CHAPTER 2

The Marketing Aspect

This part is considered as the most important part in conducting a

feasibility study because the success or failure of the business lies in the

results of the study in this chapter.

Objectives:

1. To find out the possible opportunities and threats of the proposed

business

2. To know the external issues that could affect the establishment of

the business

3. To determine the current demand and supply conditions in the

market

4. To analyze the demand and supply gap

5. To identify the expected buyers/consumers of the proposed product

6. To learn the proposed marketing strategy as to product, price,

place and promotion

7. To interpret the results of the survey conducted by the proponents

Industry Analysis

This part consists of the factors affecting the proposed business

which includes opportunity and threats and environmental analysis.

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Opportunity and Threat Analysis

In starting a business, there are a lot of factors and areas that need

to be considered and analyzed because for these could affect the

operation of the business during the time of operation and in the future.

Therefore, the proponents came up with the following projected

opportunities and the threats:

Opportunities:

1. Geographic Market. The place of selling could be a place where

people usually buy the proposed product.

2. Technological Advances. There can be more advanced technology

that can be used in the business such as in the promotional and

production areas.

3. Changing Consumer lifestyles. Consumers could not be consistent

with their preferences.

4. Ineffective Competitors. The business could take advantage of the

market vacated by ineffective competitors.

5. Good Feedback from Consumers. Good feedbacks from

consumers mean good profit margins.

6. Changes in Population. Increase in population in the area of selling

could increase profit.

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Threats:

1. Competition. The business might engage in competition with

companies in the same line of business.

2. Buying preferences of the consumers. A well-known brand could

defeat the product that the business is selling.

3. Cost of Technology Investment. Technologies that could help the

business might be expensive.

4. Price Wars. The price that competitors declare might be lower than

the business’ price making consumers patronize competitor’s

products.

5. Economic Crisis. Crisis in the economy will affect the business

status.

Environmental Analysis

This part includes the external forces that could affect the business

operations. These are the Demographic, Economic, Natural,

Technological and Political Environments.

Demographic Environment

Parañaque is composed of several shopping malls, convenience

stores, groceries, and retail stores. In addition to the population which is

around 564,247, people from other places visit Parañaque because of its

numerous commercial districts making it the perfect place for distributing

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coffee to various retailers. Since a lot of people here are employed, coffee,

which serves as a stimulant, is suited to their lifestyle. The target

consumers of the intended business are those who are 17 years old and

above since it is not advisable for children to drink coffee.

Economic Environment

The year-on-year headline inflation rate in the Philippines jumped to

a double-digit figure of 11.4 percent in June from 9.5 percent in May. This

was the highest rate since May 1994 (11.5%).

The country has emerged as one of the rapidly growing food and

drinks industries in the Asian region over the recent past. The country is

characterized by various factors, such as its growing young affluent

population and rising consumer awareness regarding health and safety

concerns. With these factors, the demand for health food and drinks is

surging high.

Natural Environment

There is a substantial supply of raw materials needed for the

production of ginseng coffee tablets. Coffee beans and ginseng are the

main components of the product. Electricity would be required for the

grinding of coffee beans. Aside from that, the business promotes waste

reducing and recycling.

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Political Environment

There are government policies and requirements that are essential

to establish the proposed business venture legally. These include the

registration of business name with the Securities and Exchange

Commission (SEC) as well as the clearance from the barangay within the

business location. It is also important to have a duly-notarized lease

contract if the place of the business is rented. Business taxes that will be

paid annually and business permits such as the sanitary permit for health

and sanitation purposes, and fire clearance affect the operations of the

business.

Market Analysis

This part identifies if there is a potential market for the proposed

business by measuring the demand and supply quantum.

Demand Conditions

These are the data needed in determining the demand for coffee tablet

and determine whether the majority of people will buy it.

1. The area of distribution would be in Baclaran, Parañaque City

2. Total participants would be the sample size of the area’s population

based on the Sloven’s formula which is 400, resulted to 191 male

and 209 female.

3. The respondent’s age majority is from 26 to 35 years old.

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4. The average income or allowance is 10,000 - 20,000 pesos a

month.

5. An average of two cups was able to consume by the consumers in

one day.

6. The respondent’s average spending in coffee is below 20 pesos.

7. The consumers were willing to buy a coffee ginseng tablet in a

below 20 pesos price.

