Fruitas Holdings, Inc.

1. INTRODUCTION
1.1 Company Background
Fruitas Holdings, Inc. (FHI) is a leading holding company of multi-format food and

beverage stores in the Philippines. It was founded in 2002 by businessman Lester Yu, starting

out as a small venture under Lush Enterprises Corporation. The company’s initial plan was to

capitalize on the increasing demand for fitness and healthy living by offering fresh and

affordable fruit products. Since then, the company has grown into a major player in the healthy

food and beverage market in the country.

In 2015, FHI was incorporated and registered with the Securities and Exchange

Commission to engage in investment activities. It now has 6 subsidiaries, 29 active brands across

its portfolio, and more than 817 stores across the Philippines. The subsidiaries are Fruitasgroup

Incorporation, Negril Trading Incorporation, Balai ni Fruitas Incorporation, Soykingdom

Incorporation, CocoDelivery Incorporation, FlyKitchen Incorporation, and Lingnam Food

Incorporation. Some of the brands under FHI are Babot’s Mart, Balai Pandesal, Black Pearl,

Buko Loco, Buko ni Fruitas, Coco Delivery, De Original Jamaican Pattie Shop and Juice Bar,

Juice Avenue, Johnn Lemon, Ling Nam, Tea Rex, The Mango Farm, and Sabroso Lechon. These

provide FHI two significant generators of income: sales and franchise operations. Additionally,

the company operates two food parks, both located in Quezon City, Philippines, where its

headquarters are situated.

FHI offers a diverse range of products due to the multiple brands included in its portfolio.

Among these products are beverages such as coconut and mango-based drinks and shakes,

freshly squeezed lemonade, milk teas, coffees, and soy-based drinks. On the other hand, the

2
company’s food product comprises of freshly baked pandesal, specialty breads, pastries, Chinese

cuisine, roasted pork and other Filipino-style dishes, Jamaican patties and snacks, silken tofu

snacks, potato-based snacks, and even fresh fruit and vegetable products.

At present, FHI’s mission is to expand their operation guided by their core values which

are love for the country, innovation and integrity, focus and sacrifice, search for excellence,

customer, centricity, bias for action, and sense of ownership. The company also continues its

vision of being the top food and beverage brand dedicated to healthy living conscious Filipinos.

ORGANIZATIONAL CHART
Figure 1. Fruitas Holdings, Inc. Organizational Chart

PRODUCTS OFFERED

Fruitas Holdings, Inc. has established itself in the market by offering fresh and reasonably

priced products tailored to the middle-class consumer. They are well-known in offering a variety

3
of fresh and healthy drinks and snacks. The company’s approach involved preparing many of its

items on-site at its stores, while its commissary plays a crucial role in ensuring that all products

reach the stores in peak condition.

Some highlights of Fruitas Holdings Inc.’s menu include:

1. One-Fruit Shakes, Two-Fruit Smoothies, & Seasonal Fruit Specials

 The company’s signature is incorporating fruity flavors into their products. These fruit

shakes and smoothies offer dozens of flavors, ranging from classics like mango to more

unique options such as dragon fruit.

2. Afforda Shakes

 The company ensures that customers can purchase their products at a lower price, making

them accessible to a majority of the customers. These shakes, available in banana and

papaya flavors, are priced from 59 PHP to 139 PHP.

3. Ready-to-drink Juices, Fresh Fruit Juices, Buko Juice

 For customers looking to quench their thirst, Fruitas offers fresh juices made with natural

ingredients. These drinks are among the best on the Fruitas menu in terms of both tastes

and health benefits.

1.2 Mission Statement Analysis

Our journey to Bigness shall be anchored on the path of these values; Love for Country,

Innovation & Integrity, Focus & Sacrifice, Search for Excellence, Customer Centricity, Bias for

Action, Sense of Ownership.

4
 Table 1: Analysis of Mission Statement

Criteria Statement

Customer Yes Customer Centricity

Product & Services No

Market No
Employees No
Technology Yes Innovation & Integrity

Public Image Yes Love for Country

Self-Concept Yes Sense of Ownership

Philosophy Yes Focus & Sacrifice

Survival Growth and Profits Yes Search for Excellence

1.3 Proposed Mission Statement

We are committed to nourishing the nation with innovative products and services while

fostering sustainable growth, creating value for our stakeholders.

