SELECTA
Selecta has captured the taste of the Filipinos since it challenged Magnolia’s domination of the bulk ice
cream market in 1993. In 1990, it only had one percent share of the ice cream market. Since then it has
become one of the leading brands in the ice cream industry.
Selecta attributed its success to its management focus on upgrading product quality, providing logistics
support, and giving proper marketing for the product to maximize its potential. It packaged and
marketed ice cream in a manner that a consumer feels regarded for buying the product. Selecta
capitalized on understanding the Filipino consumers, making this activity the center of all the work --from manufacturing to marketing.
Selecta’s management continued to believe that success is not destiny but a journey. With Magnolia and
Nestle revitalizing its efforts and some foreign brands penetrating the local market, Selecta had to find
ways to sustain market leadership and expansion.
The Philippine Ice Cream Industry
Ice cream is everyone’s favorite dessert. Ice cream is bought either for special occasions or everyday
refreshment. It knows no seasons and moods: it is a happy product, more often taken as a reward for
oneself for all sorts of reasons.
The ice cream industry caters to a flavor conscious market. Although some are brand-loyal, most
consumers look into, and discriminate among, available flavors. Those craving ice cream, when the
flavor they like is not available, easily switch to another flavor and/or brand just to satisfy their craving.
According to market research, 80 percent of Filipino consumers bought ice cream on impulse (they
bought only upon passing an ice cream scooping station, but without intention to buy at first); 98
percent ate ice cream in the comfort of their home; and 70 percent of the time, ice cream was an
afternoon snack. A report on consumer data for ice cream indicates its total market size as about
Php6.5B in 2010, with 25% of Filipinos buying ice cream thrice a year.
The leading players in the Philippines ice cream market are Unilever/RFM Corporation, San Miguel
Corporation and Nestle S.A. Selecta, Magnolia and Nestle are the leading brands. Arce is also a popular
brand. There are also foreign brands , and more recently artisanal brands. Four categories of ice cream
based on the classification of Euromonitor are artisanal ice cream, take-home ice cream, impulse ice
cream and frozen yogurt.
The market for ice cream in the Philippines increased at a compound annual growth rate of 3.6%
between 2004 and 2009. The take-home ice cream category led the ice cream market in the Philippines,
accounting for a share of 63.6%.

This case, especially those portions and facts pertaining to the early- to mid- 1990s, were based on the case
Selecta: Mixing the Right Ingredients for the Future” in Gutierrez, B., ed. Cases on Marketing Management in the
Philippines. University of the Philippines, 2002. Updates were drawn from various reports as cited in the
footnotes.
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Consumption of ice cream in the Philippines was concentrated within the Greater Manila area between
2004 and 2008, with 60% of total volume purchased there.
Products geared towards lower- and middle-income consumers have enjoyed recent success in 20092010. Nestlé embarked on the introduction of Nestlé Sorbetes which banks on the penchant of Filipinos
for unbranded home made sorbetes. This brand competes through its lower-pricing strategy of Ps100
per 1.6 litres. Meanwhile, responding to warm acceptance from buyers, Selecta’s Wall' maintained the
price of its Selecta 3-in-1 at PHP95 but increased volume by 33%.
The proliferation of smaller companies offering lower-priced branded products in the market has been
snatching sales from major brands especially in impulse ice cream. Other products such as icebergs
(sundaes, fruit shakes) are also eating up into the ice cream market.
Unilever/RFM the joint-venture between multinational Unilever and local company RFM Corp, maintains
its lead in ice cream in the local market. The company’s share is expected to reach 49% in 2013, as it
continued to push its Selecta variants both in impulse and take home ice cream. During 2012 and 2013
the company heavily promoted a new use for its Selecta Super Thick Ice Cream. Unilever RFM Ice Cream
encouraged consumers to make ice cream cake using this bulk dairy ice cream variant.1 The company’s
aggressive advertising campaign generated good interest amongst middle-income consumers, who
excitedly tried to make their own ice cream cake.
