippines is also known for having

too many occasions in one year attracting more tourists to celebrate with and of

course, in every occasion, liquor is always there.

Analysis: (O1) This is an opportunity to the liquor industry as there will be

more consumers to cater to, and thus, more demand for their products.

Figure 3.3 Tourists Arrival Projection

19
Retrieved from:

http://www.philstar.com/business/2017/01/17/1663305/tourist-arrivals-hit-6.5-

m-year

3.2.3 Gross Domestic Product

In an article published in CNN’s website, the Philippine economy has

experienced a 6.8 percent growth in 2016, the fastest growth in the last three years.

The Philippines also had the fastest growth in GDP, which measures the total

economic production and performance of a country, together with China and

Vietnam, with 6.7 percent and 6.2 percent, respectively. It is also reported that in

the last quarter of 2016, the GDP grew 6.6 percent, higher than 2015’s GDP of 6.5

percent that is attributed to the manufacturing, trade, and real estate, renting, and

business activities. Finance Secretary Carlos Dominguez also expects the economy in

2017 to grow to 7 percent as with the performance of the economy since the Duterte

presidency in the last six months have shown that the economy is in “pretty good

shape” also because of the trust and confidence of people with the Duterte

administration. Socioeconomic Planning Secretary Ernesto Pernia also added that

the economy will expand by 50 percent in real terms, and per capita income will rise

by over 40 percent in the next six years.

The Philippines’ economic growth and great performance in gross domestic

products are attributable to the domestic demands for investment and consumption

and among these domestic demands are from the liquor industry. With the good

20
performance of the country’s GDP, many foreign investors will surely invest more in

the Philippines and would open more opportunities to people and businesses. This

is good news for Tanduay as they are part of the consumption by the Filipinos and

would also mean higher production and selling of their products as they also try to

globalize their products.

Analysis: (O5) This is an opportunity to the liquor industry as this will create

a way for the industry to expand their market and their business with the help of

local and foreign investors who are attracted now to invest in the Philippines

because of growing GDP rate.

Figure 3.4 Philippines GDP

Retrieved from: http://cnnphilippines.com/news/2017/01/26/philippines-GDP-

2016.html

21
3.2.4 Disposable Income

According to Prinz Magtulis (2016) of Philstar, the rising middle class in the

Philippines grew to 5.8 percent, although slower than in 2014 and lower than

projected, it is still the fastest among five Southeast Asian countries. One of the

things that the rising middle class’ disposable income spends for is the acquisition of

vehicles and the government, which had a slow pace in spending for infrastructure,

only adds up to the growing traffic in the Metro Manila area. The private sector,

however, had a double-digit rise in machinery and equipment and imports will grow

substantially reflecting the growth of Gross Domestic Product. The public sector, on

the other hand, lagged in spending behind the private sector, which is not good, as it

has to spend more to reach the target of five percent GDP for the year.

The rising middle class had been reaping the fruits of growing economy and

one example of it is their spending in commodities such as local and imported goods

and vehicles. This will have a great impact also on the industry of liquor as the

government focused on boosting the consumption bonuses and increasing the

salaries of workers, which would mean more spending in consumption goods and

one of the goods the middle class is spending on are alcoholic beverages that are

always in every occasion and celebrations. Also, the middle class is a large part of

the consumer sector of the Philippines.

Analysis: (O2) This is an opportunity to the liquor industry as the disposable

income increases; their product demand and sales will increase too. This will also

22
widen their market as the middle-class sector rises, thus, more consumers who are

capable can purchase their products.

Retrieved from:

http://www.philstar.com/business/2016/02/01/1548259/special-report-middle-

class-reaping-fruits-fast-growing-economy

3.2.5 RCEP Trade (ASEAN)

According to Jon Viktor Cabuenas (2017), it will be a big boost to the

Association of Southeast Asian Nations (ASEAN) and its trading partners to improve

economic ties under the Regional Comprehensive Economic Partnership, which is a

free trade agreement that comprises the ASEAN member states and six partners –

Australia, China, India, Japan, Republic of Korea, and New Zealand. It will strengthen

the Philippine government’s efforts on “expanding markets and participation in

productive trade based on specialization and comparative advantage,” according to

Cid L. Terosa, Dean of the School of Economics of the University of Asia and the

Pacific. Aside from the RCEP Trade, overseas developments such as “Policies of the

Trump administration and its effects on ASEAN, changing perspectives of

globalization and integration and economic sovereignty over disputed territorial

waters” are to be discussed.

Through the Regional Comprehensive Economic Partnership, the Philippine

market will be opened to foreign investors and the Philippines would also have a

23
free trade to other countries under the ASEAN and six partnered countries. It will

give the Philippine market and industries an opportunity to trade their products

overseas especially for the liquor and alcoholic beverages industry, as it will now

cater more consumers other than the 3 rd heaviest drinkers in the world, which are

the Filipinos.

Analysis: (O3) This is an opportunity to the liquor industry because it will

open doors for them to export their products as well as make their products

internationally known.

Retrieved from:

http://www.gmanetwork.com/news/money/economy/608445/asean-2017-

regional-economic-ties-are-strategically-important-for-phl/story/

3.3 SOCIAL

3.3.1 PH alcoholic drinks industry remains bubbly

In an article published in the Manila Times on June 29, 2016, the opening of

new bars and promotion of booze in on-trade channels have created a “cocktail

culture” in the Philippines that has helped raise the alcohol sector from their slump

in 2013 due to the increased excise tax. Asian consumers will now also require a

variety of beer, wines, and cocktails for different occasions, giving liquor companies

a chance to offer a wider range of products to remain competitive. However, despite

the opening of new bars and hotels that offers liquors, domestic brands have a

24
strong competition with their foreign competitors, as the premium segment will be

comprised of imported products too. To keep up with the competition, Ginebra San

Miguel wanted to appeal to consumers of cocktails by introducing “Gin on the Go”,

which is a mobile bar that offers GInebra’s own cocktails such as GSM Blue and the

like. Moreover, through the on-trade channels, such as hotels, bars, and restaurants,

there will be a boost in the cocktail culture in the country, thus, helping the liquor

industry to recover from the slump.

Through the introduction of different beers, wines, whiskeys, and cocktails

here in the Philippines, truly there will now be a cocktail culture that will develop,

as Filipinos are known for having fun and for having many occasions all year round

to which alcoholic beverages will never not be a part of the celebrations. Domestic

companies may find it hard to compete with foreign brands, but Filipinos are always

ready to try new things even if it is locally made as long as it will suit their taste

buds and help brighten the celebrations as Filipinos are also price conscious so they

will still opt to buy new but affordable beverages.

Analysis: (O4) This is an opportunity the liquor industry because despite the

sin taxes and other taxes imposed from their procurement, production, to

distribution, they still managed to remain active and overcome the expenses. (S1

Retrieved from: http://www.manilatimes.net/ph-alcoholic-drinks-industry-

remains-bubbly/270788/

25
3.3.2 Filipinos 3rd heaviest drinkers in the world

In an article published in Philstar, Filipinos can out-drink everyone in the

world except the South Koreans and Russians with an average of 5.7 shots per

person per week, making the Philippines place third in the list of world’s heaviest

drinkers. South Korea has an average of 13.7 shots per week while Russians, despite

the stereotype of being heavy drinkers, only have an average of 6.3 shots per week,

making them second place after South Korea. With the heavy investment on

advertisements and promotions as well as facilitating growth in alcoholic drinks

categories, the alcohol consumption in the Philippines have grown stable, although

for the beer category, it has slowed down due to their maturation stage, but other

categories, such as cocktails, wines, and spirits, are growing as liquor companies

now shift and cater more drinks that will suit the tastes of their consumers.

According to the demographics, the Philippines ranked third in world’s

heaviest drinkers, which may greatly be attributable to the fact the Filipinos love

drinking and will always involve drinking in every occasion possible. Filipinos are

also known to have fun and one of their motivators for having fun is alcohol to boost

their confidence. With the expansion of choices for alcoholic drinks, Filipinos now

enjoy a variety of drinks to choose from depending on their occasions and

celebrations whether it may be outdoors or indoors.

26
 Analysis: (07) Filipinos ranking 3 rd in World’s Heaviest Drinkers is an

opportunity to the liquor industry as Filipino drinkers alone already create a big

demand for alcoholic beverages.

Figure 3.5 Top 10 Drinkers in the World

Retrieved from: http://www.philstar.com/news-

feature/2014/02/06/1286936/infographic-filipinos-3rd-heaviest-drinkers-world

3.3.3 Alcoholism in the Philippines

The Philippines is becoming dependent on alcohol because mainly this

drinking culture was brought to the country from the Spaniards and the Filipinos

have a positive view of alcohol despite of the havocs it causes in the society because

it helps people deal with stress. Drinking can also be seen in the media as it is shown

as glamorous and sexy. Drinking is for the male pursuit for the past years but had

changed as the country is slowly being urbanized and the Filipinos are adopting a

western approach to alcohol drinking and has also devoted a whole month for

27
drinking, Octoberfest, that is sponsored by San Miguel. The Philippines is also the

second highest consumers of alcohol in South East Asia and the number one wine

drinkers. Almost 5 million Filipinos drink regularly and 39.9 percent of the

population drinks irregularly. With the havoc it causes in communities and families,

only small number of people seeks help for their alcohol problems, as alcoholism is

not viewed as a medical matter when in fact, if alcohol drinking is abused, it may

cause damaging effects to one’s body such as liver cirrhosis and alcohol poisoning.

In addition to this, there is also a rampant underage drinking in the Philippines even

though the legal drinking age is 18 years old; many have tried drinking alcohol

before they reach the legal age.

The Philippines is greatly colonized that we have picked up already the

culture of other countries such as this drinking culture, which have little benefit for

every individual as alcohol beverages do not have positive effects to one’s body.

Although liquor companies benefit greatly from this, there should be moderation

and proper regulations to be followed to avoid any havoc that may cause

disruptions to businesses and work of people. Underage teenage drinking is also a

great problem in the Philippines aside from public drunkenness that have caused

many casualties to communities and families because underage teenagers would

eventually become out of school youth and alcoholic adults.

28
 Analysis: This is a relevant factor but cannot be considered as opportunity

nor threat as alcoholism is not widely acknowledged as an illness, thus, many people

still do not take it as a stigma and still continue to consume it.

Retrieved from: http://alcoholrehab.com/alcoholism/alcoholism-in-the-philippines

3.3.4 Effects of Alcohol

In the article published in National Institute on Alcoholic Abuse and

Alcoholism, alcohol greatly affects the human body. Some of the implications

brought by too much alcohol consumption – on single occasion or overtime will

interfere with the brain’s communication pathways and affect the way the brain

looks and works. As for the heart problems, cardiomyopathy or stretching and

drooping of heart muscle; arrhythmias or irregular heart beat; stroke; and high

blood pressure are the effects. Liver problems such as Steatosis or fatty liver,

Alcoholic hepatitis, Fibrosis, and Cirrhosis are also the effects. Alcohol consumption

can also prevent proper digestion and may also lead to cancer in the mouth,

esophagus, throat, liver, and breast. However, with moderate consumption, research

says that it is helpful in protecting healthy adults from developing coronary heart

disease.

Drinking alcohol always has a consequence and with moderate consumption

of it would also be of help to healthy adults. With these side effects, the liquor

industry should always remind people to drink moderately their products to avoid

people from getting sick, as with more people getting negatively affected, so as the

29
sales of liquor products will lessen because then, people will no longer buy and

drink alcoholic beverages for the tolls it has on the body.

Analysis: (T2) With consumers being more health conscious nowadays, it

imposes a threat to the liquor industry as little or many consumptions of alcohol still

have negative effects on one’s body. To counter this threat, liquor industry should be

more cautious and responsible in the advertising of their products having more

emphasis on the reminder of moderate drinking.

Retrieved from: https://www.niaaa.nih.gov/alcohol-health/alcohols-effects-body

3.4 TECHNOLOGY

3.4.1 Internet Penetration

In the article, with the 97 million population of the Philippines, the country

has 101 percent of mobile penetration rate and 39 percent internet penetration

rate. While 70 percent of the netizen population are people aged 29 and below, 96

percent of the overall Internet user population are social media users. The statistics

done by the Digital Marketing of the Philippines that is attempting to show the

digital marketing outlook in the country longs to provide some insights that will be

helpful for business owners and digital marketers. According to the statistics, over

33.6 million are internet users in the country with 52 percent of them having access

to speed internet connection and are spending 42 percent of their time in a week on

the internet. With social media marketing, over 94 percent are on Facebook and are

30
spending as much as 4 hours each day engrossed in their favorite social media apps

making the Philippines the most engaged social media users in the Asia-Pacific

region. Aside from this, multimedia marketing and ecommerce are also flourishing

with the help of technology to the users.

The generation today is so engrossed to technology that almost everything

can be now be done through the use of internet and smartphones, which a huge part

of the Philippine population has access to. In times like these, companies are really

taking advantage of it as it is less costly than traditional advertisements and

promotions and it is more accessible for people. Tanduay is also using this

opportunity to promote their products all over the Philippines through commercials

in televisions and advertisements in different social media applications in

smartphones, tablets, laptops, and computers. This leap in technology that the

Philippines is experiencing is beneficial to companies as this is also progressing

their products through promotions

Analysis: (O6) This is an opportunity to the liquor industry as people are now

becoming more Internet savvy, and thus, will enable the companies in the liquor

industry to expand their market through additional efforts in advertising using

different social media applications and connect with its consumers through the

development of websites that will be easily accessible to all.

31
Figure 3.6 Percentage of total media time spent on Social Media

Retrieved from: http://digitalmarketingphilippines.com/digital-marketing-in-the-

philippines-2015-edition-infographic/

3.4.2 Targeted Hyper-Esterification Aging (THEA)

Targeted Hyper-Esterification Aging or THEA is the hyper-speed aging

reactors that will create the equivalent of twenty years of barrel aging in a week’s

time created by Lost Spirits Distillery. Bryan Davis and Joanne Haruta, founders of

Lost Spirits Distillery, spent a few years in Spain making absinthe and gin and they

first made heavily peated whiskies, but soon turned their attention to rum. In April

2015, during American Distillers Institute conference talk, Davis announced that he

plans to license the aging technology to other distilleries.

The invention of hyper-speed aging for rums will surely be convenient for all

rum-makers as it will cut them time and thus produce rum at a rational speed and

32
sell products fast. This technology made will turn the rum industry around as the

process revolutionized helping the industry keep up with the fast-paced market

around the world.

Analysis: (O8) This is an opportunity the liquor industry should grab for

them to be able to produce more products rapidly.

Retrieved from: http://cocktailwonk.com/2015/09/unveiling-the-thea-one-aging-

reactor-from-lost-spirits.html

3.5 ENVIRONMENT

3.5.1 The Environmental Impact of Alcohol Production

In an article published in Blue & Green Tomorrow on May 4, 2016, aside from

the health effects of drinking alcohol, there is also an environmental effect by the

production of alcoholic beverages such as wines from the vineyard activities to

consumer shopping to the recycling of glass bottles to the transportation of the

products.

The problem our world faces now is the climate change that is purely

attributable to damaging human activities as simple as not recycling recyclable

materials and using harmful determinants without thinking it is harmful to the

environment. Alcohol production should also be a catalyst for change in the

environment through its processes and raw materials as well as the proper disposal

33
of their wastes that greatly affect bodies of water as their drainages are connected

to it. Philippines’ liquor should gain profits without the expense of damaging the

environment.

Analysis: This can be a threat to the liquor industry but only few people are

concerned with the environment and do not really take into consideration if

companies harm the environment and the government have little to none efforts

regarding issues like these so this cannot be considered as threat yet.

Retrieved from: http://blueandgreentomorrow.com/society/environmental-

impact-alcohol-production/

3.5.2 Sugarcane Impact

Sugarcane is an essential part of the industry as it as a significant effect on

biodiversity with it being the source of biofuels and bioplastics. Sugarcane is also

the raw material for ethanol, which are then used in making beer and rum. While it

is a vital part of the liquor products, sugarcane effluents flow into the water and

damage ecological areas and production mills release flue gases, soot, ash, ammonia

and other substances during processing.

While it is an important and raw material for rum making, it is no doubt that

the process behind sugarcane – planting and harvesting, has a lot of damage to the

environment. The land used for sugarcane planting causes erosion; the process of

34
making the output – ethanol, from sugarcane also damages the bodies of water

because it is mostly where the effluents flow. Liquor industry should be aware of the

effects their materials for their products are doing on the environment because if

the condition of the environment worsens, surely their raw materials will be

affected, as it also needs to coexist with the environment it is in.

Analysis: (T4) Sugarcane plays a pivotal role in the production of ethanol and

with the harmful effects it has on the environment, from planting to harvesting, it

poses a threat to the liquor industry because they will be held responsible for any

negative effects.

Retrieved from: https://www.worldwildlife.org/industries/sugarcane

3.5.3 Ethanol Output

In an article published in Manila Times website in 2015, the Philippines is

nowhere near meeting the standard of 10 percent Ethanol in gasoline mandated in

2012 and this standard is expected to be increased to 20 percent by 2020.

Meanwhile, the ethanol production in the country is problematic, as mills producing

the raw material essential for ethanol production is switching between ethanol and

sugar production because of the prices. The farmland is also at risk and is a problem

because there are lesser and lesser usable lands left.

35
 Liquor industry should take into consideration the effects their production of

ethanol need for their beverages on the environment because they will be greatly

affected if the situation of the land needed for sugarcanes to be planted on are not

anymore usable. The liquor industry should also think of new ways in which they

can produce ethanol efficiently so that mill productions will no longer choose which

to produce, as ethanol is costlier than sugar, and sugar being a commodity, is always

out of the question of which to produce. Philippines also has a lot of work to do to

attain the Ethanol standard for gasoline because it is vital in producing biofuels,

which will reduce greenhouse emission and thus lower the rate of climate change

and all industries, both local and foreign, will surely benefit from it.

Analysis: (T1) This is a threat to the liquor industry as Ethanol is the main

raw material for production of alcohol beverages and with lesser production of it

because of external factors such as prices, liquor companies are in danger of having

less raw material supplied to them and it will affect their overall production if there

will also be no substitutes for their raw materials.

Retrieved from: http://www.manilatimes.net/rethinking-biofuels/180847/

3.6 LEGAL

3.6.1 Bill prohibits drinking liquor in government offices

In an article published on November 29, 2013 in Philstar website, the Quezon

City Representative Winston Castelo has filed a bill prohibiting officials and

36
employees from drinking liquor in government offices. The House Bill 2956 or “No

Drinking of Liquor or Other Intoxicating Beverage Act of 2013,” says that drinking in

government offices is "inimical to civil service and tends to push employees or

officials to get unruly and get into trouble when they are already drunk." Employees

and officials who will be caught would face sanctions and disciplinary actions under

the Civil Service Code and the representative also said that the Civil Service

Commission and the Department of Labor and Employment are mandated to issue

rules and regulations for the implementation of the act.