Our journey to Bigness shall be anchored on the path of these values; Love for Country,

Innovation & Integrity, Focus & Sacrifice, Search for Excellence, Customer Centricity, Bias for

Action, Sense of Ownership, Cultivate a Dynamic Work Environment.

Table 2. Analysis of Proposed Mission Statement

Criteria Statement

Customer Yes Customer Centricity

Innovative product and
Product & Services Yes
services
Market Yes Fostering sustainable growth
Cultivate a dynamic work
Employees Yes
environment.

5
Technology Yes Innovation & Integrity

Public Image Yes Love for Country

Self-Concept Yes Sense of Ownership

Philosophy Yes Focus & Sacrifice

Survival Growth and Profits Yes Search for Excellence

6
2. EXTERNAL AUDIT
1.4 PESTEL Analysis
PESTEL analysis is a strategic management tool used to identify and analyze the external

factors that can impact an organization’s performance. The acronym stands for Political,

Economic, Social, Technological, Environmental, and Legal factors. Each of these dimensions

offers insights into the broader environment in which a business operates.

 Political factors - refer to government policy and political actions that affect the

economic environment in which the international political economy operates.

These may include laws, rules, government stability, and foreign policies that

influence global economic trends and relations.

 Economic factors - examine the economic environment in which a business

operates, including inflation rates, interest rates, economic growth, exchange

rates, and overall economic conditions. These factors can affect consumer

purchasing power and business investment decisions.

 Social factors - encompass demographic trends, cultural norms, lifestyle

changes, and consumer behavior. Understanding social dynamics is crucial for

businesses to align their products and services with customer preferences and

societal values.

 Technological factors - involve the impact of technological advancements on the

market, including innovations, automation, research and development, and the

rate of technological change.

7
  Environmental factors - consider ecological and environmental aspects,

including climate change, sustainability initiatives, and regulations related to

environmental protection.

 Legal factors include laws and regulations that affect business operations, such

as employment laws, consumer protection laws, health and safety regulations,

and antitrust laws. Compliance with legal standards is essential to avoid

penalties and maintain operational legitimacy.

Political Factors
P1 - Government Regulations

Government regulations have a significant role in shaping the food and beverage

industry. There are strict regulations made to protect consumers and ensure the products they

consume are safe and healthy. The Food and Drug Administration (FDA) which is a regulatory

agency under the Department of Health created under Republic Act 9711, otherwise known as

"The Food and Drug Administration Act of 2009," is mandated with promoting and protecting

the Filipino people's rights to health by ensuring the safety, efficacy, quality, and purity of foods,

drugs, devices, and cosmetics. Furthermore, it is responsible for establishing and maintaining an

effective health product regulatory system that is responsive to the country's health requirements

and issues. Compliance with these regulations can increase operational expenses. On the other

hand, it can also enhance brand reputation and consumer trust, leading to increased sales and

profitability in the long run.

P2 - Public Health Policies

8
 Increasing government focus on health, the Department of Health-Center for Health

Development (DOH-CHD) promotes a healthy lifestyle to reduce obesity, which places

individuals more at risk for diabetes, cardiovascular diseases, and some cancers. In order to

avoid obesity, DOH-Bicol advises adults to consume less fat and sugary foods, eat more fruits

and vegetables, eat a lot of dietary fiber, exercise frequently, focus on lowering their daily stress

levels, and measure their servings. According to the International Diabetes Federation's current

data, out of 66.7 million adults in the Philippines, 7.5% have diabetes, or 4,303,899 cases

(Calipay, 2024). To prevent people from consuming unhealthy foods and beverages,

policymakers impose taxes on sugar-sweetened beverages. This could result in consumer

demand towards healthier options, which increase Fruitas Holdings Inc.’s sales volume.

