Ex-MNC exec ‘pays back’ via local firm
By Margie Quimpo-Espino
Philippine Daily Inquirer
First Posted 22:35:00 08/02/2008
WHEN HE RETIRED FROM Johnson & Johnson four years ago, Diosdado C. Salvador Jr. was only 57 and had a lot more years left in him to propel businesses.
People knew this, so offers came from big and small companies.
Salvador had the choice of working abroad or in Manila. After all, he used to be president of Johnson & Johnson Asean, a post where he was responsible for the development, control, profitability, growth and efficient management of 10 markets.
At one point, Salvador said yes to a huge local company in the beauty products business. But when he told Cecilio Pedro, the founder of Lamoiyan Corp., makers of Hapee toothpaste, that he was set to join the beauty products firm, Pedro persuaded Salvador to stay on with Lamoiyan.
At that time, Salvador and Pedro had an informal arrangement where the former executive of a multinational company (MNC) would work as sales and marketing consultant for Lamoiyan three days a week.
Although the offers of other firms were more tempting, Salvador’s family decided for him.
“My wife said that Pedro is a walking statement of my want to serve the country,” Salvador tells the Inquirer. “Since I worked for 35 years in a multinational company, it was now time to help a Filipino company slug it out with MNCs.”
Lamoiyan is the third largest player in the toothpaste market in the Philippines. The biggest are Colgate-Palmolive, makers of Colgate, and Unilever, makers of Close-up. It was not that long ago when only two brands were mentioned when one talks of toothpaste in the Philippines.
Hapee toothpaste was not taken seriously by these multinationals when it started out in 1988.
The people behind Hapee toothpaste only managed to create awareness when they sponsored the Philippine team in the 1988 Olympics.
The MNCs have dominated the market for decades, and no one could dispute the fact that it would take a lot of capital to loosen their stranglehold on a market where the word Colgate is synonymous to toothpaste; and Close-up was secure in second place.
This was the challenge that Salvador faced when he agreed to join Pedro to carve out a bigger slice of the toothpaste market for Lamoiyan.
At the start, Pedro had pointed out to Salvador that Hapee was not growing. After studying the firm, Salvador saw the need to strengthen product development and marketing.
He claims luck was with him because he found out that the former research and development head of Colgate Palmolive, Zeny Soriano, had retired. He sought her out and she agreed to join Lamoiyan.
With Soriano and a newly created marketing team, Salvador says sales have increased four times over the past five years.
He cites several ingredients that contributed to the firm’s success: new products, investment in advertising and plant improvements.
Among the major steps taken was advertising. In late 2004, Campaigns and Grey was tapped to handle Hapee.
Salvador says Lamoiyan came up with new toothpaste variants, like Extreme Clean which targets the young.
Also, the Night and Day variant, which claims to provide the user with fresher breath in the morning. Then there is Complete, Lamoiyan’s answer to Colgate’s Total.
But on top of the new variants, Salvador had the packaging of the toothpaste changed to make it more appealing to its varied target markets.
Salvador also pursued the lower-end market. Lamoiyan has gained tremendous strength in the toothpaste sachet market. He explains that the toothpaste market is divided between users of tubes and sachets. In the past, only 25 percent of the market used sachets. In 2006, this has grown to 35 percent and is expected to further grow as people downsize their purchases in view of rising commodity prices.
The sachet market was initially dominated by the two MNCs. This, Salvador says, despite the fact that Lamoiyan was selling its 10 ml. sachets for only P2.50, while the two were selling their 10 ml. for P7.
He realized that the Lamoiyan packaging was smaller than then others. But the truth was, the Hapee sachets contained more toothpaste than what Lamoiyan’s competitors had in their respective packets.
To address the issue, Salvador says they made twin packs which they then sold for P5. From 200 cases a month in 2004, he says sales increased to 60,000 cases a month last year and is expected to hit 100,000 this year.
He cites a Nielsen study that shows their market share in sachet rising from nil to 32 percent.
Salvador says the sachet market is very important. “This is the way to reach the poor.”
He also cites a DepEd study that reveals how half the time, children from kindergarten to Grade 3 tend to miss class due to dental caries or cavities.
Studies also showed that if children were to brush their teeth once a day for three minutes, the incidence of dental cavities could go down by 27 percent. If they were to brush their teeth twice a day, the incidence would drop by half.
Salvador says the margins in sachets are very minimal, but “it is Cecilio Pedro’s social marketing.”
“He told me, you make more money in tubes. For as long as we do not lose, we will continue with this.”
The struggle to slug it out with MNCs is not just difficult in terms of the brand power the bigger firms enjoy, nor the capital backing them up. There is also the efficiency in operations to consider. With an efficiently run operation, costs may be brought down. The MNCs set up production facilities where it is cheapest and most efficient for them.
“We can easily bring manufacturing to Vietnam or China, as we did with J&J and save a lot, but Cecilio does not want this,” Salvador points out. “We have to help provide employment.”
Lamoiyan is one of the few firms that employs disabled individuals. Lamoiyan mostly employs deaf and mute workers. Salvador, who is used to the rigid systems of MNCs, is the first to admit that lack of communication can be a major stumbling block.
But he says Pedro’s policy cannot be changed.
Today, Salvador is proud that people are now talking of three toothpaste brands, unlike in the past where they used to only consider two.
The goal is to achieve a 25-percent market share by 2010. But Salvador is confident that the firm will exceed its goal.
One of the factors that helped the firm achieve growth so fast is that it is a small company, and decision making is quicker.
“It takes 18 to 24 months for MNCs to move.”
At present, the MNCs are adopting one of the worse strategies to get market share—price cuts. In answer to the MNCs’ moves, Hapee is resorting to bundling—adding more items to what one gets for the price he usually pays.
Experts will always say no one wins in a price war. Yes the competition could die, but the winner would also be scarred and several millions poorer.
Meantime, to combat reliance on one product, Lamoiyan has been diversifying over the past few years.
It has improved its dish washing liquid called Dazz. It also came out with a feminine wash, Fresher, which has a cooling feature. It now has a shampoo for lice called Licealiz (a play on lice alis but pronounced as lay-shalis).
And why a shampoo for lice? Because, he says, 30 percent of the cause of absenteeism in public school is due to lice in the hair.
Addressing the cavities and the lice problems will help some children go back to school—something so vital to the progress of any country.
Salvador is happy where he is right now. He says some of his friends spend their days playing golf and getting together and talking about their physical aches and pains.
His goal when he retired on April 1, 2004 was to teach and start a foundation that would mold the young into better marketers and sales people. This he was able to do with marketing lecturer Josiah Go under the MarkProf Foundation.
Teaching and sharing his knowledge and experience was supposed to be his payback to society. Although Lamoiyan was not in his initial plans, he feels he is paying back more by helping a Filipino firm. So, despite the fact that he was supposed to have said goodbye to work four years ago, he remains as busy as ever.
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