Drinking in places such as in government offices should strictly be

prohibited, as this place is a place for work alone and any act of recklessness such as

drinking is not the proper deed to be done inside any offices. Although this might

have a minor effect to liquor companies because people might refrain from buying

alcoholic beverages to prevent any mishaps in the offices, still many businesses will

be there who will be the liquor companies’ consumers that are in the right place to

purchase and drink. With this house bill, work in government offices will be merely

for work done by professional people who do not act recklessly. The Philippines

deserve workers who work professionally and accordingly for the country to

progress.

Analysis: Although this bill poses threat to the sales of liquor industry and

reputation of the product, this cannot be considered a threat yet as there are still

37
little to none accounts of any incidents related to drinking liquor in government

offices.

Retrieved from: http://www.philstar.com/headlines/2013/11/29/1262335/bill-

prohibits-drinking-liquor-govt-offices

3.6.2 "Anti-Underage Drinking Act."

In a Senate Bill presented by Sen. Ramon Revilla in January 17, 2011, it

explains that the minors, persons aged below 18 should be prohibited from

drinking, purchasing, or obtaining alcoholic beverages. Any minors who have

violated this law will be required to do community service and any person or

business that have sold alcoholic beverages to underage teenagers will have their

licenses suspended and establishments will be fined of Php10, 000 to Php50, 000.

Underage teenage drinking is rampant in the Philippines as many minors are

unsupervised by their parents or are provoked by peers and influenced by the

community they are in. It is also disturbing that liquors are easily bought in the

convenience stores or grocery retail stores making it effortlessly available to minors

to purchase. It is also undeniably rampant that many minors have access to liquors

especially to those who are in unsupervised homes and squatter areas and also the

fact that age can be faked and thus giving access to minors to purchase and drink

alcoholic beverages in convenience stores or bars or nightspots. This senate bill will

help prevent any further underage teenage drinking that surely do not have positive

38
effects to minors who are seen as the future of the country. Liquor companies

should also be liable to their consumers as their products are one of the culprits for

crimes such as rape, murder, and alcohol abuse that mostly victimize minors who

are vulnerable.

Analysis: This is a relevant factor the liquor industry can look into, but this

cannot be considered a threat as an estimate of 60% of minors have already tried

drinking alcoholic beverages before they even reached legal drinking age of 18,

which means that there is no strict implementation of rules and regulations in liquor

drinking.

Retrieved from: https://www.senate.gov.ph/lisdata/105759056!.pdf

3.6.3 Consumer Act of the Philippines (RA 7394)

The basic policy of Republic Act No. 7394 is to protect the interest of the

consumer, provide general welfare and to establish standards of conduct for

business and industry. The objectives of this act all focused on the welfare,

protection and rights of all the consumers in the Philippines. This policy also

requires manufacturers a proper labeling, and fair packaging to enable the

consumer to obtain accurate information as to the nature, quality and quantity of

the contents of consumer products. Also, manufacturers are prohibited to use toxic

substances to their products; misinterpretation in advertising is also prohibited in

this act.

39
 With this Republic Act, the liquor industry should be wary of the state’s law

on manufacturing, producing, and selling of their products so that they will uphold

the standards of their products and of the state and be allowed to distribute and sell

without compromising and without damaging their image.

Analysis: This is poses a threat to the liquor industry if ever they will violate

this Act, but so far, this cannot be considered a threat yet as there are no encounters

of any violations yet, and thus, only has little effect to the liquor industry.

Retrieved from: http://www.officialgazette.gov.ph/1992/04/13/republic-act-no-

7394-s-1992/

3.6.4 Liquor advertisements

Aside from prohibitions on cigarette and tobacco advertisements in the

media in the Philippines under the Republic Act of 9211 and usage of it in both

public and private establishments, the Philippine government also prohibits the

liquor and alcoholic beverages advertisements on television as it portrays men

virility, sex appeal, social acceptance, good relations, athletic skills, personal

confidence, corporate success, dominance over others, and superiority in practically

every aspect of human endeavor. Some of the advertisements also correlate alcohol

consumption to nationalism.

40
 The liquor industry should be aware of the advertisements they show in

television and billboards as it influences not only the adults but also the teens in

consuming their products. In the Section 9, Article XVI of the 1987 Constitution, it

mandates “The State shall protect consumers from trade malpractices and from

substandard or hazardous products.” Liquor advertisements should also be wary of

the effects and underlying messages of their advertisements as alcoholic beverages

are always linked to illegal usage and violence

Analysis: This is a threat to the liquor industries as their efforts in advertising

are prohibited but despite these precautionary measures applied to their

advertisements, their sales are not affected so this cannot be considered a threat yet.

Retrieved from: http://www.thestandard.com.ph/mobile/article/155668

3.6.5 Alcohol sector drinks in impact of ‘sin’ tax law

According to VG Cabuag of Business Mirror, due to the implementation of the

Republic Act 9334, there has been a significant drop in sales in the liquor industry

since 2013. San Miguel may have the 90 percent market share in the beer market,

but they were not spared by the industry-wide slump together with the Tanduay

Distillery Inc. due to the changing drinking habits of their consumers. From having

consumed beers, they now shifted to Tanduay’s ‘alcopop’, alcohol-laced pop drinks,

that really did not help in the now shrinking beer market due to higher taxes. To

prevent any downshifting to cheaper prices, a two-tier tax structure – one for lower-

priced and the other for higher-priced segment was made for fermented liquors

41
such as beer, which will be taxed at the same rate. Products priced at Php50.60 and

below, there will be a Php15.00 tax, which will increase every year by Php2.00 but

by 2017, it will only increase by Php1.50. Products priced at Php50.60 and above

will be taxed Php20.00 and will increase by Php1.00 per year but will change to

Php1.50 by 2017. Distilled spirit sectors also experienced an industry-wide decline,

as their taxes are per-proof basis or amount of alcohol content in a beverage, it has

now taxed Php20.00 per specific proof per liter plus a 15 percent ad-valorem tax

from 2013 to 2015. With this, they have been able to still cater to mid-market by

launching products with lower alcohol content and selling it with higher prices,

further widening margins and cushioning the impact of excise-tax hike. However,

the increase in prices and widening of margin came at the expense of Tanduay

Distillery Inc., which caters to lower-income bracket. Recovery was fast despite the

initial decline as companies learned how to efficiently improve their operations and

companies such as Emperador acquired scotch whiskey maker Whyte and Mackay

to introduce premium brands to the Filipinos but Ginebra disagrees to this motion

as 90 percent of their consumers are still into mass and economy brands.

With the implementation of the Republic Act 9334, the liquor industry in the

Philippines experienced an industry-wide decline as taxes became higher and sales

became lower. This has been a great problem for the liquor companies, as the

majority of their consumers cannot keep up with their strategy of them increasing

prices to cushion the impact of higher taxes imposed to them. Although Filipinos

cannot be hindered from buying alcoholic products, they, however, changed their

42
drinking habits and are now opting for substitutes such as alcopops. The increase in

one’s product will always be at the expense of the other as they try to be diversified

as possible to cater more consumers and lower the competition between the

companies.

Analysis: (T3) This is a threat to the liquor companies although they may

have already surpassed the burden of higher sin tax in 2013, the yearly increase in

sin tax since still poses a threat to them as they still have to increase their prices or

settle it above their previous prices to cushion the effect of sin tax, which in turn will

make consumers purchase alcoholic beverages that have lower prices.

Retrieved from: http://www.businessmirror.com.ph/alcohol-sector-drinks-in-

impact-of-sin-tax-law/

43
 CHAPTER IV
INDUSTRY AND COMPETITOR ANALYSIS

4.1 INDUSTRY ANALYSIS

There are four competing major brands in alcoholic beverages industry –

Emperador Distillers (EDI), Ginebra San Miguel Inc. (GSMI), Tanduay Distillers Inc.

(TDI), and San Miguel Brewery (SMB). The three (3) major players in the Spirits

Industry in the Philippines contribute to about 98.1% of market shares, with other

competitors at 1.9%. These players are: Emperador Distillers Inc., Ginebra San

Miguel Inc., and Tanduay Distillers Inc.

Competitive Position

Figure 4.1 Alcoholic Drinks

Alcoholic Drinks
San Miguel Brewery Emperador Distillers Inc.
Ginebra San Miguel Inc. Tanduay Distillers Inc.

9%
6%

13%

72%

44
 The figure shows the data taken from Euromonitor the market share of the

companies in the Alcoholic Drinks category as of the year 2016.

Figure 4.2

Alcoholic Drinks Category

Asia
Tanduay
Brewery San
;Distiller
5.9; 6%
Ginebra
Emperad Miguel
s; 6.5;
orSan7% Brewery
Miguel; ; 66.9;
Distiller
s;8.7; 9% 67%
11.8;
12%

Figure 4.3

45
 Spirits Category
Emperador Distillers Inc. Ginebra San Miguel Inc.
Tanduay Distillers Inc.
23%

44%

33%

The figure shows the data taken from Euromonitor the market share of the

top 3 companies in the Spirits category as of the year 2016.

Figure 4.4 Sales of Spirits

46
 Brandy is the highest selling spirit with 46%, Gin came at second with 28%

and Rum at 20% market shares, followed by whisky, vodka and other liquors such

lambanog.

Traditionally, men are the main consumers of spirits particularly locally

produced spirits, according to Euromonitor. Underage drinking has become

dominant due to poor policy implementations regarding legal purchasing and

drinking in the country. Moreover, the target markets of the liquor manufacturers

are the Filipinos under the lower, middle, and upper-class section. The middle class

is comprised of about 3.6 million households. This magnitude constitutes about 3

out of every 20 households. In 2012, the income share of the middle class can be

estimated at about a third (32.2%) of total household income in the country.

Table 4.1 Distribution of the Population According to Age

MALE FEMALE TOTAL in %

0-14 year 17,652,419 16,943,261 33.71%
15-24 years 10,042,520 9,629,762 19.17%
25-54 years 19,204,977 18,618,333 36.86%
55-64 years 2,758,867 3,282,416 5.89%
65 years and over 1,863,339 2,628,315 4.38%

Figure 4.5 Distribution of Households and Shares of Total Household Income

by Income Groups, 2012

47
COMPETITOR ANALYSIS

Direct Competitors:

4.2 COMPETITOR ANALYSIS

1. Emperador Distillery Inc.

EMPERADOR DISTILLERS Inc. is a member of a conglomerate engaged in

diverse operations such as manufacturing, marketing & distribution, importation,

quick service restaurants and real estate development and currently a holding

company, which operates an integrated business of manufacturing, bottling and

distributing distilled spirits and other alcoholic beverages. EDI was the leader in

48
overall spirits in 2016, with a 43.2% volume share. EDI has been recognized as the

world’s largest selling brand in the world in terms of volume sales in 2016. Through

the recently acquired Whyte and Mackay Group Limited (“WMG” or “Whyte and

Mackay”) of United Kingdom, EMP has entered the global Scotch whisky business.

WMG has a rich heritage of a Scottish spirits company, which is the fifth largest

Scotch whisky manufacturer in the world, and its products are distributed in over

50 countries.

Basis: The leader in brandy products and spirits as well as the second in overall

alcoholic products in 2016 with 11.8% of the total market share. Emperador

Distillers Inc. has been recognized as the world’s largest selling brand in 2016.

The following are Emperador’s products:

 Emperador Brandy

 Emperador Hotshot Brandy

 Emperador Bunso (New 2017)

 Emperador Light

 Andy Player

 Andy Cola

 The Bar Flavors:

 Apple Vodka

 Orange Vodka

 Strawberry Vodka

 Lemon and Lime

49
  Gin

 Silver

 Cocktails – Margarita

 Citrus – Tequila

 Fundador Brandy

EMP’s Key Performance Indicators

2. Ginebra San Miguel Inc.

Ginebra San Miguel, Inc. (GSMI), incorporated in 1987, is engaged in

manufacturing and distribution of alcoholic and non-alcoholic beverages. Most of

GSMI's revenues are from liquor products. The company's branded liquors include

Ginebra San Miguel (GSM), Gran Matador Brandy, Tondeñ a Premium Rum, and for

the younger market, GSM Blue. GSMI flagship brand, “Ginebra San Miguel” of GSMI

registered a total volume sale of 172 million liters in 2015, and represented a 90%

50
share in the gin category. With total volume sales of 188 million liters in 2016,

Ginebra San Miguel ranked third in the overall alcoholic drinks market.

Basis: Ginebra San Miguel was the largest-selling gin in the world in 2012 as well

as the second largest spirit manufacturer. In 2016, Ginebra San Miguel ranked

third in the overall alcoholic beverages market with 8.7% of the total market

share.

The following are Ginebra’s products:

 Ginebra San Miguel

 Ginebra San Miguel Premium Gin

 G.S.M. Blue

 G.S.M. Flavors

 Primera Light Brandy

 Vino Kulafu (Chinese Wine)

 Antonov Vodka

 Tondeñ a Manila Rum

GSMI’s Financial Ratios

51
 Indirect Competitor

3. San Miguel Brewery

San Miguel Brewery Inc. (SMB) is the largest producer of beer in the

Philippines, with nine out of ten beer drinkers preferring its brands. San Miguel

Beer was first produced by La Fabrica de Cerveza de San Miguel, an upstart brewery

in the heart of Manila that began its operations in 1890.

Basis: San Miguel Brewery Inc. is the largest producer of beer in the Philippines

with a market share of more than 95 percent. SMB also has a high number of

retailers nationwide with 471,000 retail outlets.

The following are SMB’s products:

 San Mig Light

 Red Horse Beer

 Cerveza Negra

52
  Gold Eagle Beer

 San Miguel Strong Ice

 San Miguel Super Dry

 San Miguel Premium All-Malt Beer

 San Miguel Flavored Beer

 San Mig Zero

 San Miguel Pale Pilsen

4.3 PORTER’S FIVE FORCES OF COMPETITIVE ANALYSIS

Threat of Substitute
Suppliers Power Performance and presence of
Number of suppliers substitute products
Switching cost of materials Relative price of substitute

Rivalry Of Competition
Brand loyalty
Product differentiation

Threat of New Entrants Bargaining Power of Buyers

Amount of capital required Price sensitivity
Brand reputation Many product substitutes
Buyers' switching cost 53
Access to distribution channels
See next page for in-depth discussions of the forces and its sub factors.

RANKING:
LOW MODERATE HIGH
FORCES RANK DISCUSSION
1. Rivalry of Competition HIGH Companies can consider competition as a
positive factor as it will motivate them to
- Brand loyalty improve their overall productivity to gain
- Product differentiation competitive advantage, however, rivalry among
firms are still going strong because firms are
becoming more equal in terms of size and quality
to keep up with the customers’ needs and desires
as well as the market’s requirements.

Factors such as brand loyalty is important

because it is one of the company’s basis for its
permanence in the industry as the company will
continue to exist as long as there will be
customers who are loyal to the company’s
brands. It is also a critical factor for its success
because having loyal customers and creating
more loyal customers will pave their way in
making the brand popular and stable.

Product differentiation on the other hand, is

what makes a product standout out of all its
competitors in the industry and having a unique

54
 product and new to the taste of the market will
surely grapple other products competing for the
patronage of customers.

This force helps companies identify which part of

their business needs improvement and more
focus in order to continuously compete within
the industry.

2. Threat for New Entrants LOW Threat of entry of new competitors is low to the
liquor industry as there are barriers to entry
- Amount of capital required such as government compliance and the need to
- Brand reputation have high capital requirements to compete with
- Access to distribution the major players in the industry. In the liquor
industry, the establishment of a liquor company
alone is not enough; the company also has to
have production plant/s for the manufacturing
processes especially for the distillery companies
and sugarcane plantations that is essential in
rum-making. The minimum paid-up capital for a
domestic corporation with 40% foreign equity is
$200,000 according to the Securities and
Exchange Commission.

New competitors would also have to entice the

public to try their products and would have to
build up their brand’s reputation as majority of
the public have their own product preferences
and loyalty. Brand reputation is also hard to
achieve as it has been built through time and has
to withstand the ever-changing tide of the
market. Customers also buy products that they
know are already in the industry for many
number of years as their basis for the quality and
service of products.

New entrants would also have to have access to

different distributors and resellers for their
products to be availed by the public, and thus,
gain them consumers. Distribution of products
should also be nationwide for it to be recognized
by the whole country and it should also establish
a strong base of consumers to gain customer
loyalty. Top 4 liquor companies in the
Philippines have many accesses to distribution.
Emperador Distillers Inc. has 21 sales offices

55
 and more than 112,500 outlets; Tanduay
Distillers Inc. has 117,000 points of sale
throughout the Philippines through eleven
(11) exclusive distributors and TDI’s
distributors operated 75 sales offices and 61
warehouses located throughout the
Philippines;
Ginebra San Miguel Inc. has 14 sales offices,
and San Miguel Brewery has 38 sales offices
all over the Philippines and 471,000 retail
stores in distribution. (Data taken from
Emperador, Tanduay, Ginebra, and San Miguel
Brewery’s financial and annual reports)
3. Bargaining Power of Buyers LOW The bargaining power of buyers refers to the
buyers’ pressure on the companies to provide
- Price sensitivity them better services, high quality products, and
- Many substitutes product lower prices.
- Buyers’ switching cost
suppliers Even with the growing population of the country
especially in the middle-class sector that is 3.6
million in population from the 2012 data and
5.8% growth report from the 2016 Philstar
article (refer to 3.2.4 Disposable Income in
PESTEL Analysis) where the disposable income
are coming from, the bargaining power of
buyers/consumers is low as the products in the
liquor industry are sold through retailers like
supermarkets, wholesalers, traders, grocery
outlets, convenience stores, and sari-sari stores,
thus giving them no opportunity to buy directly
to the company and bargain directly with the
company for any discounts.

Price sensitivity refers to the to the level of

importance consumers place on price relative to
other purchasing criteria, which means that a
consumer will not spend a few extra pesos for a
product when there is a lower-priced product
offering the same characteristics, but with the
growing middle-class sector who can afford to
spend a few extra pesos, this is sub factor is
relatively low.

In relation to the price sensitivity, consumers

also have the liberty to switch between products
that are in the level of their preference and

56
 willingness to spend as well as those that they
are only capable in purchasing. Consumers can
opt to drink any alcoholic beverages available
even if they are a specific drinker because of the
varieties made available in the market due to
consumers’ insatiable needs and wants that is
why they now have choices from beer, brandy,
rum, wine, gin, alcopops, tequila, vodka, and
many more.

