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Introduction

COMPANY BACKGROUND

A. The Philippine Agriculture Sector

The agriculture in the country has remained to be one of the major contributors to economic growth of many countries in the Asia-Pacific region. More than 70% of the country’s population is dependent on agriculture. Despite the low priority that this sector has been given in the past in terms of budgetary resources, it continuously provided income and livelihood to millions of farmers and their dependents. This attaches the high priority of transforming agriculture into a modern, dynamic and competitive sector. A sustained expansion of the national economy requires growth in the agricultural sector in the country.

B. Nature of Business

Agrinurture started as a trader of post-harvest agricultural machineries, which aimed to help improve the productivity and income of rural Filipino farmers. The company was formerly recognized as Mabuhay 2000 Enterprises, Inc. and eventually diversified into various agro-commercial businesses and became one of the country’s top fresh mango exporters to world markets.

AgriNurture serves the fresh needs of the leading retail & key institutional accounts in the country, and also supplies of home grown fruits such as banana, sweet pineapple and papaya to consumers in the Greater China Region, Japan, Korea, and the Middle Eastern, European, and North American Regions. The company engages in manufacturing and distribution of fruit beverages and puree, dried fruit snacks, processed fruit mix, frozen fruits & vegetables, dairy and rice products.

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C. Company Structure

AgriNurture consists of six divisions in order to perform and produce good quality agricultural products. These are: Farming, Export, Local Distribution, Foreign Trading, Retail, and Others.

For the Farming/Farm Management Group:

The farming group engages in commodity such as rice and corn and high value crops production, joint venture farming and contract growing. Agricultural goods produced by the Farming Group are supplied to the Distribution and Export Groups. Aside from fruit and vegetable production, the Farming Group is also engaged in the distribution of farm inputs such as seeds, fertilizers, pesticides, as well as greenhouses and equipment.

For the Export Group:

The Company’s Export Group is in charge of looking for markets abroad as well as sourcing the best quality produce possible to satisfy its growing number of clients. It is considered to be the top dollar earner of ANI by exporting all kinds of fruits, vegetables and other agro products but its main export products are fresh banana, fresh mango and coconut water.

For the Local Distribution Group:

ANI distributes agricultural products under the “FCA” (Fresh Choice Always) brand. They supply fresh vegetables as in-house brands of various supermarkets.

The Distribution Group intends to boost revenues through new and innovative distribution methods such as direct selling approach to address consumers’ and institutional

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buyers’ need for fresh produce amidst problems on lack of proper storage. ANI also intends to take its distribution to a global level. It aims to enter the Australian, European and US markets.

For the Foreign Trading Group:

As for international distribution, this activity has been undertaken by ANI with the support of Hansung Agro Products Corp., and Sunshine Supplies International Co., Ltd. ANI together with these companies sell and distribute agricultural and other commodities in Hong Kong, Macau, China, Japan, Korea, Australia and Europe.

For the Retail Group:

The establishment of the Retail Group completes ANI’s strategy of integrating Retail and Franchise into its portfolio of services in line with its vision of becoming a global leader in providing nutrition from farm to plate.

The direct and indirect subsidiaries of the company under the retail group are: a) The Big Chill, Inc. and b) Heppy Corp. AgriNurture, Inc. owns 80% of the outstanding capital stock of The Big Chill, Inc., while wholly owns Heppy Corp.

Foreign Subsidiaries

In line with the plan for the global re-organization of the ANI Group of companies for more streamlined and efficient operations, a number of foreign subsidiaries have been established. The Company is currently in the process of implementing the previously approved global re-organization in accordance with the following plan and goal:

At present, the subsidiaries in the ANI Group of Companies are in the process of amending their Articles of Incorporation in line with the foregoing global re-organization plan.

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FIGURE 1. AgriNurture, Inc. Global Re-Organization Plan, 2013 D. Vision, Mission, and Values

AgriNurture Inc. envisions being a leader globally in providing nourishment from farm to plate. It has different objectives such as:

(a) supplying quality but affordable goods and services,

(b) applying modern technologies to innovate operations and productivity, (c) enhance stakeholders’ value;

(d) promote advocacies for environmental and social upliftment and; (e) foster national pride.

The company also has corporate values and philosophies which are:

(a) integrity – being honest and fair in every course of action and not compromising ethical business practices,

(b) teamwork – communicating, trusting and respecting each and every individual, (c) care for people – respecting, coaching and giving recognition to each other.

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Chapter II

STATEMENT OF THE PROBLEM

A. Background of the Study

AgriNurture, Inc. mainly focuses its operations through the local and international production and distribution of Cavendish bananas, Carabao mangoes, coconut water and other products such as rice grains, pineapple, papaya, etc. allocated for its other sub-products.

Cavendish Banana; 50%

Carabao Mango; 20% Coconut; 20%

Others; 10%

In view of these facts, the researchers settled for the prime revenue drivers as the focus of the paper with all the relevant data from these products, as well as other material data such as the actual and forecasted rates of the GDP, inflation and the like.

B. Purpose of the Study

The purpose of this study is to develop a strategy for AgriNurture, Inc. in order to improve, compete and forecast the possible outcomes that the company could embark on with their future needs despite the threats that are expected to arise in the future. The purpose of the study is to answer the following questions:

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1. What causes the constant decrease in the net profit despite the big share of increasing revenues? bakit hindi macover up yung net income losses

The researchers chose the company based on the following factors: a) the availability and willingness of the company to share its information such as financial statements and company background and; b) the significance of the products the company offers to its customers.

C. Scope and Limitation

The scope of this paper mainly focuses on AgriNurture Inc. and its Subsidiaries. This business line permits the production and processing of different agricultural products. This process overall starts from farming, manufacturing, and distribution down to retail and franchise division until the export group. The paper emphasizes on the company’s prime revenue drivers – Cavendish bananas, Carabao mangoes, and coconuts, and the components that have a substantial effect on its revenues. This will be discussed further in the Industry Analysis section. Recommendations and solutions are taken in consideration of the revenue management of the company and the strategies of international companies that could help the company raise its revenues.

The amount of the data to the financial performance of the players is limited to the audited financial statements from 2009 to 2013 of AgriNurture Inc. accessed and utilized through the latest available financial reports submitted by the company in the Securities and Exchange Commission. Information was gathered through interviews and connections to the company. The Vice President of the company’s farming sector, Mr. Larry Pangilinan instituted the researchers to the head of exports, Ms. Liza Guinto who both provided the researchers with the internal information necessary for the research. The proponents also gathered information from: a) print materials from the San Beda College library; b) government websites such as

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NEDA, PSA and NSO; c) international websites such as FAO, Trading Economics and World Bank, and; d) the company’s website.

