Romancing Selecta

Biting into his favorite halo-halo ice drop, Selecta Wall’s Inc. chairman Jose Concepcion III talks about romancing the brand.

"Ice cream is considered a snack. We want to reposition our ice cream products as ice refreshments, something you take when you want to cool down or when you want to satisfy a sweet craving."

Brother John Concepcion’s favorite is Selecta best-seller, cookies and cream. As Selecta Wall’s managing director and chief executive officer, he sees ice cream from another perspective.

"Ice cream is considered a treat. It is a small luxury that is, unfortunately, easily interchangeable with other products. Our job is to sell ice cream as an affordable pleasure, something that makes people feel good without breaking the bank."

Growing the business

Compared to the P40 billion soft drinks business, the P5-billion ice cream market is small. Aside from the two dominant players, one of which is Selecta Wall’s, the industry includes the soft ice cream sold by fast food chains and the dirty ice cream produced by mom and pop operators.

"The challenge is to grow the business and the industry," said the Selecta Wall’s chairman. "Instead of fighting for a larger share of the existing market, we must expand the existing market."

This year, Selecta Wall’s has been more aggressive in pushing its impulse or frozen novelty products such as ice drops, which require less cash up front than take-home products sold in pints, half-gallons and gallons. Aside from stocking these in traditional outlets such as supermarkets, Selecta Wall’s frozen novelty products are also sold through uniformed street hawkers.

Frozen novelty products currently account for 30% of total industry sales.

Selecta Wall’s has also shipped its first container van of ice cream to the US West Coast this year. Projected to be sold out in a month and a half, the first shipment of Philippine flavors such as mango and ube was totally wiped out in two weeks.

"Before this year, export was not an option," said John Concepcion. "For one, we felt that the fight was here where we are now in a neck-to-neck fight for market leadership. For another, we didn’t have the capacity."

Selecta currently has a 37% share of the market which has been shrinking since the 1997 Asian financial crisis. Before 1997, the ice cream market was estimated to be P7 billion.

High barriers

Selecta Wall’s is a joint venture of Selecta Dairy Products Inc., a subsidiary of RFM Corp., and Unilever Group’s ice cream arm, Wall’s. Based on the 1999 agreement, Unilever owns one share more than SDPI in the joint venture.

"Unilever thinks global but acts local. On the one hand, Unilever provides us with the research and development that we need. On the other hand, Unilever complements our entrepreneurial spirit by giving us enough space to be innovative," said Concepcion.

One product developed by Unilever for Selecta’s teen market is Cornetto. The frozen novelty item has been marketed so successful in the local market that it has since been rolled out in Southeast Asian countries through Wall’s extensive distribution system.

The cost of R&D is not the only factor that raises the barriers of entry into the industry. For it to be distributed nationwide, an ice cream company must have a cold chain or a distribution system from trucks to depots to cabinets at the retail end which are refrigerated at a constant temperature of between 18 and 20 degrees Celsius.

To keep costs down, everything outside Selecta Wall’s production plant in Manggahan, Pasig is outsourced. "We believe in dealing with fellow entrepreneurs. They know the local market better than we do. They work very hard to push our products because they have a stake in the business," John Concepcion said.

Harder to manage is the foreign exchange cost of imported ingredients that add texture to the ice cream and of imported power to keep everything frozen. In the past year, Selecta Wall’s has sourced more of its ingredients locally or has found acceptable and cheaper substitutes.

At any point in time, Selecta Wall’s has 35 flavors, including frozen novelty products, in the marketplace. Twice a year, three new flavors under the Selecta Limited Edition are introduced. They are sold for six months and are then pulled out when the next set of three special flavors are launched.

"For the Limited Edition, we come up with a theme. It could be inspired by popular cakes like chocolate mousse or inspired by what children like to eat. This is the creative part of the business," John Concepcion said.

"It’s a tough business," he added. "But if you do it right, it might be a profitable one." The Concepcion brothers are betting on it.