Companies that offer products or services that

are very easy to replicate at comparable prices
by competitors have low buyers’ switching cost
as consumers can always find and buy another
product with lower price but with same quality
or services.
4. Bargaining Power of Suppliers MODERATE The raw material for Tanduay Distillery Inc. is
the ethanol, which is extracted from sugarcane
- Number of suppliers molasses before turning it into rum, which is
- Switching cost of materials supplied by Tanduay Distillery Inc.’s two
subsidiaries, Asian Alcohol Corporation and
Absolut Distillery Inc. (from Tanduay’s annual
report). For other companies such as Emperador
Distillery Inc., they also have their own
subsidiary companies supply raw materials such
as grapes for them. Aside from ethanol and
grapes (From Emperador’s annual report),
Tanduay, Emperador, Ginebra, and San Miguel
Brewery also need sweeteners to their products
and sugar milling companies in the Philippines
such as Victorias Milling Co., Binalbagan Sugar
Company, and Tate & Lyle Corp. are a few their
top suppliers (From Tanduay’s annual report).
Apart from the listed known suppliers, many
local and foreign suppliers exist and can have
better offers.

With having subsidiary companies supplying the

raw material, other materials such as flavoring,
bottle and packaging materials can be supplied
by many participating suppliers locally and
internationally, which gives them moderate
power over companies, as there are more
options with same or better quality for the
companies that can also cut them expenses.
Other than the different available suppliers, most

57
 liquor companies procure their bottles through
secondhand bottle dealers, which is still less
costly than buying new bottles despite cleaning
costs.

The cost of switching materials is low as there is

price volatility attached to the commodities such
as sugarcane, thus, giving the suppliers only
moderate power to companies because there will
always be the option to go to other suppliers
both locally and internationally who will offer
lower prices with same or better quality or
service in case the prices will be affected by price
volatility caused by changes in global supply and
demand, weather conditions, agricultural
uncertainty or government controls deem
unfavorable.
5. Threat of Substitute The consumers’ continuous and insatiable needs
and desires play a major role in the liquor
- Performance and presence industry’s competition.
of substitute products
- Relative price of substitute The threat of substitute is on a moderate to high
impact as there are many options for alcoholic
beverages; it does not stop only to liquor
products such as rum and distilled spirits,
substitutes like (1) beer, (2) wine, (3) whiskey,
(4) tequila, (5) vodka, (6) alcopops, (7) gin,
(8) brandy and the like exist in the industry.

Although consumers’ taste, preference, and

ability and willingness to spend are key factors, it
MODERATE is not hard for the consumers to opt for other
alcoholic beverages other than their favorite
products because they take into consideration
the availability, price, quality, experience, and
overall performance that other products can
offer.

As to the prices of substitute alcoholic beverages,

the top 4 companies in the alcoholic beverages
industry, namely Ginebra San Miguel, Emperador
Distillery Inc., and Tanduay Distillery Inc., all
have a variety of product offers with different
prices to different social classes. Ginebra and San
Miguel sells its products to the lower-income
bracket while Emperador and Tanduay sells its

58
 products at a much higher price compared to the
two aforementioned to cushion the effect of the
sin tax law, which now determines that this sub
factor is on a moderate level.

The prices of the companies’ flagship brands are

as follows: 375 ml Tanduay Five-Years Rhum is
worth PHP 52.50; Emperador Light’s 350 ml is
worth PHP 42.00; Ginebra’s Round 350 ml is
worth PHP 40.25; and San Miguel Pale Pilsen’s
330 ml is worth PHP 32.00. (Prices taken from
the companies’ and retailers’ such as Puregold
websites).

4.4 THE COMPETITIVE PROFILE MATRIX (CPM)

TDI EDI GSM SMB
RATIN
CRITICAL SUCCESS RATING RATING RATING
WEIGHT AS AS G AS AS
FACTORS (1-4) (1-4) (1-4)
(1-4)
1. Product Line 10% 4 .40 4 .40 3 .30 3 .30
2. Marketing
Strategy and 20% 2 .40 3 .60 4 .80 4 .80
Efforts
3. Production
12% 3 .36 3 .36 4 .48 4 .48
Capacity
4. Price
15% 2 .30 2 .30 3 .45 3 .45
Competitiveness
5. Brand Image 19% 3 .57 4 .76 4 .76 4 .76
6. Customer
11% 3 .33 3 .33 4 .44 4 .44
Loyalty
7. Distribution
13% 4 .52 4 .52 3 .39 4 .52
Channels
TOTAL 100% 2.88 3.27 3.62 3.75

CSF Weight Reason for Weight Reason for Rating

Product Line 10% Product Line is the collection Tanduay (4) – Tanduay has a total of
of products the company 46 various products ranging from
offers to its consumers. It is their company’s reputable rum to
essential to have a range of whiskey, brandy, gin, vodka, wine,

59
 and alcopops or flavored drinks.
(From Tanduay’s annual report)
Emperador (4) – Emperador has a
total of 34 products ranging from
brandy to whiskey and has been
acquiring foreign brands of liquor for
their expansion overseas as well as
locally to present more products to
their consumers aside from their
local products. (From Emperador’s
products to satisfy the
annual report)
changing consumers’ taste
Ginebra (3) – Ginebra focuses more
and preferences and for the
on their flagship brand, which is gin.
company to keep up with the
(From Ginebra’s annual report)
market’s trends.
San Miguel Brewery (3) – San Miguel
Brewery is the largest producer of
beer in the Philippines having 95
percent of the market share, also this
is their flagship product and Red
Horse, Pale Pilsen, and San Mig Light
are the only ones who are greatly
contributing towards the market
share of the company. (From San
Miguel Brewery’s annual report)
Marketing 20% Marketing strategy and Tanduay (2) – Tanduay lacks strong
Strategy and efforts include advertising the marketing efforts with only few
Efforts company’s products and/or advertisements in tv, billboards, and
services through different other commercial platforms.
channels of communication. Emperador (3) – Emperador being a
With the help of and through well-loved and well-known brand in
marketing strategy and the Philippines, continues to attract
efforts, the company’s and retain consumers through their
products will be known and heartfelt and relatable
will entice more consumers advertisements.
and will also keep the Ginebra (4) – Aside from being the
enthusiasm of loyal largest-selling gin brand around the
consumers. world, Ginebra also shows relatable
and very Filipino-like traits in terms
of drinking during celebrations.
San Miguel Brewery (4) – With well-
known celebrities endorsing its
products and being the leader in beer
sales, it only shows that San Miguel
Brewery’s advertisements are
working perfectly in attracting and

60
 retaining its consumers.
Production 12% Production Capacity is the Tanduay (3) – Tanduay has a
Capacity volume of products or production capacity of 100,000 cases
services that can be produced per day in their new relocated plant
by the company using current in Cabuyao Laguna after the
resources. decommissioning of their Quaipo
plant, which had the capacity to
produce 30,000 cases per day. TDI
also spent PHP 500 Million for plant
upgrades. Tanduay Distillers’
subsidiaries, Absolut Distillers Inc
and Asia Alcohol Corp., which
supplies Tanduay its raw materials
such as the ethanol from sugarcane
molasses, own two (2) distillation
plants located in Pulupandan, Negros
Occidental and Lian, Batangas. TDI
also have three (3) leased properties
for their production plants located in
Cabuyao, Laguna; Murcia, Negros
Occidental; and El Salvador, Misamis
Oriental; and an additional
distillation plant leased in Lian,
Batangas. (From Tanduay’s annual
report).
Emperador (3) – Emperador
Distillers Inc. has a production
capacity of 100,000 cases per day in
their two plants in Laguna. (From
Emperador’s annual report)
Ginebra (4) – Ginebra San Miguel Inc.
has the largest production capacity,
with nine productions, bottling and
distilling facilities in Albay, Cebu,
Isabela, Laguna, Negors Occidental,
Pangasinan, and Quezon, it has a
production capacity of 200,000 up to
300,000 cases per day. (From
Ginebra’s annual report)
San Miguel Brewery (4) – San Miguel
Brewery Inc. has a production
capacity of 200,000 cases per day
through their twelve (12) production
facilities, with six (6) of it located
here in the Philippines and

61
 remaining six (6) of it overseas and
are located in Thailand, Indonesia,
two in China, and Vietnam. (From
San Miguel Brewery’s annual report)
Price 15% Price competitiveness is the Tanduay (2) – Tanduay, being the
competitiveness setting of prices of products household name for rums, has been
based on the market highly sensitive in product pricing
requirement, competition in considering its target market and
the industry, and the government rules such as excise tax,
availability and willingness to and thus, pricing its products with
spend of the consumers. high suggested retail prices to
compensate for the taxes attached to
the production and distribution of
the products. One of TDI’s product,
Tanduay Five-Years Rhum’s 375 ml
is worth PHP 52.50 based on an
online supermarket HonestBee
(http://www.honestbee.ph/en/groc
eries/stores/robinsonsdepartments/
8019/categories/41748).
Emperador (2) – Emperador’s
brandy products has created a
demand by its consumers being the
only company in the Philippines that
offers brandy with much lower
alcohol content for younger
consumers that is why it has a higher
suggested retail price compared to
its competitors. Emperador Light’s
350 ml is worth PHP 42.00 based on
Emperador’s annual report
Ginebra (3) – Ginebra has established
itself well enough to price its
products lower than its competitors
to capture more consumers and
retain its loyal consumers through its
affordable prices. Ginebra’s Round
350 ml is worth PHP 40.25 based on
Ginebra’s annual report.
San Miguel Brewery (3) – San Miguel
Brewery has also lower prices
compared to its competitors in the
market to make it more affordable
and accessible for every alcoholic
beverage drinker. San Miguel Pale

62
 Pilsen’s 330 ml is worth PHP 32.00
based on San Miguel Brewery’s
delivery website
(http://www.smbdelivers.com/buy-
beers/).
Brand Image 19% Brand Image is the Tanduay (3) – Tanduay is leading in
impression of the consumers the Visayas and Mindanao region and
over the brand’s products. is also widely known having been in
This is essential in marking the industry since 1854. TDI is also
the company in the industry known for their tagline “Tibay ng
through advertising overtime Loob, Tibay Tanduay”, perfectly
and is also built up by the defining their strength and longevity.
consumers’ impression and Through this, TDI boasts to be the
firsthand experience. number one in the rum sector having
99% market share, while placing
third in the distilled spirits industry
with a 22.9% market share, and
placing fourth with 6.5% market
share in the alcoholic drinks category
based on Tanduay’s annual report
and Euromonitor, respectively.
Meanwhile, their low-strength
brandies such as Tanduay Light,
contributed to 2% and 5% market
share nationally and in Visayas and
Mindanao, respectively.
Emperador (4) – Emperador’s brand
is a status brand for success and
sophistication through its
advertisements using taglines such
as “Tagumpay Nating Lahat”. With
this, Emperador Distillers Inc.
accounted for 92% of the Philippine
Brandy market in terms of sales
volume, according to AC Nielsen
Retail Audit. (From Emperador’s
annual report)
Ginebra (4) – Through the tagline of
Ginebra, “Tagay”, the company
captured the Filipino culture of
drinking and it has also established
the image of friendship and
camaraderie. With this, Ginebra San
Miguel Inc.’s flagship brand San
Miguel and its other heritage brand

63
 Vino Kulafu registered five percent
and 12% volume growth,
respectively, and boosted the
company’s market share to almost
29% according to Ginebra’s annual
report.
San Miguel Brewery (4) – San Miguel
Brewery has established its own
brand of beer in the Philippines with
over 95% of market share according
to San Miguel Brewery’s website and
having been in the industry since
1890, SMB has made it a household
name in the Philippines and is the
largest producer of beer in the
Philippines.
Customer Loyalty 11% Customer loyalty is the result Tanduay (3) – Tanduay has
of consistent positive established a strong base of
experience and satisfaction of customer’s loyalty having their rum
the consumers. as a staple in the Visayas and
Mindanao region. Tanduay has also
constantly improve its quality culture
to continuously ride the tide of times
and offer wider ranges of products
that cuts across gender, age, and
social class.
Emperador (3) – Emperador
Distillery Inc. has continuously
produced more products to the
market to satisfy its consumers and
to keep its loyal consumers
enthusiastic.
Ginebra (4) – Ginebra San Miguel
engages with their customers
through events and being one with
the masses through its products and
promotions.
San Miguel Brewery (4) – San Miguel
Brewery also creates memorable
events and engagements with its
consumers and the company has also
established center supports to
reaffirm its responsibilities to its
customers and SMB also made a
communication center to answer

64
 customers’ inquiry about quality,
pricing, distribution, and availability
of a product or service.
Tanduay (4) – Tanduay served more
than 117,000 points of sale
Distribution Channel is a throughout the Philippines through
chain of businesses or eleven (11) exclusive distributors
intermediaries through which and TDI’s distributors operated 75
a good or service passes until sales offices and 61 warehouses
it reaches the end consumer. located throughout the Philippines.
Distribution It can include wholesalers, Emperador (4) – Emperador have 22
Channels retailers, distributors and sales offices strategically located
13%
even the internet itself. The thoughout the Philippines while its
more that they have products are distributed across more
distributors and channels, the than 121,000 outlets.
more they can distribute and Ginebra (3) – Ginebra has 14 sales
reach their consumers, and offices in the Philippines.
thus, increase their sales and San Miguel Brewery (4) – San Miguel
consumer range. Brewery has 67 sales offices all over
the Philippines and 471,000 retail
stores in distribution.

4.5 EXTERNAL FACTORS EVALUATION

Opportunities

65
 Weight
Weig Ratin
Opportunities Source ed
ht g
Score
1. The projection of 6.5 Million tourists’
PESTEL;
arrival by the Department of
Economi 10% 4 .40
Tourism in 2017 will boost the sales
c (1.2.2)
of alcoholic beverages.
2. The rising middle class in the
Philippines grew to 5.8 percent PESTEL;
would mean higher spending in Economi 15% 3 .45
consumption goods including c (1.2.4)
alcoholic beverages
3. Association of Southeast Asian
Nations (ASEAN) and its trading
partners to improve economic ties PESTEL;
under the Regional Comprehensive Economi 12% 4 .48
Economic Partnership that will open c (1.2.5)
opportunities to local companies in
trading their products overseas.
4. Philippine alcoholic drinks industry
remains active because of continuous PESTEL;
high liquor consumption even after Social 8% 4 .32
the increase of excise and six taxes in (1.3.1)
2013.
5. The economy in 2017 to grow to 7
percent from 6.8 percent in 2016
attracting many foreign investors PESTEL;
and opening more opportunities to Economi 11% 3 .33
industries in the Philippines c (1.2.3)
especially in the consumption goods
industries.
6. The increasing Internet penetration
and Internet users widens the PESTEL;
spectrum of advertising in the liquor Technol
5% 2 .10
industry, thus, creating more chances ogy
of promotions and reaching out to (1.4.1)
the consumers.
7. Filipinos ranked the 3rd heaviest
PESTEL;
drinkers in the world with an
Social 9% 3 .27
average of 5.7 shots per person per
(1.3.2)
week
8. The invention of Targeted Hyper-
Esterification Aging or THEA that is a PESTEL;
hyper-speed aging reactor will create Technol
7% 3 .21
the equivalent of twenty years of ogy
barrel aging in a week’s time was (1.4.2)
created by Lost Spirits Distillery.
TOTAL 77% 2.56 66
Reason for Weight and Rating

O1. (4) As the projection of tourist arrivals will rise, the effort in product advertisement

and distribution should also increase to cater more consumers and gain more consumers

especially the foreign consumers for products to be known internationally too.

O2. (3) With the increase in the middle-class sector will mean higher disposable income,

the liquor industry’s opportunities will rise too because people will now have more

capacity to purchase commodities and will be more willing to spend to recreational

commodities such as alcoholic beverages.

O3. (4) The RCEP Trade will open more opportunities for the liquor industry outside the

Philippines, and thus, will create more demand for their products resulting to the increase

in their sales. This will widen their market and help them increase their brand reputation

overseas.

O4. (4) With the decline in sales due to the increase in six taxes that was imposed in 2013,

the liquor industry had remained active and never lost hope in regaining their sales. The

continuous high consumption of alcoholic beverages also helped as despite the increase in

the prices, many consumers still purchase alcoholic beverages.

O5. (3) The increase in the GDP will help the liquor industry to expand more as foreign

investors will be more attracted in investing in the Philippines, it will give them a chance to

also create a higher demand as disposable income will rise too in relation to the increase in

the GDP.

O6. (2) The people are now becoming more Internet savvy, and thus, will enable the

companies in the liquor industry to expand their market through additional efforts in

67
advertising using different social media applications and connect with its consumers

through the development of websites that will be easily accessible to all.

O7. (3) Filipinos ranking 3rd in World’s Heaviest Drinkers just means that Filipino

consumers alone create big demand for alcoholic beverages and will help the liquor

industry to continuously rise despite taxes imposed to them that will then make them

lower their prices to cater more consumers in the lower-class sector.

O8. (3) The invention of hyper-speeding equipment for rums will surely be convenient for

all rum-makers as it will cut them time and thus produce rum at a rational speed and sell

products fast.

THREATS

68
 Weight Reason
Weig Rati
Threats Source ed
ht ng for
Score
1) The Philippines is nowhere near
meeting the standard of 10 percent Weight
Ethanol in gasoline and the Ethanol
PESTEL; and
production in the country is
Environm
problematic, as mills producing the 7% 2 .14
ent Rating
raw material essential for ethanol
(1.5.3)
production is switching between
ethanol and sugar production T1. (2)
because of the prices.
2) The effects of drinking alcohol on a Ethanol
regular basis and the growing health PESTEL;
awareness have a toll on the Social 3% 2 .06 is a
consumers’ health as well as to the (1.3.4)
liquor industry, respectively. main
3) The yearly sin tax increase of P2 on
alcoholic beverages and the raw
PESTEL;
proposed 4 percent excise tax
Legal 8% 3 .24 material
increase by 2018 affect the liquor
(1.6.5)
industry as higher prices might lower
demand for alcoholic beverages. for
4) Sugarcane effluents flow into the
water and damage ecological areas
PESTEL;
and production mills release flue
Environm
gases, soot, ash, ammonia and other 5% 2 .10
ent
substances during processing, which
(1.5.2)
affects the environment as well as
the people.
TOTAL 23% .54
100
OVERALL TOTAL 3.10
%

production of alcohol beverages and with lesser production of it because of external

factors such as prices, liquor companies are in danger of having less raw material supplied

to them and it will affect their overall production if there will also be no substitutes for

their raw materials.

69
T2. (2) With consumers being more health conscious nowadays, it imposes a threat to the

liquor industry as little or many consumptions of alcohol still have negative effects on

one’s body. To counter this threat, liquor industry should be more cautious and

responsible in the advertising of their products having more emphasis on the reminder of

moderate drinking.

T3. (3) The liquor companies may have already surpassed the burden of higher sin tax in

2013, the yearly increase in sin tax since still poses a threat to them as they still have to

increase their prices or settle it above their previous prices to cushion the effect of sin tax,

which in turn will make consumers purchase alcoholic beverages that have lower prices.