Chapter III

CAUSES OF THE PROBLEM

A. Industry and Competitor Analysis

a. The Philippine Agricultural Sector

Philippines has a total area of 13 million hectares devoted to agricultural crops making it an agricultural country. It is divided into 4 parts which is the food crops, food grains and non-food crops. 31% is occupied by non-food grains, 52% is utilized by the non-food crops, on the other hand 17% were used for non-food crops.

b. Agricultural Economic Sector

The country’s agricultural sector comprises of livestock and crop produce. The NEDA aims for a competitive agriculture and fisheries sector as it plays an important role in the country’s development: “from 2004 to 2010, agriculture and fisheries contributed an average of 18.4 percent to GDP and the sector grew at an average rate of 2.6 percent annually” (“Millennium Development Goals”, 2013). The 2013 agricultural performance report provided by the Bureau of Agricultural Statistics (BAS) shows that the current agricultural industry of the country is valued at 1.3 trillion pesos with a growth rate of 1.15 percent. Looking forward, the NEDA development plant for 2010 to 2016 is to “achieve a stable macro environment of the country by reducing a “deficit-to-GDP ratio from 3.7 to 2.0 percent by 2016” (“Development Matrices”, 2011).

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2012 2013 2.89

1.15

Agriculture

Agriculture posted a 1.15 percent growth in 2013. Subsectors registered on output gains but increase in crop production was minimal. Livestock, poultry and fisheries also contributed to the improved performance of the sector. The gross output in agricultures was valued at P1.5 trillion, which is equal to 3.51 percent increase from the 2012 earnings.

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2012 2013 4.15

0.09

Crops

Production in the crops subsector inched up by 0.09 percent. Crops contributed

51.05 percent on the total agricultural output. Palay production grew by 2.26 percent while

corn declined by 0.40 percent. Tobacco, onion, mango and cassava had the higher outputs that was recorded. While coconut, sugarcane, banana, coffee, abaca, peanut and calamansi had lower output levels was noted from those products. The subsector grossed P814.7 billion at current prices. This was 2.13 percent higher than last year’s record.

2012 2013

-1.56

2.5

Farmgate Prices

On the average, farmgate prices went up by 2.33 percent during the reference period.Crops subsector registered an average price gain of 2.04 percent. On the other hand livestock had higher average price increment of 6.94 percent. Poultry sector increased prices by

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an average of 0.10 percent. While fisheries subsector prices increased by an average of 1.53 percent.

The Philippine Banana Industry

The Philippines’ production area of banana ranked as the third largest in the world at 415,000 hectares in 2004 or about 8.5% of the total world area. It ranked second to India which has 680,000 hectares.

The Philippines is the second largest exporter of bananas after Ecuador, with some

2.6m tonnes exported in 2012. That same year the exports from the Philippines made up 98% of the Asian banana trade. Two thirds of the exported volumes were shipped to Japan, China and South Korea.

Banana is the leading fruit grown in the Philippines and a consistent top dollar earner. The Philippine prospect for bananas in the domestic and foreign market is still promising: Cavendish and banana chips for export.

Others; 6%

Lakatan; 6%

Saba; 18%

Cavendish; 70%

Figure 3.5. Banana: Percent distribution of production by variety, Philippines, July – September 2014

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The banana industry in the Philippines is surrounded by a number of issues which include agrarian reform, labor rights violations, environmental degradation, sustainable development and food security.The root cause of these issues are the practices and manner by which international companies have managed the banana industry. The price determination of bananas for export has remained under the control of the big institutional buyers, despite the growing liberalization of the industry.

Relevance

The main banana export variety of AgriNurture, In. is Cavendish and its main production area is in Mindanao. The Export Group sources its supply from small independent growers and from established corporate plantations to consolidate as much supply as it can to satisfy its clients in China, Korea, Middle East and Russia. The requirement of the ANI Export Group is currently in the range of 25-50 forty-foot containers a week.

The Philippine Mango Industry

Based on the Bureau of Agricultural Statistics data, Philippines is the 7th largest mango

producer in the world. It reached 771.4 thousand metric tons in which 95% is domestically consumed.It has an established domestic market and has bright opportunities for the international market both in fresh or processed forms.

Majority of the mango processors are small and medium enterprises (SMEs). Small farmers own about 73% of the total area planted to mangoes while 24% operate farm sizes between 3 to 9.99 hectares. Those 10 hectares and above constitutes only 3%. Based on management contract with the farmers, sprayers (contractors) undertake cultivation management including the well-known Philippine mango. Mangoes are sold to wholesale

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markets, processors, wet retail markets, supermarkets and exporters. Manila, Cebu and Davao are the major cities that serve as the key trading centers for mangoes that are sold in the local market.

Carabao; 79% Others; 18%

Piko; 3%

Figure 3.4. Mango: Percent distribution of production by variety, Philippines, July – September 2014

The world demand for mangoes are increasing particularly in temperate countries. According to a major exporter, the strengths of the Philippine mangoes are the year-round production, superiority in taste of Carabao, a major variety cultivated and geographical adjacency when exporting to East Asia.Fresh mango exports ranked 3rd among the exported

fruits of the country. Japan and Hong Kong are the major export destinations, the transshipment point to China, whose respective shares are 52.9% and 35.7% in value term.

Relevance

ANI exports Carabao mangoes. The Export Group sources its mangoes from all over the Philippines via a network of growers and suppliers who have been in the mango business for decades. The Export Group also taps the various mango contract growers of ANI who avail of the inputs loan provided by the Farming Group. These mango growers follow the strict mango production system prescribed by the Government to comply with good agricultural practices as

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well as the pesticide spraying protocol. By adhering to these strict standards, ANI’s mango exports can be accepted by any stringent market abroad. The Export Group manages all the processes involved in exporting mango with the help of Hansung Agro Products Corp. as the processing and packing facility with Vapor Heat Treatment capability.

The Philippine Coconut Industry

The coconut industry by any measure is a majorindustry in agriculture. It has been a consistent contributor to the Phillippine economy. It accounts for 5.97% on the average the country’s gross value added (GVA) and 1.14% of the gross national product. Coconut products are included on the top five net foreign exchange earners, averaging at least US$760 million annually. Moreover, the industry has a 59% share in world coconut exports.

On the contrary of the good performance of the sector, the coconut sector of the country is in crisis due to the poor productivity, unstable prices, under-utilization of coconut farms, under-employment and inadequate industrialization. Poverty among the coconut farmers and farm workers has been widespread as stated earlier. There are about 90% of the 3.4 million farmers who live below the poverty line.

Relevence

Coconut water is one of the most sensational among ANI products in the market today for both local and export. This product is exported by the ANI Export Group to USA, Canada, Australia, New Zealand and the Middle East. The facility used for processing and packing for coconut water export is owned by M2000 IMEX Co., Inc.

