College of Business and Economics Ramon V. Del Rosario Sr.

Graduate School of Business

COMPETING WITH THE GIANTS

In Partial Fulfilment of the Requirements in Marketing Management Submitted To: Dr. Antonio V. Concepcion Submitted By: Rachel Reyes Date Submitted: September 1, 2010

I.

INTRODUCTION

De La Salle University Graduate School of Business

Marketing Management

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Fighting multinationals was very tough. At first, everyone thought I was crazy. They told me, how will I survive this? True enough, its by the grace of God that Im still here in the toothpaste industry after 20 years. God is good.1 This was the statement of Cecilio Pedro, owner of the Lamoiyan Corp. which is known as the manufacturer of the Hapee toothpaste. Lamoiyan Corp. is the first Philippine manufacturer of toothpaste which strongly faced the challenge of its two multinational giants - Colgate-Palmolive and Unilever. Pedros story is likened to the parable of David and Goliath. Lamoiyan was formed after the collapse of Pedros first company, Aluminum Container Inc., where both Colgate and Unilever were its main customers. Both companies started to use plastic tubes in 1985 and Pedro wanted to make up for the loss especially of the machine and equipment. He decided to enter the oral care market with the help of a formula from a Japanese company. It was in 1988 when Lamoiyan, a small and aggressive company was born to challenge the giants, Colgate and Close Up. 1 After more than 22 years, Hapee toothpaste has now become the no. 3 toothpaste brand in the Philippines along with these two giant competitors. Lamoiyan has continuously increased its capacity to capture market outside the country and penetrate internationally. Its CEO and President Pedro aggressively works on improving the companys competency to survive in the industry. Before presenting a more detailed background of the company, heres a short discussion on the background and market of toothpaste.

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II.

THE TOOTHPASTE BACKGROUND & GLOBAL TRENDS Toothpaste has started 4,00 years ago. People have different ways in cleaning their teeth such as the use of fish bones for Chinese, fine sand and
pumice were the formula for Arabs, strong acids for Europeans,

corrosive mixtures

for the western cultures and even table salt. 2 It was only in 1850 when Dr. Washington Wentworth Sheffield, a dental surgeon and chemist, invented the first toothpaste, which he called Creme Dentifrice, in his private practice. Through the encouragement from the positive feedback of his patients, he marketed the paste and constructed a laboratory to improve it. Eventually, he also built a small factory to manufacture it. The modern toothpaste that we use nowadays was invented to help in cleaning our teeth and was originally packaged in jars.2 Toothpaste has grown to be a dynamic sector of the oral care market with continuous launch of new products such as the whitening toothpaste. The benefits of toothpaste have now evolved from fighting cavities alone to additional benefits of fresher breath, healthier gums and whiter teeth. III. THE MARKET The Oral Market Care has reached $3.8 Billion. Of which $1.66 billion-ayear industry is the Total Toothpaste Market. The $1.26 billion comes from the retail segment with 25% sales coming from drug stores alone.
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As for the Philippine market, according to the study of Ben Paul Gutierrez, less developed countries have different consumer market compared to North American or European counterparts in aspects like average household disposable income is low, income disparity between the rich and poor is high, youths represent more than two thirds of the population, literacy level is low, and access to a wide variety of communication media is poor.
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Based from the 2006 Family Income and Expenditure Survey

(FIES ), average annual family income of the estimated 17.4 million

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Marketing Management

Filipino families is approximately PHP173 thousand with PHP147 thousand average expenditure, an increase of 18.5% from 2003. The annual average income for 2006 in NCR is PHP221 thousand compared among other regions: CALABARZON at PHP153 thousand, Central Luzon at PHP147 thousand and CAR at PHP137 thousand. Below is the breakdown of expenditures. Of the other expenditures, around 3.7% goes to personal care.
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This is part of the expenses consumed for toothpaste. As income

increases, it has higher tendency of spending on personal care. However, this was not proven on the 2009s consumption of toothpaste which fell down to 13% only.
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IV.

