Carmen's Best: Discovering Filipinos can and will spend
MANILA, Philippines – Any day now, Paco Magsaysay will move the Carmen's Best ice cream production line from his house, where it has expanded from room to room, to a brand new facility in a Laguna export processing zone. It's a symbol of how he's grown the business over the past 6 or so years. It's also a reminder of the key miscalculation behind a lot of his success.
He got into ice cream because his dad, former senator Jun Magsaysay, had gotten into milk production. Because you can't really make the cows slow down production if there isn't enough sales, father asked son to come up with other products. Magsaysay tried the requisite pastillas and cheese, but only got excited when he made ice cream. Because, he said, it was the best he'd ever tasted.
But that means it was expensive, in part because of expensive ingredients. Magsaysay said imported nuts, berries, and chocolates make up 30% of costs, something to think about with the peso at 11-year lows! And so, he thought, he'd have to sell it abroad.
He invested time and effort signing up some distributors in Singapore and Hong Kong – and continuing to supply them until now. He also invested time and effort – and money – locating in a Philippine Economic Zone Authority (PEZA) zone to take advantage of export incentives.
But the local business grew more and faster than he thought it could. When we talked for Rappler's "What's the Big Idea?" series, Magsaysay said one sign was a voice he heard during Sunday Mass, though it's not what you might be thinking.
"This guy next to me just leaned over and asked me if I had any new flavors. And I was thinking, 'How does this guy know I even make ice cream?' It's not like I've got a Carmen's Best t-shirt on or anything. But apparently a lot of people were already talking about it. I thought to myself that maybe it's time to take it, you know, full-time, take it seriously, and really grow it," he recalled.
Most of us grew up happy with Magnolia and Selecta. But more and more of us are willing to pay double the price for so-called premium brands, whether they're imports like Ben & Jerry's or one of the many homemade or "artisanal" brands Carmen's Best started out as. Many of us are more and more willing – if not hooked on – paying for expensive drinks and food at Starbucks and similar chains.
We're told that's in part because more and more people – including or especially young people without too many financial responsibilities – have more and more spending money. We're told it's because more and more people – especially young people – are willing to pay for "experiences," such as really good ice cream or whatever buzz they appreciate in their favorite coffee shops, whether alone or with friends.
Conversely, when it comes to buying clothes, the biggest trend, if you can still call it a trend, remains fast fashion, one of whose pillars is low prices. Kids these days are less willing to spend on clothes than some of us were, Magsaysay said, betraying his age. Clothes, unlike good food, aren't experiences.
As the owner of a high-priced tea shop said several years ago: some of his customers may not be able to afford his prices very often. But there are so many more Filipinos, who can afford it once in a while, that he is packed. They are willing to spend, once in a while, for the experience.
In the interview, Magsaysay said he got his first big retailer thanks to a meeting at a food expo. A friend of his had a booth and gave him enough space for a freezer. No space for him or a stool. So he stood in the aisle and encountered Mrs Retailer. As she tried his ice cream, Paco told her that he had already made her husband try it at a meeting some time before. Mrs Retailer said she liked it and her husband had told her about it and she'd give him a call. A month passed, and no call. And then, the call came.
It wasn't Rustan's, it was Puregold. Soon, Magsaysay had a contract to supply 4 of the chain's higher-end "Lifestyle" stores. And then other Puregold supermarket managers wanted in. And then other supermarket chains.
Magsaysay echoed what Puregold says: that many Puregold customers are sari-sari and other small retailers, many of whom show little sign of their willingness to splurge, though many of them certainly have the ability. But at least once in a while, they will. Ditto with other Puregold customers.
One way Magsaysay has grown Carmen's Best is by getting restaurants to put him on their dessert menus. For people already paying for the experience of eating out, premium ice cream might be an easier sell. Now he has opened his first retail outlet, a kiosk in Alabang Town Center, and told us there could be 3 more by yearend. All the better to reach more people who are already spending time and money in the malls – but not necessarily the freezer section at the back of the supermarket – for an experience. – Rappler.com
Coco Alcuaz is a former Bloomberg News bureau chief and ANC business news head and anchor. He now hosts Rappler's "What's the Big Idea?" interview series. Reach him on Twitter at @cocoalcuaz.