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c. Industry and Market Segments

Performance of Philippine Agriculture

Gross output in agriculture was valued at P1.5 trillion at current prices in 2013. In relation to the gross earnings during the reference period it increased by 3.51 percent growth due to the increases in both production and prices across subsectors.

I. Value of Production 2011 2012 2013 18.60 19.52 19.35 102.89 108.13 116.63 120.89 88.83 81.33 Mango Banana Coconut

*in trillion pesos FIGURE 3.6 Value of Production in Agriculture at Constant Prices,

Philippines, January - December, 2011 – 2013

In 2013, gross output in agriculture was valued at P1.5 trillion at current prices. The increases in both production and prices across subsectors resulted in the 3.51 percent growth in gross earnings during the reference period. P1.87 billion at current prices and posted a 2.13 percent increment from last year’s level was the gross of the crop subsector.

Gross value of coconut production decreased by 8.44 percent because of lower production and prices during the reference period. This year, a 5.77 percent contraction was registered because of lower volume of output. Better prices contributed to the 7.86 percent gain in gross earnings from banana during the year.

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2011 2012 2013

0.79 0.77 0.82

9.17 9.23 8.65

15.24 15.86 15.34

Mango Banana Coconut

*in trillion pesos FIGURE 3.7. Volume of Production in Agriculture,

Philippines, January - December, 2011 – 2013

In 2013, agricultural production increased by 1.15 percent. The crops subsector with a 51.05 percent share in the total agricultural output increased by 0.09 percent over the year ago level.

Coconut production decreased by 3.26 percent during the reference period. This was due to the reduction of the area harvested in the provinces which was affected by the Typhoon “Pablo”, namely, Davao Oriental, Davao del Norte, Compostela Valley, Agusan del Sur and Surigao del Sur. The other typhoons “Labuyo” and “Santi” contributed on the short fall in Aurora and “Yolanda” in Leyte, Eastern Samar, Samar and Aklan. Cutting and replanting of less productive trees were noted in Oriental Mindoro. Shifting to rubber cultivation was reported in Basilan. Lesser harvesting as a result of low prices of copra was noted in Surigao del Norte. In Batangas, trees affected by scale insects were cut.

Banana production decreased by 6.29 percent. Trees toppled down by Typhoon “Pablo” in Davao Region, Caraga and Central Visayas had not yet fully recovered. “Labuyo” and “Santi” which hit CAR, Cagayan Valley and Central Luzon and Typhoon “Yolanda” affected the Visayas regions and the reported closure of Soriano Farm in Agusan del Norte also contributed to the negative performance of banana.

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d. Major Global Contributors to the Industry Indi a Chin a Ecua dor Indo nesi a Cam eroo n 29.7 11.1 10.7 9.2 8.0 7.3 6.1 5.1 4.8 3.9

Output (in million tonnes)

Source: Food and Agriculture Organization of the United Nations FIGURE 3.8. Top Banana Producers in the World, 2013

Indi a Thai land Paki stan Braz il Nige ria 15.19 4.35 2.60 2.13 1.89 1.82 1.25 0.89 0.85 0.80

Output (in million tonnes)

Source: Food and Agriculture Organization of the United Nations FIGURE 3.9. Top Mango Producers in the World, 2013

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Indo nesi a Indi a Sri L anka Papu a Ne w G uine a Thai land 18.30 15.35 11.93 2.82 2.20 1.31 1.20 1.10 1.01 0.61

Output (in million tonnes)

Source: Food and Agriculture Organization of the United Nations FIGURE 3.10. Top Coconut Producers in the World, 2013

e. Analysis of Macro-Environment Components General Economic Conditions and Global Factors

According to the National Statistical Coordination Board (NSCB), the latest gross national income growth rate of the country is at 7.8 percent based on the fourth quarter of 2013, however decreased by 0.3 percent from the third quarter of 2013 (StatWatch,2014).

In addition, the National Economic Development Authority (NEDA), reported that over the years, the country’s growth rate in the second half of 2010 was at 6.7 percent but had a slow increase over the years with a 7.6 percent growth rate recorded in 2012 (“Socioeconomic report”, 2012). During 2010, NEDA reports that the some of the indicators that led to a steady growth rate over the years 2010 to 2012 were fuelled by “upgrades in infrastructure and capital stock and expanding social safety nets” as well as “strong domestic demand, sustained growth in overseas Filipino remittances, and low inflation” (2012). As shown above, the growth rate indicates a slow but increasing rate.

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Latest Year Ago Previous Gross National Income

(Growth Rate)1 7.8 4th Qtr 2013 6.4 4th Qtr 2012 8.1 3rd Qtr 2013

Gross Domestic Product (Growth Rate)1 6.5 4th Qtr, 2013 7.1 4th Qtr, 2012 6.9 3rd Qtr, 2013

Exports2 USD 4,599 million

Dec 2013

USD 3,971 million Dec 2012

USD 4,294 million Nov 2013

Imports2 USD 5,233 million

Nov 2013

USD 5,208 million Nov 2012

USD 4,824 million Oct 2013

Headline inflation rate 4.2 Jan 2014

4.2 Jan 2013

4.1 Dec 2013

Core Inflation Rate 3.2

(Jan 2014) 3.2 Jan 2013 3.2 Dec 2013 Underemployment rate3 17.9% Oct 2013 19.0 % Oct 2012 19.2% Jul 2013 Unemployment Rate3 6.5% Oct 2013 6.8 % Oct 2012 7.3% Jul 2013

1 Taken from National Statistical Coordination Board; 2 Taken from the National Statistics Office; 3 Taken from Bangko Sentral ng Pilipinas Table 3.1. Economic indicators in the Philippines, 2012 – 2013

The Natural Environment

The Philippines is considered to be a tropical rainforest with different natural resources such as forests, fertile lands and seas (NSCB, 2011). Below are the statistics regarding the environment situation of the Philippines from the United Nations Statistics Division:

Total area (sq km) 300,000

Agricultural land (sq km) 121,000

Arable land (% of agricultural land) 454

Permanent crops (% of agricultural land) 43

Permanent meadows and pastures (% of agricultural land)

12

Change in agricultural land since 1990 (%) 9

Forest area (sq meter) 77,198

Change in forest area since 1990 (%) 18

TABLE 3.2. Statistics on Philippine Environment, 2011

One of the projects developed by the Department of Environment and Natural Resources (DENR) is to manage and distribute lands: “management and disposition of alienable and disposable lands of the public domain and other lands outside the responsibilities of other government agencies, such as reclaimed areas and other areas not needed for or are

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not being utilized for the purpose for which they are established. The latest issued progress on is that currently, “a total of 176,091 patents were issued covering 94,021 hectares. These consist of: (a) agricultural areas (CARP-funded) – 115,631 patents (92,146 ha); (b) residential areas – 58,486 patents (1,430 ha); and (c) commercial and industrial areas – 1,974 patents (445 ha)” (DENR, 2011).