ABOUT THE COMPANY

Lamoiyan Corp was named after the CEOs grandmother. It started in 1988 as the first Philippine manufacturer of toothpaste with their brands Hapee and Kutitap. In addition to the mentioned brands for toothpaste, Dr. Pedro ha diversified its product lines to include the following brands: Dazz Dishwashing Paste and All-Purpose Kitchen Cleaner, Fresher feminine wash and Gumtect, a special gum-formula toothpaste.
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Lamoiyan also has not only penetrated the domestic market but also the international market of neighboring countries such as China, Vietnam, and Indonesia thus, increasing their capacity to 6,000 tons of production. This is to start operations in Vietnam in order to be the Colgate of Asia. 8

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Mission Improve the quality of life by bringing essential products within the reach of the common people. Vision To have a Lamoiyan product in every home. Values
Pursuit of Excellence - Doing things better than before and better

than competitors. Respect for the Individual - Values individuality by treating each other with fairness. Social Responsibility - Making our presence a blessing to society. Teamwork - Reaching collectively goals that we cannot reach separately. Awards Most Outstanding Toothpaste Manufacturer of the Year (1990, 1993, 1995, 1996, 1997, 2001 and 2002) given by the Consumers Union of the Philippines Agora Awards Marketing Company of the Year (1992) given by the Philippine Marketing Association A Special citation for Best Outdoor Advertising for Hapee Singing Christmas Tree given by the Catholic Mass Media Council (1993) Apolinario Mabini Rehabilitation Award for the Employer of the Year (1993)

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Outstanding Program for Equal Employment Opportunities for the Disabled (1993) given by the Personnel Management Association of the Philippines Big Bird Award, Asian Licensee of the Year award (April 2007)

V.

4 Ps of MARKETING Product Offering

Type Fresh & Cool White Toothpaste

Description Hapee Fresh & Cool White is the ideal toothpaste for the whole family. Hapee Toothgels has maximum fluoride protection that fight tooth decay, strengthen teeth, and freshen breath. Hapee Explosive Menthol Red has a strong peppermint flavor and intense spice that gives excellent freshness. Hapee Fresh Green Outburst is a blend of vivid strong mints that provides long-lasting freshness. Hapee Outrageous Blue Chill has a strong spearmint flavor that keeps breath fresh longer. Hapee Mandarin Orange Blast has an invigorating flavor with a citrus kick that gives a new dimension of freshness.

Benefits It gives maximum fluoride protection for strong white teeth, fresh breath, and healthy gums for a truly world-class smile. This classic variant is professionally accepted and recommended by the Philippine Dental Association.

Toothgels

- Hapee Explosive Menthol Red

This blazing variant is professionally accepted and recommended by the Philippine Dental Association.

- Hapee Fresh Green Outburst

This refreshing variant is professionally accepted and recommended by the Philippine Dental Association.

- Hapee Outrageous Blue Chill

This ultracool variant also has Vitamin Care Action to moisturize gums.

- Hapee Mandarin Orange Blast

This variant is also packed with Vitamin C that helps make gums healthy.

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Complete Plus Whitening

Hapee Complete plus Whitening provides 12hour antibacterial protection and is clinically proven to whiten your teeth

It contains Green Tea and Guava Leaf extracts to give more than a dozen benefits for your teeth and gum defense. It is truly your mouth's perfect partner as it helps to: - kill bacteria that cause bad breath - protect from Gingivitis - toughen weak tooth enamel - prevent tooth cavities - reduce gum bleeding - shield from plaque build up - prevent exposed root cavities - fight against bacteria - prevent tartar - moisturize gums - clean teeth all over - prevent gum inflammation - remove teeth stains

Type Tweens Sachet

Description
Sa Hapee Tweens 20ml, presyong buy one take one all year round sa halagang limang piso lang! Available in Fresh & Cool White, Explosive Menthol Red, Fresh Green Outbust, and Outrageous Blue Chill variants. With 7 kidciting flavors to choose from, brushing has never been this fun! Kids can enjoy yummy flavors like Strawberry Bloom, Apple Crunch, Juicy Grapes, Tutti Frutti Twist, Orange Squeeze, Bubblegum Pop, and Cookies & Cream Ahoy. Hapee Night Mint is the first Filipino toothgel brand designed for night use. Hapee Extreme Clean Toothgel has deep penetrating crystal granules that provide an advanced oral care system.

