Happy days at Fiesta

It was in 1987–when the newly installed government of then President Aquino was being challenged by coup plotters and when investors were pulling out of the country–that a group of overseas Filipino workers bought the smallest of the three food processing plant of Red V Coconut Processing Inc. in Medina, Mindanao and named the company, Fiesta Brands, Inc.

"We had an idea and we were confident that we can make it work, despite the bad timing and the fact that the old and more experienced previous owner of the plant had lost all hope of getting back his investment," said Fiesta president Romeo Chan, who was part of the operations and maintenance crew for a sports utility complex in Saudi Arabia.

With a working capital of only P5 million, Fiesta restarted the production of 8,000 bags or 800,000 pounds of desiccated coconut a month, retaining all 750 employees of Red V.

"The 3.5-hectare plant was just the right size for the operation. The number of employees was a little too much. But laying off employees was not on the list of options of the new owners," said vice-president for manufacturing Paul Rene Tayag, one of the employees absorbed by Fiesta from Red V.

Assets

Instead, the new owners have retrained the employees to do repair and maintenance and other operations, which would have been outsourced. Training accounts for 5% of the company’s operational costs.

"We have changed the culture of the employees to enable them to manage their resources very well and help them become better employees," said vice-president for administration and finance Henry Raperoga.

For example, the company has contributed seed money of P500,000 for a foundation that has helped the employees get out of debt.

"We literally bought their debts," said Tayag. "We now have funds worth P2 million. Our employees still come to the foundation in times of need instead of going to the usurers."

Employees are treated as part of the corporate team and the families of the employees as welcome in company-sponsored activities.

"As a team, we will not be able to perform as efficiently if all the members are not working together. It has come to a point where some of our employees are now stockholders of the company so they know that they are working for themselves," said Tayag.

Fiesta Brands now has 800 employees and has never laid off any employee in its 16 years of business.

Growth

Although margins have remained unchanged, the company has expanded its base by diversifying its product line to coconut milk, coconut cream, coconut water, and the current health fad of the moment, extra virgin coconut oil. An affiliate company, Fresh Fruit Ingredients, produces a line of fruit juices.

"Whenever we launch a new product, we have to put up a new set of equipment. But to keep us from sinking deep into debt that we cannot repay, we only borrow 30% of our requirements. The balance 70% is internally-generated," said Raperoga.

The monthly production run is currently at 10,000 bags or about three to 3.5 million pounds, maximizing available land through improvements in production line efficiency.

This year, the company expects to hit its target sales of P700 million, largely from exports.

"We have always taken the road not usually taken," said Tayag. "When people have money and the economy is doing good, their tendency is to expand. We have done it the other way. When business and the economy are bad, we take this opportunity to prepare more goods to sell for the time when the business picks up and others are only beginning their preparation. When business is doing well and our sales are picking up, this is the time when we tighten our belts in preparation for the hard times."

For Fiesta Brands, this contrarian strategy has worked well.