P3 - Subsidies and Support

Government subsidies and support play a major role in the growth and sustainability of

the food and beverage industry. The Philippine government provides a variety of grants,

incentives, and support programs to promote economic development and stimulate company

growth in various industries. Tapping into these government programs may give vital resources,

and help Philippine companies, accelerating development and competitiveness. For instance, the

government supports initiatives to improve distribution. This will help Fruitas Holdings Inc.’s to

reach consumers more effectively and provide more strategic locations from which their

consumers can avail.

P4 - Taxation Policies

9
 One of the most important political factors influencing the food and beverage industry is

taxation. These policies serve as both instruments for achieving larger socio-economic goals and

ways for generating revenue. Based on the taxation in the Philippines, the food and beverage

industry are subject to Value-Added Tax (VAT) at a standard rate of 12%, and income taxes,

which are reported on the statement of financial position. On January 5, 2024, Ease of Paying

Taxes Act (Republic Act 11976) was signed into law and became effective on January 22, 2024.

The Act aims to protect and safeguards taxpayer’s rights and welfare, modernize tax

administration, provide mechanisms that encourage proper and easy compliance, update the

taxation system, and adopt best practices. Changes in taxation policy can affect Fruitas Holdings

Inc.’s profitability. For instance, higher taxes would increase production cost and reduce margins.

P5 - Employment Laws

The Philippine Labor Code is an extensive legal structure that regulates employment

practices, labor relations, and business standards in the Philippines. The Code was created to

protect workers' rights and welfare, and it establishes legal requirements for wages, hours

worked, benefits, and job conditions. It serves as the foundation of labor relations, establishing

methods for resolving disputes between employers and employees and ensuring fair labor

practices (Chua, 2024). The Philippine Department of Labor and Employment (DOLE) is a

government agency committed to protecting the welfare and rights of Filipino workers.

Employment law affects Fruitas Holdings Inc.’s employee welfare, operational expenses, and its

brand reputation.

Economic Factors

10
EC1 - Inflation Rate

The overall inflation rate in the Philippines decreased in August 2024, primarily due to

slower price increases in food and non-alcoholic beverages. The annual growth rate for these

items fell from 6.4% in July to 3.9% in August. Additionally, the transportation sector

contributed to the decline, with prices decreasing by 0.2% in August compared to a 3.6%

increase in July.A significant decline in inflation is generally seen as a positive indicator for the

economy. When inflation rates decrease, prices for goods and services are rising at a slower pace.

This can benefit consumers by increasing their purchasing power, contributing to a more stable

economic environment, and potentially leading to lower interest rates.

EC2 - Supply Chain

According to preliminary data released by the Philippine Statistics Authority (PSA),

Department of Trade and Industry (DTI) Secretary Fred Pascual is optimistic about the

Philippines' export performance, which increased by 26.4% in April 2024 to USD 6.2 billion

from USD 4.9 billion in April 2023. Cumulative goods exports climbed by 9.6% in the first four

months of the year to USD 24.2 billion, up from USD 22.1 billion in the same time previous

year, demonstrating the export industry's resilience in the face of global economic headwinds. A

good supply chain is vital for procuring high-quality components, producing efficiently, and

delivering products on schedule. Companies. can increase its competitiveness, boost customer

happiness, and reach sustainable growth

EC3 - Cost of Living

11
 According to statistics from Numbeo, the cost of living in the Philippines has a big

impact on businesses and consumers. The typical monthly cost of living for a single person runs

between PHP 25,000 to PHP 35,000, including necessities like rent, food, transportation, and

utilities. However, the cost may vary depending on lifestyle preferences and region. Rising living

costs can have a variety of effects on businesses. One significant influence is on labor costs, as

rising living expenses frequently result in greater demand for higher compensation.

Furthermore, as the cost of living rises, people tend to spend less on discretionary things, which

reduces demand for non-essential goods and services. Businesses may also experience higher

operational costs as a result of rising commodity, service, and utility prices.

EC4 - Employment Rate

NEDA stated this following the release today (April 11, 2024) of the Philippine Statistics

Authority's February 2024 Labor Force Survey (LFS) data, which indicated that the country's

labor market remained strong as unemployment and underemployment rates fell year after year.