T4. (2) Sugarcane plays a pivotal role in the production of ethanol and with the harmful

effects it has on the environment, from planting to harvesting, it poses a threat to the

liquor industry because they will be held responsible for any negative effects.

STRATEGIC ISSUES BASED ON EXTERNAL FACTORS

After careful analyses, the researcher identified opportunities and threats that will

have effects on the company. There are key opportunities: first is Projected tourist arrivals

that will create possible demands for commodities such as alcoholic beverages that will

further increase sales in the liquor industry; second is the rising middle-class sector,

which brings higher disposable income to be spent in commodities including alcoholic

beverages; third is the RCEP Trade, which will open opportunities for the liquor

companies to export products outside the Philippines, and thus, widen their market; last is

the increase in GDP, which may entail higher average income for the country and this will

70
also enable consumers to enjoy more goods and services and enjoy better standards of

living.

There are key factors that may affect the industry and they are as follows: first is the

yearly increase in sin taxes as this can affect the company’s sales and profit by increasing

the prices of their products to cushion the increase in sin tax; and lastly, the threat of

sugarcane’s effluents that affect the environment as well as the people will put pressure to

the liquor companies to halt their production if cases related to sugarcane’s effluents will

grow.

71
 CHAPTER V
COMPANY ANALYSIS

This chapter presents an internal analysis of the company’s operation and financial

performance, and also identifying its strengths and weaknesses. The researcher must

identify and knowledgeably understand each strengths and weaknesses of the business.

5.1 Vision and Mission of the Company

Vision

To be the best in the liquor industry in the Philippines and ultimately in the

global market with a vision of One World, One Spirit.

Company Vision Evaluation

Yes
Parameter Why
/ No

Does it clearly answer Yes The company’s statement is clear state what they
the question: What do want to become, that is, to be the best in the
we want to become? liquor industry in the Philippines and ultimately
in the global market.

Is it concise enough yet Yes The vision is very concise in stating that they
inspirational? want to be the best in the Philippines and
globally in the industry of liquor. And using the
“with a vision of One World, One Spirit” gives the
aspiring part.

Is it aspirational? Yes The company is aspiring to be the best liquor

72
 company locally and globally “with a vision of
one world, one spirit.”

Does it give clear No There is no statement that indicates on when the

indication as to when it company wants aim the vision.
should be attained?

Mission

To provide the consumers with quality products that will satisfy their taste at

the best possible value.

To produce liquor products perfected and nurtured through ingenuity and

craftsmanship and elevate the Filipino stature in the global standard.

Company Mission Statement Evaluation

Parameter Yes If yes, which part of the statement

/ No

1.  Customers No

2. Products & Yes To produce liquor products perfected and nurtured

services through ingenuity and craftsmanship

3.  Markets No

4.  Technology Yes To produce liquor products perfected and nurtured

through ingenuity and craftsmanship

73
5.  Concern for Yes To elevate the Filipino stature in the global
survival, growth, standard.
profitability

6.  Philosophy Yes The company wants to provide consumers with

quality products that will satisfy their taste at the
best possible value.
7.  Self-concept Yes The company want to produce liquor products
perfected and nurtured through ingenuity and
craftsmanship and to elevate the Filipino stature in
the global standard.

8.  Concern for No
employees

9.  Concern for nation No

building

74
5.2INTERNAL AUDIT

A. MANAGEMENT AUDIT

Tanduay Distillers Inc.’s Board of Directors is the highest governing and

decision-making body of the organization. The Board of Directors is composed of

eleven members, two of whom are independent directors. Dr. Lucio Tan heads the

board and the members are businessmen of long-standing with exemplary track

record on achievement. Their combined experiences and business acumen, as well

as their knowledge of the market and business processes are the key factors that

have propelled the company to an enviable position of profitability and growth. The

Board of Directors is also governed and committed to the corporation’s Corporate

Governance Manual, which contains the principles, best practices, and same

guidelines to the attainment of the corporate goals. The Corporate Governance

Manual also serves as the basic reference in implementing the principles of good

corporate governance and in reminding of the Board members and corporate

officers of their roles, duties, and responsibilities to the stockholders and other

stakeholders, which include, among others, customers, employees, suppliers,

financiers, government and the community in which it operates.

Tanduay Distillers Inc. is governed by the standard of “It shall act with

integrity in all dealings and in the discharge of duties and responsibilities.” Tanduay

Distillers Inc. wants to build good reputation as the cornerstone of its success and

build good relationships with its company investors through the dissemination of

necessary corporate information.

75
 Tanduay served more than 117,000 points of sale throughout the Philippines

through eleven (11) exclusive distributors, who in turn may work with a large

number of sub distributors, and Tanduay has maintained good relationships with its

distributors since 1988 As of December 31, 2016, TDI’s distributors operated 75

sales offices and 61 warehouses located throughout the Philippines and TDI

employs in-house sales staffs who provide general administrative support to TDI‟s

distributors. TDI‟s products are transported from production facilities to

distributors’ warehouses by third party transportation companies for the account of

TDI. Pricing of TDI’s products is dependent on the cost efficiency of suppliers and

the disposable income of its market.

Figure 5. 1 Tanduay Distillers Inc. Organizational Chart

Dr. Lucio C. Tan
Chairman and Chief Executive Officer

Janet Tan- Carlos R.

Carmen K. Tan John G. Tan Lucio K. Tan, Lee Alindada Peter P. Ong
Director Director Jr. Director/Corpor Independent Independent
President/Chief ate Secretary Director Director
Operating Officer

Nestor C. Mendones Atty. Ma. Cecilia L.

Chief Financial Pesayco
Officer/ Chief Assistant Corporate
Information Officer Secretary

76
Table 5.1 Total number of employees of Tanduay Distillers Inc.

AA

ADI C TDI TOTAL

Administrative - 1 - 1

Regular monthly 63 5 214 282

Regular daily 6 6 46 58

Contractual 144 - 820 964

TOTAL 213 12 1,080 1,305

B. MARKETING AUDIT

Tanduay’s leading brand, Five Years Rum, reflects the hallmark of Tanduay‟s

rich and lively heritage and this brand accounts for 72% of TDI‟s total sales by

volume and 75% by revenues and posted an 18% increase in sales volume on

account of strong distribution efforts to recover market share in the VisMin area. It

continues to have a bigger share of the market in the Visayas and Mindanao region

at 61%. Tanduay products are also widely available anywhere and can be bought at

supermarkets, wholesalers, traders, grocery outlets, convenience stores, and sari-

sari stores.

TDI sales are largely derived from the domestic market. Export sales

comprise approximately 0.001304% of total sales, mostly coming from the

Company’s sales in the USA. As for the sales volume locally, sales in Visayas and

Mindanao in the year 2015 were 59% and 62%, respectively, while in Metro Manila

and Luzon, the gross sales by volume were 6% and 8%, respectively, as a result of

their marketing efforts.

77
 The price increased by 2013 due to higher excise tax that resulted to

decrease in net income by 82% higher selling and marketing expenses increased by

48% due to increase in advertising expense occurred during the promotion of

Compañ ero Brandy and Tanduay Five Years.

The Group’s operating businesses are organized and managed separately

according to the nature of the products and services provided, with each segment

representing a strategic business unit that offers different products and serves

different markets.

C. FINANCE/ACCOUNTING AUDIT

Tanduay Distillers Inc. uses key performance indicators, which have analyses

based on comparisons and measurements on financial data of the current period

against the same period of the previous year.

Table 5.2 Financial Ratios

RATIOS 2015 2014 2013
Current Ratio 4.91 1.59 6.47
Quick Ratio 2.86 0.94 3.76
Receivables Turnover 2.61 2.55 2.27
Turnover (Days) 140 143 161
Payable Turnover 1.07 0.97 0.86
Turnover (Days) 341 376 424
Inventory Turnover 3.28 3.24 2.70
Turnover (Days) 111 113 135
Gross Profit Rate 19% 18% 21%
Return on Assets 0.03 0.01 0.0.0.01
Return on Equity 0.03 0.01 0.02
Debt-to-Equity Ratio 0.18 0.72 0.72
Fixed Assets to Long-Term Liability 12.82 12.60 1.25

TDI’s return on equity (ROE) is the measure of the profitability of a business

78
in relation to the book value of shareholder equity and it also measures how well a

company uses its investments to generate earnings growth. The current ratio

measures a company's ability to pay short-term and long-term obligation. TDI’s

current ratio increased from 1.59 to 4.91 in 2015. The quick ratio is a test of ability

to meet demands from quick assets such as Cash, Marketable Securities, Accounts,

and Notes Receivable. TDI’s quick ratio increased significantly from 0.94 in 2014 to

2.86 in 2015. The receivables turnover determines the rapidity of the collection of

receivables; it measures the ability and the efficiency of the credit department. TDI’s

receivables turnover increased from 2.55 times in 2014 to 2.61 times a year in 2015,

in which they now collect their receivables every 140 days compared to 2014’s 143

days. The payable turnover determines the rapidity of the payment of payables; it

also measures the promptness of the business in paying its purchases. TDI’s payable

turnover grew from 0.97 to 1.07 times a year in 2015, in which they now pay their

payables every 341 days. The inventory turnover indicates the liquidity of inventory

and shows the number of times that inventory was sold on the average during the

period. TDI’s inventory turnover increased by 0.04 percent in 2015. The gross profit

rate is a profitability ratio that compares the gross margin of a business to the net

sales. This ratio measures how profitable a company sells its inventory or

merchandise. TDI’s gross profit rate decreased to 18% in 2014 from 21% in 2013

but has increased in 2015 to 19%. The return on assets is shows the percentage of

profit a company earns in relation to its overall resources. TDI’s return on assets

increased from being 0.01 in 2014 to 0.03 in 2015. The return on equity is a ratio

that provides investors with insight into how efficiently a company (or more

79
specifically, its management team) is managing the equity that shareholders have

contributed to the company. TDI’s return on equity increased by 0.02 in 2015. The

debt to equity ratio is used to measure a company's financial leverage and indicates

how much debt a company is using to finance its assets relative to the amount of

value represented in shareholders' equity. TDI has decreased to 0.18 in 2015 from

0.72 in 2014 for its usage of debt to finance its assets. The fixed assets to long-term

liabilities determine the ability of the business to retire its long-term debts, which

are secured by a pledge of its fixed assets. It shows if the company have enough

fixed assets to be used as collateral for the mortgage. TDI’s fixed assets to long-term

liabilities increased from 12.60 to 12.82 in 2015.

There are no other trends or any known demands, commitments, events or

uncertainties that will result in or that are reasonably likely to result in the Group’s

increasing or decreasing liquidity in any material way. The Group is not in default or

breach of any note, loan, lease or other indebtedness or financing arrangement

requiring it to make payments. The Company does not have any liquidity problems.

There are no events that will trigger direct or contingent financial obligation that is

material to the Company, including any default or acceleration of an obligation.

There are no known material off-balance sheet transactions, arrangements,

obligations (including contingent obligations), and other relationships of the

company with unconsolidated entities or other persons created during the

reporting period. The company has no known trends, events or uncertainties that

have had or that are reasonably expected to have a material favorable or

unfavorable impact on net sales, revenue or income from continuing operations.

80
There are no other significant elements of income or loss that did not arise from the

Company’s continuing operations.

Figure 5.3 Vertical and Horizontal Analysis

HORIZONT
VERTICAL AL
ANALYSIS   ANALYSIS
TREND
TREND PERCENTAG
PERCENTAGE   E

Y1 Y2 Y3   Y1(2013) Y2(2014) Y3(2015)

ASSETS:  

CURRENT ASSETS  

Cash 7% 7% 8%   207% 4% 6%

Receivables 27% 28% 27%   -17% 3% -5%

Inventories 18% 18% 18%   17% -2% -2%

Prepayments and Other Current Assets 7% 7% 7%   24% 4% -1%

Total Current Assets 59% 60% 59%   6% 1% -2%

NONCURRENT ASSETS  

Available-for-sale (AFS) financial assets 0% 0% 0%   -28% 23% 5%

Property, plant and equipment:  

At appraised values 31% 31% 31%   12% 0% -2%

At cost 7% 6% 6%   -23% -14% 10%

Investment properties 1% 1% 1%   1% 0% 0%

Goodwill 1% 1% 1%   0% 0% 0%

Net retirement plan assets 0% 0% 0%   -3% 113% -53%

Other noncurrent assets 0% 0% 1%   -39% -16% 281%

Total Noncurrent Assets 41% 40% 41%   3% -2% 1%

TOTAL ASSETS 100% 100% 100%   4% 0% -1%

LIABILITIES AND EQUITY:  

CURRENT LIABILITIES  

Notes Payable 0 0 2%   0% 0 0
Accounts payable and other current
liabilities 9% 8% 10%   -24% -6% 15%

Bonds payable 0% 29% 0%   0% 0% 0%

Income tax payable 0% 0% 0%   -79% -65% 260%

Total Current Liabilities 9% 38% 12%   -29% 314% -68%

NONCURRENT LIABILITIES  

Bonds payable 29% 0% 0%   0% -100% 0%

Net retirement benefits liabilities 3% 3% 0%   465% -6% -93%

Defered Income Tax Liabilities 3%   2% -6% -6%

81
Total Noncurrent Liabilities 33% 3% 3%   -1% -90% -1%

TOTAL LIABILITES 41% 15% 100%   -8% -2% -63%

EQUITY  
Attributable to equity holders of the
Company:  

Capital stock - P1 par value 7% 7% 17%   0% 0% 150%

Additional paid-in capital 22% 22% 46%   46% 0% 102%

Effect of transactions with non-
controlling interests 0% 0% 0%   0% 0% 0%

Other comprehensive income - net 8% 7% 7%   -7% -3% -9%

Retained earnings 20% 21% 14%   9% 5% -35%

57% 58% 84%   17% 2% 43%

Non-controlling interests   -8% 1% -5%

TOTAL EQUITY 58% 59% 85%   16% 1% 43%

TOTAL LIABILITIES AND EQUITY 100% 100% 100%   4% 0% -1%

 
STATEMENT OF COMPREHENSIVE
INCOME  

Net Sales 100% 100% 100%   -19% 14% 1%

Cost of Goods Sold 79% 82% 81%   -16% 18% 0%

Gross Profit 21% 18% 19%   -26% -2% 4%

OPERATING EXPENSES  

Selling Expenses 6% 8% 8%   8% 48% -2%

General and Administrative Expenses 8% 6% 5%   49% -26% -2%

15% 14% 13%   0% 5% -2%

Other Income Charges  

Finance Costs -4% -3% 0%   0% 0% -86%

Finance Income 0% 0% 0%   -94% -76% 56%

Rental Income 0% 0% 0%   -39% 73% -45%

Others - net 1% 0% 0%   -20% -84% 133%

  -3% -3% 0%   8% 20% -93%

Income before income tax 3% 1% 5%   -76% -53% 283%

Provision for Income Tax  

Current 2% 1% 2%   -69% -24% 100%

Deferred 0% 0% 0%   -114% -753% -70%

  2% 1% 2%   -64% -59% 226%

Net Income   -82% -47% 326%

Net Income Attributable to:  

Equity Holders of the Parent Company 2% 1% 4%   -80% -51% 337%

Non-controlling interests 0% 0% 0%   -430% -109% -658%

82
   2% 1% 3%   -82% -47% 326%

D. PRODUCT/OPERATIONS AUDIT

The main raw materials for the production of Tanduay Distillers Inc.’s

alcoholic beverages are molasses, distilled alcohol, sugar, and flavoring agents. TDI

obtains its ethyl alcohol, which is distilled from sugarcane molasses and pivotal to

the production of their products, from their two subsidiaries namely Asian Alcohol

Corporation and Absolut Distillers Inc. while their sugarcane is obtained through

sugar mills and traders namely Victorias Milling Co, Binalbagan Sugar Company, and

Tate & Lyle Corp. In 2014, alcohol accounts for 29% of product cost while specific

tax accounts for 34% of the total cost. With the temporary shutdown of Asian

Alcohol Corporation’s operations, Tanduay increased its importation of products to

other countries such as Pakistan, India, South Africa, and Indonesia to compensate

for any income and sales loss.

E. RESEARCH AND DEVELOPMENT AUDIT

Tanduay Distillers Inc.’s research and development accounts to an estimated

amount of PHP 10 Million or 8% to their total revenues. The research and

development is for continuous product development and expansion of product lines

through monitoring the market trends and consumer needs to identify potential

opportunities and to address the current and emerging requirements of customers.

TDI conducted extensive research and development for new products, line

83
extensions for existing products, and for improved production, quality control, and

packaging as well as consumer preferences, habits, and trends. They also researched

new processes and tests new equipment to maintain and improve the quality of its

beverages.

F. COMPUTER INFORMATION SYSTEMS

Tanduay Distillers Inc.’s official website is http://www.tanduay.com and is

easily accessible by the public. The website, however, filters its visitors by making

them enter their birthdate to confirm that they are of legal age. The company’s

website provides public announcements and latest updates of their products and

events, corporate news, their company’s heritage and products details, and the

different kinds of mixes of their products under the mixology tab. Their active social

media account is Facebook wherein they post and promote their products using

celebrity endorsers.

84
5.3MCKINSEY’S 7S

A. STRATEGY

Tanduay Distillers Inc.’s current strategy is backward integration as they control

their subsidiaries, which are also their suppliers of raw materials. TDI is also

focused on increasing domestic market share, tapping overseas markets and

launching of new products. Its principal strategy is to gain and increase its market

share by introducing new products to cater to the current and emerging preferences

of the markets and to strengthen its distribution capabilities. TDI being the second-

largest producer of rum in the world, with a total of 140 international awards to its

credit, expanded its export business through new rum products by selling it in the

United States in 2013.

85
 B. STRUCTURE

Tanduay Distillers, Inc. (the Company) was incorporated in the Philippines as

Twin Ace Holdings, Inc. (Twin Ace) on May 10, 1988. The Company is a wholly

owned subsidiary of LT Group, Inc. (LTG) formerly Tanduay Holdings, Inc. (THI).

The Board of Directors is the highest governing and decision-making body in the

organization. It consists of eleven members, two of whom are independent

directors.
Dr. Lucio C. Tan
Chairman and Chief Executive Officer

Janet Tan-Lee Carlos R.

Carmen K. Tan John G. Tan Lucio K. Tan, Jr. Director/Corporate Alindada Peter P. Ong
Director Director President/Chief Secretary Independent Independent
Operating Officer Director Director

Nestor C. Mendones Atty. Ma. Cecilia L. Pesayco

Chief Financial Officer/ Assistant Corporate Secretary
Chief Information Officer

C. STYLE

The company’s style of leading the employees is persuasive and motivational. The

Management is headed by Dr. Lucio C. Tan as the Chairman and CEO and by Mr.

