Gardenia Bakeries Philippines Business Analysis

Food processing defined as the methods or techniques used to transform raw material into forms for human or animals consumption which utilize by food industry. Food processing take clean, harvested or slaughtered and butchered product and uses it to produce marketable food product. The concern of my report will focus on Gardenia Philippines Bakeries Industry. Gardenia is a food processing which transformed from raw material (Flour) to final product (bread). Gardenia Bakeries Philippines inc. (GBPI) they use to import milk only from particular countries such as USA, Australia and New Zealand. Gardenia only uses premium ingredients from all over the world that under strictly checking and testing to ensure the high-quality and safe bread product.

Vision

Becoming the premier company in the baking industry, being a consumer-focused and branded food company

Mission

Bread making to embrace good wholesome health and family values

Goals

Delight to more and more satisfied customers as it continues to create, innovate and share new, delicious and healthful product.

In 1978, gardenia first started as a small in-store bakery a Bukit Timah Plaza producing variety bread with the help of experienced American baker, Horatio ‘syed’ Slocumm, who had 35 years experience in the bakery business . In early 1997, QAF Limited through Gardenia international (Singapore) Pte Ltd established Gardenia Bakeries (Philippines), Inc. and started construction of its bakery plant in the Laguna international Park (LIIP) in Binan, Laguna. It is a multinational company with operations in Singapore, Thailand, Malaysia and other countries Asia. Gardenia Philippines began its operations in 1998 with a state-of-the- art bread factory considered to be the biggest and modern in the country. Gardenia grew rapidly after that. It offers a wide array of high quality bakery product including white and wheat breads, health bread, flavoured loaves, pandesal and snack items. Gardenia bread is associated with qualities such as trust, reliability, good taste, freshness, softness, oven-baked aroma and nutritive value. In highly competitive market, these are the values that make it stand out and stay ahead. By its product slogan “So good…you can even eat it on its own” best describes the product benefits. Gardenia is singularly driven and aligned behind delivering superior consumer value through providing customer with superior brands. The Gardenia trademark means value and respected all over Asia. By delivering excellence in product quality and service, they set standards for the industry to follow in order consistently drive the market forward. At Gardenia, they are made the science of baking an art. Over the pass, further improvements have been made to the range of recipes and the method of processing. All these ensure that the aroma, taste and keeping qualities of the bread are being maintained. Besides that, Gardenia is constantly improving and adapting to suit consumer needs.

2.0 Strategic Analysis

There are 3 steps which follow by Gardenia bakeries food processing company.

2.1 Input

High quality control team has set up by Gardenia in order to ensure that all ingredients and raw material are freshness and with best quality. From selecting to purchasing, they are strictest checking and specification the quality of product and finest ingredients. Gardenia has using Just-in-time system in purchase raw material. Therefore, they are very efficient in inventory control.

2.2 Process

Gardenia using new facility features advance equipment that as globally-accepted baking industry standard in processing. It produces baked bread following a unique process. The whole operation of bread making is closely monitored by quality controllers with trained. They inspection the whole process ensure quality breads are delivered to the market. Other than that, controllers are responsible to ensure that every loaf produced is in best quality and meets customer expectations.

Automatic blending

The production process starts with a Computerized system control. Begin blending of the right amount of quality ingredients required. This helps to makes sure equal goodness of every loaf.

Production of sponge mix

The specially formulated Gardenia enriched flour, purified water, yeast, vitamins and minerals are added together to form the sponge which released into a trough.

Fermentation room

The sponge dough is then kept in a fermentation room, under controlled temperature and humidity. Fermentation process helps develop a unique Gardenia bread texture, aroma and taste.

Production of dough mix

At this stage, the sponge is mixed again with other ingredients t form the dough.

Divider

The dough is then divided into the standard weight for each particular loaf and conveyed to a rounder and checkweigher

Intermediate proofer

The dough is then left to rest in the intermediate proofer for 10 minutes then just being moulded and placed into the baking pans.

Final proofer

At this final proofer stage, the yeast is allowed to rise further under controlled temperature and humidity. Once the dough has risen to the desired height, it is ready for baking.

Tunnel oven

Gardenia breads are baked for about 20 minutes at a temperature

aorund 200 degrees Celsius in the state-of-the –art tunnel oven.

