Q&A with Universal Robina Corporation’s VP-Marketing Edwin Totanes on Launching and Defending New Products (Part 1)

“Research results should be “used directionally” and not necessarily to be “followed directly” Edwin Totanes

Q1: Congratulations on your winning the prestigious Agora Awards for marketing management from the Philippine Marketing Association last 2013. What do you consider are your biggest marketing achievements so far and why?

I have selected 3 examples from my previous employment at a) Kraft Foods, Inc.; b) Del Monte, and c) RFM / Swift Foods; then 2 major examples from my current employment at URC: a) C2 Green Tea and b) URC Coffee (Great Taste and Blend 45)

The significance and in fact commonality of these achievements are essentially 2-fold:

I work best when I am the underdog but tasked to develop a clear competitive advantage; and
Working with a Filipino family corporation, such as RFM of the Concepcion Family and URC of the Gokongwei Family (as opposed to multi-national companies) provide me with a lot more latitude to freely implement my own ideas. Multi-national Companies generally have a “Not invented in America” syndrome and as such, new ideas are generally shunned. I do have a number of experiences in this regard with my employment with P&G and The Coca-Cola Company.

Q2: C2 ready-to-drink green tea is a phenomenal success not just in the Philippines but in many parts of Asia, can you tell us the thought process of the launch since I understand you went after a different category, the cola market, instead of the tea market? Why was that decision important?

In one of Mr. John Gokongwei’s many travels, he observed that in China, bottled tea was drank quite a lot by many Chinese and even outsold soft drinks. I was personally tasked to introduce a green tea product in a PET bottle, URC’s first foray into the RTD Beverage market. I was the ideal man for this having worked 5 years with the biggest soft drink company in the world, The Coca-Cola Company. At first, I tried to talk him out of this plan, saying there is hardly any tea market in the Philippines except for those in tea bags and the “bottomless ice teas” served in fast food restaurants. I also told him that the reason why China bottled tea outsells soft drinks is because China has traditionally been a tea-drinking country and carbonated soft drinks was introduced only in the 1980s when China opened its doors to the foreign world after years as a solitary Communist state. On the other hand, the Philippines has been a soft drink market for over 100 years. In 2003, Bottled Tea market was estimated at less than P3Billion; while the carbonated soft drink market was at over P100Billion! However, Mr. John was truly passionate about his plan and would call me almost weekly to check if I had already thought of how to introduce the product soon. I didn’t realize that when he said “soon” he meant “very, very soon.” He said the line equipment was already on a ship and will arrive at our Plant in the next 4 months!

So there I was, faced with a market potential of almost zero, a consumer market that has been “addicted” to cola for over a hundred years and a stubborn and passionate owner that had a dream! . . and I, I had to have a plan!

The plan was “right under my nose”! Given the following information:

Filipino consumers had an impression that teas were for the old and lethargic population,
A growing preference for healthy lifestyle and
A very huge gap in size of market of Tea vs. The Cola market. The positioning therefore had to be against the large and young market of cola drinkers by providing C2 as the healthier alternative.

Q3: There was a judgment call on the brand name C2 because it didn’t exactly fare as well as another brands in market research, why did you insist on the name C2?

While we were yet developing the product, Mr. John would always send me tea samples from his many travels abroad, for me to taste. One day, I drank one that finally appealed to my taste. It was labeled “Green Pumpkin Juice” from Taiwan. It was not a tea, but it felt “cool and clean” down my throat and tasted much like “sago-gulaman”, a taste I, and most Filipinos, would be quite familiar with. It was at this time that I was inspired by such a taste and felt that if only I could mask the taste of tea, (which based on our product tests, young Filipinos, generally dislike), then perhaps, the concept of bottled tea can finally work in the Philippines! I wrote the words, “Cool & Clean” on a piece of paper and said to myself, “I shall introduce a tea and call it “Cool & Clean” if and when the time comes. Moreover, I wanted to be hip, to be cool, and appeal to my young target, as it was already clear in my mind that I had to “source my business” from the young and large market of carbonated cola drinkers.

My daughters, who were both in College then, would call me up and say. “Papa, pasundo naman ako sa G-4 (which meant Glorietta 4) or G-3 (Greenbelt -3). The popular singing quartet then was called F-4! So, I thought then, that the young love to abbreviate, so I will call my product “Cool Clean” green tea, or “C2” for short.