The environment of the country is affected by several changes in its climate, and due to global warming, especially with the recent hit typhoon Yolanda, a category 5 typhoon has been alarming. According to the PAGASA report, “there is reduction in rainfall in most parts of the country during the summer (MAM) season. However, rainfall increase is likely during the southwest monsoon (JJA) season until the transition (SON) season in most areas of Luzon and Visayas, and also, during the northeast monsoon (DJF) season, particularly, in provinces/areas characterized as Type II climate in 2020 and 2050. There is however, generally decreasing trend in rainfall in Mindanao, especially by 2050” (PAGASA, 2011).

Population Demographics 2008 2009 2010 2011 2012 2013 1.99 1.96 1.93 1.9 1.87 1.81 Population Growth Rate

Source: National Statistics Coordination Board FIGURE 3.11. Philippine Population Growth Rate (%)

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The Philippine population is currently at 92.34 million (as of May 2010) from 88.55 million from August 2007 (NSO, 2013). Based on the statistics released by the National Statistics Office, the population is expected to rise: “the Philippine population would continue to grow, increasing 76.5 million, as of the latest population census conducted in May 2000, to 141.7 million in 2040, according to the Medium Series of the 2000 Census-based population projections. This means that 65 million people would be added to the nation's population between 2000 and 2040, which is a span of 40 years, even if the average annual growth rate is projected to drastically decline from 2.34 percent during the 1990-2000 period to around 1.0 percent during the 2030-2040 period. The population is projected to grow by 1.95 percent in the 2005-2010 period, from 85.3 million in 2005 to 94.0 million in 2010” (NSO, 2006).

f. Supply Chain

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The agri-food system includes farmers and a diverse range of firms, including backward-linked input suppliers and forward-backward-linked intermediaries, processors, traders, wholesalers and retailers. The main activities for direct supply chain entities are as follows:

Input supply. This includes the production and distribution of material inputs — such as fertilizer, seeds, packaging, etc. — utilized in the primary production, processing and/or trade of the focal commodity.

Farm production. This stage is concerned with primary agriculture production and ends with the sale of a raw commodity at the farm gate. These transactions may occur literally at the farm gate or at some other point where the farmer hands over ownership of the product to the next supply chain participant. Depending on the crop, some type of primary processing (such as the shelling or bagging of dry grain) may take place at the farm level.

Processing. The processing stage involves the transformation of agriculture raw materials into one or more finished goods — through drying, canning, freezing, or Enabling Environment – Domestic and International many other methods. Raw commodities, of course, are also traded and distributed and thus this stage may not apply to every crop.

Domestic and international logistics. The logistics stage is concerned with the delivery of marketed commodities to their final market destination.

Conditioning the entire supply chain are the domestic and international enabling environments. From a domestic perspective this includes: fiscal and financial sector policies, pricing and investment incentives and institutions, the regulatory and legal framework etc. From an international perspective, the enabling environment includes international trade regulations and agreements, other international protocols, and the policies/regulations of nations and trading blocs with whom the focal supply chain sources and sells inputs or products.

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Supply chains are more complex, with many participants, with product, finance and information flows often traversing large geographical/international areas and with distinct intra-and interseasonal dimensions. Supply chains may also be divided into an array of sub-supply chains, traversing the farm-to-fork continuum (i.e. production to consumption) for specific commodities (or closely associated commodities). It is therefore important to focus on key supply chain participants, flows, and transaction points, and to identify appropriate levels of analysis.

C. Market Segments and Trends

2011 2012 2013 2014E 2015E 3.7 6.8 7.2 6.2 6.4 4.6 3.2 3.0 4.4 4.1 Gross Domestic Product (%)

Inflation (%)

Source: Asian Development Bank FIGURE 3.13. Economic Forecasts (% per year),

Philippines, 2011 – 2015E

Robust growth in the first half of 2014 was fueled by private consumption and investment coupled with a recovery in exports. Growth is seen quickening in 2015, though earlier forecasts for both this year and next are trimmed to take into account a slowdown in government

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spending and the steady tightening of monetary policy. Inflation will be slightly above the earlier projections (ADB, 2014).

Slightly stronger growth is projected through the rest of this year and in 2015 on expectations that post-typhoon reconstruction accelerates, government fiscal disbursement improves, and exports benefit from brighter prospects in the major industrial economies.However, unexpectedly low government spending coupled with higher inflation and associated monetary tightening prompt revised forecasts trimmed to 6.2% for this year and 6.4% for 2015 (ADB, 2014). D. Pricing 2011 2012 2013 23.6 25.41 23.71 11.19 11.72 13.49 7.93 5.6 5.3

Mango Banana Coconut

*in Philippine Peso FIGURE 3.14. Weighted Average Farmgate Prices in Agriculture,

Philippines, January - December, 2011 – 2013

Farmgate prices increased by an average of 2.33 percent in 2013. In the crops subsector, prices made a changed its course from last year’s decline to an average gain of 2.04 percent this year.

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O c e a n B io c h e m is t r y R e s e a rc h T e c h n o lo g y

F re s h a n d G re e n P a la w a n A g r iv e n t u re s , In c .

F a rm v ille F a rm in g C o ., In c .

B e id a h u a n g ( P h ils .) A g ro In d u s tr ia D e v e lo p m e n t

B e s t C h o ic e H a r v e s t A g r ic u lt u r a l C o r p o r a t io n

F r u it ilic io u s C o m o n a y , In c .

M 2 0 0 0 IM E X C o ., In c .

C o c o T ro p ic , In c .

F ir s t C la s s A g r ic u lt u re C o r p o r a t io n

L u c k y F r u it a n d V e g e t a b le s P ro d u c t , In c .

F re s h a n d G re e n H a r v e s t A g r ic u ltu r a l C o r p o r a t io n

H a n S u n g A g ro P ro d u c t s , C o r p .

G o o d s a n d N u t r it io n fo r A ll, In c .

W a n t a ix in g G ro u p C o r p o r a t io n

Q u a lis L o g is t ic s a n d T r a n s p o r t S e r v ic e s , In c .

S u n s h in e S u p p lie s C o ., L t d .

H e p p y C o r p .

T h e B ig C h ill, In c .