Bread cooler

Automatic slicer&bagger

The bread to be kept in cooler for about an hour. After that ready to be sliced and pack. Gardenia packaging mechanically before they are automatically sealed with kwil-logs tags that are printed with the use-by dates.Gardenia delight’s unique packaging. It is in an unconventional way which colourful packaging is displayed in an upright position. Besides that, Gardenia was use the G-lock in its packaging. G-lock is a clip that locks the Gardenia bread tightly in its package, sealing in the freshness and makes sure the bread retains its flavour, aroma, and softness. The making Process as below:

2.3 Output

After all process has been done, it comes to step 3 which is output. All raw materials have turned to final product which sellable. The company sells its product at supermarket, groceries, convenience, and variety stores. Gardenia is the only bread manufacturer with a unique distribution system. Gardenia is using the Roll-On-Roll-Off (RO-RO) shipping network system. It delivers bread every day, seven days a week, to ensure that consumer get the most freshness bread whenever to be consume. All unsold bread item will be take out and replaced with newly baked ones during every single delivery. It is to make sure the standard of bread

2.4 PEST Analysis

2.4.1 Political factor

Political processes and legislation influence the environment regulations with which industries must obey. This includes items such as government stability, taxation policy, and government regulation. Some of the products which required using produce bread are under control by government. For example, flour, salt or sugar will be the product control by every government. In last past few years, the price of these controlling products had been increase. Indirectly affect all the bakery industry and Gardenia is not be excluded. Price rising of particular product had increasing the production price of bread. Therefore, Gardenia force to increasing the bread price in order to cover the cost. However, the rising prices have resulted in a decrease in total domestic bread consumption. According to Umali Jr., president of Gardenia Bakeries Inc., the prices of bread is depending on the prices of flour. The Gardenia expects continue growing when the political spending and fairly better prices of ingredients.

2.4.2 Economical factor

The economy has an impact on all industries, from the suppliers of raw materials to manufacturing of finished goods and services. Key economic indicators include interest rates, gross domestic, retail price index, unemployment rates and exchange rates. Philippines provide a growing market for premium food product. Economy growth, and especially employment in services sector jobs, is driving demand for more convenient and prepared foods. Gardenia believes that the Gardenia’s success is brought regarding by the dedication and commitment of each member of the Gardenia family. These dedications are leading Gardenia to be the no1 in bread industry. During global economic crisis, the industry had a flat growth but Gardenia continue to grow by two to four percent. Besides that, Gardenia take step further in encouraging micro-entrepreneurship and providing more opportunities for employment while making Gardenia bread more widely available conveniently to customer.

2.4.3 Social factor

Social factor include cultural changes within the environment. Socio-cultural forces will affect the values, beliefs, and lifestyles of a society. Over the past few years, rising levels of obesity, heart disease, and diabetes in the Philippines have rapidly increased consumer interest in healthy and nutritionally food and government interest in promoting healthier eating and lifestyles. Breakfast is important for people for having healthier. According to the Philippine Association of Flour Millers Inc. (PAMFIL) said that 85 percent of Filipinos’ prefer to eat bread instead of rice for their breakfast. Gardenia had formed its own wellness team and offering nutrition counselling to educate the consumers on the true understanding of good nutrition. In this young 21st century, wellness becomes an issue to be considered. Consumers are willing to pay anything that will make healthy and fit.

2.4.4Technological factor

Developments in technology lead to new products and services and improve how they are produced and delivered to the end user. As the top-bread maker and leader of bread manufacturing industry, Gardenia using state-of-the-art-bread manufacturing plant is capable making 6000 loaves of bread per hour or nearly 150000 loaves per day. It is the equipment whereby almost untouched by human hands. Therefore, it ensures providing safe and best quality of bread product. The new plants keep to current Good Manufacturing Practices (cGMP), and follow the highest globally-accepted food quality and safety standards through the international Organization for Standardization (ISO) and as well as Hazard Analysis Critical Point (HACCP).

2.5 SWOT Analysis

2.5.1 Strength

Gardenia is the top-bread maker which a very strong brand name which accept by consumer. Popularity and high customer awareness of the Gardenia brand in the regional markets are attested to by the award of “Category Leader” by Super brands. The company recognized as the most outstanding bread manufacturing in the product category by the consumer Urion of the Philippines (CUP) held yearly during its Annual National Consumer Award (ANCA). This award is a special award which significantly to the general public and attracting key demographic customer groups, built upon a unique philosophy.

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Product innovation and development is a key area that helps Gardenia keep up with changing consumer demands. Without media advertising, Gardenia still able target the consumer based on the way Gardenia packaging and the way to be present. Philippines strengthened its distribution network by expanding its retail. Gardenia is the first company which using G-lock to ensure the freshness, aroma and taste of the product. G-lock contains all of the important information that the consumers might need such as product expired date, production line the bread was produced and the batch number. In additional, Gardenia quality and freshness come first. They are strictly for the freshness and quality of bread.

