Business Plan - Universal Robina Corporation PDF

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UNIVERSAL ROBINA CORPORATION A Business Plan Presented to the University of Santo Tomas Alfredo M. Velayo – College of Accountancy In Partial Fulfillment of the Requirement for the Degree of Bachelor of Science in Management Accounting By: Balisnomo, Ma. Lynsel M. Dela Peña, Jenica Anne S. Josue, Jo...

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UNIVERSAL ROBINA CORPORATION

A Business Plan Presented to the University of Santo Tomas Alfredo M. Velayo – College of Accountancy In Partial Fulfillment of the Requirement for the Degree of Bachelor of Science in Management Accounting

By: Balisnomo, Ma. Lynsel M. Dela Peña, Jenica Anne S. Josue, John Philippe P. Ramos, Patricia Gail S. Zubia, Raynielle Anthony P. 4MA9

Submitted to: Mr. Gerardo M. Castro, MBA May 2018

CHAPTER 1: INTRODUCTION Background of the Study

1. Nature of the Business

Universal Robina Corporation is the leading branded snack food and beverage company in the Philippines. Their product lines include snacks, like chips, bakery goods such as biscuits and cookies, and confectionaries under Jack n’ Jill like Nips, Cloud 9, and Wiggles, and instant cup noodles by Nissin. For beverages, Universal Robina has Danone, Vitasoy, and C2, which is the first ready-to-drink tea in the Philippines. Other than those beverages, they also manufacture coffee mixes particularly, Great Taste, Blend 45, and Cream All. Their megabrand, Jack n’ Jill, is in partnership with Japan’s biggest snack maker, Calbee, to form Jack n’ Jill Calbee, which was then introduced to the Philippine market in the year 2014. Jack n’ Jill Calbee is selling chips like the Jack n’ Jill Calbee Potato Chips, Jack n’ Jill Jagabee, and Jack n’ Jill Calbee Pizza Potato. URC has been in the industry since 1954, and still continues to be one of the leading players in the snack food market in the Philippines.

Some financial highlights follow:

2. Financial Highlights In general, Universal Robina Corporation has increased their operations, as a result of the company’s increase in their economic resources – assets, liabilities, and equity, which then resulted to higher sales and profit. Based on their financial highlights in their 2016 and 2015 annual report, their assets increased by 81.52% from 2014 to 2016, from Php 77.92B to Php 141.44B. Liabilities of the company also increased by more than 200%, but despite, the company was still able to increase their equity from Php 56.03B to 75.27B, equivalent to an increase of 34.33%.

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In terms of their net sales, URC has a total of Php 111.63B during their 2016 fiscal year ending September 30, which is 20.84% higher than 2014 fiscal year amounting to Php 92.38B. The increase in economic resources and sales also resulted to an increase in the company’s earnings and book value per share, with an increase of 30.94% and 32.79%, respectively.

FY2015 SALES SPLIT

FY2016 SALES SPLIT

AIG CFG 8% 8%

CFG AIG

BCFG (Philippines)

BCFG 84%

Universal Robina Corporation is handling 3 sectors, namely, BCFG or the Branded Consumer Food Groups, AIG or the Agro – Industrial Group, and CFG or the Commodity Food Groups.

The BCFG, or the Branded Consumer Food Groups, offers in this sector snack foods, beverages, grocery and other food products, which is serving two divisions – Philippines and International, and URC is the leading branded convenience food and beverage company here in the Philippines. It is known in the production of products like Chippy, Nova, and other chips and food snacks under Jack n’ Jill, and also Nissin and C2.

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The AIG, on the other hand, is focusing more on the production and distribution of animal feeds and other products related to hogs and poultry farming. The Universal Corn Products, one of the leading companies in animal feeds, Robichem, which offers high – quality health products for animals, and Robina Farms, are the companies URC handles.