Abig price gain was noted for banana at 15.10 percent. This was traced to the high demand from buyers for bananas as fresh fruit for immediate consumption and for processing. It is because of the high demand buyers for bananas as fresh fruit for immediate consumption and for processing. Coconut price was down by 5.36 percent due to the low buying price for copra. These were attributed to the decreasing world market prices of these commodities. Price of mango went down by 6.69 percent because of increase in production.

E. Distribution Channel

AgriNurture, Inc. and Its Subsidiaries

FIGURE 3.15. Distribution Channel of AgriNurture, Inc. and Its Subsidiaries

F. Porter’s Five Forces of Competitive Analysis

The economic structure of an industry is not an accident. Its complexities are the result of long-term social trends and economic forces. But its effects on the management are immediate because it determines the competitive rules and strategies that likely to be used.

The diagram below shows the five forces formulated by Michael Porter that are widely used to assess the structure of an industry:

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FIGURE 3.16. The Five Forces Model of Competition

The overall five forces show that the competition in the agricultural industry is strong. Below is the summary of how strong, moderate or weak the five competitive forces are in the industry:

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a. Factors affecting Strength of Rivalry

The diagram below describes the factors that strengthen or weaken this competitive force. Overall, the rivalry among competing sellers is strong.

Competing sellers are active in making fresh moves to improve their market standing and business performance.

Agricultural production and distribution is characterized by a high degree of competitive rivalry. Efforts to develop branded or specialized products are quickly and effectively copied, and meaningful differentiation is difficult to achieve. The competitive rivalry plays out most clearly in bidding for productive resources. Here, producers typically bid most of their long-term potential profitability into the price of fixed assets such as farmland. As a result, rivalry has a very detrimental impact on individual profitability in the sector. However, it also encourages firms to be extremely efficient and productive as cost competition is the most likely source of competitive advantage.

Buyer demand is growing slowly

The buyer demand is growing slowly because the demand grows in line with population growth. There is a growing buyer demand because buyers rely on these producers in order to survive. Buyers are unable or unwilling to cut out of their budgets regardless of their financial situation. Also, buyers tend to demand these products at a relatively constant level, regardless of their price.

Buyer costs to switch brands are low.

Buyer costs to switch brands are low because the competitors’ products are similar in terms of features and usage of the product. All the more, because of similarities of features and usage, it is important to develop brand loyalty through brand differentiation.

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b. Factors affecting Threat of Entry

The diagram of the competitors as shown below describes the strengths and weakness affecting the threat of potential entrants. Overall, the threat of new entrants is weak.

The pool of entry candidates is small.

There is difficulty in entering into the current industry primarily because the amount of capital needed for new entrants is quite sizeable and the gross profit margins are very limited (leading to small returns). Current players that possess a competitive advantage in the market are big domestic companies, although there are other multinational competitors such as Dole, who are able to compete because of their large resources.

Entry barriers are high.

Entry barriers are high because of high capital requirements such as the acquisition of lands and the strong brand image of existing players. Current players in the industry have somehow gained customer loyalty and brand preference.

As per an internal basis with AgriNuture, Inc., with over a decade of experience in handling fresh fruits and vegetables and gaining many years worth of learning in product innovation, the company has attained product acceptance in major world markets such as Hong Kong and China. It has catapulted ANI into being one of the top exporters of mangoes from the Philippines. The Company is even now among the few, accredited by the China government to export mangoes to their country.

Buyer demand is growing slowly or is stagnant.

Demand for agricultural products is growing slowly primarily because these serve as inputs to crop production, which tends to grow in line with population growth.

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Industry members will strongly contest the efforts of new entrants to gain a market foothold.

The ability of the existing players to contest new entrants is strong because of their significant size and developed brand equity with customers.

c. Factors affecting Competition from Substitutes

The diagram below shows the following factors affecting how strong or weak of threat of substitutes in the industry. The competitive force of substitutes is weak. There are three factors that make the competitive force of substitutes weak.

Good substitutes are not readily available or don’t exist.

There are currently no cost-effective substitutes for the crops offered in the agricultural sector because they offer crops that have been grown under strict systems that maximizes the quality of crops produced.

Substitutes are higher priced relative to the performance they deliver.

The current substitutes for agricultural products are food supplements and other vitamins which clearly are priced higher than the current commodities provided by the agricultural sector. The effect of these substitutes is also not yet proven to be more effective than the natural and organic products offered by the industry.

End users have high cost in switching to substitutes.

End users have high cost in switching to substitutes because these substitutes may not offer the same quality of products. Although some end users can produce it themselves, the production cost will be quite costly considering the high capital required and non-possession of the benefit of scale and access to competitive raw material sourcing.

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d. Factors affecting Bargaining Power of Suppliers

The diagram below describes the factors that strengthen or weaken this competitive force. Overall, the bargaining power of suppliers is strong. The following are the factors that make the bargaining power of suppliers strong.

Industry members incur high costs in switching their purchases to alternative suppliers.

Industry members typically incorporate alternative fertilizers when the price of the main raw material is high but there are limits because the nutrient factors of the substitutes are different. However, industry players will source from established reputable traders (either local or international traders) to ensure both quality and delivery of their raw materials.

Needed inputs are short in supply (which gives suppliers more leverage in setting prices).

For instance, the current instability in the supply of fertilizer products and the concomitant surge of its prices with the industry members purchasing the products in bulk through a consortium (i.e, so they can contract an entire vessel). Suppliers have high bargaining power during supply imbalances because they can dictate the price of the raw material.

There are a few suppliers of a particular input.

Ferilizers and pesticides are limited because there are licences required before their production and distribution of these products according to the Fertilizer and Pesticide Authority (FPA), making the bargaining power of suppliers much stronger.

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Overall, the bargaining power of buyers is strong. The current buyers of the company’s products are retailers and distributors wherein the products are sold to the end consumers. The following are the factors that make the bargaining power of buyers strong:

Buyer switching costs to competing brands or substitute products are low.

Buyer switching costs to competing brands or substitutes are low because competing brands offer products that provide the same features or enhancements. Industry players can easily switch from one brand to another without having to worry about how much cost they would incur.

Large volume of purchases by buyers is important to sellers.

Agricultural farms harvest large quantities of their products at specific times of the year. Thus, large volume of purchases are important so that the inventories they maintain would be consumed before peak seasons or before demand decreases.

Buyers are large and can demand concessions when purchasing large quantities.

Agricultural farms buy the pesticides and fertilizers in large quantities because of the large inventory they maintain. All the more, these buyers can exert a great degree of influence on the pricing and delivery of goods from AgriNurture and it’s competitors.

Some buyers are a threat to integrate backward into the business of sellers.

Buyers can be a potential threat because of the resources that the country offers. When the prices of crops become expensive, buyers can resort to producing the raw materials needed or making the crops themselves.