2.5.2 Weakness

Increases in the cost of raw materials and energy have been remarkable in this recent year. Over the past two years, there have been increase the price pressures especially in price for flour and fuel. Therefore adjusting prices are difficult task for Gardenia. Although increases are kept to the minimum, consumer purchasing power is still low.

2.5.3 Opportunity

Gardenia continuing to looking suitable plant manufacturing location in Northern Mindanao instead of Cebu for its planned expansion in the south. Gardenia is believed on using quality of water supply also one of the issues to produce quality bread. Besides that, Gardenia is fast track the implementation of its US$17.6million bread manufacturing expansion program to meet increased demand of bread. They are investing in another new production line adding another 2000000 loaves per day capacity. Gardenia launch Pedi cart for those who wish to venture in micro-entrepreneurship. It provides opportunity for individuals, families, housewives, others wanting to start a business can have a change venturing in this profitable project .

2.5.4 Threat

Unfortunately, the developments are driving the threat of a possible over saturation of the market, as mainstream retailers are beginning offer more variety of bread like the bakery shop or others related Bread Company. Unstable of economical is the major threat for Gardenia. It affects the pricing and the consumption of consumer.

3.0 Strategy Formulation

Gardenia will keep position their product as a high quality and freshness product as well as become consumer focused and customer only choice. Gardenia is focusing the guideline such as “Our Quality Guarantee” and “Customer Deserve the Best”. All Gardenia products are made from the finest quality ingredients to deliver highest value for every day. Gardenia gain the competitive advantages that using high-tech manufacturing machine and carries the quality and freshness guarantee of Gardenia product.

3.1 Core Competency of Gardenia

Gardenias become the bread leader not just because of the high quality product. It become top-bread maker because gardenia have develop the new plant manufacturing machine and keep come out with better formulation of produce bread. Gardenia core products will be very beneficial especially in terms of quality, nutrition, health, hygiene and most important consumer believe and satisfaction. Besides that, Gardenia’s pillars of success continue to be guided by its four ingredients of success namely:

Product

The best quality products made with premium ingredients and good formulas

Plant

Using the high tech state-of-art-bread manufacturing machine.

Process

Running on an internationally develop process. High supervision process to monitoring the process.

People

A dynamic organization made up of people with an untiring passion for consumer orientation.Besides that, Gardenia established a suitable strong brand, which gained attention of the target market.

3.2 Porter Five Forces

3.2.1 The Threat of New Entrants

In these high competitive industry, there are a lot possibility that new competitor enter to the industry. Indirectly, new entrants to industry will lead threat that might decreasing level of customer loyalty and will be highly competition in between. Capital requirement for investment in bread industry in purchasing those raw material and machinery before the entrant could begin selling the product. In additional, certain market share need to be capture for the new entrant before it could reap the necessary economies of scales to allow it with rival firm. Gardenias produce affordable products and enjoy the economies of scales to compete effectively. Gardenias enjoy fairly high product differentiation whereby retailers prefer of brand recognition and customer loyalty. Therefore, it results harder for new entrants to enter the market.

3.2.2The Bargaining power of buyers

Economic recovery has a strong consumption back in this year. The individual does not influence much to bakery industry. Gardenia main buyers are like hypermarket and retailers which pay lots for every year. Therefore, bargaining power is low due to a lots distributor getting resources (bread product) from Gardenia and selling it to end-user. The product for Gardenia is differentiated base on the quality. Buyers are not easy to always find alternative suppliers. In relation to buyer power in Gardenia industry seeks to enhance customer loyalty in focusing existing relationships and trying maintaining in long-term relationships with buyers.

3.2.3 The bargaining power of suppliers

Suppliers of Gardenia have a great bargaining power especially for those monopoly products. For example, flour is the main raw material in producing bread. Due to there are few substitutes to their product. Therefore, the bargaining power will on the other side.

3.2.4 The threat of substitute product and service

The threat of substitute for Gardenia product is high within the industry. Consumer is looking for bread with attracting topping and decoration. For example, those bakery shop usually providing filling bread and attractiveness bread which meet the expectation of customer. Besides that, other industry such as fast food also providing breakfast value which meal serve with bread. It becomes a threat to the Gardenia.

3.2.5 Rivalry

Gardenia’s operates in a highly competitive industry. Some of the competitor are by low priced confectionery producers which are small family-run businesses whereby producing bread that are sold in the neighbourhood which called small-scale production for the local market. On the other hand, a few large competitors such as Golden Donuts, Inc or Red Ribbon Bake Shop, Inc also produce affordable products.