Michael G. Tan as President and COO. Their roles are complementary to each other

to ensure timely and efficient implementation of strategies of the business. On

critical or sensitive issues, the President coordinates closely with the Chairman/CEO

for directions and confirmation of decision on the matter at hand. The President

also continuously initiates discussions with Management on its business

86
performances and initiatives to grow the Company. In the course of performing its

functions, Management and the Board adhere to the principles of good corporate

governance throughout the organization, and they ensure that the structure and

mechanism for its observance are securely in place. The President/COO, members of

the Board and Members of Management Committees attended the annual

stockholders’ meetings.

D. STAFF

ADI AAC TDI TOTAL

Administrative - 1 - 1

Regular monthly 63 5 214 282

Regular daily 6 6 46 58

Contractual 144 - 820 964

21
TOTAL 3 12 1,080 1,305

With the amount of employees in the company shown in the table, the positions

are properly filled with a great focus on the manufacturing aspect having

contractual employees with the highest quantity that do the most in the

manufacturing plants from two (2) manpower agencies namely Global Skills

Providers Multipurpose Coop (GlobalPro), whose primary objective is to engage in

service contracting, management service, productivity and manpower services and

HD Manpower Service Coop, , which makes the company’s work force strong.

87
 For Tanduay Distillers Inc., all regular daily employees of the TDI Plants have

separately formed a labor union except for the Cagayan De Oro Plant. On April 1,

2013, TDI closed its Quiapo plant and paid retrenchment benefit to 153 affected

employees. TDI-Cabuyao has a Collective Bargaining Agreement with the

NAGKAKAISANG LAKAS MANGGAGAWA NG TDI-FSM, which is effective from

August 1, 2014 up July 31, 2017. TDI’s Negros plant concluded its own collective

bargaining agreement with its union in June 2012, with the agreement to be

effective until 2015. As for Asian Alcohol Corporation, there were 2 employees

separated during the year 2014 due to retirement. The company has no existing

Union and Collective Bargaining Agreement after the end of its retrenchment

program in 2010 due to the shutdown of operations that is caused by the failure to

meet effluent standards set by the Department of Environment and Natural

Resources and by the damaged pipeline. Absolute Distillers Inc., however, had 213

employees as of December 31, 2014. ADI's registered labor union is Absolut

Distillers, Inc. Employees Union-Olalia-KMU effective May 1, 2013 and shall be

automatically renewed for another term of five (5) years upon expiration on April

30, 2015.

TDI and ADI expect to maintain its average number of employees in the next

twelve months while AAC expects to hire new employees when it resumes normal

operations. There are no supplemental benefits or incentive arrangements that the

Group has or will have with its employees.

88
E. SHARED VALUES

Tanduay Distillers Inc. has a set of values that they abide to in order for them to

achieve and attain their corporate and individual goals. Tanduay Distillers Inc. has

five (5) values that they share throughout the corporation, these are:

(1) Attain Manufacturing Leadership Through Innovation where they shall maintain

a manufacturing facility that is at par with world’s best and adopt innovative

practices that would meet the global standard and encourage all employees to find

innovative and creative ways to improve our business;

(2) Excellence where they shall pride in providing the consumers with the highest

quality products at the best possible price through investing in the right technology

and embracing the best industry practices and they shall also strive for excellence in

serving the consumers;

(3) Concern for People where they shall look after the welfare, well-being, and

professional growth of their employees by maintaining a working culture of

continuous improvement towards attaining their personal fulfillment as well as

achieving corporate goals;

(4) Responsibility towards Community wherein they shall enhance the local

communities where they operate through job creation, supporting local business

and actively working on important community issues and shall encourage and

support responsible use of alcoholic beverages; lastly,

89
(5) Responsibility to Government where they shall conduct themselves as responsible

corporate citizens who share in the enhancement of the economic viability of the

country through observance of environmentally sustainable practices and

contribute to national progress.

F. SYSTEM

TDI attributes its leading position in the distilled spirits products to strong

brand equity, diverse utilization of marketing channels and an established sales and

distribution network by working with eleven (11) exclusive distributors, who in

turn may work with a large number of sub distributors. TDI has generally

maintained good business relationships with its distributors since 1988. As of

December 31, 2016, TDI‟s distributors operated 75 sales offices and 61 warehouses

located throughout the Philippines.

TDI also has existing labor supply contracts with two (2) manpower agencies

namely Global Skills Providers Multipurpose Coop (GlobalPro), whose primary

objective is to engage in service contracting, management service, productivity and

manpower services and HD Manpower Service Coop and one (1) labor cooperative

covering its three plants, which are then in-charge of the salary distribution and

benefits and workers’ attendance.

G. SKILLS

The Company is committed to the safety and wellbeing of its employees and

keeps open the lines of communications. The Company and its subsidiaries have

90
 provided company-wide health insurance to its employees, scholarship benefits to

the children and beneficiaries of the employees and further training and learning

opportunities for those that aspire and are determined to undertake such

opportunities. There are numerous scholarship programs and study grants that

employees can apply for and qualify in the group. Moreover, an Employee Mode of

Conduct or Personnel Policies are in place in all subsidiaries, which are observed

and implemented throughout the Company. The Company also subscribes to the

“Whistle Blowing Policy” which has been adopted in the operating companies.

TDI employs in-house sales staffs that provide general administrative support to

TDI’s distributors. Third party transportation companies for the account of the

distributors transport TDI’s products from the production facilities to distributors’

warehouses.

INTERNAL FACTOR EVALUATION MATRIX

WEIGHTED
STRENGTHS WEIGHT RATING
SCORE
1. Tanduay Distillers Inc. owns 95% and 96% of Asian Alcohol
Corporation (AAC) and Absolut Distillers Inc. (ADI),
11% 4 .44
respectively, which provides them ethyl alcohol for the
production of their rum.
2. Tanduay maintains a network of secondhand bottle dealers
across the nation who retrieves and sells back bottles to
5% 3 .15
Tanduay, which reduces operating costs by 61%, lower than
the cost of purchasing new bottles despite the cleaning costs.
3. Despite the decline in the liquor industry due to the increase
in excise tax, Tanduay Distillers Inc.’s product Brandy
remained constant from their volume in 2013 and accounted 8% 3 .24
to 51% of the market share while TDI’s rum and gin
contributed 22% and 21% of the market share, respectively.

91
4. Absolut Distillers Inc., Tanduay’s subsidiary, holds the
distinction as the only alcohol producer that started the liquid
fertilization program, a method of wastewater treatment 4% 3 .12
wherein ADI converts its liquid water into liquid fertilizer, in
1999 and is still in use until present.
5. LT Group's Absolut Distillers turns on 2-MW solar power
plant, which generates electricity that is then sold to Batangas 2% 3 .06
Electric Cooperative for PHP 9.68 per kilowatt hour
6. LT Group's Absolut Distillers sends their effluents to
Aseagas Corporation that converts it into an alternative fuel
3% 4 .12
named Liquid Biomethane or LBM granting ADI awards in the
field of environmental undertakings and best practice.
7. Tanduay Distillers Inc., together with P.E Labellers, now
uses self-adhesive technology with optical centering system
and servomotors with integrated drive called Rollmatic that is
7% 3 .21
made in Italy, for the application of the new washable labels
that is helpful for the recycling of their bottles and has a
production speed of 60.000 bph or barrels per hour.
8. Tanduay Distillers Inc. continues to have the largest share of
the Visayas and Mindanao market from 58% as of 2015 to 10% 3 .30
60% as of December 2016.
SUBTOTAL 50% 1.64

WEIGHTED
WEAKNESSES WEIGHT RATING
SCORE
1. DOLE orders Tanduay Distillers Inc. to regularized their
workers after they dismissed 200 contractual workers in their 15% 2 .30
Cabuyao, Laguna plant and found labor code violations.
2. Tanduay has only 6% and 4% of gross sales by volume in
Metro Manila and Luzon, respectively, where most of its
distribution channels sell more in the Visayas and Mindanao 17% 2 .34
region with 59% and 62% of gross sales by volume,
respectively.
3. Tanduay has been a late adopter to the social media trend
with only 431,519 likers in their official Facebook page; 2,742 10% 2 .20
and 6,191 followers on instagram and twitter, respectively.
4. Tanduay is lacking and has a weak effort towards
improving their Research and Development with R&D only 8% 2 .16
amounting to PHP 9,519,626 or 8% of the total revenues.
SUBTOTAL 50% 1.00
TOTAL 100% 2.64

92
STRATEGIC ISSUES BASED ON INTERNAL FACTORS

The recognition of TDI’s flagship brand, Tanduay Rhum Five Years is one of their

major strengths. On a global scale, TDI is already known as the best-selling rum in the

industry and it still ranks as top #1 in the present. Another strength of TDI is that their

main raw material suppliers are their subsidiaries namely Asian Alcohol Corporation and

Absolut Distillers Inc., which cut expenses for them, as they do not have to procure

materials from other suppliers. Tanduay also maintains a network of secondhand bottle

dealers across the nation who retrieves and sells back bottles to Tanduay that reduces

operating costs by 61%, lower than the cost of purchasing new bottles despite the

cleaning costs. With the excise tax imposed in 2013, Tanduay Distillers Inc.’s Brandy

remained constant from their volume in 2013 and accounted to 51% of the market share

while rum and gin contributed 22% and 21% of the market share, respectively. Tanduay

Distillers Inc., together with P.E Labellers, now uses self-adhesive technology with optical

centering system and servomotors with integrated drive called Rollmatic that is made in

Italy, for the application of the new washable labels that is helpful for the recycling of their

bottles and has a production speed of 60.000 bph or barrels per hour.

While there are company strengths, it cannot be avoided to have weaknesses and

Tanduay is not spared from it. Tanduay Distillery Inc. has been filed a case against them

about labor code violations specifically the violation of having contractual employees. TDI

also has a low gross sale by volume in Metro Manila and Luzon with only 6% and 8%,

respectively, even though they are selling more in the Visayas and Mindanao regions with

59% and 62% of gross sales by volume, respectively, mainly due to their products being

more widely known in the VIsMin regions and also having more distribution channels in

93
those regions. Aside from weak effort and less focus on Research and Development, TDI is

a late adopter to the social media trend having only created social media accounts

recently, which is evident with their low market share in Metro Manila and Luzon.

94
 CHAPTER VI

STRATEGY FORMULATION

6.1TOTAL IFE RATING

Internal-External Matrix IE stands for Internal external as the name

suggest that it’s based upon internal and external factors of the organization. The

IE is an important strategic tool, which comes under the portfolio management.

Table 6.1 Total IFE Rating

TOTAL IFE RATING – 2.64
STRONG (3.0 – AVERAGE (2.0 – WEAK (1.0 – 1.99)

4.0) 2.99)
HIGH

3.0 – 4.0
I III
TOTAL EFE RATING – 3.10

MEDIUM

2.0 – 2.99
IV V VI

LOW
VII VIII IX
1.0 – 1.99

The IE rating of Tanduay Distillers, Inc., based on its Internal Factors and

External Factors, is in the Region I, which composed of the quadrants I, II, and IV.

TDI’s IE rating is in the second quadrant, which is a result of the combination of an

average score through its Internal Factors and a high score through its external

95
factors. With this, TDI should grow and build using suggested strategies such as

Intensive or Integrative strategies.

Table 6.2 Strategies under each Region

Grow and Build Hold and Maintain Harvest or Divest

Backward, Forward, or Market Penetration Retrenchment
Horizontal Integration
Market Penetration Product Development Divestiture
Market Development
Product Development

6.2GRAND STRATEGY MATRIX

A grand strategy matrix is a tool used by businesses to devise alternative

strategies. The matrix is primarily based on four essential elements: rapid market

growth, slow market growth, strong competitive position and weak competitive

position. The Grand Strategy Matrix is based on two evaluative dimensions:

competitive position and market (Industry) growth.

96
 Table 6.3 Grand Strategy Matrix
RAPID MARKET GROWTH
QUADRANT 1
QUADRANT 2
1. Market development
WEAK COMPETITIVE POSITION

STRONG COMPETITIVE POSITION

1. Market development
2. Market penetration
2. Market penetration
3. Product development
3. Product development
4. Forward integration
4. Horizontal integration
5. Backward integration
5. Divestiture
6. Horizontal integration
6. Liquidation 
7. Concentric diversification
QUADRANT 3
QUADRANT 4
1. Retrenchment
1. Concentric diversification
2. Concentric diversification
2. Horizontal diversification
3. Horizontal diversification
3. Conglomerate diversification
4. Conglomerate diversification
4. Joint ventures
5. Divestiture
6. Liquidation
SLOW MARKET GROWTH

The industry of alcoholic beverages has rapid market growth, as the industry

remains active because of continuous high liquor consumption even after the

increase of excise and six taxes in 2013. One contributor to the active industry is the

consumer, specifically the Filipino consumers, who ranked third in the world’s

heaviest drinkers. However, despite the rapid market growth, TDI is in the weak

competitive position as TDI ranked fourth in the Alcoholic Drinks Sector and third in

the Spirits Category. TDI also has a low market share in the Metro Manila and Luzon

area, so it is best for the company to penetrate the market as well as develop and

innovate products to sell to the market.

97
 6.3 SPACE MATRIX

SPACE Matrix is use for determining what type of a strategy a company

should undertake. This is a strategic management tool that focuses on strategy

formulation especially as related to the competitive position of an organization.

Table 6.4

FINANCIAL POSITION Rating +1 (worst) to +7 (best) RATINGS

Liquidity +6
Working Capital +5
Leverage +3
Cash Flow +5
Return on Equity +5
TOTAL 24
AVERAGE 4.8

INDUSTRY POSITION Rating +1 (worst) to +7 (best) RATINGS

STABILITY POSITION Rating -1 (best) to -7 (worst)
Growth Potential RATINGS
+5
Rate
ProfitofPotential
Inflation -4
+6
Demand
FinancialVariability
Stability -3
+6
Resource Utilization +7
Productivity Capacity Utilization +7
Price Range of Competing Products TOTAL -5
31
Barriers to Entry AVERAGE -2
6.2
Price of Elasticity of Demand -5
TOTAL -19
AVERAGE -3.8

COMPETITIVE POSITION Rating -1 (best) to -7 (worst) RATINGS

Market Share -2
Product Quality -1
Product Life Cycle -3
Customer Loyalty -3
Competition’s Capacity Utilization -2
Technological Know-How -2
Control over suppliers & distributors -1
TOTAL -14
AVERAGE -2

CONCLUSION
X – axis = (IP average+ CP average) 6.20 + (- 2.00) = +4.20

98
 Y – axis = (FP average + SP average) 4.80 + (-3.80) = +1.00
(X= +4.20), (Y= Retrenchment
+1.00) FP
Backward, Forward, Figure Market Penetration
6.5 Integration
Horizontal SPACE
Divestiture Conservativ  
Market Penetration Market Development
Liquidation
Market Development Product Development
    e         Aggressive    
Product Development Related
  Diversification 7    
Diversification (Related or Unrelated)
  6    
  5    
  4    
  3    
  2    
CP   1     IP
-7 -6 -5 -4 -3 -2 -1 0   1 2 3 4 5 6 7
  -1    
  -2    
  -3    
  -4    
  -5    
  -6    
  -7    
     
    Defensive         Competitive      
SP

The ratings for different positions resulted to the graph above, which

concludes that TDI is in the Aggressive quadrant where strategies such as

Backward, forward, horizontal integration, Market Penetration, Market

Development, Product Development, and Diversification (related or unrelated) are

located. TDI is currently using the backward integration where it controls its

subsidiaries that are also its suppliers of raw materials. TDI is also advantageous as

they have an increasing net income over the past years, which will enable them to

expand their market share and develop and innovate products to sell to their

current market and penetrating markets.

99
 6.4TOWS Matrix

STRENGTHS WEAKNESSES
S1 - Tanduay Distillers Inc. owns 95% and 96% of Asian W1 - DOLE orders Tanduay Distillers Inc. to
Alcohol Corporation (AAC) and Absolut Distillers Inc. regularized their workers.
(ADI). W2 - Tanduay has only 6% and 4% of gross sales
S2 - Tanduay maintains a network of secondhand bottle by volume in Metro Manila and Luzon,
dealers across the nation who retrieves and sells back respectively.
INTERNAL FACTORS bottles to Tanduay. W3 - Tanduay has been a late adopter to the
S3 - Tanduay Distillers Inc.’s Brandy remained constant social media trend.
from their volume in 2013 and accounted to 51% of the W4 - Tanduay lacks and has a weak effort
market share while rum and gin contributed 22% and towards improving their Research and
21% of the market share, respectively. Development.
S4 - Absolut Distillers Inc., Tanduay’s subsidiary, holds the
distinction as the only alcohol producer that started the
liquid fertilization program in 1999.
S5 – LT Group's Absolut Distillers turns on 2-MW solar
power plant in Lian, Batangas.
S6 – LT Group's Absolut Distillers sends their effluents to
Aseagas Corporation that converts it into an alternative
EXTERNAL FACTORS fuel named Liquid Biomethane or LBM.
S7 Tanduay Distillers Inc., together with P.E Labellers,
now uses self-adhesive technology.
S8 Tanduay Distillers Inc. continues to have the largest
share of the Visayas and Mindanao market from 58% as of
2015 to 60% as of December 2016.
OPPORTUNITIES SO STRATEGIES WO STRATEGIES
O1 The projection of 6.5 Million tourists SO1 Product Development Fully utilize resources coming WO1 Product Development Intensify Research
arrival by the Department of Tourism in 2017. from subsidiaries and partner companies and dealers to and Development to innovate existing products
O2 The rising middle class in the Philippines produce and create more products to cater current and to cope up with the new shift of consumer trends
grew to 5.8 percent. loyal customers, as well as potential new local customers and preferences thereby also increasing product
O3 Association of Southeast Asian Nations and those coming from different countries. (S1, S2, S7, S8, variation to cater the growth of potential
(ASEAN) and its trading partners to improve O1, O2, O3, O4, O5, O7) consumers from all over the world. (W1, W2, W4,
economic ties under the Regional SO2 Service Development Take advantage of the W5, O1, O2, O3, O4, O5, O6, O8)
Comprehensive Economic Partnership. tourists’ arrival, growing middle-class sector, and Filipinos WO2 Market Penetration Improve, keep active,
O4 Philippine alcoholic drinks industry being the third heaviest drinkers in the world by and make accessible the company’s website. (W1,
remains active. increasing production to cater more consumers and W2, W3, O1, O2, O3, O4, O5, O6, O7)
O5 The economy in 2017 to grow to 7 percent extending more efforts of advertising the products WO3 Service Development Employ more
from 6.8 percent in 2016. through various media platforms such as commercials, workers directly and not through manpower
O6 The increasing Internet penetration and billboards, and social media. (S3, S7, S8, O1, O2, O4, O5, O6, agencies to avoid contractualization cases and
Internet users widens the spectrum of O7) other violations against labor code, thus, having
advertising in the liquor industry. SO3 Service Development Invest in new technologies more regular, skilled, and familiarized employees
O7 Filipinos ranked the 3rd heaviest drinkers that would improve production of products, thus working for them. Increased regular employees
in the world with an average of 5.7 shots per increasing product availability to the growing and will also contribute to improved research and
person per week. emerging local and international market and economy, as development of product innovation, faster
O8 The invention of Targeted Hyper- well as keep up to the active alcoholic drinks industry. (S1, production, and distribution of products. (W1,
Esterification Aging or THEA. S7, O1, O2, O3, O4, O5, O7, O8) W3, W4, O1, O2, O3, O4, O5, O6, O7, O8)
SO4 Market Development Export products to countries W04 Market Penetration Take advantage of the
in Asia. (S1, S3, S7, O1, O2, O3, O4, O5, O6, O7) increasing GDP and middle-class sector
SO5 Market Penetration Intensify market share in the consumers and tourists arrival by lowering their
Visayas and Mindanao region as well as increase market prices and making products more appealing to
share in Metro Manila and Luzon through further younger generation and foreigners. (W2, W3, W4,
advertising in different media platforms: producing and O1, O2, O3, O4, O5, O6, O7)
having more television commercials, billboard
advertisements, and social media posts or pubmats W06 Service Development Research about the
showcasing the new tagline: “KASAMA MO SA LAHAT NG effectiveness of Targeted Hyper-Esterification
RHUM-PA”, with the emphasis on their rum products as Aging or THEA to the production of liquor. (W4,
well as showcase it through different customized bottle O4, O7, O8)
labels and through mini web series online. (S1, S2, S3, S8,
O1, O2, O4, O5, O6)
SO6 Market Development Promote the products to
younger generation through social media, by sponsoring
festivals or parties catered to young and working people
and tourists, and buying back bottles from customers. (S2,
S3, S8, O1, O2, O3, O4, O5, O6, O7)