The country's unemployment rate fell to 3.5 percent in February from 4.8 percent in the same

month last year, resulting in 679,000 fewer unemployed people. When more people are

employed, consumer spending rises, benefiting firms in a variety of sectors. Increased customer

demand has the potential to raise corporate sales and revenue. Furthermore, a low unemployment

rate signals a tight labor market, which can put upward pressure on wages while also

incentivizing employers to invest in employee training.

EC5 - Economic Growth

12
 According to Undersecretary Dennis Mapa, our gross domestic product (GDP) growth

surged to 6.3 percent in the second quarter, above the adjusted 5.8 percent growth rate recorded

in Q1 2024. This tremendous improvement lifts our real GDP growth to 6.0 percent in the first

half of the year, putting us on course to meet our 2024 growth objective of 6 to 7 percent.

This achievement maintains our status as one of Asia's top performing major emerging

economies. A strong economic expansion in the Philippines might increase demand for its

products, resulting in more sales and revenue. The company may also profit from more

investment prospects and a better business climate. A booming economy can also help to reduce

unemployment, which makes it easier for businesses. To attract and retain talented employees.

Social Factors
S1 - Population Growth Rate

The Philippines is currently the fourteenth largest country in the world, with an estimated

population of approximately 109 million people. According to the World Population Review, the

country's population growth rate stands at around 0.83%. However, the World Bank's collection

of development indicators reports a slightly higher population growth rate of 1.53% in 2023.

This discrepancy highlights the dynamic nature of population statistics in the Philippines.

Furthermore, a significant portion of the population, approximately 30-35%, is in the 15-29 age

range, which includes both millennials and Gen Z. This youthful demographic represents a vital

market segment for various industries, particularly in the context of consumer goods and health-

related products. Fruitas Holdings Inc., a prominent player in the food and beverage sector,

specifically targets consumers within the low-to-middle income bracket. By focusing on this

demographic, Fruitas can effectively cater to the preferences and needs of young Filipinos.

13
S2 - Financial Literacy and Inclusion

In the food and beverage sector of the Philippines, significant strides have also been

made towards digital transformation. By 2022, the industry saw a substantial increase in digital

transactions, reflecting the broader trend of financial digitization. Many restaurants and food

services adopted digital payment methods, making it easier for consumers to order and pay

online. However, with the rise of e-commerce platforms, food delivery services flourished,

resulting in millions of active accounts on these platforms. This shift not only enhanced

convenience for consumers but also expanded market access for local food producers and small

businesses. In addition, financial inclusion efforts mirrored those in the broader economy, with

an increase in bank account ownership among food and beverage entrepreneurs, allowing them

better access to financing and resources. These developments align with the Bangko Sentral ng

Pilipinas (BSP) goals of fostering digital transactions and promoting financial inclusivity,

ultimately transforming the food and beverage landscape in the Philippines. By adopting digital

payment systems, Fruitas can streamline transactions, improve customer convenience, and attract

a broader consumer base.

S3 - Consumer Savings Behavior

In the recently conducted Consumer Expectation Survey for the 3rd Quarter of 2023,

reported by BSP, it was shown that the percentage of households with savings increased from

30.2% to 32.8%. However, the percentage of households with savings accounts in banks

decreased from 76.9% to 73.3%. This shift indicates a growing preference for alternative savings

methods, as many respondents opted to keep their money in various institutions, including

14
cooperatives, paluwagan, credit or loan associations, investments, microfinance, insurance, e-

wallets, or simply at home. However, this trend reflects an increasing reliance on informal and

digital financial services, which offer greater accessibility and flexibility, especially for lower-

income households. Moreover, the rising popularity of e-wallets has facilitated easier

transactions and savings management, allowing consumers to adapt their financial behaviors to

changing economic conditions. The dual nature of these savings habits suggests a need for

further financial literacy initiatives to ensure that households can effectively navigate both

traditional and alternative saving avenues.