Benefits

May fresh breath ka pa!

Kiddie Toothgels

Hapee Kiddie Toothgels provide the right amount of fluoride for kids to help fight tooth decay.

Hapee Night Mint

It works overnight with a relaxing bend of Chamomile extract, peppermint flavor, and whitening wonder to soothe your senses for a good nights sleep, fresher morning breath, and whiter teeth. It deeply cleans in between the teeth while brushing, protects teeth from cavities, and leaves the mouth with intense freshness.

Hapee Extreme Clean Toothgel

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Gumtect

Gumtect is the 1st Filipino gum formula toothpaste accepted and professionally recommended by the Philippine Dental Association.

It is clinically-proven to be an effective solution against sensitive gum problems.Gumtect is formulated with: 1. Allantoin It helps promote healthy gums by stimulating the growth of new tissues. 2. Vitamin E Acts as a moisturizer. It ensures healthy gums and teeth by soothing and smoothing damaged tissues. 3. Triclosan An active germicide that is known to reduce plaque and tartar build up.

Kutitap
Comes in 3 variants: Dynamite Red, Healthy Fresh White, Cool Blue An affordable toothpaste brand with two-fluoride protection plus vitamin action for a mouth of healthy teeth and gums.

Prices Prices of Hapee toothpaste are 20% to 30% cheaper than its competitors Colgate and Close Up. On the other hand, Kutitap is cheaper since it targets the lower classes. Distribution Shelves on big supermarkets are being monopolized by the multinational companies. This is something that local company like Lamoiyan is facing due to the high costs of shelf space. Distribution in the supermarkets may not be big enough compared to its competitors. However, they still have other channels like the 23 provincial distributors to increase their sales. Promotions/Advertising

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Since Hapee needs to create and build its name among the customers, the company has TV campaigns featuring well-known personalities. The roster of celebrities includes Sarah Geronimo, Lea Salonga, Kristine Hermosa, Jasmin trias, Angel Locsin, Loren Legarda and Manny Villar. Its commercial featuring Lea Salonga also portrays Lamoiyans goal to be known globally. This is one way of reaching out to global partners through media.

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Sarah Geronimo Kristine Hermosa

Lea Salonga

Jasmin Trias Loren Legarda

Angel Locsin

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Manny Villar Posters

VI.

STRATEGY Lamoiyan strategically entered the market competing against Close Up and Colgate through prices and innovation. But he divided first the market into segments for children, low-income and high-income before implementing pricing strategy and innovation. The 20% to 30% mark down of prices has attracted people to buy the brand. In fact, it has positioned itself as a very affordable product even catering to poor people through Kutitap. Innovation is another factor. The different variants caught the attention of the people to buy the brand especially the children segment. Hapee has created a niche for children with the two giants catering to adults market only. This continuously helps Lamoiyan to capture their current market share.

VII.

COMPETITORS Colgate Colgate-Palmolive Philippines Incorporated is one of the leading manufacturer in the area of oral and personal care. It was established by
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De La Salle University Graduate School of Business