Supply Conditions

There are several factors that may affect the supply of the proposed

product. These are the following factors:

1. There should be elasticity on the supply of the proposed product.

2. There are 34 establishments or stores in the area of Baclaran

which sell other brands of coffee that can be potentially supplied by

the proposed product. These establishments are as follows:

21. Dynapharm, Inc,

22. Supermarket

23. 7-11 Convenience Store

24. Mini Stop Convenience Store

25. SM HyperMarket (Mall of Asia)

26. Mc Donald’s

27. Dunkin’ Donuts

28. Jollibee

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29. Tropical Hut Hamburger

210. Long Chang Chinese Drug Store

211. Flores Market (No.1 Bagong Ilog St. Baclaran)

212. Bertulano Jr. Sari- Sari Store

213. Mercury Drug

214. South Star Drug

215. V&M Superette

216. Ruthland Emporium and Supermart

217. 10Q Convenience Store

218. Happiness Chinese Drug Store

219. Excel Chinese Drug Store

220. Baclaran Chinese Drug Store

221. San Miguel Food Shop

222. NC Sizzling Café

223. Heinkel Commercial (5 Taft Ave. Ext. Baclaran)

224. Niño’s Tapsi

225. Quizon Sari- Sari Store

226. Heydie Store

227. Wokking Food Haus

228. 2 Star Mami House

229. Agapito Bread House

230. Mary Jane Store

231. Ate Luz Store

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232. Lolo Tinong’s Bakery

233. Panaderia de Madre Maria

234. Leoj Café

3. The price of the proposed product must be competitive enough

against the price of other coffee brands.

4. The supply should meet the demand of the proposed product.

5. Economic threat such as increase in food prices and inflation will

have impact on the supply of the proposed product.

6. A large competition in coffee industry may also affect the supply of

the proposed product.

Measurement of Demand and Supply Quantum

A. Annual Demand

a. Parañaque City Population: 564,247

b. Population 564,247

- 31% thereof 174,917

Net Potential Market 389,330

Potential Income per cup of coffee based on survey P 10

c. Monthly Spending on Coffee

P10 x 389,330 P 3,893,300

d. Multiply: Annual buying frequency 15

e. Annual Spending on Coffee P 58,399,500

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f. Divide: Average price of Ginseng Coffee Tablets P 10

g. ANNUAL DEMAND FOR COFFEE

5,839,950 output of coffee

B. Annual Supply

a. Monthly sales of Coffee P 76,650

Multiply: Months in one year 12

Annual sales of Coffee P 919, 800

b. Multiply: Number of sellers of Coffee 34

in the proposed business location

c. Annual Supply of Coffee in pesos P 31,273,200

d. Divide: Average price of Coffee P8

e. ANNUAL SUPPLY OF COFFEE

3,909,150 output of coffee

C. The Demand and Supply Gap

Annual Demand - Annual Supply = Demand - Supply Gap

5,839,950 - 3,909,150 = 1,930,800

The Marketing Program

This part includes the four marketing mix components (4 P’s) that

the proponents plan based on the survey questionnaires conducted

among the respondents.

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The Proposed Target Market

The target market for the proposed product are males and females

who are 26 to 35 years old, single or married, with hectic schedule and

who drink coffee as part of breakfast and want to be refreshed, who

belong to middle to upper-income families, and seek affordability and

healthiness in buying coffee products.

Product Strategy

The product brand name “Kingly” was conceptualized because its

special component, which is ginseng, is considered as the “king of herbal

medicine” for its health benefits and coffee as the most consumed

beverage globally.

FIGURE 2.1Product Name

The product logo signifies royalty; the crown shows supremacy

since coffee is the most popular drink and ginseng is the king of all herbal

medicines. The red color symbolizes energy derived from the drink. The

golden yellow implies good health, relaxation and enjoyment which can be

achieved while and after drinking ginseng coffee.

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FIGURE 2.2Product Logo

The product is composed of coffee, ginseng powder, creamer and

sugar. The composition is grinded and blended thoroughly to achieve a

fine texture. The finished product is circle in shape and has a dark brown

color. To consume the product, the tablet must be dissolved in hot water.

To make iced coffee, simply add ice after dissolving the tablet in hot water.

The features of the product aside from its health benefits are:

mess-free because it is in tablet form; easy to mix, because it easily

dissolves in hot water; and handy, since its package is in a bottle and

convenient to use anywhere.

Price Strategy

In order for the proponents to easily penetrate the market, the price

of the product was set in such a way that people even in the lowest

bracket can afford to buy the product.