Lastly, the Commodity Food Groups. Under this sector, there are two divisions – URC Flour Division and URC Sugar Division. The flour division is responsible for the production wheat flour, which they sell to commercial and institutional companies, together with other flour – milling by – products like wheat germ, bran, and pollard, and El Real, which is known for its pastas like spaghetti and macaroni. The sugar division, on the other hand, provides sugar milling and refining services, located in Luzon and Visayas. As seen in the graph above, it can be seen that majority of the sales of URC is coming from its BCFGs, with 84% last 2015 and 83% last 2016. The remaining share in the total net sales of the company is from the Agro – Industrial Group, having 8% for both 2015 and 2016, and from the Commodity Food Groups, with 8% last 2015 and 9% last 2016. In terms of the financial ratios, Universal Robina Corporation’s overall performance has been good, despite the decrease in their liquidity ratio by 0.20 from 1.90 in 2014 to 1.70 in 2016, considering that they were able to obtain a good amount of funds for their projects through its issuance of stocks. Also, having a good mix of its debt and equity enabled them to acquire for the company a return on their investments. In terms of solvency, which increased for the past three years, it showed that they are capable of paying their debts and obligations, together with interests. Moreover, the company can still pay off its creditors in the event it undergoes liquidation. In terms of profitability ratios, URC’s operating margins have decreased by 0.8% from the previous fiscal year, which indicated a low profit for the company. Despite this decrease, there has been a notable increase in terms of their earnings per share, which became more enticing on the part of the investors.

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3. Major Consumer Groups Served Universal Robina Corporation’s array of products appeal to the masses particularly children and adults. Since URC’s products are consumer goods, prices are kept at affordable levels to entice consumers, and thus achieve high sales growth.

4. Other Relevant Information

The group conducted a survey involving a total of 103 individuals, from a cross section of students from different colleges of the University of Santo Tomas, to determine their perception of URC products and that of its competitors. The survey reveals that: Universal Robina Corporation is at a very tight competition with Oishi and Nissin Monde, in different food categories like baked goods, sweets, and salty snacks, as seen in the graph presented below:

According to the respondents, Nissin – Monde lords over its competitors, URC and Oishi in the biscuits and cookies category. Universal Robina Corporation, however, has managed to top the

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other categories, namely, drinks, chips, and sweets category. Besides that, URC also managed to take the lead in the overall count, having a total of 638, or equivalent to 42%, of the total responses.

Universal Robina Corporation also is currently expanding as its operations are already catering in emerging markets like Myanmar, Laos, and Cambodia. Besides that, they also export their products in different countries in Asia like Japan, Korea, and Middle East, and also in the US, Europe, and West Africa. URC continues to expand, as it maintains its Filipino culture, truly making them as one of the best companies, not only in the Philippines, but of the whole world.

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CHAPTER 2: VISION / MISSION / OBJECTIVES

MISSION

The mission statement of Universal Robina Corporation is indicated below: “Universal Robina Corporation (URC) is one of the largest branded food product (2) companies in the Philippines and has a growing presence (5) in other ASEAN markets (3).” According to David’s framework. Universal Robina Corporation’s mission statement lacks the following components, namely:

Customers

Considering that they are a manufacturing company of some unhealthy food products, they do not value the health and the well – being of their customers, especially nowadays where most of the people are more health – conscious.

Technology

They lack transparency, with regards to their manufacturing and production process.

Philosophy

The market in general is not knowledgeable on the culture, management style, and the general philosophy of the company and the people who run it.

Concern for public image As a manufacturing company of “junk foods,” the common notion of the public with regards to their image is a negative one, when in fact they are much more than capable of

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cleansing their image through community development and corporate social responsibility programs like the “Kariton Klasrum” and the “URC Learning Center.”

Concern for employees

The statement lacks the recognition of the hard work and effort of all their employees, that has become a huge factor in the success of their business.

Ergo, we propose an improvement of the current mission statement of URC to wit:

“Universal Robina Corporation is one of the largest branded food product serving a huge market throughout the ASEAN region (3), carrying a wide portfolio of delightful brands of exceptional quality and value (2), equipped with efficient technological systems (4) and motivated people (9), loved by all ages (1).