Baking of bread, cakes, pastries, pie and similar “perishable” bakery products

Company

Sales

End-use channels

Production

Red Ribbon Bake shop Inc

36,714

Retail

3 (Philippines)

Gardenia Bakeries Philippines

28,143

Retail

1 (Philippines)

Golden Donuts, Inc

21,286

Retail

1 (Philippines)

Table: Baking industry

3.3 Resources

The resource-based view (RBV) of the firm is ability of a firm’s resources to achieve the competitive advantages. The competitive advantages required to be capabilities and hard to be duplicate by competitor. Gardenia having lots competitive advantages which adding the strength and capabilities.

Tangible resources

Physical

Modern plant facilities

Manufacturing located which near with good water supply

JIT inventory control system

Technological

State-of-the- art manufacturing machinery and equipment

Untouched by human hands from beginning to end of the process

With innovative and unique production processes

Patents, copyrights, trademarks

Organizational

Effective strategic planning with international processes

Effective and efficiency evaluation and excellent control system

Intangible resources

Human

Experience and high productivity employees

Capabilities employees

Believe on people key of success

Excellent managerial skills

Innovation and creativity reputation

Good brand name

Reputation in between customer for quality and reliability

Reputation in between supplier.

Organisational capabilities

Provide outstanding customer services

High quality product development capabilities

Ability hire right people in right position and motivate them

3.4 Value Chain Analysis of Gardenia

Secondary Activities

Primary Activities

3.5 Source of cost efficiency

3.5.1 Economy of scale

Manufacturing of Gardenia is high due to using modern large scale state-of-art-plant machinery in producing product. Whole processing is under control by advance-technology and the processes are without human touch had been decrease the risk of damage product. High capacity increases the volume of output and able to get maximum product in minimum time using. It is save the produce time and save cost.

3.5.2 Experience

Gardenia has been develop and serving consumer since 1978 whereby start as a small-store bakery, with help by experienced American baker. After that, Gardenia changes to commercial bakery which expanding to other countries. As the bread leader, Gardenia keep on develop the formulas for making bread and using high-tech equipment in producing. Besides that, Gardenia is continuing to change the taste of bread and producing healthy product which need the demand of consumer.

3.5.3 Product design

Gardenia’s using unique packaging which attracting consumer. First company using G-lock had gain the competitive advantage. Besides that, G-lock has a specific whereby let the consumer know when the baked for. Gardenia changed packaging from being boxed-like packaging to colourful labels. It standing out when displays on shelves and become popular among consumer.

3.6 BCGMatrix

3.6.1 Stars

The stars are representing the high relative market share and high market growth. Most Gardenia products are in stars business due to their popular and high quality of products. In order word, Gardenia meets the needs and wants of consumer which looking for healthy lifestyle. Gardenia major product categories as star business whereby providing nutrients and freshness product.

3.6.2 Question marks

The product in high growth industry but having relatively weak market share will fall in question marks. Gardenia is launching new product to meet the market. For example, new products like Gardenia muffins which with the mission “A taste of England in Your home”. Gardenia muffins are another winning choice in quality baked-good as well as an innovative line.

3.6.3 Cash cows

The product in high market shares in low growth industry such as snack product. Gardenia’s company has to take measures and develop to make this product become stars business in order to maintain as bread leader.

3.6.4 Dogs

Gardenia does not have the product whereby with weak market shares in low growth industries.

3. 7 Product life cycle

Introduction

Growth

Maturity

Decline

Gardenia’s Australia

Gardenia’s Malaysia Gardenia’s Singapore

Gardenia’s Philippine non-food product

Product

sales

Time

Product life cycle

The product life cycle use to analyse the development. It divides to four stages: Introduction, Growth, maturity, and decline. Gardenia is a leader of bread maker, the sales of the bread also high. Gardenia has developed in few countries such Malaysia, Indonesia and Philippines. Based on the life cycle above, the Gardenia’s Philippine is categorising as introduction stage. By using high-tech manufacturing plant, it gains as first mover advantages. It will continue to grow and produce innovation product. Gardenia’s Malaysia, Gardenia’ Singapore and Gardenia’s Australia categorise in growth stage and maturity stage. Meaning, the business in the growth stage sales gain rapidly as the market grows. For example, Gardenia’s Australia had relocated to bigger and more modern one of factory whereby handle larger orders and broaden the customer base. Non-food product are in dogs business whereby hive off at the market. They concentrate on expanding the food business.