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The following are the Opportunities and Threats of AgriNurture, Inc. and its significant weights. The ratings on the external factors are identified to have either a poor response (Rating: 1); average response (Rating: 2); an above average response (Rating: 3); or a superior response (Rating: 4).

OPPORTUNITIES

O1. Increased awareness to further develop strategies in the banana industry.

Rating 2: AgriNurture, Inc., despite its strong position in its current sector continues to partake in several symposiums that would help them give focus on various strategies to further boost the banana industry. As the banana industry being one of the major economic driver in the country and ANI, symposiums and seminars will help the industry leaders and company to improve its strategies in scientifically developing crops and its growing market demand and to save it from diseases as well.

O2. AgriNurture Inc. adds pineapple as the new fruit product for export.

Rating 4: AgriNurture Inc. is looking at expanding its export product line with pineapple as it eyes additional offerings to markets in Russia, China and the Middle East.Considering the country as a top exporter of pineapples with one of the best qualities around the world, the company proves its excellent capacity on the selection of new products it will offer and introduce in the market.

O3. Increased global opportunities due to the ASEAN Integration in 2015

Rating 4: Most ASEAN countries are engaged in agriculture, producing and exporting similar varieties of fruits and vegetables. The challenge for ANI is to be a better-known brand and company in the global markets than its ASEAN counterparts, ensuring that only quality products from the Philippines reach the market.

O4. Productivity is expected to grow according to the National Economic and Development Authority.

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Rating 2: According to the Philippine Development Plan 2011 prepared by the National Economic and Development Authority, productivity is expected to rise in the following years. As a result, AgriNurture may have an increase in percentage of sales and a reduce cost of sales due to the reported decrease of harvest loses of bananas and mangoes in the country.

O5. Expected 6.4% increase in the 2015 GDP growth rate.

Rating 1:A slightly stronger economic growth is projected through the rest of this year and in 2015 on the expectation that post-typhoon reconstruction accelerate, government fiscal disbursement improves, and exports benefit from brighter prospects in the major industrial economies.The progressing economy of the country may result to a higher GDP for the coming months. As a result, this may improve the company’s stability and revenue and may open different opportunity like expansion in the ASEAN countries.

THREATS

T1. Cocolisap infestation damaging the coconut production.

Rating 2: On the other hand, ANI, with its vast experience, valuable linkages, and wide geographical presence is able to manage this type of risk by adopting modern pest control systems and Good Agricultural Practices such as crop rotation and the use of a mixture of organic fertilizers. In practice, ANI sources its supply requirements from farms and buying stations located in different provinces and regions of the country. This way, no widespread infestation would drastically weaken ANI’s supply chain at any time. Also, ANI’s strategic nationwide locations allow its farm production and trading activities to easily shift bulk of its key operations from one region to another should the need arise.

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Rating 3: ANI produces its vegetables and fruits (especially mangoes) from various sources, ranging from small farmers to big producers. Currently, a minimal part of ANI’s internal supply requirement is provided for by its farming subsidiary, Best Choice Harvest. As a policy, volume and quality is the main consideration in the sourcing of all the products handled by ANI. However, the risk of supply shortage poses significant threat to the continuity of business operations and ultimately to the image of the Company.

T3. Increased government intervention due to allegations of AgriNurture, Inc.’s CEO with Vice President Binay

Rating 1: ANI, an agricultural company was one of the biggest stock decliner (2014) after the company’s top executive, Antonio Tiu was linked to the allegation with Vice President Binay. As a result to the company’s loss, ANI may have a negative impact on its investors and customers

.

T4. Increasing intensity of competition due to ASEAN Market Integration in 2015

Rating 2: While the ASEAN integration is expected to level the playing field among industries in the region, it is also expected that Philippine firms should brace for an intense competition with their ASEAN counterparts. An intense competition will therefore raise the bar for innovation, quality and productivity, which will enable businesses to compete head on with other players.

a. External Factor Evaluation Matrix

Opportunities & Threats Weight Rating Weighted Score O1. Increased awareness to further develop strategies

in the banana industry. 14% 2 0.28 O2. AgriNurture Inc. adds pineapple as their new fruit

product for export. 15% 4 0.60

O3. Increased global opportunities due to the ASEAN

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O4. Productivity is expected to grow according to the

National Economic and Development Authority 10% 2 0.20 O5. Expected 6.4% increase in the 2015 GDP growth

rate. 8% 1 0.08

T1. Cocolisap infestation damaging the coconut

production. 10% 2 0.20

T2. Decreasing area of production affecting the

satisfaction of demand for exports 11% 3 0.33 T3. Increased government intervention due to

allegations of AgriNurture, Inc.’s CEO with Vice President Binay

9% 1 0.09

T4. Increasing intensity of competition due to ASEAN

Market Integration in 2015. 12% 2 0.24

TOTAL 100% 2.46

TABLE 3.3. The External Factor Evaluation Matrix

b. Strategic Issues Based on External Factors

The highest point in opportunities given by the researchers is about Agriurture’s new export product line with pineapple. It can help raise the revenue of ANI, as it eyes additional offerings to markets in Russia, China and the Middle East. Considering the country as a top exporter of pineapples with one of the best qualities around the world, the company can sustain its position in the export market. The highest possible threat is the increasing intensity of competition due to the ASEAN Market Integration. The local market will be greatly affected due to the entrants of foreign market and the less government intervention in the country.

Breakdown of Cost of Sales Breakdown Operating Expenses

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2013 2012 2011 2010 2009 A. Gross Profit Margin

Gross P rofit

Sales

Gross Profit 578,355,822 385,222,207 519,031,385 270,707,544 151,715,938 Sales 2,926,429,244 2,329,946,985 2,253,760,239 1,585,011,759 1,017,682,209 Total 19.76% 16.53% 23.03% 17.08% 14.91% B. Operating Profit

Operating Profit

Sales

Operating Profit 100,401,423 28,851,405 320,613,502 151,380,584 56,881,536 Sales 2,926,429,244 2,329,946,985 2,253,760,239 1,585,011,759 1,017,682,209 Total 3.43% 1.24% 14.23% 9.55% 5.59%

C. Net Profit Margin

Net Income

Sales

Net Income 22,446,181 -145,010,551 216,101,374 638,722,288 35,689,968 Sales 2,926,429,244 2,329,946,985 2,253,760,239 1,585,011,759 1,017,682,209

Total 0.77% -6.22% 9.59% 40.30% 3.51%

D. Net Return on Sales

Net Income

Total Assets

Net Income 22,446,181 -145,010,551 216,101,374 638,722,288 35,689,968 Total Assets 4,788,820,066 4,893,061,512 3,761,036,914 2,424,243,615 769,904,504

