Grow your business through vertical integration
To control its processes, this company pursued vertical integration.
By: Jimbo Owen B. Gulle | Jul 30, 2012 13:00 pm
The Universal Group of Companies, a conglomerate of five firms based in Zamboanga City, is one of the country's largest producers of canned sardines. From its humble beginnings as a dried fish maker and retailer, it has become one of the country's most successful vertically integrated group of companies--meaning that it has effectively executed its strategy of controlling all stages of the production process, from raw material acquisition to the selling of its final products.
The group's core company, Universal Canning Inc. (UCI), started in 1994 and initially provided toll-packing services for local and international sardine brands, including the Master Sardines brand that is very popular in Metro Manila and Luzon. But by 1998, UCI came out with its own sardine product called Family's Brand, which emerged as the fastest-growing sardines brand in the country with a market share of 50 percent in Mindanao and 35 percent in the Visayas.
To increase its presence in the lucrative Luzon market, UCI decided in 2008 to buy the Master brand--which has been in existence since the 1980s--from its former toll-packing client, Bagong Buhay Industrial Corp. According to UCI managing director Dr. Leoncio Kaw Jr., it was part of a P500-million expansion plan that also saw Universal buy the sardine brands Atami and Mikado to strengthen its hold of the market in Mindanao, particularly in the cities of Davao and Cagayan de Oro where these two brands dominate.
Universal Canning had no problems supplying its growing market because its sister companies took care of the other phases of its sardine production:
- The Zamboanga Universal Fishing Corp., the largest deep-sea fishing company in Mindanao, caught the fish;
- The Universal Shipyard took care of maintaining the fishing fleet;
- The Universal Ice Plant and Storage made sure the sardines stayed fresh before they went into the cans; and
- The Southern Philippines Fishmeal Corp. took care of the fish entrails or waste by processing them into fishmeal and fish oil, which are used in other industries.
What's more, says Dr. Kaw, these companies served other firms besides Universal, thus generating additional income for the group.
In October 2008, Universal Canning also added a club canning line, a blast freezer and a cold storage facility--collectively worth P300 million--at its 3-hectare manufacturing plant in Barangay Ayala, Zamboanga City. This allowed the company to produce the flat club cans suitable for exporting sardines (round cans of sardines are used for local consumption) to the huge European market.