In our previous blog on Oishi® and Del Monte®, we talked about ‘process‘ as an integral part of Brand Marketing which is the third major pillar that comprises The Brand Architecture. It would be recalled in previous blogs that the correct sequence of building the brand architecture is as follows:
- First, Brand Strategy, including brand positioning, unique selling proposition and supporting evidence
- Second, Brand Identity, including brand name, visual hammer, personality and battlecry
- Third, Brand Marketing, which includes the six Ps of the marketing mix
In my 3-part webinar dubbed “The Brand Architecture | What It Takes to Build a Strong Brand That Lasts”, it is during the second module where I introduce my students to the concept of Brand Marketing and the 6 Ps. That’s when I explain that process is a critical part of the 6 Ps of Brand Marketing.
As I wrote in our blog on Del Monte®: “For me, ‘process strategy‘ is like a secret weapon of a brand. It is usually not visible to the brand’s consumers and the brand’s competitors. This critical pillar of the brand architecture usually happens ‘behind the scenes’. And as such, it is hard for its competitors to copy or replicate. Initiatives like training, procedures, quality assurance, recruitment, sourcing of materials, operations manual, product development, and more, all form part of process.“
However, in some cases, a brand’s process strategy can be very much part of its core Brand Strategy itself which includes its USP (unique selling proposition) as well as its RTB (reason to believe), and as such, can be used as part of its marketing communication. It no longer becomes a secret weapon, but rather, it becomes a publicized evidence of the brand to help consumers believe how the brand is positioned in the market.
Such is the case for Filipino super-premium artisanal ice cream brand Carmen’s Best®.
The brand was founded in 2009 by Francisco “Paco” Magsaysay, son of former Philippine Senator Ramon “Jun” Magsaysay, Jr., and grandson of the late Philippine President Ramon Magsaysay.
And in the case of Carmen’s Best®, its super premium ice cream positioning very much rests on its process strategy, more specifically, its vertical integration process strategy.
But before we go further on our discussion regarding Carmen’s Best®, let’s talk more about ‘vertical integration‘.
Vertical Integration Process
What is vertical integration?
Investopia states: “Vertical integration is a strategy that allows a company to streamline its operations by taking direct ownership of various stages of its production process rather than relying on external contractors or suppliers.“
This is not a new concept.
There are many brands around the world which employ this kind of process strategy, and in varying degrees.
Samsung® is one example of a global brand which employs this strategy. Through its various divisions, the brand is actively involved in the production of various components, such as LCD and AMOLED displays, antennas, Li-ion batteries, camera modules, and semiconductors. In fact, the brand is so dominant in some of these product component that even its direct competitor Apple® buys some of its components from Samsung®.
Website startingbusiness.com explains this concept of vertical integration further through the example of the oil industry:
“The fossil fuel industry as a whole is one giant case study of vertical integration along the entirety of the supply chain. Major corporations such as British Petroleum®, ExxonMobil®, and Shell® are prime examples of this, and have a presence at all major levels.
“It all starts with access to the raw material, which in this case would be crude oil. All companies have huge exploration divisions to find and secure new sources of this finite resource across the world, and invest vast sums of money in this regard.
“Once an oilfield is secured, the next step is to build oil rigs in order to extract the material from the earth or the seabed. BP, Shell, and Chevron all have independent or part-owned subsidiaries involved in the production of crude oil.
“The chain of vertical integration then extends further, and includes the transportation of crude oil for further processing at refineries. Through daughter companies, subsidiaries, and joint ventures, the major oil companies maintain tight control at this level.
“Finally, each company then has a retail division to take care of marketing and sales of petrol, diesel, engine oils, and other related products and services. Some companies, such as Shell, even interact directly with individual customers through petrol stations across the world.”
In the Philippine market, one notable example of vertical integration is fast-food giant Jollibee®. Through its own commissaries, the brand manufactures the primary products that are sold through its vast network of company-owned and franchisee-owned fast-food restaurants across the Philippines and around the world. A number of players in the QSR (quick service restaurant) industry have a similar process strategy.
In all these cases, vertical integration has proven to help companies manage and control the various aspects of their production, distribution and sales processes thereby delivering increased sales, lowered costs, improved bottomline and overall stronger competitive advantage.
A Super Premium Brand is Born
In the case of Carmen’s Best®, in a way, this process strategy was somewhat serendipitous, and has ultimately proven to serve the brand well through the past thirteen years since its founding.
The brand was compelled into existence because of the need to make use of the fresh cow’s milk produced in the 27-hectare dairy farm in Bay, Laguna in the Philippines, called Holly’s Milk Farm, which was co-founded by former Senator Jun Magsaysay back in 2007. Because its fresh milk production was higher than what they could sell out, much of the fresh milk produced ended up getting spoiled and just thrown away. “In 2008, my father asked us to come in and help sell the fresh milk, of which there was a surplus. Since dairy cows have to be milked twice a day, and we were not selling the fresh milk fast enough, there was a good amount of spoilage. As a result, we had to throw a lot of milk away,” shared Paco in a 2019 interview with Josiah Go.
After experimenting in various products that used milk as an ingredient including cheese, pastillas and more, Paco settled on a product which he loved best: Ice Cream.
As featured in the website of St. Thomas High School in Texas, where Paco attended: “The game-changer proved to be a weekend encounter at the exclusive Amanpulo Resort, one-time playpen for the likes of Al Pacino and JFK Jr, where Beyonce and Brad Pitt have holidayed. The native New Zealander general manager instantly had an appreciation for Magsaysay ’s luxurious offering which would be consistent with the ultra-standards of the secluded getaway. The exclusive nature of the account served as a much needed stabilizing corporate relationship and soon Magsaysay discovered a catalyst for future growth.