3.8 TOWS matrix

After analyse SWOT analysis, TOWS matrix then need to be analysis.

SO (strength opportunity)

Increasing the innovation product and develop good formulation to produce high quality which meets the demands. They have to ensure the raw material reach the level of requirement and using best resource to produce freshness, good quality and healthy products. Consumers are looking to outlook of the product. Therefore, innovation of packaging use to target market need to be improve. Besides that, they have to expand the networks distribution whereby up to standard and meet consumer expectation.

WO (weakness opportunity)

Selecting of raw materials need to be strictly. For example, few years ago when found the badness of melamine. Gardenia does only get the milk from Austria and New Zealand not from China. Besides that, as growing of health lifestyle habit, they have to increase the nutrient of product and ability to be expanding.

ST (strength threat)

Introduce new technology for quality assurance and better productivity. Other than that, invest more capital in business and maintaining the performance and trusted of consumer. Therefore, bakery shop would not be the threat for Gardenia for the future.

WT (weakness threat)

Experiment the other resources whereby can replace flour as the main material. Motivated every process of the production ensures zero error occurs.

4.0 Strategy Implementation

4.1 Growth strategy

Gardenia is doing things differently compare with others industry. They are even doing things much better. Therefore, it is the key whereby to achieving market penetration faster and with high affects. It is increasing market share in bread industry. Besides that, Gardenia plans to expand and construct a Gardenia bakery not just in term on to be the premier company, as well as related to food and beverage industries. In additional, Gardenia has product development such as snacks, muffin, and filling bun to sell in the market.

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4.2 Gardenia International

As today’s global marketplace, Gardenia realised the importance of raising the quality of goods and services. Bread is an essential food item in the markets whereby operate by Gardenia. It proves by the sales whereby the top bread seller and do not expect any significant drop in demand. Gardenia international won the top place in the list of the Fastest 50 companies in Singapore in 2008. By international quality ensuring, Gardenia refer to high quality management practices across the country. They are accommodating to the different various markets in term of culture, diversification and priorities (Kim and Chang, 1995). Especially in this new generation, consumer looks for high quality demand and nutrient expectation. Via a global network, Gardenia takes advantages in differences of countries’ economic and technological capabilities. In 1996, Gardenia International only emerged after QAF, the listed company that own gardenia decided to restructure.

4.3 International environment Condition

In order to expanding Gardenia, many issues require to identify. International environment consists four major categories: socio-cultural, political-legal, economic, and educational. Gardenia emphasizes long term orientation and closes coordination with suppliers as well as work closely with human resources and commitment with employees.

As international competition increases, cost, quality and competitive become much more interdependent (Naidu et al., 1996) . Gardenia is strictly examined their quality strategies and practising. Below is the outline of Dimension of international environment and quality control management for Gardenia.

Environment condition

Information and analysis

Human resource development and management

Management quality

Leadership and strategic quality planning

Quality and operational results

customer focus and satisfaction

4.4 International Sales Subsidiary

Gardenia established first in Singapore, after the development, it expand to broader such as example Malaysia, Philippine, Thailand and so on. Gardenia owes an overseas manufacturing plant. They invest in plant, machinery and labour in the over sea market. For example, new unveil plants was been developed in Philippine. It is able increasing the producing and as well as ensuring quality product. Gardenia is continuing get know the local market and be able to produce suitable products and services to the needs of local customer. As example, the taste of food for Filipino consumer is more to savoury. Therefore, Gardenia is changing the formulation of product and produce product which accept by consumer.

4.5 Challenging in international market of Gardenia

Gardenia leading packaged sandwich Loaf Company in Singapore, Malaysia and the Philippines. It had capturing at least 75 per cent of market share in these three countries. Gardenia moved according consumer demands over the years. Over the years, Gardenia apparent focus on their nutritional information and commitment to quality baked goods in order to growth. Gardenia global bakery arm- Gardenia International, a group of bakery companies in Malaysia, Philippines and Australia and Bonjour Bakery in Singapore- Leads the pack in this year’s Fastest Growing awards ( Lynn kan, 2008)

Gardenia is keep go beyond just offering their ‘core-product’, the sandwich loaf. In 2004, Gardenia international bought over sole proprietorship called Baker Masion which specialised in par-baked goods. It is challenging for Gardenia international turn the business focusing from producing just ‘ ready-for-consumption’ packaged bread loaves for those retail market. Recently, Gardenia International’s sales in Australia have doubled. A high opportunity for Gardenia International goes beyond the high competitive industry.