S4 - Consumption Trends

The food and beverage industry is experiencing significant shifts in consumption trends

driven by evolving consumer preferences. Health and wellness remain central, with increasing

demand for juices made from natural ingredients, low sugar content, and functional benefits like

added vitamins and probiotics. According to the research, 70% of consumers prioritize health-

focused beverages. The trend towards plant-based diets is also impacting product innovation,

resulting in a broader range of vegetable blends and fruit-infused options. Convenience is

essential, as busy lifestyles lead to a rise in ready-to-drink juices and meal replacement options.

Personalization is increasingly important, with consumers seeking juices tailored to their

individual health needs, supported by data showing a 25% increase in personalized product

demand. The integration of technology enhances the consumer experience, with apps for juice

delivery and nutritional planning. Additionally, a growing interest in global flavors promotes

unique blends inspired by diverse cuisines. These trends signify a shift for Fruitas Holdings Inc

toward healthier, sustainable, and convenient juice options that resonate with modern consumer

15
values. By implementing strategies such as expanding their product lines and enhancing delivery

services, Fruitas is well-positioned to capitalize on these evolving trends.

S5 - Consumer Spending Growth

According to NEDA Secretary Arsenio Balisacan, inflation remains a dominant factor

affecting household spending in the Philippines. While inflation has moderated since its peak in

2022 and early 2023, high prices for essential goods and services continue to dampen the growth

rate of household spending. In the second quarter of 2024, spending increased by only 4.6%, a

slowdown compared to the 5.5% growth observed in the same period in 2023. This decline

highlights the ongoing challenges posed by inflation, which erodes purchasing power and affects

consumer confidence. Furthermore, companies like Fruitas Holdings Inc., which specializes in

fresh fruit beverages and snacks, play a crucial role in adapting to consumer spending patterns.

As consumers become more price-sensitive, Fruitas has focused on offering affordable and

healthy alternatives to traditional snacks, aligning with growing health consciousness among

Filipinos. Their expansion into retail and partnerships with local suppliers also help meet demand

while navigating inflationary pressures, ultimately positioning the company to benefit from shifts

in consumer preferences during challenging economic times.

Technological Factors
T1 - Digitalization

With the era of digitalization, many companies, including food cart companies, ought to

have a website for their own brand. With this, the customer can look at what the company is all

about, what the company is offering to them, especially their flagship brands, where you can find

16
their stalls in different locations, building relationships for their potential investors. Lacking

some factors might lose customers’ retention due to lack of knowledge about the brands they’re

into recently and updates regarding that brands especially about the menu and prices.

T2 - Social Media Promotion

According to statistics, 93% of businesses have their facebook page for their brands for

the promotions and updates regarding their products. This factor is used by lots of businesses to

market their brand or their business itself by showing their new items in their menu with some

brand ambassadors, and many more. This type of marketing strategies affects the marketing

potential and customer loyalty to the business.

T3 - Cybersecurity Measures

Facebook has an updated feature for businesses to improve the safety of the entrepreneurs

and businesses that uses their application and that is the verification system for profiles and

pages. It is symbolized by the check mark beside the name of the page. In this way, posers who

might use the same name to tarnish the name of the businesses will be distinguished because of

the lack of the verified mark. Lots of online businesses, even the different entrepreneurs, use

verified marks to mark themselves the original and avoid posers and scammers that may tarnish

their name in their own industries and fields.

T4 - E-Money Transactions

Last year, Bangko ng Sentral ng Pilipinas launched QR Ph which helps different e-wallet

users to have standardized QR codes for different stores and different types of e-wallet apps.

17
Lacking this type of payment method may reduce customer retention because some of their

target markets only use e-wallets and no longer use physical cash. Many businesses are already

using it which benefits not only the company as their way to go with the trend of digitalization

but also their customers who are using e-wallets on their day-to-day basis.

T5 - Food Delivery Applications Usage

Since 2010, food delivery applications are being utilized by almost all of the consumers

because of the efficiency in ordering their meals anywhere they want and anytime they want. The

percentage of usage of this factor rose when the pandemic striked. According to Market

Research, the upward trend of this feature rose up to 2.9 million users. Businesses in the food

service industry need to have a presence on online food delivery applications or set up their own

delivery system to keep up. Taking this innovation is to not only market their business but

broaden the scope of consumers who might be interested in their product.