A distinctive feature of the ice cream market was its distribution system. Each ice cream brand carried
exclusive outlets. Unlike other consumer products, ice cream requires freezers. Ice cream companies
have to provide stores with freezers free of charge regardless of tore size. More freezers therefore
correspond to a higher market share. Besides, selling ice cream was costly because of the electricity
consumed. So normally, dealers, particularly the smaller ones were just content with carrying one
brand. Apart from the addition cost of electricity, the space constraint also posed a problem in
convincing them to carry a second, third or fourth brand.
Selecta
Selecta got its name from the Selecta Refreshment Parlor owned by Ramon Arce and his wife. The
place served sizzling tenderloin steak and other popular American dishes. However people flocked to
the parlor not for the meals but for its ice cream that came in three flavors: mantecado, macapuno and
ube.
The Selecta enterprise started in 19332 when Ramon Arce started pasteurizing carabao’s milk near his
home in Novaliches where carabaos were abundant. Arce began selling and distributing fresh milk in
bottles using the Selecta brand name to residences, restaurants and offices. Soon after, Arce and his
wife, Carmen, would come up with their own ice cream recipe made from carabao milk. These products
became the foundation of the family’s Selecta business, which later included the Selecta restaurants and
bakery. The Selecta business was continued by Arce’s children after his retirement in 1950. By the
1970s, Selecta’s carabao milk based ice cream and fresh milk became available in supermarkets. Its milk
was packaged in glass bottles while its ice cream was packaged in gold colored tin containers.
1
http://www.euromonitor.com/ice-cream-in-the-philippines/report
Unilever Philippines, Inc., the parent of Unilever RFM Ice Cream, Inc., would cite the brand’s foundation year as
1948.
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In 1990, RFM Corp., owned by the Concepcions bought the Selecta brand from the Arce family and
established Selecta Dairy Products, Inc. to take over the production of Selecta ice cream. Selecta was
then far behind in the ice cream industry along with their competitors --- Presto, Sorbetero, and Coney
Island. Under RFM ownership, the recipe of Selecta ice cream was improved and aggressively marketed,
posing a serious challenge to then market leader, Magnolia ice cream. RFM also introduced its own
Selecta milk products which were made from cow’s milk.
RFM relaunched Selecta to target the A and B and upper C markets. With strict adherence to quality and
RFM’s corporate philosophy, “to give nothing less than the consumer’s satisfaction and his money’s
worth --- Selecta Dairy Products Inc. came out with its success formula: a winning combination of a high
quality product, marketing innovation, modern production technology and a strong distribution
network.
In 1999, to complement its frozen novelties category and strengthen itself for competition, RFM teamed
up with Unilever, the largest ice cream company in the world to form Selecta Walls Incorporated. The
joint-venture proved to be a success and in 2000, Selecta defeated competition to become the national
ice cream leader. Unilever is the world’s largest ice cream company with an annual turnover of €5
billion.
Selecta went into the production of bulk ice cream and frozen novelties. Bulk ice cream, with around 30
flavors ranging from avocado, to ube constituted about 80 percent of the Company’s output. The
Company’s line included Classic, Supreme, Indulgence, and Hershey’s Collection. A fifth category,
Regional Flavors, was an innovative venture into the production of indigenous fruit flavors. The
Company came up with frozen novelties and more than a dozen type of pops, cones, and sundaes.
Frozen novelties constituted the remaining 20% of the company’s output.
Selecta ice cream comes in different flavors. There are several variants, the Gold, Creations, Moo,
Supreme, Classic, ice cream cones (Cornetto & Moo Cone) and ice cream stick Selecta also comes in
several sizes: 3.4L, 1.5L, 800ml & 750ml for Selecta creations & supreme, and 1.8L & 750ml for Moo
20. 7.