100
THREATS ST STRATEGIES WT STRATEGIES
T1 The Philippines is nowhere near meeting ST1 Backward Vertical Integration Improve partnership WT1 Product Development Intensify
the standard of 10 percent Ethanol in gasoline with sugar mill companies to prevent switching of Research and Development to find new,
and the Ethanol production in the country is production between ethanol and sugar by giving innovative, environmental-friendly ways of
problematic. incentives to them such as proper recognition and long- producing or improving products to make it
T2 The effects of drinking alcohol on a regular lasting partnership so that they will not decrease the appealing and less dangerous to health-conscious
basis and the growing health awareness have a quality of raw materials. (S6, T1, T4) consumers so that they will not lose consumers
toll on the consumers’ health as well as to the ST2 Service Development Continue liquid fertilization but instead gain more for their healthier
liquor industry, respectively. program wherein water wastes are converted into liquid discoveries in their products and also to lower
T3 The yearly sin tax increase of P2 on fertilizers to prevent effluents from flowing into the water. alcohol content for lesser tax. (W4, T1, T2, T3,
alcoholic beverages and the proposed 4 (S4, T4) T4)
percent excise tax increase by 2018. ST3 Forward Vertical Integration Continue partnership WT2 Service Development Employ regular
T4 Sugarcane effluents flow into the water and with secondhand bottle dealers to decrease expenses workers directly to increase regular manpower
damage ecological areas. while still maintaining quality and quantity of products so that would monitor and keep social media
as to not use all of revenues in paying increasing annual accounts active to increase product awareness
taxes and disrupt production in case of insufficient bottles especially in Luzon and Metro Manila area and
and distribution to sellers and consumers. (S2, S3, S7, S8 also to increase workers in the research and
T3) development area to attend to issues such as
ST4 Product Development Maintaining quality of locally health issues regarding alcohol consumption and
produced products from local suppliers. (S1, S2, S3, S4, S5, research for more ways in increasing sales and
S6 S7, S8, T1, T2, T4) decreasing expenses aside from the tactic of
ST5 Market Penetration Increase market share in Luzon, increasing prices to cushion the effect of yearly
Visayas, and Mindanao regions by advertising products’ sin tax increase. (W1, W2, W3, W4, T2, T3)
health benefits such as rum do not contain any WT3 Market Development Research for ways
carbohydrates and fat as well as it can also increase life to market rum and brandy to younger generation
span 2-5 years through moderate drinking, etc. to also such as lowering alcohol content. (W1, W2, W3,
appeal to health-conscious consumers. (S1, S8, T2, T3) W4, T2, T3)

Table 6.5 Frequencies of Identified Alternative Strategies from the TOWS

Matrix

ALTERNATIVE STRATEGIES FREQUENCY IN TOWS MATRIX

1. Forward Integration 1
2. Backward Integration 1
3. Horizontal Integration 0
4. Market Penetration 4
5. Market Development 3
6. Product Development 4
7. Service Development 6
8. Related Diversification 0
9. Unrelated Diversification 0
10. Retrenchment 0
11. Divestiture 0
12. Liquidation 0
13. Joint Venture 0

101
 6.5Summary of Strategies

The recommended strategies from the result of the matrices or the

different strategy formulation tools that are listed below will identify which strategy

is the most suggested among the matrices. The most recommended strategies for

the firm are to be used for strategy implementation.

Table 6.6 Tally of Alternative Strategies from Different Matrices

STRATEGIES IE GSM SPACE TOWS TOTAL

1. Forward Integration X X X 2
2. Backward Integration X X X 2
3. Horizontal X X X 2
Integration
4. Market Penetration X X X X 4
5. Market X X X X 4
Development
6. Product X X X X 4
Development
7. Service Development X 1
8. Related X 1
Diversification
9. Unrelated X 1
Diversification
10. Retrenchment 0
11. Divestiture X 1
12. Liquidation X 1
13. Joint Venture 0

6.6 Quantitative Strategic Planning Matrix

The Quantitative Strategic Planning Matrix is a strategic tool which is

used to evaluate alternative set of strategies. The QSPM incorporate earlier stage

details in an organize way to calculate the score of multiple strategies in order to

find the best match strategy for the organization.

102
 STRATEGY 1 STRATEGY 2 STRATEGY 3
(MARKET (MARKET (PRODUCT
PENETRATION) DEVELOPMENT) DEVELOPMENT)
WEIGHT AS TAS AS TAS AS TAS
OPPORTUNITIES
O1 The projection of 6.5 Million
tourists arrival by the Department of .10 4 .40 3 .30 2 .20
Tourism in 2017
O2 The rising middle class in the
Philippines grew to 5.8 percent.
.15 4 .60 3 .45 2 .30
O3 Association of Southeast Asian
Nations (ASEAN) and its trading
partners to improve economic ties .12 4 .48 3 .36 2 .24
under the Regional Comprehensive
Economic Partnership
O4 Philippine alcoholic drinks
industry remains active. .08 3 .24 2 .16 4 .32
O5 The economy in 2017 to grow to 7
percent from 6.8 percent in 2016.
.11 2 .22 3 .33 4 .44
O6 The increasing Internet
penetration and Internet users
widens the spectrum of advertising in
.05 4 .20 3 .15 2 .10
the liquor industry.
O7 Filipinos ranked the 3rd heaviest
drinkers in the world with an average .09 4 .36 2 .18 3 .27
of 5.7 shots per person per week.
O8 The invention of Targeted Hyper-
Esterification Aging or THEA. .07 - - - - - -
THREATS
T1 The Philippines is nowhere near
meeting the standard of 10 percent
Ethanol in gasoline and the Ethanol .07 - - - - - -
production in the country is
problematic.
T2 The effects of drinking alcohol on
a regular basis and the growing
health awareness have a toll on the .03 2 .06 3 .09 4 .12
consumers’ health as well as to the
liquor industry, respectively.
T3 The yearly sin tax increase of P2
on alcoholic beverages and the
proposed 4 percent excise tax
.08 2 .16 3 .24 4 .32
increase by 2018.
T4 Sugarcane effluents flow into the
water and damage ecological areas.
.05 - - - - - -
STRENGTHS
S1 - Tanduay Distillers Inc. owns 95%
and 96% of Asian Alcohol
Corporation (AAC) and Absolut
.11 2 .22 3 .33 4 .44
Distillers Inc. (ADI).
S2 - Tanduay maintains a network of .05 4 .20 3 .15 2 .10

103
secondhand bottle dealers across the
nation who retrieves and sells back
bottles to Tanduay.
S3 - Tanduay Distillers Inc.’s Brandy
remained constant from their volume
in 2013 and accounted to 51% of the
market share while rum and gin
.08 4 .32 3 .24 2 .16
contributed 22% and 21% of the
market share, respectively.
S4 - Absolut Distillers Inc., Tanduay’s
subsidiary, holds the distinction as
the only alcohol producer that started .04 - - - - - -
the liquid fertilization program in
1999.
S5 – LT Group's Absolut Distillers
turns on 2-MW solar power plant in .02 - - - - - -
Lian, Batangas.
S6 – LT Group's Absolut Distillers
sends their effluents to Aseagas
Corporation that converts it into an .03 - - - - - -
alternative fuel named Liquid
Biomethane or LBM.
S7 Tanduay Distillers Inc., together
with P.E Labellers, now uses self- .07 - - - - - -
adhesive technology.
S8 Tanduay Distillers Inc. continues
to have the largest share of the
Visayas and Mindanao market from .10 4 .40 3 .30 2 .20
58% as of 2015 to 60% as of
December 2016.
WEAKNESSES
W1 - DOLE orders Tanduay Distillers
Inc. to regularized their workers.
.15 4 .60 2 .30 3 .45
W2 - Tanduay has only 6% and 4% of
gross sales by volume in Metro .17 4 .68 3 .51 2 .34
Manila and Luzon, respectively.
W3 - Tanduay has been a late adopter
to the social media trend.
.06 4 .24 3 .18 2 .12
W4 - Tanduay lacks and has a weak
effort towards improving their .04 2 .08 3 .12 4 .16
Research and Development.
TOTAL 2.00 5.46 4.06 4.28
The strategy that has the highest score is Market Penetration with a total of

5.46. Market Penetration is a strategy that seeks to increase market share for

present products or services in present markets through greater marketing efforts.

It includes increasing the number of salespersons, advertising expenditures, offering

extensive sales promotion items, or increasing publicity efforts.

104
 CHAPTER VII

OBJECTIVES AND STRATEGY RECOMMENDATIONS

STRATEGIC OBJECTIVES

Given that Tanduay has only 6% and 4% of gross sales by volume in

Metro Manila and Luzon, respectively, and has 59% and 62% of gross sales by

volume, respectively, in the Visayas and Mindanao region with where most of its

distribution channels sell more, Tanduay Distillers Inc. should stress the need for

extended efforts in promoting the brand where it significantly lacks as well as

strengthen their hold in the rum sector and in VisMin regions. This can be achieved

through an intensive and progressive market penetration strategy and they should

be able to maintain and improve company profitability and liquidity by revitalizing

sales the following year and offset the negative external effects by posting a target of

at least 3% increase in sales annually for 3 years.

ACTION PLAN

Intensify publicity and promotional strategies

ACTIVITY AND RESPONSIBLE

TIME FRAME, ACTION, LOCATION BUDGET
REASON FUNCTION
The Marketing division is Initiate primary research methods by the
to do a new market study second week of April and then work on
aimed at identifying what gathered data until the third week of May
Marketing PHP 100,000-
type of media would be to have conclusions and findings by the
Department 200,000
most susceptible to start of June.
maximum exposure
towards all audiences Meeting Room/Brainstorming Area
Marketing division is to Marketing Gather all marketing personnel for a three- PHP30,000
formulate different Department week brainstorming of advertisement
advertisement designs for designs and where to strategically place it
billboards showcasing the from first week of June to third week of
new tagline: “KASAMA June and launch it by first week to second
MO SA LAHAT RHUM- week of July.
PA” to attract customers

105
 and garner product Meeting Room/Brainstorming Area
awareness.
Marketing division is to Meeting of Marketing department with the
partner up with a Media Media Advertising company for the
Advertising company that contract of billboard advertisement to be PHP 300,000
caters Outdoor launched on first week to second week of to PHP
Marketing
Advertisements like July. 500,000 (for
Department
billboards to put up the billboard rent
designs for billboards for Along EDSA and other strategically per month)
every person to see and to positioned billboards in Metro Manila,
gain attention. Luzon, and Visayas.
Marketing division is to Gather all marketing personnel for a three-
come up with a television week brainstorming for a television
commercial tactic to commercial advertisement from last week
showcase the new tagline: of June to second week of July.
Marketing
“KASAMA MO SA PHP 60,000
Department
LAHAT RHUM-PA” to Meeting Room/Brainstorming Area
have media recognition
and garner viewers and
customers.
Marketing division is
showcase the new tagline:
“KASAMA MO SA
Meeting of Marketing Department with the
LAHAT NG RHUM-PA”
Production Agency for contract meeting PHP 1 million
through various “RHUM-
and signing and have two weeks (includes
PA MOMENTS” of
Marketing preparation for the commercial and shoot production,
Tanduay drinkers via
Department the commercial for 3-5 days to launch the talent fees,
television commercials to
commercial by August. management
properly deliver the
fees, food)
message of the new
Production Set-up
tagline, which is that
Tanduay is for every
occasion.
Marketing division is to Marketing Come up with different bottle label designs PHP 60,000
come up with ways on Department displaying the different occasions starting
how to advertise from the design for Christmas from first
customized bottle labels week of August to second week of August
for New Year, Valentine’s to be relevant for the coming Ber-months,
Day, Independence Day, when most Filipinos feel the spirit of
Father’s Day, Mother’s Christmas and present it through
Day, Christmas, Fiestas, powerpoint presentations first in the board
and Birthdays with the of directors by third week of August and
tagline to attract officially launch it by last week of
consumers to purchase the September.
limited edition and
customized bottle labels Meeting Room/Brainstorming Area

106
that can be used and gifted
for occasions mentioned.
Production Department will set aside
50,000 cases of Tanduay bottles daily for
the customized labels while still retaining
Production Department is
the 150,000 cases or more of bottles daily
to start producing the
for the standard Tanduay bottle label as the
customized bottle labels
customized bottle labels will only be
for Christmas to be
limited edition. Start of customized bottle
relevant for the coming
labelling will be from third week of
Ber-Months in the
August until last week of December.
Philippines when
Distribution of customized bottle labels
Christmas spirit is
will start from first week of September
starting. Production is to
until last week of December. For any PHP
also start producing other
excess and unbought customized bottle 9,831,228,256
customized bottle labels
Production labels, it will still be in the market until the (based from
after the Christmas bottle
Department supplies last to avoid any loss as there is no TDI’s 2015
labels such as New Year,
difference with the Tanduay formulation, Cost of Goods
Valentine’s Day, Father’s
only the bottle label is different, so it can Sold)
Day, Mother’s Day,
still be sold in the market. It is best advised
Independence Day,
to have blanket orders, which is when the
Fiestas, and Birthdays,
customer and manufacturer agree to a long-
with Fiestas and Birthdays
term order that’s for a fixed period or
to be produced at the same
quantity, at an agreed upon price to lower
rate as the standard
overall cost per label because the
Tanduay bottles as it will
manufacturer (TDI) can produce a large
be distributed all year
quantity and ship from stock.
round.
Meeting Room/Production Area/Retail
Stores
Gather Marketing Department to
Marketing Department is brainstorm ideas and concepts for social
to come up with ways on media posts and marketing tactics to gain
Marketing
how to keep active their attention from second week to last week of PHP 30,000
Department
social media to reach their September.
online audience.
Meeting Room/Brainstorming Area
Marketing Department is Marketing Marketing Department will start the launch PHP 1-2
to start hyping up their Department of the #BREAKTHESTEREOTYPES and million
existing social media #TANDUAYPARASALAHAT and
accounts such as #KWENTONGTANDUAY through mini
Facebook, Twitter, and web series that will be posted in social
YouTube to attract and media through the mini web series to
interact with “internet showcase the hashtags aforementioned.
citizens” or social media Marketing Department may partner with
users that will contribute media and production agencies to produce

107
 these mini web series starting from second
week of October until second week of
November to launch the start of the five-
to the goal of market part series in December to captivate more
penetration. consumers with heartfelt and relatable
series portraying the hashtags.

Production Set-up
Form focus groups to distribute in different
retail establishments to personally give
Initiate market research survey forms with the intent to know where
Marketing
methods through surveys and when the consumers/buyers have seen
Department,
both online and the advertisements by the third week of
Sales
physically, and set up August until second week of September
Department, PHP 50,000
focus groups to get and also conduct sample survey online
Customer
customer feedback of their through free survey platforms such as
Service
commercial and billboard surveymonkey and social media polls to
Department
advertisements. know the effectivity of the advertisements.

Retail Stores

7.1Recommended Vision-Mission Statements

Proposed Vision Statement

To be the best in the Philippines and ultimately in the global market with a

vision of One World, One Spirit 163 years more.

Company Vision Evaluation

Yes
Parameter Why
/ No

Does it clearly answer Yes The company’s statement is clear state what they
the question: What do want to become, that is, to be the best in the
we want to become? liquor industry in the Philippines and ultimately
in the global market.

Is it concise enough yet Yes The vision is very concise in stating that they

108
 inspirational? want to be the best in the Philippines and
globally in the industry of liquor. And using the
“with a vision of One World, One Spirit” gives the
aspiring part.

Is it aspirational? Yes The company is aspiring to be the best liquor

company locally and globally “with a vision of
one world, one spirit.”

Does it give clear Yes The company, having been operated since 1854,
indication as to when it wanted to continue their vision 163 years and
should be attained? beyond.

Proposed Mission Statement

To provide the Filipino and International community with quality products

that will satisfy their taste at the best possible value and to maximize long-term

stockholder and stakeholder values.

To provide liquor products and absolute experience of pleasure in drinking

locally and globally, perfected and nurtured through ingenuity, craftsmanship, and

advanced use of technology.

To give significance in the improvement of the society and to elevate the

Filipino stature in the global standard.

109
Company Mission Statement Evaluation

Parameter Yes If yes, which part of the statement

/ No

1.  Customers Yes It is indicated that their customers are the Filipino

and International community.

2. Products & Yes To produce liquor products perfected and nurtured

services through ingenuity and craftsmanship

3.  Markets Yes The company’s markets are markets locally and

globally.

4.  Technology Yes To produce liquor products perfected and nurtured

through ingenuity, craftsmanship, and advanced use
of technology.

5.  Concern for Yes It is indicated that the company wants to maximize

survival, growth, stockholder value and to elevate Filipino stature in
profitability the global standard.

6.  Philosophy Yes The company wants to provide consumers with

quality products that will satisfy their taste at the best
possible value.
7.  Self-concept Yes The company wants to produce liquor products and
absolute experience of pleasure in drinking their
products locally and globally that is perfected and
nurtured through ingenuity, craftsmanship, and
advanced use of technology.