Environmental Factors
EN1 - Climate Change Impact

The occurrences and consequences of climate change are relevant to the future

performance of Fruitas Holding, Inc. Fruitas Holdings, Inc. is a company that heavily relies on

fresh fruits and other raw materials for their products. Therefore, climate change can severely

impact the affordability and stability of their supplies. Finding innovative approaches can help

the company in managing its effects. A holistic climate change strategy is helpful in adapting to

the changing climate, and to consider both the external and internal factors, like considering how

18
Fruitas Holdings Inc, contributes to the climate change, as well as the effects of climate change

itself to the company.

EN2 - Regulatory Compliance

Showing compliance with the different environmental laws is an important requirement

for all organizations. The company must be compliant with different environmental laws and

regulations, specifically those relating to water disposal, resource usage, and emissions such as

The Ecological Solid Waste Management Act of 2000 (RA No. 9003) and The Philippine Clean

Water Act of 2004 (RA No. 9275). Compliance with these regulations can prevent Fruitas

Holdings, Inc.. from experiencing legal issues and can also enhance their reputation. In addition,

companies are required to submit their sustainability practices and their impact on the

environment, and these can influence consumer perception and investor decisions.

EN3 - Energy Efficiency

The food industry is estimated to consume about 30% of global energy and is accountable

for at least 20% of green gas emissions. It is becoming increasingly important for companies

such as Fruitas Holdings, Inc. to reduce such use of energy. Fruitas Holdings can reduce carbon

footprint as well as operational costs by implementing energy-efficient practices in their

facilities. The company may use control and monitoring systems to track their energy

consumption to allow them to make adjustments as needed. Making use of renewable resources

can help the company in meeting sustainability goals, regulation compliance, and can be a selling

point for their brand in which they are showcasing their efforts to be environmentally

responsible.

19
EN4 - Sustainability Practices

Using plastic and other nonbiodegradable materials is a great concern in this increasingly

environmental-conscious society. Emphasizing their commitment to being a sustainable company

can be shown by Fruitas Holdings through the use of environmentally friendly packaging and by

promoting waste reduction practices. Reports show that 82% of consumers of all demographics

are willing to pay more for a sustainable packaging. Being efficient in waste management like

recycling and smart water consumption can help minimize their environmental impact. Fruitas

Holdings Inc. not only contributes to a more sustainable future, but also strengthens its market

position and long-term viability.

EN5 - Water Stewardship

Water consumption is becoming an increasingly important topic in the food and beverage

industry because of rising concerns about water scarcity and sustainability. Fruitas Holdings, Inc.

is focusing on reducing water consumption and ensuring efficient use of water resources across

their operations. This includes measures such as water recycling, efficient water use, and

participating in community programs to promote water awareness and conservation.

Legal Factors
L1 – Food Safety Law

The Food Safety Act of 2013 (Republic Act No. 10611) ensures the protection of

consumer health and facilitates fair practices in the food trade. It applies to all food businesses,

from production to processing, distribution, and consumption, ensuring that food is safe and

20
properly labeled. The law assigns key regulatory agencies such as the Department of Agriculture

(DA) and the Department of Health (DOH) to oversee its implementation, with the DA managing

raw foods and the DOH supervising processed foods. One of the central mandates of the law is

the adoption of Hazard Analysis and Critical Control Points (HACCP), a preventive approach

that identifies, evaluates, and controls food safety hazards. It requires food businesses to

maintain proper hygiene, sanitation, and proper handling practices across the supply chain. Non-

compliance to this law may result to fines, suspension of operation, closure of business, or

revocation of permits.

L2 – Consumer Act of the Philippines

The Consumer Act of the Philippines (Republic Act No. 7394), enacted in 1992, is a

comprehensive law designed to protect consumer rights and promote fair trade. It covers various

aspects of consumer protection, including product safety, labeling, warranties, and advertising,

with the goal of ensuring the safety and welfare of consumers in the marketplace. The Act

emphasizes the right to information, ensuring that consumers receive accurate and sufficient

details about the products and services they purchase. It also addresses deceptive, unfair, and

unconscionable sales practices, providing recourse for consumers who fall victim to fraudulent

business activities. Overall, this act promotes transparency and accountability, fostering trust in

the industry while ensuring consumer rights are upheld.