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The following are the materials used in the product including their

monetary equivalent per grams:

Price of the product per tablet:

Coffee (2 grams) P 1.42

White Sugar (8.25 grams) P 0.30

Coffee Creamer (5 grams) P 0.99

Ginseng Powder (3 grams) P 2.50

Wrapper P 0.64

Total Cost per tablet P5.85

+Labor and Overhead Cost P1.09

+ 30% Markup Price P 2.08

Selling Price per Tablet P 9.02

Price of the product per bottle:

Coffee (20 grams) P 14.20

White Sugar (82.50 grams) P 3.00

Coffee Creamer (50 grams) P 9.90

Ginseng Powder (30 grams) P 25.00

Wrapper P 6.40

Bottle P 9.30

Total Cost per bottle P67.80

+Labor and Overhead Cost P10.90

+ 30% Markup Price P 23.61

MANUFACTURERBUYER

SELLER

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Selling Price per Bottle P 102.31

Place Strategy

The manufacturing and business office will be located at 788 A.

Guarra St. Baclaran, Parañaque City. This will be easier for the

manufacturer to acquire the raw materials for production and to distribute

the product since the location is a place for market and have many

potential establishments which manufacturers can supply with the product.

The product will be offered primarily into retailers, leading

supermarkets and department stores such as SM Hypermarket, YDM

Supermarket, and alike along Baclaran area to test the market of the

product, but as soon as the market will grow and the business will have a

larger capital to distribute the product in other areas in Metro Manila and in

rural places. The manufacturer will act as a Direct Supplier to the Retailers

and Retailers will act as a direct seller to the buyers. The distribution

channel is shown in the figure below.

FIGURE 2.3Product Distribution Channel

Promotion Strategy

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The proponents decided to promote the product with the use of

advertisement, specifically flyers and product taste sampling. Advertising

is the most effective way for the product to be recognized and patronized

by the market. The flyers will be distributed in the market areas because of

high market potential. The method is chosen because of its low cost

compared to the other advertising methods and yet as nearly efficient.

(See attached sample flyer)

The proponents also have a product taste sampling on the first

week of the operations of the business to arouse interest for consumers to

try the product. The proponents believe that if the consumers had a

firsthand experience on the product, the more interested they will be.

The proponents did not choose television, radio and newspaper

advertising due to heavy expenses. They would rather increase the

expenses in developing the physical product to improve its quality rather

than promote it in an expensive way because in the long run, the quality

will be more noted by the consumer.

Given only a mere 1 million pesos for capital, paying for a TV or

radio company to promote the product is impossible.

FIGURE 2.4SAMPLE FLYER (FRONT)

FIGURE 2.5SAMPLE FLYER (BACK)

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The crown and shield represent an idea from the royalty in the

middle ages which basically means “quality” and “elegance”. The circular

stains in the background are actually remainders of coffee when one lifts

the coffee from a placemat or a platter. The coffee stains symbolize

abundance because no matter how much coffee you drink; there will still

be remains which are of course outside the cup. The slogan “Experience

the taste of royalty” means that the coffee that the consumer is about to

drink is a choice of a king or queen. But still, given its ROYAL quality, the

price still suits even a pauper. In short, this drink is for everyone. The two

irregular shapes on bottom edges of the flyer represent the Ginseng root

which is the main ingredient of the product.

Presentation, Analysis and Interpretation of Data

This part presents, analyzes and interprets the data gathered

based on the survey questionnaires.

TABLE 2.1Frequency Distribution of Gender

Table 2.1 shows that 191 or 47.75% of the respondents were male

and 209 or 52.25% were female.

CHOICES FREQUENCY PERCENTAGEMale 191 47.75

Female 209 52.25TOTAL 400 100.00

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It is evident that out of 400 respondents 209 or 52.25 % of them

were females.

TABLE 2.2Frequency Distribution as to Age of Respondents

Table 2.2 shows that 129 out of 400 or 32.25% of the respondents

were in the age range of 26 to 35 years old, 119 or 29.75% were in the

range of 18 to 25 years old, 81 or 20.25% were in the range of 36 to 50

years old, 44 or 11% were below 18 years old, and 27 or 6.75% were

above 50 years old.

Based on Table 2.2, it is apparent that there is a close match

between the age range of 18-25 years old and 26-35 years old, with

frequencies of 119 and 129 respondents respectively.

