MANILA - Filipino brand Go Nuts Donuts is tying up with Vietnam's Highlands Coffee so they can take on bigger rivals.
In a briefing on Tuesday, Tina Trillana-Lagdameo, owner and marketing manager of The Donut People Inc, said the company has partnered with Highlands Coffee to "capitalize on the numerous synergies between the two companies." Part of this is selling Go Nuts Donuts in the cafe chain.
Go Nuts Donuts is owned by the De Ocampo and Trillana families, who introduced Coney Island Ice Cream and Whammos in the Philippine market. IP Ventures Group owns the master franchise of Highlands Coffee and bought 40 percent of the donut company in June last year.
According to Lagdameo, their unique value proposition is they know the Filipino palate, since her maternal family has been in the food business for 30 years.
Aside from this, Go Nuts Donuts are priced lower than the competition but "not that cheap" as not to be in the same league as its foreign counterparts.
Prior to Go Nuts Donuts' entry in December 2003, the market was dominated by Mister Donut and Dunkin' Donuts, both American brands. Ten years after, Go Nuts Donuts' competitors now include Krispy Kreme, another American brand, and J.Co Donuts of Indonesia.
When flour prices went up a couple of years ago, Go Nuts Donuts decided to absorb the pain and let margins take the hit rather than hike prices. Thankfully, flour prices have stabilized and the company has kept its prices steady for two years, Lagdameo said.
"Our customers are price-sensitive and if we increase our price, there would be some kind of fallout," she said, adding that the company plans to keep to the broad B market.
This is the same value proposition that Highlands Coffee offers. Michael N. Lacy, IP Ventures Inc Retail Group chief executive advisor, said the best arabica coffee from Brazil is four times the price of the best robusta coffee from Vietnam.
Vietnam now is the second-biggest coffee producer in the world after Brazil.
"Because it is grown in Asia, the cost of importing it to the Philippines is substantially less. That means we win on quality and we win on price," Lacy said. This would be more pronounced once the Asean economic integration starts by 2015, which would spell lower tariffs on commodities coming from the Philippines' neighbors.
Some of Highlands Coffee's competitors source their coffee from different parts of the world, which makes their prices variable, Lacy said. A no-frills latte from Highlands Coffee is under a hundred pesos, at least P10 cheaper than rivals.
Drinking high-end coffee is aspirational and some would go to coffee shops to relax and to check emails. Lacy said just going into the coffee shop to do that is a product in itself, just like what some of Highlands Coffee's competitors offer. To trump that, Highlands Coffee is offering free Internet courtesy of its sister company, Netopia, the country's biggest Internet cafe network.
Aside from Go Nuts Donuts, Highlands Coffee would also be offering other food products in the next six months so customers can have a wider range of choices depending on the time of the day. They intend to go 24/7 in some of its branches where there are business process outsourcing firms nearby, such as in Alphaland Southgate Tower in Makati.
The coffee company now has 10 stores and would be opening at least six Highlands Coffee-Netopia hybrid stores nationwide this year, some in Cebu, Davao and Cagayan de Oro. For Go Nuts Donuts, at least six stand-alone stores are in the pipeline, most in Luzon.
To keep it edge over its foreign competitors, Highlands Coffee would be opening stores in places "where there won't be Starbucks in it," Lacy said.
He said Highlands Coffee is strong in "unlikely" places such as Lucena City, where the company already has two branches. He said the Philippines may look saturated with coffee shops but it still has enough room to grow. In the US, a person goes in a coffee shop an average of 17 times a month while in the Philippines it is only four times a month.
Go Nuts Donuts and Highlands Coffee are banking on the robust consumer spending and the fast economic growth so Filipinos can afford luxuries such as high-end beverages and impulse purchases, as Lagdameo calls it.
In the next five years, Go Nuts Donuts intends to have 50 branches nationwide while IP Ventures would like to increase its stores from 200 across all brands (Highlands Coffee, Kitaro, Netopia) to 1,000.
source: interaksyon.com