Total 0.47% -2.96% 5.75% 26.35% 4.64%

E. Return on Stockholders Equity

Net Income

Total Shareholders Equity

Net Income 22,446,181 -145,010,551 216,101,374 638,722,288 35,689,968 Total Shareholders Equity 2,284,815,700 3,488,441,765 2,315,690,680 1,585,192,634 546,301,771

Total 0.98% -4.16% 9.33% 40.29% 6.53%

F. Return on Invested Capital

Net Income

Long Term Debt +Equity

Net Income 22,446,181 -145,010,551 216,101,374 638,722,288 35,689,968 Long Term Debt 361,903,281 417,902,857 535,949,483 252,388,988 733,215 Equity 2,284,815,700 3,488,441,765 2,315,690,680 3,488,441,765 546,301,771

Total 0.85% -3.71% 7.58% 17.07% 6.52%

TABLE 3.3.Profitability Ratios for Years 2009 to 2013 (in PHP)

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Php2,926,429,244 in 2013. However, the increase in sales in itself does not tell the overall performance in the company since based on its ratios, there is a remote decline in terms of its profitability, especially in the year 2012. From the gross profit margin ratio, the decline from 23.03% in 2011 to 16.53% in 2012 shows a decrease of 6.5% and such decline can be attributed to the increase of cost of sales of the company during the year (see Appendix).

Liquidity Ratios 2013 2012 2011 2010 2009 A. Current Ratio

Current Assets

Current Liabilities

Current Assets 2,708,069,905 2,514,667,150 1,744,170,488 1,091,260,798 604,168,994 Current Liabilites 2,142,101,085 986,716,890 909,396,751 586,661,993 222,869,518 Total 126.42% 254.85% 191.79% 186.01% 271.09%

B. Net Working Capital

Current Assets 2,708,069,905 2,514,667,150 1,744,170,488 1,091,260,798 604,168,994 Current Liabilities 2,142,101,085 986,716,890 909,396,751 586,661,993 222,869,518 Total 565,968,820 1,527,950,260 834,773,737 504,598,805 381,299,476 In addition, the operating profit margin ratio of 2012 declined to 1.24% because of the increase in expenses and other costs attributed, that the sales generated for the year is not enough to increase the level of operating profit margin for 2012. Furthermore, in terms of its return on stockholders’ equity, there is a heavy decrease by 12.99% from 2011 to 2012. The decline in 2012’s profitability ratios is substantially high which can however, be improved with serious conservation in the latter years considering the slight recovery that it has made by 2.19% in 2013.

TABLE 3.4 Liquidity Ratios for Years 2009 to 2013 (in PHP)

Leverage Ratios

2013 2012 2011 2010 2009

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Total Liabilities

Total Assets

Total Liabilities 2,504,004,366 1,404,619,747 1,445,346,234 839,050,981 223,602,733 Total Assets 4,788,820,066 4,893,061,512 3,761,036,914 2,424,243,615 769,904,504

Total 52.29% 28.71% 38.43% 34.61% 29.04%

B. Long Term Debt to Capital Ratio

LongTerm Debt

Long Term Debt +Equity

Long Term Debt 361,903,281 417,902,857 535,949,483 252,388,988 733,215 Total Shareholders Equity 2,284,815,700 3,488,441,765 2,315,690,680 1,585,192,634 546,301,771

Total 13.67% 10.70% 18.79% 13.73% 0.13%

C. Debt to Equity Ratio

Total Debt

Total Equity

Total Debt 2,504,004,366 1,404,619,747 1,445,346,234 839,050,981 223,602,733 Total Shareholders Equity 2,284,815,700 3,488,441,765 2,315,690,680 2,424,243,615 546,301,771

Total 109.59% 40.26% 62.42% 34.61% 40.93%

D. Long Term Debt to Equity Ratio

Long Term Debt

Total Equity

Long Term Debt 361,903,281 417,902,857 535,949,483 252,388,988 733,215 Total Shareholders Equity 2,284,815,700 3,488,441,765 2,315,690,680 2,424,243,615 546,301,771

Total 15.84% 11.98% 23.14% 10.41% 0.13%

Table 3.4 shows the two important liquidity ratios: the current ratio and the working capital ratio. Overall, the company is liquid and the company has sufficient funds to pay short term debts and other current liabilities. In this situation, there was a significant drop from 254.85% in 2012 to 126.42% in 2013. This is primarily caused by the increase in current liabilities from 2012 to 2013, Php 986,716,890 and Php 2,142,101,085 respectively. This could be considered a threat to the company’s liquidity since the decrease was too much and could pose as a warning that eventually, current liabilities would outweigh current assets.

TABLE 3.5. Leverage Ratios for Years 2009 to 2013 (in PHP)

Activity Ratios

2013 2012 2011 2010 2009

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Inventory

(

Cost of Goods Sold

365

)

Inventory 28,456,368 134,863,797 155,442,289 77,536,576 37,749,478 Cost of Goods Sold 2,348,073,422 1,944,724,778 1,734,728,854 1,314,304,215 865,966,271

Total (in days) 4.42 25.31 32.71 21.53 15.91

B. Inventory Turnover

Cost of Goods Sold

Inventory

Cost of Goods Sold 2,348,073,422 1,944,724,778 1,734,728,854 1,314,304,215 865,966,271 Inventory 28,456,368 134,863,797 155,442,289 77,536,576 37,749,478

Total (times) 82.51 14.42 11.16 16.95 22.94

C. Average Collection Period

Receivables

(

Total Sales

365

)

Receivables 715,241,065 900,652,472 715,816,762 352,329,640 296,969,099 Total Sales 2,926,429,244 2,329,946,985 2,253,760,239 1,585,011,759 1,017,682,209 Total (in days) 89.21 141.09 115.93 81.14 106.51

Table 3.5 shows the different leverage ratios of the company. The significant increase in the company’s debt-to-equity and debt-to-asset ratio shows that the company is taking risks. In addition, it could be considered as a risk for investors since the company had a substantial drop in 2012 with only a slight recovery in 2013 based on its profitability performance (in terms of net income from years 2009 to 2013 and generating sales for the past five years). In addition, the increase of debt and other financing needs of the company can be attributed to adding new investments and expansion that the company is undertaking.

TABLE 3.6. Activity Ratios for Years 2009 to 2013 (in PHP)

Table 3.6 shows the different activity ratios for years 2009 to 2013. The company’s inventory turnover is relatively low particularly in years 2009 to 2013, which is a good indicator because inventory is moving fast to be sold during the year’s business operations. In addition, the company’s receivable turnover is significantly high, making the company’s collection period much longer, generating lower cash collection during the year.

