MANILA: From switching ingredients to staggering price increases, Philippine companies are rethinking strategies to cover rising costs without losing customers squeezed by inflation and a weak peso.
The Philippines is now grappling with the second-weakest growth and fastest inflation among South-East Asia’s economies after a graft scandal weighed on confidence and the Iran war stoked consumer prices.
The peso, Asia’s third-worst-performing currency this year, is also making imports more expensive.
“Shifts in consumer spending and higher credit costs are weighing on select names across real estate, telecommunication, banking, and consumer discretionary,” said Juan Paolo Colet, managing director at China Bank Capital Corp.
Revenue pressures could intensify later this year if growth remains weak and inflation stays high, Colet said, making it important for companies to strengthen operational efficiencies to better weather the headwinds.
For now, restaurants are rethinking expansion, food makers are limiting price increases and telecom companies are leaning on prepaid plans to support consumption.
Here’s a roundup of how Philippine companies are responding.
Shakey’s Pizza Asia Ventures Inc, which saw first-half profit fall by a third, said inflation and surging fuel prices weakened non-essential spending.
Aside from promotions, the restaurant operator is slowing expansion and is being more selective on investments, while restructuring its Peri-Peri chicken chain.
Jollibee Foods Corp fared better as customer visits improved from April to June despite higher prices.
Still, the Asian fast food giant cut same-store sales forecast, profit growth and outlet openings.
Price increases have also been selective, while keeping its cheaper Mix & Match meals for “those who are extremely price sensitive”.
In addition, the company is on track with its 2.8 billion-peso (US$45mil) “cost containment” programme.
Monde Nissin Corp, the nation’s largest instant noodle maker, said it is switching to lower-cost ingredients without sacrificing consumers’ preference.
At the same time, the company has been staggering price increases of 1% to 5% by product.
“We want to cushion the blow to our loyal consumers,” chief financial officer Jesse Teo said.
Century Pacific Food Inc, which held prices steady for two years, has now raised them by 4% to 5% and plans to do much smaller increases in the third quarter.
“We see consumers being more intentional in making every purchase count,” said Dappy San Juan-Tecson, the tuna canner’s investor relations head.
Meanwhile, San Miguel Food and Beverage Inc is controlling costs.
“We are managing our costs carefully, adding capacity where demand is growing, and keeping our brands within reach,” chairman Ramon Ang said.
Demand held up for its cheaper food lines in the first half.
PLDT Inc’s mobile unit Smart Communications raised selected prepaid packages to 109 pesos from 99 pesos while “adding more data and benefits so customers still see good value”, chief operating officer Butch Jimenez said, after the telecommunication company’s income drop.
PLDT Home also added more speed choices for customers seeking affordable broadband.
Globe Telecom Inc is using free service periods, speed upgrades and targeted discounts as consumers become more cautious.
Offers include 30 days free, triple speeds on the same plan and 100 pesos off for selected customers.
In the meantime, Philippine Seven Corp may benefit from the squeeze.
The 7-Eleven operator said as inflation pushes consumers to cheaper products and stores nearer home, it is opening more branches in the provinces and leaning on ready-to-eat food and its own drinks, which it said are a “competitive differentiator and margin driver”. — Bloomberg