URC exemplifies its passion to win (6), to innovate (5), and to encourage people in ensuring its competitive advantage (7). It uses its influence to aid its consumers through its humanitarian programs, doing its responsibility as expected of its Filipino background. (8)”

VISION Current vision statement of URC:

“URC's vision is to be the best Philippine food and beverage company, with a powerful presence throughout the ASEAN region, carrying a wide portfolio of delightful brands of exceptional quality and value, equipped with efficient systems and motivated people. We are committed in making lives a truly fun experience.”

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A company’s vision is supposed to evoke powerful and compelling mental images to anyone who reads it, whether he is a shareholder, employee, or a customer. It is also supposed to be massively inspiring, overarching, and on a long – term basis. Universal Robina Corporation’s vision statement, while impressively inspiring, proved to be better suited as a mission statement rather than a vision statement. It doesn’t appear to look into the future in a matter of years and vaguely described itself “to be the best Philippine food and beverage company,” which lacks the motivation for their employees to work and strive harder to achieve their vision. The vision statement seems to emphasize the well – being of its employees but fail to mention about its social responsibilities outside the company. In terms of the environmental aspect of the company, they lack the initiative to promote a more environmental and eco – friendly way of producing their products. The mission and vision are reconciliatory, in fact both statements emphasized the company’s desire to be the best “Philippines food and beverage company in its ASEAN markets”. As stated earlier, the vision failed to set a deadline for when it decides to fulfil its goal “to be the best”, but making such a vague remark allowed for the vision statement to endure the changing times as it remained to its root values. Thus, we propose this revision for the company’s new vision statement:

“URC’s vision is to be the best Philippine food and beverage company throughout the ASEAN region, through the use of its exceptional line of products, empowered employees, eco – friendly processes, and loyal customers.

It aims to sustain its competitive advantage as a premier multinational company in Asia and Oceania by embedding a sustainability program that ensures continued growth that is deeply rooted in the Filipino values.”

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OBJECTIVES

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To be able to incorporate its value to win and the virtue of dynamism, integrity, and courage

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To invest on healthier food products for health - conscious consumers, in line with the increasing trend in healthy living effective within 3 years

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To adopt a more efficient way of production and other operations while considering its effects on the environment within 2 years.

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CHAPTER 3: EXTERNAL ENVIRONMENT ANALYSIS

GENERAL ENVIRONMENT

Demographic According to the FNRI or the Food and Nutrition Research Institute, the prevalence of obesity and overweight in the Philippines has been steadily increasing in the last two decades. Despite the increase in number of people shifting to a more healthy life, majority of the Filipino population still finds it difficult to have a balanced diet due to the limited variety of fruits and vegetables and high cost of fresh food in comparison to processed snacks.! While junk foods are associated to obesity and chronic health conditions, majority of the people, especially the masses, still opt to buy junk food over their healthy food counterparts, because it is affordable, prepacked, and easily accessible, considering also the fact that parents, especially the mothers, today are always on - the - go and have limited time in preparing healthy meals for their families.! Also, considering the fact that the on-the-go lifestyle has been rapidly increasing, stress and anxiety levels have increased as well, which causes the human body to consume more energy, thus pushing people to eat food with high fat and sugar content. High levels of anxiety also cause people to crave for sweets as a means of comfort.! ! Different organizations and business are continuously doing its best in addressing this problem. Different kinds of strategies are being used by these businesses, like URC’s introduction of Mang Juan Chicharon, which incorporates the healthy aspect in the food products that people are used to eating. These strategies help in order to encourage people, especially the families, in shifting to healthy food alternatives. !

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Political – Legal Currently, there have been amendments with regards to the existing taxation policies in the Philippines, mostly known as TRAIN or the Tax Reform for Acceleration and Inclusion. In this tax reform, incomes of Filipinos will be higher, resulting to higher purchasing power. But, despite the increase in the take home pays of consumers, products and other goods increased their prices, one of which is the SSBs or the sugar - sweetened beverages. Under TRAIN, drinks containing caloric or non-caloric sweetener will increase by Php 6 per liter under excise taxes, and Php 12 per liter on drinks containing high-fructose corn syrup. 3-in-1 coffee and milk, however are tax exempted. With the support of the Department of Health, as part of their campaign in raising awareness in the health of the Filipinos, this train law helps encourage each and every consumer to patronize healthier alternatives for consumption.