8.  Concern for Yes It is stated that they want to maximize long-term

employees stakeholder value.

9.  Concern for Yes The company longs to give significance in the

110
 nation building improvement of the society and to elevate the Filipino
stature in the global standard.

7.2Proposed Strategy

The proposed strategy is Market Penetration. TDI has a weak market

share in the Metro Manila and Luzon region with only 6% and 8% gross sales by

volume, respectively, compared to its market share of 60% in the Visayas and

Mindanao regions based on the 2016 annual report of Lucio Tan Group of

companies.

Different strategies can be made to penetrate the target market starting

from entering the markets of Metro Manila and Luzon further by intensifying efforts

in promoting the products and researching and developing for new ways in keeping

up with the trend of the market especially now that people are getting more internet

savvy and the GDP of the country and the middle-class sector are rising.

In order to achieve full market penetration, improved and increased

efforts in advertising the products should be done such as promoting the new

tagline, hashtag, and customized bottle labels through social media posts,

commercials, and billboards all over Metro Manila, especially in EDSA, where people

are all passing through to get to their destinations to target areas where market

share needs to increase specifically Metro Manila and Luzon area. Philippines is also

known to have monthly festivals celebrating different things from flowers to culture

and Filipinos are also keen in celebrations of birthdays and the like so customized

111
bottle labels portraying the occasions will help boost product awareness. Although

currently TDI holds School of Rhum, where it visits different universities and

colleges in Metro Manila and teaches different arts of rum mixing and bartending, it

still has a weak effect in increasing the market share.

Coming up with the new tagline “KASAMA MO SA LAHAT NG RHUM-PA”,

as rum is what Tanduay is best known for, and flaunting it all over different media

platforms:

1. On Billboard advertisements as billboards are deemed the most effective form of

advertisement according to ATAOutdoor Advertising (2018) as it listed the

following top reasons to consider outdoor advertising: (1) Media Mix

Reinforcement because Billboards, transit and bus shelter advertising enables

companies to complement their investment in digital, print and radio with a

consistent marketing message that will be viewed multiple times and has the

ability to reach an entire region; (2) Eyes on the Road, with outdoor advertising

the audience can’t simply change the channel; (3) Total Market Reach because

over the course of a 4-week advertising period, your ad will likely be seen across

every corner of a transit system’s footprint; (4) Benefit of a Blank Canvas

because advertisers will have the ability to use the space in unorthodox ways

that can be extremely eye-catching to the viewer; (5) Billboards: People see

them morning, noon and night; (6) Builds Immediate Brand Awareness because

outdoor advertising offers advertisers the opportunity to reach a captive

audience with an exclusive, uncluttered message; (7) More Value for your Money

112
 because even though it is costly, it is the most effective way of advertising if

properly positioned and is captivating;

2. Television commercials as well as promoting the tagline through different

customized bottle labels suited for major occasions celebrated in the Philippines

starting from New Year, Valentine’s Day, Father’s Day, Mother’s Day,

Independence Day, Christmas, Fiestas, and Birthdays that will be released via

limited edition so as to suit the occasion except for Fiestas as it can be used for

different fiestas happening almost every day of the year in the Philippines and

also birthdays. The new tagline and release of customized bottle labels will also

be posted in Tanduay’s existing social media accounts such as Facebook, Twitter,

and YouTube for wider and virtual reach; and

3. For additional online presence or social media presence since according to a

survey of Statista, 30.4 million of Filipinos are using smartphones today,

Tanduay will launch a five-part campaign for “BREAK THE STEREOTYPES”

through mini web series where it will show the common stereotypes for people

who drink and to also entice the audience to share their own stories of

stereotyping through #KWENTONGTANDUAY to gauge the audience and achieve

market penetration in the virtual world. The following are the web series to

show #BREAKTHESTEREOTYPES, #TANDUAYPARASALAHAT, and

#KWENTONGTANDUAY:

113
 STEREOTYPES REALITY
1. Students who drink alcohol are These students despite their drinking

worthless and don’t do well in school. habits, excel in studies.

2. Girls who drink alcohol are labeled These girls who are judged by the

“PAKAWALA” and very unlady-like. community by their drinking habits have

stable work and others are boss in their

work.
3. Mothers who drink are “PABAYA” These mothers, some maybe single

mothers, are all raising their children

well and just drinks occasionally, but are

all easily judged as problematic drinkers.

4. Men and women who drink have all These men and women are not sad

just came from a painful heartbreak despite heartbreaks and are just having

and are sad. fun and are enjoying being single.

5. COMING OUT STORY: LGBT

The son drinks Tanduay with his father and is deemed by his father as “macho” but

the son is secretly gay. One day, the son finally had the courage to tell his father

about his sexuality and his father secretly knows it and is just happy that his son is

brave enough and still loves him no matter what.

This story will captivate not only the LGBT people but also the people supporting

the LGBT community and will also give encouragement and hope for those who are

still hiding behind their closets. This will also encourage the viewers to not just

tolerate but to also accept the LGBT community and Tanduay on the other hand, will

be the bridge to acceptance.

114
 These mini web series will be posted in Facebook, Twitter, and YouTube

where “netizens” will be able to watch it as well as comment their own experiences

of stereotyping and also help spread the realities of life.

That is why it is also important to have sales and marketing personnel to

formulate ways on how the marketing efforts mentioned above will reach the

audience, which is the Filipino mass. They also need to maintain relationship and

expand network of distribution channels and resellers to reach places where the

products are not sold.

The proposed market penetration strategies are based on the TOWS matrix in

chapter 6. The following are the said strategies:

1. Improve, keep active, and make accessible the company’s website. (W1, W2,

W3, O1, O2, O3, O4, O5, O6, O7)

2. Intensify market share in the Visayas and Mindanao region as well as

increase market share in Metro Manila and Luzon through further

advertising in different media platforms: producing and having more

television commercials, billboard advertisements, and social media posts or

pubmats showcasing the new tagline: “KASAMA MO SA LAHAT NG RHUM-PA”,

with the emphasis on their rum products as well as showcase it through

different customized bottle labels and through mini web series online. (S1,

S2, S3, S8, O1, O2, O4, O5, O6)

3. Take advantage of the increasing GDP and middle-class sector consumers

and tourists arrival by lowering their prices and making products more

115
 appealing to younger generation and foreigners. (W2, W3, W4, O1, O2, O3,

O4, O5, O6, O7)

4. Increase market share in Luzon, Visayas, and Mindanao regions by

advertising products’ health benefits such as rum do not contain any

carbohydrates and fat as well as it can also increase life span 2-5 years

through moderate drinking, etc. to also appeal to health-conscious

consumers. (S1, S8, T2, T3)

7.3Departmental Program

A. Human Resource

TDI should employ and carefully review qualifications of workers that

would be in the marketing and sales department to properly address the need to

increase the market share in Metro Manila and Luzon. Aside from employing

marketing and sales personnel,

1. TDI should conduct quarterly seminars, workshops, and consultations for its

employees about marketing strategies and equip them with new and trendy

marketing tactics;

2. As well as stress management to avoid burnout and overstressing in work

that might lead to poor work performance and decreased production.

3. Crash courses about operations management to improve operations and to

lessen wasted time and;

4. Trainings to update the employees and the company operations about the

new trends in the market are also important;

116
 5. TDI should also conduct an annual teambuilding for its employees to

encourage teamwork and build camaraderie for better workplace

relationships and environment and;

6. To give health care benefits that covers hospitalization and annual physical

examination as well as drug tests to ensure a drug-free work place.

B. Marketing

TDI should focus the sales and marketing department that would

monitor the proposed billboard and commercials showcasing the new tagline:

“KASAMA MO SA LAHAT NG RHUM-PA” through “Eyes on Impression” or EOI, which

is the new currency for buying billboards and other out of home products product,

according to Pattiistilllearning.com. This Eyes on Impression is defined by the

average number of persons who will likely notice an ad on an outdoor display such

as billboard and lampposts. It also takes into account the distance from the road, the

angle, the size, the speed of traffic, and it all boils down to a weekly cumulative

impressions count.

Marketing department will also know their reach of audience in social

media through the (1) Number of Likes (2) Number of People Who Watched or

Number of Views (4) Number of Comments (5) Number of Shares.

Through marketing staff that will monitor media platforms, TDI will

know how much awareness they are making for them to be able to achieve

significant rise in their market share especially in Luzon and Metro Manila area and

also to maintain and further increase their market share in the Visayas and

Mindanao regions.

117
 Sales and Marketing personnel should also find ways in promoting the

customized bottle labels discussed in the proposed strategy for them to fully lock-in

success in penetrating the market because these bottle labels will be relevant in any

occasions happening everywhere in the Philippines as it will be available on specific

occasions namely: New Year, Valentine’s Day, Father’s Day, Mother’s Day,

Independence Day, Christmas, Fiestas, and most importantly, the one that is

happening ever day of the year celebrated by every person in the Philippines, is

Birthdays.

C. Finance

TDI’s liquidity ratios for the year 2015 are the following: Current

Ratio is 4.91:1; Quick Ratio is 2.86:1 and TDI’s current assets is 10,039,188,665

With these, the company can finance strategies such as market penetration The

research and development department is beneficial as the company needs know

consumer preferences, habits, and trends and make their products and marketing

efforts appealing and interactive for Internet users to help in the promotion of the

products and TDI needs to boost this they have only used PHP 9,519,626 or 8% to

the total revenues.

Intensification of market share through market penetration in Metro

Manila and Luzon is of utmost importance and focus as well as maintenance of

market shares in the Visayas and Mindanao region. It will account to 30% operating

expenses annually and 3% to 10% in COGS as there will be an increase in the

quantity of production. There will be improvement in different areas pivotal for

market penetration.

118
 Marketing strategies through:

1. Billboards will cost TDI PHP300,000 to PHP 500,000 for photographic poster,

neon, or backlit billboards along EDSA – G.A Tower Boni Avenue and other

strategically located roads (BGC, C5 MAKATI, BACOLOD, SLEX, NLEX,

BATANGAS, TAGAYTAY, and CEBU) for rent per month where there is a traffic

flow of 200,000 to 300,000 daily commuters according to MacGraphics Carranz

Int’l Corp., an out-of-home media company (see attached photos below); and

2. Television commercials’ production will cost up to at least PHP 1M depending on

the company’s budget, this already includes talent fees, production staff fees,

venue, and equipment, and airing time of 30 seconds will cost at least PHP

179,743.2 based on the given sample computation below retrieved from CARAT

Philippines, a media advertising company:

TV Patrol rating is 8.23, which is the number of times the commercial will be played

multiplied by PHP 21,840 per air time = PHP 179,743.2 for a 30-second commercial,

and if it will only be 15 seconds, PHP 179,743.2 will be multiplied to 0.6 to arrive at

a cost of PHP 107,845.92.

3. Social Media posts cost for the pubmats of “KASAMA MO SA LAHAT NG RHUM-

PA”, #BREAKTHESTEREOTYPE #TANDUAYPARASALAHAT, and

#KWENTONGTANDUAY are composed of and computed as follows:

119
Maximum Estimated Number of People Who Will See Your Boosted Post: 118,000

to 311,000 people

Amount: PHP 14,560

Amount per day of Duration: PHP 160.00

Duration: 3 months (91 days)

120
The “BOOST POST” option where you can boost or hype your post to reach, inform,

and engage more people.

121
 The following are what you will see the “BOOST POST” option consist of as

well as the price range of the BOOST POST:

122
Audience: The group of people you want to see your promotion.

Reach People:This
Duration: Youiscan
theshow your
length promotion
of time to people will
your promotion in certain
be seelocations,
by people.like
Youan can
entire country or
make
justchanges
the area after
around your
your business.has started.
promotion
Characteristics: You can show your promotion to people with relevant interests. Interests can be broad

(cars) or specific
(Retrieved (racing
from cars).Boost Post Help)
Facebook
Ages: To make sure the right people see your promotion, specify ages and genders for your audience.

Total Budget: The bigger your budget, the more people will see your promotion. The amount you

choose can be updated later.

123
MacGraphics Carranz Billboard locations:

Location: EDSA – G.A Tower Boni Avenue, Southbound, includes Ortigas, Pantaleon,

Boni Avenue, Cor Ortigas, New York Cubao NB, New York Cubao SB

Traffic Flow: 300, 000 Daily (Estimated)

124
Location: EDSA Kalayaan, BGC Gateway, includes Pitogo T12, Pitogo T13, Pitogo T14

Traffic Flow: 200,000 Daily (Estimated)

125
Location: C5 Makati – Pasig Bridge, Antipolo Bound, includes Makati Pasig Bridge

Traffic Flow: 200,000 Daily (Estimated)

126
Location: Bacolod City – La Salle Avenue, La Salle Ave. Cor B.S Aquino Drive

Traffic Flow: 200,000 Daily (Estimated)

127
Location: SLEX –Cor. President Quirino Ave. includes Cor Pres Quirino Ave, Sucat

Muntinlupa SB, Sucat Muntinlupa NB, Alabang SB, Alabang NB, Susana Heights NB,

Southwoods SB

Traffic Flow: 255,000 Daily (Estimated)

128
Location: Northbound, includes NLEX – Canlumay, Valenzuela, NLEX – Malinta SB,

NLEX – Malinta NB

Traffic Flow: 200,000 Daily (Estimated)

129
Location: Sto. Tomas, Batangas

Traffic Flow: 155,000 Daily (Estimated)

130
Location: Tagaytay Market Intersection, SLEX Tagaytay

Traffic Flow: 200,000 Daily (Estimated)

131
Location: Cebu City – Gorordo, Lahug, coming from Lahug going to Colon

Traffic Flow: 150,000 Daily (Estimated)

132
 Cost-Benefit Analysis for Market Penetration Strategy

Particulars Cost Weight Benefit Weight

 New Marketing Technique:
1. New marketing campaign for the ₱300,000 per month ₱52.50 per 375ml
new tagline: “KASAMA MO SA x 7 billboards x 30M consumers
BAWAT RHUM-PA” consists of ₱2,100,000 per month 20% 29%
x 6 months ₱1,575,000,000
billboard advertisements,
television commercials, and ₱12,600,000 TC
social media posts like Facebook
₱ 160 per day
post.
x 1 Facebook post ₱52.50 per 375ml
₱ 160 cost per day x 311k followers
x 3 months(91 days) ₱16,327,500
₱ 14, 560 per post
x 7 posts
₱101,920 TC

₱21,840 per air time

x8.23 times/primetime show
₱179,743.20/week
x 4 weeks
₱718,972.80 TC

2. 15 seconds to 30 seconds
Television commercial and Social ₱21,840 per air time
Media Post of consolidated series x8.23 times/primetime show
showing #BreakTheStereotypes ₱179,743.20/week 10% ₱52.50 per 375ml 15%
#TanduayParaSaLahat x 4 weeks x 10M consumers
#KwentongTanduay campaign. ₱718,972.80 TC
₱525,000,000

With the new and

₱26.43 per bottle customized bottle labels
3. Customized bottle labels for x 50,000 cases/day 12% and expecting new 14%
different occasions such as: ₱ 1,321,500/day potential buyers, in four
x 360 days years, sales of the
 New Year
₱ 475,740,000 TC company will increase
 Valentine’s Day by at least 13% at fourth
 Mother’s Day year.
 Father’ Day
 Independence Day
 Christmas
 Fiestas
 Birthday

SUB TOTAL 42% 58%

TOTAL 100%

133
Cost-Benefit Analysis is a process by which business decisions are analyzed, this is

used as means of evaluating all the potential costs and revenues that may be

generated if the project is completed. The costs mentioned above are the pivotal

costs for the strategy chosen, which is Market Penetration, and TDI is expected to

spend at least PHP 489,879,865.60, with PHP 475,740,000 of it will be from COGS

and PHP 14,139,865.60 will be for Advertising Expenses under General and

Administrative Expenses, and the results for the market penetration strategy are

the benefits listed, which would highly benefit the company as it will not only attract

patrons and new customers of at least 30 Million people within the said period of

advertising of 6 months contributed by billboard advertisements that are seen by

200,000 to 300,000 people daily and social media posts that reaches up to at least

311,000 netizens but will also consecutively increase sales and product awareness

amounting to an estimate of additional PHP 2,116,327,500 but not guaranteed on

the first year of launch since it is only the introduction period but is expected to be

seen in the succeeding years.

D. Operations/Logistics

TDI currently has self-adhesive technology with optical centering

system and servomotors with integrated drive called Rollmatic that is made in Italy,

for the application of the new washable labels that is helpful for the recycling of

their bottles and has a production speed of 60.000 bph or barrels per hour from P.E

Labellers. The proposed strategy on customized botte labels will still be produced

134
by the Rollmatic at the same manner with the standard bottle labels and is

estimated to produce only at least 50,000 cases of bottles per day prior to the month

where the customized bottle is suited so that it will be easily prepared and

distributed in accordance to the occasion, as these customized bottles will be limited

edition, except for the Fiesta and Birthday bottles as these will be produced at the

same rate as the standard bottles as these two occasions occur almost every day of

the year.

135
 CHAPTER VIII
STRATEGY EVALUATION, MONITORING AND CONTROL

1.1Strategic Objectives

FINANCIAL INTERNAL PROCESSES

Revenue Generation Quality and quantity of production
Expand Market Share
VISION
To be the best in the Philippines and
ultimately in the global market with a
vision of One World, One Spirit 163 years
more.

CUSTOMER LEARNING AND GROWTH

Customer Retention Employee benefits and rewards
Attract New Customers

1.2Balanced Scorecard

Perspective Objectives Measures Targets Initiatives

2016-18 2018-19 2019-20
Increase distribution
Increase sales channels and resellers
volume
Launch new marketing
7% increase in 10% increase in 13% increase in
Financial Revenue Generation campaign through
sales sales sales
Expand flagship customized and
product limited-edition bottle
awareness labels and billboard
advertisements.
Reach 9% market Reach 10% Reach 11%
Intensify product
Expand Market Growth rate of share in Metro market share in market share in
promotion and
Share the company Manila and Luzon Metro Manila and Metro Manila and
awareness
region Luzon region Luzon Region.
Customer Customer Retention Improved Maintained Increase market Increase market Launch customer
Customer market share in share by 3% in share by 5% in feedback and
Retention and Visayas and Luzon, Visayas, Luzon, Visayas, aftersales program
Loyalty Mindanao regions and Mindanao and Mindanao like making the
products attractive
and at the same time
reusable or holiday or

136
 seasonal greetings or
advertisements.
Intensify marketing
strategies through
billboard
Increase in advertisements and
Attract New market share all television
10% 12% 14%
Customers over the commercials.
Philippines
Reintroduce products
other than Brandy and
Rum
Intensify second-hand
bottle dealers network
for faster retrieval of
bottles to be reused

Improved Conduct trainings and

Internal Quality and quantity manufacturing 350,000 cases 400,000 cases 500,000 cases seminars for
Processes of production processes and produced per day produced per day produced per day employees about
increased outputs internal and external
operations
management as well
as keeping up with the
current market trends
of alcohol production
Increase reward for
top performing
employees to motivate
them and make them
Efficiency in
Learning and Employee benefits 7% work 9% work an efficient worker
employee’s % work efficiency
Growth and rewards efficiency efficiency and also provide
productivity
trainings, seminars,
and organization
activities focusing on
market penetration.