L3 – Franchise Agreements Regulations

21
 In the Philippines, franchise agreements are governed primarily by the Civil Code along

with specific guidelines from the Department of Trade and Industry (DTI). The primary

legislation concerning franchise agreements is the Franchise Act, which mandates that

franchisors provide a comprehensive disclosure document to potential franchisees. This

document should include crucial information such as the franchise fee, total investment, financial

performance representations, and the terms of the franchise agreement. The DTI is responsible

for enforcing these regulations and ensuring that franchises operate fairly and transparently. The

Franchise Act aims to create a balanced relationship between franchisors and franchisees while

protecting consumer rights.

L4 – Foreign Ownership Limits

The Philippine government adopted the Foreign Investments Act (Republic Act No.

7042) in 1991 which allows foreign investors to own up to 100% of a business in specific

industries. Under this act, foreign investments are generally encouraged in areas not included in

the "Negative List," which outlines sectors where foreign ownership is restricted or prohibited.

The law includes provisions for the protection of foreign investments, such as safeguards against

expropriation and guarantees for the remittance of profits. It also mandates that foreign investors

register their investments with the appropriate government agencies to secure rights and benefits.

The objective of this law is to promote and encourage foreign investment in the country while

ensuring that such investments contribute to national development.

L5 - Anti-Money Laundering Act (AMLA) of the Philippines

22
 Officially known as Republic Act No. 9160, the Anti-Money Laundering Act (AMLA) of

the Philippines seeks to prevent and combat money laundering operations while advancing

financial transaction transparency. The act requires certain businesses to establish and implement

compliance programs designed to detect and report suspicious activities. Holding companies,

which primarily manage and control other companies, often deal with substantial financial

transactions and investments, making them potential targets for money laundering schemes. As a

result, AMLA mandates that these companies conduct thorough due diligence on their clients and

business partners, ensuring they know the source of funds being used in transactions. Failure to

comply with AMLA requirements can result in severe penalties, including fines, and

imprisonment for company officers.

1.5 Porter’s Five Forces Model Analysis

Porter's Five Forces Model is a strategic framework developed by Michael E. Porter in

1979 to analyze the competitive forces within an industry. This model helps businesses

understand the dynamics of their industry and the factors that affect competition and profitability.

The five forces are:

 Threat of New Entrants - refers to the likelihood that new companies will enter

an industry and challenge existing players. High barriers to entry can protect

established companies from potential competition. These barriers can include

substantial capital investment, which may discourage new entrants who lack the

financial resources.

 Bargaining Power of Buyers - refers to the influence that customers have over

pricing and product quality. When buyers have many choices and can easily

23
 switch to competitors, they hold significant power, which can lead to demands

for lower prices or better quality.

 Suppliers Bargaining Power - examines the influence that suppliers have over

the pricing and quality of materials or services. If there are few suppliers for a

specific input or if the input is unique, suppliers can dictate terms, leading to

higher costs for companies.

 Threat of Substitutes - examines the presence of alternative products or services

that can fulfill the same need as those offered by a company. High availability of

substitutes can limit pricing power, as customers can easily switch to alternatives

if prices rise or if they perceive a decline in quality.

 Competitive Rivalry - assesses the intensity of competition within an industry.

High levels of rivalry can lead to aggressive marketing tactics, price wars, and

increased operational costs, ultimately squeezing profit margins. Factors

contributing to rivalry include the number of competitors, the rate of industry

growth, and the degree of product differentiation. In industries with many

competitors and slow growth, firms may engage in cutthroat competition to

capture market share, leading to reduced profitability for all.