In 1994, Selecta signed a three-year exclusive agreement with Fun Characters Inc. to use Walt Dsiney
characters in promoting its ice cream products. This was part of an overall thrust to establish a stronger
presence in the frozen novelties market. In the same year, Selecta signed a three-year licensing
agreement with Hershey Foods International. The tie-up allowed Selecta to use Hershey’s popular brand
names for its ice cream products.
The company likewise entered into a three-year sponsorship agreement with Artrust Holdings, Inc.,
(AMI) in March 1995 under which Selecta-Hershey became the official ice cream of the part and the
Company paid AMI fees over three years for certain advertising, publicity and marketing activities of the
Enchanted Kingdom.
Selecta ice cream’s primary target market are kids aged 5-14, belonging to the BCD market with a
lifestyle of study, playing, and eating sweets in between, including ice cream if available. Family bonding
has been a recent theme of Selecta TV advertisements, appealing to children and young teens’ need for
belongingness.
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Fresh carabao’s milk from Bulacan, Nueva Ecija, and Pampanga were used in the production of Selecta
Dairy products. The Company ensured that the local fruits met quality standards, otherwise Selecta
sourced fruits abroad.
Selecta ice cream sold at par with what the main competition offered. Its products area were available
in shopping stores, supermarkets, groceries, and sari-sari stores. Selecta built its own scooping stations
in selected areas. Selecta was more noticeable in the Greater Manila area and in some key cities in the
country.
Television was used as the primary medium in reaching the target markets backed up by print,
merchandising and cinema. Campaigns included Chocollection, Classic Selection, Swirls and Twirls, etc.
Magnolia
Magnolia was the first in the country to produce ice cream in commercial quantity. In January 1955,
Magnolia introduced its Flavor of the Month (FOM) series with Swiss Mocah as the first FOM. Thus
began the Filipino consumers’ monthly love affair with Magnolia. Until today, the Filipino consumer is
treated to exciting flavor combinations month after month. Vloum-wise, Magnoila has thus far sold over
20 million gallons of FOM ice cream since its initial launching.
Magnolia was the pioneer in the development of tropical flavored ice cream such as ube, macapuno,
mango and durian. These flavors gained acceptance in the local market and were fast capturing the AsiaPacific market as well.
The Company’s ice cream facilities were the first ice cream plants in the Philippines to meet quality
system standards set by the International Standards Organization (ISO). Magnolia- Nestle’s ice cream
products have been recipient of awards from the prestigious Monde Selection in Brusseld, Since 1982,
Magnolia-Nestle products have won 25 Monde Selection Medals.
Magnolia-Nestle (MNC) was the result of the partnership forged in between San Miguel Corporation and
the Switzerland-based Nestle S.A., the world leader in the food industry. Nestle brought to the
partnership, its expertise in the field of consumer food goods, and a wide array of internationally
acclaimed brands. Magnolia contributed its manufacturing infrastructure, nationwide distribution
network, and seven decades of unrivalled Filipino patronage.
In 1996, San Miguel transferred its ice cream and milk businesses to a new company, Magnolia-Nestlé
Corporation, a joint-venture with Nestlé. San Miguel retained ownership of the Magnolia brand since it
was also being used by other San Miguel food products. In 1998, San Miguel withdrew from the
Magnolia-Nestlé venture and a non-compete clause barred it from the ice cream and milk businesses for
five years. Upon the expiration of the non-compete clause in 2004, San Miguel revived its ice cream and
milk businesses through its subsidiary, Magnolia, Inc. On May 19, 2010, Magnolia, Inc. inaugurated its
main ice cream production facility in Santa Rosa, Laguna. When Magnolia was relaunched by San
Miguel, the ice cream division was renamed Nestlé Ice Cream.