137
 1.3Projection
TANDUAY
DISTILLE
RS INC.
BALANCE
SHEET

HISTORICAL DATA FORECASTS

2012 2013 2014 2015 2016 2017 2018 2019

ASSETS:
CURRENT
ASSETS

Cash ₱394,076,896 ₱1,210,079,886 ₱1,255,845,229 ₱1,335,989,636 1,669,987,045 2,087,483,806 2,609,354,758 3,261,693,447

Receivabl
es 5,593,119,512 4,643,617,659 4,770,105,013 4,515,709,220 5,644,636,525 7,055,795,656 8,819,744,570 11,024,680,713
Inventorie
s 2,628,152,629 3,068,648,294 2,995,074,365 3,002,033,607 3,752,542,009 4,690,677,511 5,863,346,889 7,329,183,611
Prepayme
nts and
Other
Current
Assets 926,920,138 1,149,464,908 1,196,790,143 1,185,456,202 1,481,820,253 1,852,275,316 2,315,344,145 2,894,180,181
Total
Current
Assets 9,542,269,175 10,071,810,747 10,217,814,750 10,039,188,665 12,548,985,831 15,686,232,289 19,607,790,361 24,509,737,952
NONCUR
RENT
ASSETS
Available-
for-sale
(AFS)
financial
assets 42,460,269 30,460,269 37,460,269 39,460,269 49,325,336 61,656,670 77,070,838 96,338,547
Property,
plant and
equipmen
t:
At
appraised
values 4,788,719,140 5,358,650,800 5,334,784,862 5,252,534,641 5,413,326,497 6,051,816,318 6,867,070,251 5,095,281,485

At cost 1,501,901,560 1,152,037,035 994,161,133 1,090,824,667 1,363,530,834 1,704,413,542 2,130,516,928 2,663,146,160

Investmen
t
properties 231,530,000 233,626,000 233,626,000 233,626,000 292,032,500 365,040,625 456,300,781 570,375,977

Goodwill 144,702,917 144,702,917 144,702,917 144,702,917 144,702,917 144,702,917 144,702,917 144,702,917

Net
retiremen
t plan
assets 19,925,185 19,262,399 41,034,895 19,347,018 24,183,773 30,229,716 37,787,145 47,233,931
Other
noncurren
t assets 50,308,986 30,698,233 25,802,148 98,412,677 123,015,846 153,769,808 192,212,260 240,265,325
Total
Noncurre
nt Assets 6,779,548,057 6,969,437,653 6,811,572,224 6,878,908,189 7,410,117,703 8,511,629,596 9,905,661,119 8,857,344,341
TOTAL ₱17,041,248,40 ₱16,918,096,85
ASSETS 16,321,817,232 0 ₱17,029,386,974 4   19,959,103,534 24,197,861,885 29,513,451,481 33,367,082,293

LIABILITI
ES AND
EQUITY:
CURRENT
LIABILITI

138
ES
Accounts
payable
and other
current
liabilities 2,016,205,413 1,523,491,148 1,433,399,514 1,649,448,730 2,061,810,913 2,577,263,641 3,221,579,551 128,562,434
Bonds
payable 0 0 4,998,008,297 0 0 0 0 0
Income
tax
payable 167,456,311 34,402,561 12,180,444 43,882,644 54,853,305 68,566,631 102,849,947 128,562,434
Total
Current
Liabilitie
s 2,183,661,724 1,557,893,709 6,443,588,255 1,693,331,374 2,116,664,218 2,645,830,272 3,324,429,498 257,124,867
NONCUR
RENT
LIABILITI
ES
Bonds
payable 4,968,295,454 4,982,544,419 0 0 0 0 0 0
Net
retiremen
t benefits
liabilities 99,885,320 564,762,952 528,748,495 37,931,386 47,414,233 59,267,791 74,084,738 1,217,303,403
Defered
Income
Tax
Liabilities 555,199,035 564,762,952 528,748,495 498,607,474 623,259,343 779,074,178 973,842,723 1,217,303,403
Total
Noncurre
nt
Liabilitie
s 5,623,379,809 5,586,397,212 540,478,516 536,538,860 670,673,575 838,341,969 1,047,927,461 2,434,606,807
TOTAL
LIABILIT
ES 7,807,041,533 7,144,290,921 6,984,066,771 2,229,870,234 2,787,337,793 3,484,172,241 4,372,356,959 2,691,731,674

EQUITY
Attributab
le to
equity
holders of
the
Company:
Capital
stock - P1
par value 1,180,765,620 1,180,765,620 1,180,765,620 2,951,914,050 2,951,914,050 2,951,914,050 2,951,914,050 2,951,914,050
Additional
paid-in
capital 2,617,463,482 3,817,463,482 3,817,463,482 7,717,463,482 9,646,829,353 12,058,536,691 15,073,170,863 18,841,463,579
Effect of
transactio
ns with
non-
controllin
g interests 52,156,083 52,156,083 52,156,083 52,156,083 52,156,083 52,156,083 52,156,083 52,156,083
Other
comprehe
nsive
income -
net 1,387,795,197 1,292,362,517 1,259,908,782 1,148,717,163 1,435,896,453.75 1,794,870,567.19 2,243,588,208.98 2,804,485,261.23
Retained
earnings 3,133,908,904 3,422,609,606 3,602,179,417 2,341,345,967 2,926,682,459 3,658,353,073 4,572,941,342 5,716,176,677

8,372,089,286 9,765,357,308 9,912,473,384 14,211,596,745 17,013,478,398 20,515,830,464 24,893,770,547 30,366,195,651

Non-
controllin
g interests 142,686,413 131,600,171 132,846,819 126,629,875 158,287,344 197,859,180 247,323,975 309,154,968
TOTAL
EQUITY 8,514,775,699 9,896,957,479 10,045,320,203 14,338,226,620 17,171,765,742 20,713,689,644 25,141,094,522 30,675,350,619

139
TOTAL
LIABILITI
ES AND 16,321,817,23 ₱17,041,248,4 ₱17,029,386,9 ₱16,568,096,8 24,197,861,88 29,513,451,48
EQUITY 2 00 74 54   19,959,103,534 5 0 33,367,082,293

FORECASTS
STATEME
NT OF
COMPRE
HENSIVE
INCOME 2016 2017 2018 2019
₱12,117,345,
Net Sales ₱12,949,591,911 ₱10,539,843,345 ₱12,020,516,844 129 12,965,559,288 13,873,148,438 15,260,463,282 17,244,323,509
Cost of
Goods
Sold 9,924,896,596 8,293,156,504 9,819,049,240 9,831,228,256 10,126,165,104 10,632,473,359 11,376,746,494 12,514,421,143
Gross 2,286,116,87
Profit 3,024,695,315 2,246,686,841 2,201,467,604 3 2,839,394,184 3,240,675,079 3,883,716,788 4,729,902,365
OPERATI
NG
EXPENSE
S
Selling
Expenses 601,716,909 648,018,234 957,664,294 939,452,710 1,080,370,617 1,242,426,209 1,428,790,140 1,643,108,661
General
and
Administr
ative
Expenses 600,109,161 894,444,400 665,631,353 653,219,799 751,202,769 863,883,184 993,465,662 1,142,485,511
1,592,672,50
  1,201,826,070 1,542,462,634 1,623,295,647 9 1,831,573,385 2,106,309,393 2,422,255,802 2,785,594,172

Other
Income
Charges
Finance
Costs (417,656,290) (416,998,965) (418,214,379) (57,969,231) (72,461,539) (90,576,923) (113,221,154) (141,526,443)
Finance
Income 6,686,399 405,629 98,960 154,151 192,689 240,861 301,076 376,345
Rental
Income 1,067,857 653,304 1,133,464 618,281 772,851 966,064 1,207,580 1,509,475
Others -
net 99,172,043 79,118,842 12,490,610 29,058,226 36,322,783 45,403,478 56,754,348 70,942,935

  (310,729,991) (336,821,190) (404,491,345) (28,138,573) (35,173,216) (43,966,520) (54,958,150) (68,697,688)

Income
before
income
tax 1,512,139,254 367,403,017 173,680,612 665,305,791 972,647,583 1,090,399,166 1,406,502,836 1,875,610,505
Provision
for
Income
Tax

Current 555,857,866 171,332,598 129,440,081 258,777,015 323,471,269 404,339,086 505,423,857 631,779,822

Deferred (60,233,256) 8,426,321 (55,046,776) (16,612,006) (20,765,008) (25,956,259) (32,445,324) (40,556,655)

  495,624,610 179,758,919 74,393,305 242,165,009 302,706,261 378,382,827 472,978,533 591,223,167

Net
Income 1,016,514,644 187,644,098 99,287,307 423,140,782 669,941,322 712,016,339 933,524,302 1,284,387,338
Net
Income
Attributab

140
le to:
Equity
Holders of
the Parent
Company 1,013,154,683 198,736,275 98,240,145 428,985,314 536,231,643 670,289,553 837,861,941 1,047,327,427
Non-
controllin
g interests 3,359,961 (11,092,177) 1,047,162 (5,844,532) (7,305,665) (9,132,081) (11,415,102) (14,268,877)

  1,016,514,644 187,644,098 99,287,307 423,140,782 528,925,978 661,157,472 826,446,840 1,033,058,550

RATIOS FORECASTS
2016 2017 2018 2019
CURRENT RATIO 5.93 5.93 5.90 95.32

QUICK RATIO 3.46 3.46 3.44 55.56

RECEIVABLES TURNOVER 2.55 2.18 1.92 1.74

TURNOVER (DAYS) 143 167 190 210

PAYABLE TURNOVER 1.11 1.11 1.11 1.11

TURNOVER (DAYS) 329 329 329 329

INVENTORY TURNOVER 3.00 2.52 2.16 1.90

TURNOVER (DAYS) 122 145 169 192

GROSS PROFIT RATE 22% 23% 25% 27%

INVESTMENT OR ASSETS TURNOVER 0.65 0.57 0.52 0.52

DEBT/EQUITY RATIO 0 0 0 0

FIXED ASSETS TO LONG-TERM LIABILITY 8.07 7.22 6.55 2.09

Projections Explanation

141
 The financial projection method used is the Weighted moving average

method,

142
 CHAPTER IX

CONCLUSION AND RECOMMENDATION

9.1 Conclusion

Tanduay Distillers, Inc. is the number one rum producer in the Philippines

with 99% market share of rum and ranking third with 22.5% market share in the

distilled spirits industry. Even though the alcoholic beverages industry is active in

the Philippines, it is still affected by external factors such as corruption in the

government, peace and order, annual increases in sin tax and excise tax, consumer

acts, and fast-paced consumer behavior and market trends. Through researching

and studying external and internal factors such as company, competitor, and

industry analyses of Tanduay Distillery, Inc., the researcher arrived at the strategy

of market penetration, which would help increase market share of TDI in Metro

Manila and Luzon region where it significantly lacks.

The basis for the conclusion that TDI can finance market penetration strategy

is through the projected balance sheet and income statement where its net sales and

net income are increasing even though the cost of goods sold as well as the

operating income are also increasing. This just concludes that TDI is capable of

financing market penetration strategy as there has been an increasing trend in its

historical data too.

9.2 Recommendation

Intensification of market share through market penetration in Metro

Manila and Luzon is of utmost importance and focus as well as maintenance of

143
market shares in the Visayas and Mindanao region that is why market penetration is

the chosen strategy. So, the researcher recommends Tanduay Distillers Inc. the

market penetration strategy of coming up with the new tagline “KASAMA MO SA

LAHAT NG RHUM-PA”, as rum is what Tanduay is best known for, and flaunting it

all over different media platforms with emphasis on billboard advertisements,

commercials, and social media posts or pubmats as well as promoting the tagline

through different customized bottle labels suited for major occasions celebrated in

the Philippines starting from New Year, Valentine’s Day, Father’s Day, Mother’s Day,

Independence Day, Christmas, Fiestas, and Birthdays that will be released via

limited edition but will still retain the price of a regular Tanduay bottle (PHP 52.50),

so as to suit the occasion except for Fiestas as it can be used for different fiestas

happening almost every day of the year in the Philippines and also birthdays. The

new hashtags #BREAKTHESTEREOTYPE, #TANDUAYPARASALAHAT, and

#KWENTONGTANDUAY will be launched via mini web series that will be posted on

social media such as Facebook, Twitter, and YouTube to get social media users’

interactions and boost product awareness as well as spread positivity and

acceptance in the society.

144
Potential Advertisement

145
146
147
Potential Social Media Post and Pubmat

148
149
150
 BIBLIOGRAPHY

Mourdoukoutas, P. (2017, January 26). Duterte’s Philippines is Getting More

Corrupt| Forbes| forbes.com Retrieved from:

https://www.forbes.com/sites/panosmourdoukoutas/2017/01/26/dutert

es-philippines-is-getting-more-corrupt/#58fc75145a7f

Philippine News Agency (2017 February 24). PH Dedicated to Improve Peace and

Order in the country| Manila Bulletin| mb.com.ph Retrieved from:

http://news.mb.com.ph/2017/02/24/ph-dedicated-to-improve-peace-

and-order-in-the-country-yasay/

Jazul, L. (2017, January 05). Philippine’s Inflation Settles at 1.8% for 2016| Rappler |

rappler.com Retrieved from: http://www.rappler.com/business/157434-

philippines-inflation-december-full-year-2016

Padin, M. (2017, January 17). Tourist Arrivals To Hit 6.5 M This Year| Business,

News, The Philippine star| philstar.com Retrieved from:

http://www.philstar.com/business/2017/01/17/1663305/tourist-

arrivals-hit-6.5-m-year

CNN Philippines (2017, January 26). 2016 Economy Growth The Fastest in Three

Years| Front Page, News CNN Philippines| cnnphilippines.com Retrieved

from: http://cnnphilippines.com/news/2017/01/26/philippines-GDP-

2016.html

Magtulis, P. (2016, February 01). Middle Class Reaping Fruits from Fast Growing

Economy | Business, News, The Philippine Star| philstar.com Retrieved

151
 from: http://www.philstar.com/business/2016/02/01/1548259/special-

report-middle-class-reaping-fruits-fast-growing-economy

Cabuenas, J. (2017, April 26). ASEAN 2017: Regional Economic Ties are

“Strategically Important to PHL” | Money, GMA News| gmanetwork.com

Retrieved from:

http://www.philstar.com/business/2016/02/01/1548259/special-report-

middle-class-reaping-fruits-fast-growing-economy

The Manila Times (2016, June 29). PH Alcoholic Drinks Industry Remains Bubbly|

Special Features, The Manila Times| manilatimes.net Retrieved from:

http://www.manilatimes.net/ph-alcoholic-drinks-industry-remains-

bubbly/270788/

Philstar (2014, February 06). Filipinos 3rd Heaviest Drinkers in the World | The

Philippine Star| philstar.com Retrieved from:

http://www.philstar.com/news-

feature/2014/02/06/1286936/infographic-filipinos-3rd-heaviest-

drinkers-world

Alcoholism in the Philippines | Alcohol Rehab | alcoholrehab.com Retrieved from:

http://alcoholrehab.com/alcoholism/alcoholism-in-the-philippines

Alcohol’s Effects on the Body | Alcohol & Your Health, National Institute on Alcohol

Abuse and Alcoholism| niaaa.nih.gov Retrieved from:

https://www.niaaa.nih.gov/alcohol-health/alcohols-effects-body

Digital Marketing in the Philippines | Digital Marketing Philippines|

digitalmarketingphilippines.com Retrieved from:

152
 http://digitalmarketingphilippines.com/digital-marketing-in-the-

philippines-2015-edition-infographic/

Pietrek, M. (2015, September 14). Unveiling the THEA One Aging Reactor from Lost

Spirits| Cocktail Wonk| cocktailwonk.com Retrieved from:

http://cocktailwonk.com/2015/09/unveiling-the-thea-one-aging-reactor-

from-lost-spirits.html

Blue & Green Tomorrow (2016, May 4). The Environmental Impact of Alcohol

Production| Blue & Green Tomorrow| blueandgreentomorrow.com

Retrieved from:

http://blueandgreentomorrow.com/society/environmental-impact-

alcohol-production/

Sugarcane Farming’s Toll on the Environment | World Wild Life| worldwildlife.org

Retrieved from: https://www.worldwildlife.org/industries/sugarcane

Manila Times (2015, May 04). Rethinking Biofuels| Business, The Manila Times|

manilatimes.net Retrieved from: http://www.manilatimes.net/rethinking-

biofuels/180847/

Philstar News (2013, November 29). Bill prohibits drinking liquor in gov't offices|

Headlines, The Philippine Star| philstar.com Retrieved from:

http://www.philstar.com/headlines/2013/11/29/1262335/bill-prohibits-

drinking-liquor-govt-offices

Revilla, R. (2011, January 17) “Anti-Underage Drinking Act” Retrieved from:

https://www.senate.gov.ph/lisdata/105759056!.pdf

153
Republic Act No. 7394 (1992, April 13). Consumer Act of the Philippines Retrieved

from: http://www.officialgazette.gov.ph/1992/04/13/republic-act-no-

7394-s-1992/

Avecilla, V. (2014, August 23). “Why not a law against liquor advertisements?” |

Opinion, The Standard| thestandard.com.ph Retrieved from:

http://www.thestandard.com.ph/mobile/article/155668

Cabuag, V. (2016, September 11). Alcohol sector drinks in impact of ‘sin’ tax law|

News, BM Reports, Business Mirror| businessmirror.com.ph Retrieved

from: http://www.businessmirror.com.ph/alcohol-sector-drinks-in-

impact-of-sin-tax-law/

Gross Rating Points: “Eyes on Impression” article retrieved from:

htt://www.pattiistilllearning.com/tag/gross-rating-points/

Tanduay price Retrieved from:

http://www.honestbee.ph/en/groceries/stores/robinsons/departments/8019/cat

egories/41748

Top 10 Reasons to Consider Outdoor Advertising Retrieved from:

https://www.ataoutdoormedia.com/outdoor-advertising-top-10/

Cost-Benefit Analysis Retrieved from: Cost-Benefit Analysis

https://www.investopedia.com/terms/c/cost-benefitanalysis.asp#ixzz5BaXveAiQ

Emperador Inc. annual report

Ginebra San Miguel annual report

San Miguel Brewery annual report

154
APPENDIX

155
APPENDIX A

156
APPENDIX B

157
APPENDIX C

158
APPENDIX D

159
160
APPENDIX E

161