Figure 2. Porter’s Five Forces Model

THREAT OF
NEW
ENTRANTS

BARGAININ
COMPETITIV
G POWER
E RIVALRY
OF BUYERS
PORTER’S
FIVE
FORCES
MODEL 24

THREAT OF BARGAININ
BARGAINING POWER OF SUPPLIERS - LOW

The bargaining power of suppliers in the food industry is generally low due to the

abundance of options available to buyers. This is particularly true for common commodities,

where multiple suppliers offer similar products. This competitive landscape gives chains a

significant advantage when negotiating prices for large orders. By leveraging their scale and

purchasing power, chains can secure more favorable terms than individual companies. Suppliers

are often more willing to offer discounts or other concessions to maintain or expand their

business with major customers. This is because losing a large chain customer can have a

significant impact on a supplier's revenue and market share.

THREAT OF NEW ENTRANTS - MODERATE RISK

The threat of new entrants in the food and beverage industry is moderate, since there are

factors that help and prevent the establishment of new businesses. The factors that drive new

businesses to enter the industry are low capital requirements, low consumer switching costs,

innovation, and uniqueness. Having low start-up costs partly due to low capital requirements

makes it easier for businesses to enter. Because of low customer switching costs, new entrants

may be able to rapidly increase their consumer base by attracting competitor's consumers.

Furthermore, new entrants could gain advantages from innovation in ingredients and packaging.

25
Generally, a high turnover industry, with most new entrants relying on the uniqueness and

popularity of their product offers to succeed.

On the other hand, entry barriers include government regulations and incumbency

advantages independent of size. New entrants in the industry should follow government

regulations, such as Food Safety Regulations. Potential increases in regulatory oversight may

force marginal businesses out of the industry due to higher compliance costs. The primary

incumbency advantage independent of size is location which is important to food businesses in

reaching consumers. Thus, even though the food and beverage industry are highly competitive,

certain factors may encourage new businesses to enter the industry.

BARGAINING POWER OF BUYERS - HIGH

The bargaining power of buyers in this industry is notably high. Consumers have a wide

array of comparable products available, which increases their power and influences pricing and

quality standards. Price-sensitive customers demonstrate low brand loyalty, making them more

likely to switch to competitors offering better deals or innovative products. However, several

factors contribute to this strong buyer power: First is availability of Substitutes. With many

alternatives on the market, buyers can easily switch to different brands if their needs are not met,

putting pressure on companies to remain competitive in pricing and features. Second is price

Sensitivity, which customers are highly responsive to price changes, often prioritizing cost over

brand allegiance. This compels companies to focus on competitive pricing strategies to retain

their customer base. Third is access to Information, this rise of digital platforms has empowered

consumers with information about product features, pricing, and reviews, further enhancing their

negotiating power. And lastly, the importance of Buyer Segments, which certain segments of

26
buyers, particularly large retailers or corporate clients, hold significant power due to their

purchasing volume. They can negotiate better terms, impacting overall industry profitability. To

succeed in this environment, companies must continuously innovate and adapt their offerings to

meet evolving consumer preferences and expectations, ensuring they can effectively compete

against both existing rivals and new entrants.

THREAT OF SUBSTITUTION - HIGH

Fruitas Holdings, Inc. is facing significant threats from substitute products in the

competitive landscape of the beverage and food industry. These substitutes, which include a wide

range of alternative beverages such as bottled water, soft drinks, and other fruit-based drinks,

pose a challenge to Fruitas’ market share. There is also an abundance of food alternatives out

there that consumers prefer more than what Fruitas Holdings, Inc. are offering. This is because

there are several factors that drive the consumers in opting for the alternatives such as the

product price and personal taste preferences of the customers. The industry of food and beverage

is highly dynamic, with new trends and innovations constantly emerging. Consumers are more

inclined to try out newer products that offer a wider range of options.

COMPETITIVE RIVALRY - HIGH

The rivalry among existing competitors in the food and beverage industry is high. The

market comprises numerous local and international brands offering similar products, leading to

price competition and aggressive marketing strategies. This high level of rivalry can pressure

profit margins and requires companies to invest heavily in branding and customer engagement.

Moreover, as consumer preferences shift towards healthier options, competitors are quick to

27
adapt, further escalating the competitive landscape. To thrive in such an environment, Fruitas

needs to leverage its strengths, such as its established brand reputation, diverse product range,

and focus on innovation, to maintain a competitive edge and foster customer loyalty.

28