“Magsaysay hatched an idea to churn much of the over-supply into ice cream. But just not any confection. His vision called for a pre-industrial small-batch method incorporating simply dairy, nuts, and optimal flavoring combinations. No additives. No water. Not a hint of mass production. Just 100% all-natural fresh cow’s milk and cream, and only the very best imported ingredients from around the world would be worthy for Carmen’s Best (named after Magsaysay’s only daughter born in 1997).
“The finest vanilla beans from Madagascar, pistachios from Sicily, malted milk from England and chocolate from Switzerland were sought and acquired.
Magsaysay’s intent was as simple as his recipe for ripe indulgence.”
“We don’t expect to be a major player in terms of market share. That is not our end goal. Making the best ice cream in town…in the Philippines is. We want to educate people’s palates as what to expect when looking for excellent ice cream.”Paco Magsaysay, Founder of Carmen’s Best
Even the decision to name the brand after his only daughter Carmen is very much consistent with its overall brand architecture.
“The fact that it is Carmen’s name I will never shortchange the quality of the ice cream because it’s the name of my daughter. I will not cut back on ingredient to save or to earn even for a bit of money because that means I am not being true to Carmen,” says Paco.
And because he had ready access to fresh milk, he capitalized on that and was able identify an open hole in the market which was the super premium artisanal ice cream market segment.
Since the brand operated the only dairy farm in the entire Philippines that produced fresh cow’s milk, they had a distinct advantage in entering this niche market segment which was not strongly occupied by any local player. Paco was also convinced that none of the giant players in the market (i.e. Unilever with Selecta, SMPFC with Magnolia, etc.) would bother entering this market because it was not aligned with their primary focus of mass-produced, low-mid priced, high-margin ice cream which in 2018 was valued at over Php15billion for the local market. It is probably well over Php20billion as of this writing.
And with their own Carmen’s Best® branded retail stores in selected high-end locations like Power Plant Mall in Makati City, it completed a full vertically integrated process strategy from the sourcing of fresh cow’s milk (a major ingredient of the product), to the production of the ice cream, and finally to selling its products through its own branded retail store.
Role of Fresh Cow’s Milk in Super Premium Ice Cream
As I mentioned earlier, having direct and exclusive access to fresh cow’s milk through its vertical integration process provided a distinct advantage for the brand in its pursuit of a high-end niche segment in the ice cream market.
But why is fresh milk so important for a brand that is positioned as a premium artisanal ice cream?
Eighty percent of ice cream is made up of milk. Therefore, the quality of the ice cream largely depends on the quality and amount of milk fat that is used in it.
International premium ice cream brands like Haagen Daaz® also use fresh milk in all its products.
There are two key reasons for Haagen Dazs®’ premium pricing: (1) first, its low amount of overrun and (2) second, its high fat content.
In ice cream production, overrun is the amount of air pumped into the ice cream. ‘100% overrun‘ means that 50% of the resulting ice cream is composed of actual ingredients (i.e. milk, cream, sugar, etc.) and the remaining 50% is just air.
Ice cream brands with lower overrun have fewer ice crystals thereby producing a much denser, creamier, and richer texture and taste. With super-premium ice cream brands like Haagen Dazs®, consumers are getting less air and more ice cream.
Haagen Dazs®, which was founded in 1960 in Bronx, New York, reduced its overrun to just 20% to help make the brand stand out from its competitors. For comparison, expensive ice cream brands usually have 25% to 50% overrun, while low-priced mass market brands have around 120% overrun.
Fat coming from fresh cow’s milk, on the other hand, is the main ingredient which consumers are paying for in ice cream. Ice cream with more amount of fat has a smoother texture. But since fat is costly, non-premium brands with less fat use other ingredients like emulsifiers and stabilizers to help bring the ice cream together and maintain an ideal texture.
Most local ice cream brands in the country are produced using powdered milk or fresh cow’s milk that goes through UHT (ultra-high temperature) processing. UHT processing extends the shelf life of milk by getting rid of ‘bad’ bacteria. But they also end up getting rid of the good’ bacteria that makes fresh milk taste fresh.
Premium ice cream brands have between 15% to 18% of fat, while lower priced brands often go as low as 10%. Haagen Dazs®, in particular, contains 15%-16% of fat. In the case of Carmen’s Best®, while Paco would not disclose the actual percentage, he revealed that their fat content is even higher than 16% which makes it even more premium compared to Haagen Dazs®.
Therefore, since Holly’s Milk Farm® is fully integrated into the process of Carmen’s Best®, providing the latter with direct and cost-effective access to fresh cow’s milk, this provides the brand an excellent competitive advantage in the super-premium ice cream category.
This brilliant brand leaves us with two lessons.
First, there are times when gems of opportunities for brands are hidden in plain sight of founders from amongst its own resources and available assets, just waiting to be discovered through imagination, creativity and tenacity.
Second, vertical integration can provide a unique and strong competitive advantage, especially since certain stages of the brand’s process are very difficult to replicate.
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2 thoughts on “Carmen’s Best®: A Brand Made Super Premium Through Its Vertical Integration Process”
It’s the passion of the founder Mr. Paco Magsaysay to make available real all-dairy ice cream products to Filipinos that makes Carmen’s Best a cut above the rest. If you tried & tasted Carmen’s Best you will not appreciate anymore other brands. Try it yourself and discover what I mean
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Thank you Ramon for visiting us. Yes, the founder’s passion is truly remarkable in bringing this brand to life.
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