Marketing Management

William Colgate in New York City as a small soap and candle business in the 19th century. Its global brands now include Colgate, Palmolive, Ajax and Softsoap. Operations in the Philippines started in Binondo, Manila in the year 1926 led by Arthur Brent. 9 Its Colgate toothpaste has gained a great impact in terms of its brand name. Toothpaste has become equivalent to Colgate. Its mascot Dr. Rabbit has also gained popularity and entertainment among kids teaching about dental health in commercials. Close-Up UNILEVER Philippines, Inc., formerly known as Philippine Refining Company (PRC), a leading manufacturer of laundry detergents and soaps, shampoos and hair conditioners, toothpastes, deodorants, skin care products, household cleaners, and toilet soaps. It was established first as milling business which produced at an estimated 100,000 tons of coconut oil annually on its peak. 11 Close Up is the original youth oral care brand of Unilever. It is the first to combine mouthwash and toothpaste in one formula. The brand was identified and positioned as the toothpaste that gives people confidence in those very "up close and personal" situations. VIII. MARKET SHARE Hapee toothpaste captured only 25% of the market share with the leading giants - Colgate and Close-up having around 40 percent and 30 percent market share, respectively.
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IX.

CORPORATE SOCIAL RESPONSIBILITY Lamoiyan was awarded as the Most Outstanding Program for Equal Employment by the Personnel Management Association of the Philippines (PMAP) for providing opportunities for deaf people. This is the companys way of sharing through its social responsibilities for the success it has achieved. CEO Pedro heads the Deaf Evangelistic Alliance Foundation,
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De La Salle University Graduate School of Business

Marketing Management

which provides basic sign language education to the hearing impaired, since most are not given these means to learn despite of their situation. Lamoiyan has established schools in Laguna, Nueva Ecija and Palawan and 13 community centers all over the country. In Laguna, we teach deaf students to become teachers so they themselves can teach sign language to others. X.
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CONCLUSION Lamoiyan Corp. through its brand Hapee toothpaste has successfully proven that Filipino company can compete against multi-national companies. With its No. 3 spot in the toothpaste industry, it has captured a good market share to last for more than 20 years in the business. And yet it also proves that Filipino brands can also attempt and be globally acclaimed through the companys expansion in Asian countries and a futue operation in Vietnam. However, it should be taken into consideration that the risks Cecilio Pedro faced before entering the market should be evaluated and be planned to determine the steps to undertake in order to survive in the business. A good marketing strategy could position the company within the market and create a name on its own despite of a rigid competition within. Pedro should also be recognized for the values it shared with the company, giving importance not only to the success of the company but as well as to the social responsibilities it has on its society. Quoting Pedro, "Unless we change ourselves we cannot compete, especially globally."
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This has been the positive goal of Pedro to bring

change to Lamoiyan and not just remain as a small market player in the industry. Lamoiyan, particularly Hapee should take this challenge in order to form strategies that will help them improve their current market standing. Its 25% market share may not be enough yet to surpass the competencies of its rivals Colgate and Close Up. There still be something
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that the company may do to achieve higher goals of beating the two giants.

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REFERENCES:

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Marketing Management

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1 http://www.abs-cbnnews.com/business/06/06/10/ceciliopedro-when-innovation-key 2 http://www.enotes.com/how-productsencyclopedia/toothpaste 3 http://www.reportlinker.com/p0164389/Toothpaste-GlobalMarket-Trends.html?request=news 4 5 6 http://www.primaryinfo.com/toothpaste.htm http://www.upd.edu.ph/~cba/DP/0407_gutierrez.pdf http://www.census.gov.ph/data/sectordata/sr09412tx.html

7 http://newsinfo.inquirer.net/inquirerheadlines/nation/view/2 0100131-250434/Pinoys-brush-teeth-less-or-use-less-toothpaste 8 http://www.lamoiyan.com/company/index.shtml

9 http://en.wikipilipinas.org/index.php?title=ColgatePalmolive_Philippines_Incorporated 10 http://en.wikipedia.org/wiki/Colgate_(toothpaste)

11 http://en.wikipilipinas.org/index.php? title=Unilever_Philippines_Incorporated 12 eup.aspx http://www.unileverme.com/brands/personalcarebrands/clos

13 http://onlyinphilippines.blogspot.com/2007/04/philippinebased-toothpaste-maker.html 14 http://96.0.107.6/?q=node/view/1855

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