In line with this, the prices of their sugar-sweetened beverages will also increase; making it less friendly to consumers, despite the increase in their take home pays. Because of this, these consumers will tend to focus more on the necessities, which are also affected by the train law. According to RA 9994 which is the Expanded Senior Citizens Act, manufacturers, wholesalers and retailers may agree on certain terms and conditions on how they are going to divide the burden of the discounts given to senior citizens. Retailers will bear 30% of the 20% discount which they can claim as a tax deduction. However, if retailers are granted 16% or more sales discount by manufacturers, manufacturers will no longer share in the Senior Citizens discount because this large discount will be treated as the share of the manufacturers. But if they offer less than 16% sales discounts to retailers, they will shoulder the remaining 70% in the 20% discount claimed by senior citizens.

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Economic Development

The Philippine GDP for the 4th quarter of 2017 had risen to 6.6%, creating a grand total of 6.7% GDP growth for the entire 2017 year. This is mainly due to a recovered agriculture sector, high government consumption, and better imports and exports. This affects the manufacturing industries as well; food manufacturers like URC in particular, had seen a 2.9% GDP growth. This only shows that the Philippines is showing its competitive growth in the South-Asian nations which may encourage future investors to invest into URC. It may also result in expansions to different countries in the ASEAN region that URC has yet to explore.

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The Consumer Price Index through the entire year of 2017 could only grow higher, allowing for the CPI to grow to 153.8 Index Points on February of 2018. This high ratio directly affected the inflation rate but even as prices rise, the CPI continues to climb. This suggests that the purchasing power of buyers grew with the demand, while supply is not able to cope with it, thus resulting to the spike in inflation rate. This will aid URC’s profits, however, as it would have to alter its prices to take advantage of this spike in the CPI.

As mentioned, the CPI grew the inflation rate followed suit as it spiked to 4.5% on February of 2018. According to the breakdown of inflation of prices, prices of heavilyweighted food and non-alcoholic beverages increased at a faster 4.8 percent, after a 4.4 percent rise in the preceding month. URC should have increased their prices to take advantage of the spike in inflation rate for the next months.

The unemployment rate for 2017 continued to lower which shows that job opportunities are readily available in the country which is a good sign for the future employees of the nation. Unfortunately, it spiked on the first quarter of 2018, and forecasts show the possibility for the unemployment rate to go up to 5.5% for the second quarter. This may prove to show that URC has opportunities to scout for talented employees.

Socio – Cultural Trends Today, people are becoming more conscious of their health, and it has become a trend here in the Philippines, which has increased the demand of healthier food products. Currently, most, if not all, of the products Universal Robina Corporation that they have

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been producing and selling to the consumers has been unhealthy products like chips and sweets – products health - conscious people tend to shy away from. Sales of Universal Robina Corporation is at risk in this aspect since most of their products do not cater to health – conscious individuals. Most, if not all, of their products have high contents of sodium, saturated fats, and bad cholesterol, which is very unhealthy and increases the risk of heart – related diseases. These products will not be patronized by these individuals, which may result to lower profits.

Technological Trends Demand for machine automation has been increasing, as part of their innovation and transition from human labor capital. While human labor is abundant in different industries, most companies want to establish a more efficient way in producing their products, which is why they tend to invest more now in different equipment and machineries that enhances their productivity. Universal Robina Corporation is currently the sole company that has a certified BOPP (Bi-axially Oriented Polypropylene) plant and equipment located in Batangas. This machinery converts resin material into BOPP films that is used in packaging their products, which helps prolong the life of their food products.

Environmental One of the common issues of today is climate change, and it has been an issue with regards sustaining the environment, especially for businesses, as they try to continue their operations while being environmentally friendly at the same time. According to reports, businesses have been a huge factor in climate change ever since the late 80’s, among them are Shell and Chevron, who are said to be one of the top carbon - emitting fossil fuel producers. Due to this, products from companie...