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With increasing competition, Magnolia intends to make its products available in the neighborhood
stores and major outlets, introduce a feedback mechanism that will help the corporation monitor the
market; and employ new approached to selling. Magnolia is the preferred choice of several five-star
hotels, fine dining restaurants, and food chains. Magnolia is sold in Guam, Taiwan through tie-ups and
are exported to Japan, Hong Kong, Malaysia, Singapore, Dubai, and Kuwait among others.
Arce
The Arce Family started Arce Dairy Ice Cream in January 1995 and in no time snatched 5% share of the
ice cream market. It was initially available in Metro Manila but has expanded its dealership in Central
and Southern Luzon. Dealers are mostly family friends and relatives who insisted their hand in selling
products.
The use of carabao’s milk was the trademark of Arce Ice Cream. Carabao’s milk contains considerably
more fat than cow’s milk (9.65 % compared to 4.16%). To be called ice cream, a product must contain
between 5-16 percent fat and Arce’s have a comfortable 10 percent.
Among Arce’s products only the Super Deluxe and Super Special contain carabao’s milk. Special and
regular ice creams have a milk base. The Especial Sorbete de Caro or “dirty ice cream” has a coconut
milk base. The sherbets have a fresh fruit base.
Arce has a lock on the AB market, but had more difficulty getting through to the CD market. This is
actually in its pricing strategy. The Super De Luxe ice cream costs more than the competitors’ premium
brands because buyers do not care about price.
Arce plans to target the CD market by coming out strongly on a nation-wide scale. Part of its expansion
would use the continuous method of production instead of the batch processing method.
Foreign Brands
Foreign brands include Hagen-Dazs, Dreyers Grand Ice Cream, Baskin-Robin. Dreyers was the first to
penetrate the local markets. Hagen Dazs was the latest to come in. Owners of these brands claimed that
they are not here to compete but only to expand the ice cream market with superior products. These
brands belong to the super premium category and cater to the A market.
What’s Next for Selecta
The optimistic economic prospects in the Philippines set a positive backdrop for the growth of ice cream
in the next five years. Research has shown that the consumption of products such as ice cream is tied to
improvements in income, especially amongst middle-income consumers. It is expected that the more
upbeat economy will support more frequent consumption of ice cream in the local market.
The strategic moves of manufacturers in recent years helped to boost the consumption of ice cream in
the Philippines. Leading brand Selecta was able to convince consumers to indulge in ice cream through
the affordable price of its Cornetto brand, whilst its bulk dairy ice cream variant is positioned to
promote family weekend bonding. At the same time, it also successfully launched the premium brand
Magnum. On the other hand, competing brand Nestlé made products more affordable and accessible to
middle- and lower-income consumers through the launch of SKUs which were priced lower than Ps100
5
per tub. These efforts came to fruition in 2013, as ice cream consumption was increasingly becoming a
daily or weekly indulgence, instead of being a luxury reserved only for special occasions. Value
proposition is an important criterion for dairy food purchases among middle-class that constitute the
major share of total consumers. Given the positive trends in the Philippines economic growth scenario,
the Selecta team has outlined some of the alternative strategies that the company could pursue:
Sell more Selecta products. This strategy seeks to increase sales from Selecta products in its
current markets. One component of this strategy is increasing the penetration of freezers to
smaller outlets. It may involve increasing promotional efforts or incentives to get more
consumers to but more Selecta ice cream.
Develop more Selecta products: This strategy will increase sales by developing new or
improved products for its current markets. Possibilities include developing more ice cream
flavors and entering the lucrative frozen novelty segment.
Enter new markets. The strategy seeks to increase sales by taking its existing products to new
markets. For Selecta, this means expanding its distribution networks by entering more cities and
towns where it is absent or even expand to the international market where there are large
Filipino populations.
Enter New Business Leveraging the Current Refrigeration Facilities. This strategy will increase
sales by developing new markets where Selecta’s distinctive competencies can be exploited.
Possibilities include marketing other food products that can use the freezer facilities of Selecta.
Management faced the hard challenge of identifying strategic plans for Selecta in the medium term.
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