CHOICES FREQUENCY PERCENTAGEBelow 18 44 11.00

18-25 119 29.7526-35 129 32.2536-50 81 20.25

Above 50 27 6.75TOTAL 400 100.00

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TABLE 2.3Frequency Distribution as to Monthly Income

Table 2.3 shows that 120 or 30% of the respondents earned a

monthly income of below P5,000, 65 or 16% earned P5,000 – P10,000,

120 or 30% earned P10,001 - P20,000, 55 or 14% earned P20,001 -

P30,000, 26 or 6% earned P30,001 - P40,000 and 14 or 4% of the

respondents earned above P40,000.

Based on Table 2.3 it is evident that 120 or 30% of the respondents

earned a monthly income of P5, 000.

CHOICES FREQUENCY PERCENTAGEBelow P5,000 120 30.00

P5,001-P10,000 65 16.25P10,0001-P20,000 120 30.00P20,001-P30,000 55 13.75

P30,0001-P40,000 26 6.50Above P40,000 14 3.50

TOTAL 400 100.00

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TABLE 2.4Frequency Distribution as to Occupation of Respondents

Table 2.4 illustrates the occupations of the respondents. It shows

that 175 out of 400 or 43.75% of the respondents were employees, 103 or

25.75% were students, 60 or 15% were businessmen, 42 or 10.50% were

housewives, and 20 or 5% were those who had a different line of work.

Based on Table 2.4, it is clear that 43.75% of the respondents were

employees with a frequency of 175.

CHOICES FREQUENCY PERCENTAGEBusinessman 60 15.00

Employee 175 43.75Housewife 42 10.50

Student 103 25.75Others 20 5.00TOTAL 400 100.00

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TABLE 2.5Frequency Distribution as to Number of Cups of Coffee Drank Daily

Table 2.5 shows that 134 or 33.50% of respondents drank 1 cup of

coffee in a day, 156 or 39.00% drank 2 cups of coffee, 68 or 17.00% drank

3 cups of coffee, 18 or 4.50% drank 4 cups of coffee, 9 or 2.25% drank 5

cups of coffee, and 15 or 3.75 drank more than 5 cups of coffee.

Based on Table 2.5, it is evident that most drank 2 cups of coffee

daily having a frequency of 156 or 39.00% out of 400 respondents.

CHOICES FREQUENCY PERCENTAGE1 134 33.502 156 39.003 68 17.004 18 4.505 9 2.25

More than 5 15 3.75TOTAL 400 100.00

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TABLE 2.6Frequency Distribution as to Package of Coffee Purchased

CHOICES FREQUENCY PERCENTAGEBottle 67 16.75Cup 55 13.75Pack 122 30.50

Sachet 155 38.75Others 1 0.25TOTAL 400 100.00

Table 2.6 shows that 67 or 16.75% of respondents chose to buy

coffee in a bottle as to package, 55 or 13.75% chose in a cup, 122 or

30.50% chose in a pack, 155 or 38.75% choose sachet, and 1 or 0.25%

chose others.

Based on Table 2.6, it is clear that the most preferred package of

coffee to buy is sachet, with a frequency of 155 or 38.75% of the total

respondents.

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TABLE 2.7Frequency Distribution as to Consumption of Regular Coffee

Bottles in one year

Table 2.7 shows that 44 or 11% of the respondents bought 1-2

regular coffee bottles in one year, 73 or 18.25% bought 3-4 bottles of

regular coffee, 86 or 21.50% bought 5-6 bottles, 46 or 11.50% bought 7-8

bottles, 31 or 7.75% bought 9-10 bottles of coffee, and 120 or 30% bought

more than 10 bottles of regular coffee.

CHOICES FREQUENCY PERCENTAGE1-2 44 11.003-4 73 18.255-6 86 21.507-8 46 11.50

9-10 31 7.75More than 10 120 30.00

TOTAL 400 100.00

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Based on Table 2.7, it shows that most bought more than 10

regular bottles of coffee having a frequency of 120 or 30% respondents

out of 400 total.

TABLE 2.8Frequency Distribution as to Reasons of Drinking Coffee

CHOICES FREQUENCY PERCENTAGEHealth benefits 50 12.50

Part of daily routine 176 44.00Stimulant 166 41.50

Others 8 2.00TOTAL 400 100.00

Table 2.8 shows that 50 or 12.50% of the respondents drank coffee

for health benefits, 176 or 44% drank coffee as part of daily routine, 166 or

41.50% drank coffee as a stimulant, 8 or 2% chose others.

