COFFEE  WAR  HEATS  UP

MANILA, APRIL 16, 2006
 (STAR) HIDDEN AGENDA By Mary Ann Ll. Reyes - This one is turning out to be one of those classic corporate wars for the hearts, minds - and pockets - of consumers. You see it on billboards lining our major thoroughfares, and in colorful TV, radio and newspaper commercials. It’s a war over "3-in-1 coffee," and the players waging it are no small fries. They are the kings of the jungle.

On one corner is Nestlé Corp., the reigning Swiss champion of the food industry. Challenging the champ is Philippine food and beverage heavyweight San Miguel Corp.

The war began when San Miguel introduced "San Mig Coffee" in December 2004.

Consumers quickly warmed up to the new brand because it was the first 3-in-1 coffee to offer different blends: mild, original, and strong.

It also came in a bright blue box, instead of the traditional brown of other coffee players, as well as smaller packaging sizes. Thus, instead of the industry norm of 12 sachets a box, it had boxes with six and 10 sachets.

In just nine months since it was introduced, "San Mig Coffee" managed to overtake "Great Taste" and "Maxwell House" to land in the No. 2 spot in the Philippine coffee-mix market. San Miguel then set its sights on the king himself, Nestlé, and its best-seller, "Nescafe."

Nestlé isn’t taking the challenge lightly. Sources told me the company has more than doubled its ad spending from P281 million in 2004 to over P599 million this year.

Last year, for the first time, it launched a TV ad for its 3-in-1 variant.

Then in an apparent dig at San Miguel, Nestlé re-launched last month its 3-in-1 brand as Nescafe 3-in-1 "Original," using a bright red color and repackaged the brand in boxes of 10 sachets.

Nescafe recently also claimed to help Filipino coffee farmers, but wasn’t it during Nestlé’s long monopoly of the market that drove coffee bean prices down to extremely low levels, prompting farmers to switch to other crops resulting to the Philippines now being a coffee importer?

San Miguel, meanwhile, has again signed up popular actor Piolo Pascual to endorse its sugar-free variant.

With even minor players like Great Taste and Maxwell House stepping up their marketing gigs with their own new variants and new packages, this coffee war isn’t likely to simmer down soon.

The good news for consumers is that this can only mean better and tastier products at more affordable prices. In this war, we can at least claim victory.

Brighter insurance sector

Banker turned insurance guy Lorenzo Tan must be grinning from ear to ear lately. About eight months ago, he joined Sun Life Financial Philippines with the unenviable task of bringing the company to the next level, that of becoming the market leader. To do that, he should be able to raise the company’s industry standing in all of its three business lines to the top level.

At the time he joined Sun Life, the company had already established itself as second in life insurance (next to Philam), sixth in pre-need, and among the top five in mutual funds. Given his previous accomplishments and the company’s fairly decent rankings, many believe Lorenzo could do, it but will take some time for Sun Life to make a significant move.

But as he has done in the past, PNB’s miracle man proved them wrong. As of end-2005, Sun Life made a huge jump to the third spot in mutual funds with assets under management now at over P7 billion. More dramatic, however, is the leap it has made in the pre-need industry where its huge growth countered the industry’s generally losing market. Growing by triple digits in the last three months of 2005, Sun Life pre-need grabbed market leadership during that period. Overall, it also ended the year at third, behind perennial market leaders Prudential Life and Philam.

While that should have made Lorenzo and his team happy, their onslaught continued this year. Sun Life’s mutual funds and life insurance companies are said to have had a very good start in 2006, but what’s even more outstanding is the performance of the pre-need company, which has now dislodged Philam from the number two spot.

The Securities and Exchange Commission’s January 2006 month-end report validates Sun Life’s move to the number two position in the pre-need business. While the entire industry ended the month with a decline of 6.88 percent in terms of initial cash pre-need payments vis-a-vis what it posted in the comparable period in 2005, Sun Life significantly improved its total pre-need sales in terms of the same yardstick by 595 percent versus last year. In the same period, Prudential Life sales increased by 18.53 percent against last year, while Philam sales decreased by 47 percent versus last year. Such development allowed Sun Life to grab the overall second spot from erstwhile industry runner up Philam. Prudential Life stayed on the lead with a market share of 34 percent, ahead of Sun Life’s 22 percent and Philam’s 13 percent.

Mind you, we are only talking here of how much the company has moved over the last eight months. I can’t wait to see how else the rankings in the formerly boring insurance industry will be shaken up by Sun Life’s aggressive moves in the coming days. Wonder what Lorenzo and his team still have up on their sleeves. Let’s wait and see.

For comments, e-mail at philstarhiddenagenda@yahoo.com


Chief News Editor: Sol Jose Vanzi

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