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The following are the Strengths and Weaknesses of ANI and its significant weights. The ratings on the factors are identified as a major weakness (Rating: 1); minor weakness (Rating: 2); a minor strength (Rating: 3); or a major strength (Rating: 4).

STRENGTHS

S1. The sole company in the Philippines consumer staples industry adopting “farm-to-plate” business model.

Rating 3: ANI is the sole company in the Philippine consumer staples industry adopting a “farm-to-plate” business model. They have the Farming Group, the Export Group, the Distribution Group, the Foreign Trading Group and the Retail Group that completes its strategy of integrating its portfolio of services in line with its vision of becoming a global leader in providing nutrition from farm to plate. This factor adds to the competitive advantage of ANI in terms of maximizing its products through its subsidiaries.

S2. Complete and strategic integration of operations.

Rating 3: ANI relies on its now fully integrated operations as a strategic advantage over its competitors in the industry whether local or foreign. Utilizing a zero-waste approach in its operations. The foregoing operation of ANI significantly accelerates its drive to control supply chain and thereby ensure supply and product quality, and also reduce the risks in developing their own farms. This factor adds to the competitive advantage of ANI in terms of maximizing its production through its subsidiaries.

S3. Greenergy Holdings, Inc.’s acquisition of 26% of AgriNurture, Inc.’s stock.

Rating 4: Greenergy’s idea in buying ANI was to diversify the portfolio of ANI to other ‘green’ or agricultural projects. ANI has diversified into various agro-commercial businesses,

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specifically focusing on the export trading of fresh Philippine carabao mango, cavendish banana and pineapple. With Greenergy in the picture, ANI can expand and enhance its operation through operating with more technological resources.

S4. International and Domestic Accreditations.

Rating 3: Having various accreditation locally and internationally, ANI establish a reputation in which their products will be trusted when it comes to producing good export quality products that can make consumers and distributors.

S5. Strong strategic partnerships in the industry

Rating 3: AgriNurture Inc.’s core business has a significant and direct impact on the livelihood of Filipino farmers and households, in addition to contributing directly to agricultural development and food security. In the process, the Company has forged numerous strategic alliances with government agencies, business organizations, universities, NGOs, and local and international media that were built over years of integrity and trust.

S6. AgriNurture Inc. expands banana farm in Indonesia

Rating 4: ANI has already acquired 3,000 hectares of which is allotted for the production of 40 metric tons per hectare of Cavendish banana. The company has been focusing on expanding its plantation as the company expects high growth to continue in markets outside the Philippines. With AgriNurture’s expansion, the company may boost its productivity and increase its income through increase in export sales. These networks and alliances may provide ANI the capability to mobilize resources promptly and at a bigger scale when market opportunities arise.

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WEAKNESSES

W1. Diversified business model leads to the mismanagement of some subsidiaries.

Rating 2: AgriNurture may face uncertainties with their operations due to operational risk involving inadequate or failure internal processes and systems of the parent company as well as its subsidiaries.

W2. Incapability of dividend declaration

Rating 2: Declaring dividends show that a company is stable. Investors look at a consistent dividend payout as a sign of the company's stability. When a company has been able to pay the same dividend over a long period of time, it gives investors more confidence when investing in that company. As a result, ANI’s incapability of declaring dividends may result to various negative effects to the investors and stakeholders.

W3. Continual leasehold of farmlands for agricultural production

Rating 1: With ANI’s lease holding various land in producing agricultural products, may create an impact to its investors. It may also create unnecessary expenses that ANI can save if they start purchasing their own land.

W4. Excessive costs of production

Rating 1: ANI has been unnecessarily spending expenses in which they can save by reducing it and invest in other commodities like buying new and high technological products which can boost productivity and lessen salary expenses.

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Strengths & Weaknesses Weight Rating Weighted Score S1.Distinctive “farm-to-plate” business model in the

local market. 11% 3 0.30

S2. Complete and strategic integration of operations. 8% 3 0.24 S3. Greenergy Holdings, Inc.’s acquisition of 26% of

AgriNurture, Inc.’s stock. 6% 4 0.24 S4.International and Domestic Accreditations. 7% 3 0.21 S5. Strong strategic partnerships in the industry 9% 3 0.27 S6. Expansion of banana farm in Indonesia 10% 4 0.40 W1. Diversified business model leads to the

mismanagement of some subsidiaries 4% 2 0.08 W2. Incapability of dividend declaration 4% 2 0.08 W3. Continual leasehold of lands for agricultural

production 10% 1 0.10

W5. Excessive cost of sales and services. 18% 2 0.36 W6. Excessive operating expenses. 13% 2 0.26

TOTAL 100% 2.54

TABLE 3.4. The Internal Factor Evaluation Matrix

b. Strategic Issues Based on Internal Factors

The internal factors stated above are based from its Annual Reports and some articles over the internet and the newspaper. It is evident that ANI uses its resources effectively and efficiently when it comes to its “farm-to-plate” business model. As the Philippine agricultural sector opens it into a more accessible market through ASEAN integration and increasing exports, ANI has been aggressively improving its product by penetrating different products in their export market.

Chapter IV

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A. The SWOT Matrix

The researchers used the SWOT Analysis in analyzing AgriNurture’s strengths and weaknesses, opportunities and threats that they are currently facing, in order to formulate strategies that would focus their strengths to minimize the threats they carry, and take the greatest possible advantage of opportunities available towards them.

STRENGTHS – S WEAKNESSES – W S1. Distinctive “farm-to-plate”

business model in the local market.

W1. Diversified business model leads to the mismanagement of some subsidiaries.

S2. Complete and strategic

integration of operations. W2. Incapability of dividenddeclaration. S3. Greenergy Holdings, Inc.’s

acquisition of 26% of AgriNurture, Inc.’s stocks.

W3. Continual leasehold of lands for agricultural production.

S4. Foreign and domestic

accreditations. W4. Excessive cost of sales andservices. S5. Strong strategic partnerships

in the industry. W5. Excessive operatingexpenses. S6. Expansion of banana farm in

Indonesia.

OPPORTUNITIES – O SO STRATEGIES WO STRATEGIES

O1. Increased awareness to further develop strategies in the banana industry.

SO1. Further expansion of distribution channels to include public markets. (S1, S3, S4, S5, S6, O1, O2)

WO1. Intensive utilization of wholly owned farmlands to mitigate the supply risks inherent in purchasing from third parties. (W3, W4, O3, O4) O2. AgriNurture Inc. adds

pineapple as the new fruit product for export.

SO2. Increase advertising expenditures to rapidly increase consumer awareness towards the brand. (S3, S6, O1, O3, O4)

WO2. Acquisition of existing fruit and vegetable plantations. (W3, W4, O1, O4)

Figure

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References

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