Based on Table 2.8, it shows that most respondents drank coffee

as part of their daily routine having a frequency of 176 or 44%

respondents out of 400 in total.

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TABLE 2.9Frequency Distribution as to Blend/Flavor of Coffee Preferred by

Respondents

Table 2.9 shows that 30 or 7.50% of respondents preferred brewed

coffee, 55 or 13.75% preferred cappuccino, 93 or 23.25% preferred

regular coffee, 55 or 13.75% preferred strong or black coffee, 161 or

40.25% preferred 3-in-1 coffee, and 6 or 1.5% prefer other blends of

coffee.

Based on Table 2.9, it shows that most people preferred 3-in-1

coffee, with a frequency of 161 or 40.25%.

CHOICES FREQUENCY PERCENTAGEBrewed 30 7.50

Cappuccino 55 13.75Regular 93 23.25

Strong/Black 55 13.753-in-1 161 40.25Others 6 1.50TOTAL 400 100.00

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TABLE 2.10Frequency Distribution as to Money Spent for a Regular

Bottle of Coffee

Table 2.10 shows that 174 or 43.50% of respondents spent below

P20 for a regular bottle of coffee, 101 or 25.25% spent P20 – P40, 79 or

19.75% spend P41 – P60, and 46 or 11.50% spent above P60.

Based on Table 2.8, it clearly states that most people spend below

P20 for a regular bottle of coffee, with a frequency of 174 or 43.50%.

CHOICES FREQUENCY PERCENTAGEBelow P20 174 43.50P20 – P40 101 25.25P41 – P60 79 19.75Above P60 46 11.50

TOTAL 400 100.00

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TABLE 2.11Frequency Distribution as to Place of Coffee Purchase

Choices Frequency PercentageCoffee Shops (Starbucks, Figaro, etc) 36 9.00

Convenience Stores 70 17.50Groceries/ Supermarkets 187 46.75

Sari-Sari Stores 104 26.00Others 3 00.75TOTAL 400 100.00

Table 2.11 shows that respondents usually brought in groceries

and supermarkets with 46.75%. Second to the rank are the small sari-sari

stores with a percentage of 26.00. Next, having a percentage of 17.50 are

the convenience stores. Fourth, are the coffee shops with a percentage of

9.00 and .75% of respondents who answered Others.

Table 2.11 clearly states that the places where people often bought

coffee were in groceries or supermarkets.

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TABLE 2.12

Frequency Distribution as to Factors Considered in Buying Coffee

Choices Frequency PercentageAdvertisements 37 09.25

Brand 125 31.25Family/ Relatives 57 14.25

Friends/ Colleagues 32 08.00Packaging 15 03.75

Price 101 25.25Taste 280 70.00Others 1 00.25

Table 2.12 illustrates the respondents’ frequency and percentage of

factors considered in buying coffee, Taste was the highest in figure with a

percentage of 70.00. Next to it was the brand with a percentage of 31.25.

With 25.25%, the price is in the third rank. Next was their family and

relatives with a percentage of 14.25. Followed by Advertisements, friends

and colleagues and packaging with their percentage of 09.25, 08.00 and

03.75 respectively.

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Based on Table 2.12, it shows that majority of the respondents

considered taste in buying coffee.

TABLE 2.13Frequency Distribution as to Willingness to buy Ginseng Coffee

Tablets

Table 2.13 shows that 328 or 82% respondents were interested in

buying ginseng coffee tablets and 72 or 18% were not.

Based on Table 2.13, majority of the respondents which is 328

(82%) were willing to buy ginseng coffee tablets.

CHOICES FREQUENCY PERCENTAGEYes 328 82.00No 72 18.00

TOTAL 400 100.00

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TABLE 2.14Frequency Distribution as to Willingness to spend on Ginseng

Coffee Tablets

Table 2.14 shows that 120 or 50% of the respondents wanted to

buy the lowest price possible which is below 20 pesos, 102 or 31% opted

for a range of P20-P40, 52 or 16% wanted P41-P60 and 9 or 3% preferred

the above P60 price.

It is concluded that below P20 is the most preferred because

comprising half of the entire 328 respondents who were interested in

buying ginseng coffee tablets.

CHOICES FREQUENCY PERCENTAGEBelow P20 165 50.00

P20-40 102 31.00P41-60 52 16.00

Above 60 9 3.00TOTAL 328 100.00