However, the story did not end there. We had to subject the brand name to a Brand Name Study. The other winning name we were choosing from was “Chill.” I insisted on putting ”C2” to the test because it was a personal invention and a personal choice. When results of the tests were out, “Chill” overwhelmingly won over “C2.” I was terribly disappointed because my personal choice had lost the research study. However, I did not give up, I read and re-read the research findings and verbatims until I discovered a key strength for the brand name C2. Although the name “Chill” was preferred overall vs. “C2”, the latter had a stronger association for a “health drink” than “Chill.” Knowing then that I will be positioning “C2” as a “healthy alternative to carbonated soft drinks,” I resolved to recommend “C2” as the brand name.

I then recommended to the Executive Committee the following:

Introduce a green tea product but flavored (masking the tea taste) to appeal to the Filipino palette,
Positioned not as a tea, but rather as a “healthy alternative” to carbonated soft drink; and finally
The product will be branded “C2.”

There was a deafening silence that followed. The ExCom readily understood the first two recommendations, but could not understand “Why C2?” They were even more perplexed when I confessed that the brand name “C2” lost overall in research, and they said, “ Look, Mr. Totanes, our successful products have been called simple names. When we launched chips, we called it “Chippy”! When we launched curls flavored with cheese, we called it “Chiz Curls” so why? Why C2?”

So, I went through the research results again, etc. etc. I must have been very convincing or plain stubborn that day, because by the end of the meeting, they said, “Ok, Mr. Totanes, it is up to you!” And the rest, as they say is history! In no time at all, C2 became URC’s largest selling brand in just over a year from launch.

More than just my stubbornness and preference for my personal choice, the recommendation to use “C2” as brand name is borne out of the following:

Still research based, C2 had a stronger connotation for health;
In as much as I will be sourcing my business from a beverage icon like Coca-Cola, the need for an intriguing and unique name, such as C2, was necessary I believe to draw curiosity for trial than an “almost generic” name such as “Chill”, and
I believe, research results should be “used directionally” and not necessarily to be “followed directly.” I was not afraid to go against the crowd, and in doing so, mustered enough courage and conviction to go the other way.

Q4: Two years after you launched C2, your former employer Del Monte launched a healthy drink category, Fit n Right that claimed weight loss benefit in 2006. That was another phenomenal success then, as it used the same health positioning and even was displayed beside C2 in some stores, depressing C2 volume significantly then. You had to be recalled from your new stint in URC Indonesia, and your defensive strategy worked not just to recover volume but grew the C2 brand again, can you tell us what exactly did you do as a defense strategy?

DM FnR was launched sometime in 2006 as a juice drink that helps reduce body weight with L-Carnitine as its active ingredient. This powerful USP, supported by advertising using popular endorsers like Marian Rivera and Richard Gutierrez and its merchandising strategy of “placement beside C2” was effective in “stealing volumes” from C2. On top of the DM FnR threat was also the threat from a resurging Coca-Cola business that started “painting the town red.” I was recalled from my expatriate position in Indonesia to address these dual problems that began to soften C2 sales to its lowest levels in 3 years by minus 40%.

Upon my return, I immediately visited the trade to assess the situation. I realized that the Beverage Sales Force had “lost its original focused strategy” and was too concerned with the DM FnR threat. They were very concerned that DM FnR always successfully placed itself beside C2. I immediately re-grouped the Sales Force and re-focused their attention to the original C2 strategy of “sourcing business from Coca-Cola.” They had forgotten to place C2 in stores where Coke was and to place C2 beside Coke whenever possible. Thereafter, I began developing a flanker product against DM FnR, C2 Envidia.

C2 Envidia was tea-based but had L-Carnitine just as DM FnR. But the advantage of C2 Envidia was that, being tea-based, had another natural slimming ingredient, inherent in tea, called “EGCG” thus providing 2 slimming ingredients versus only one for DM FnR. Moreover, C2 Envidia had “zero sugar” and far less calories, only 10 from its tea. On the other hand, DM FnR had an average 100 calories in every bottle from its sugar and juice combination. By highlighting this caloric content, C2 Envidia effectively “casted doubt” on DM FnR’s ability to reduce weight. In addition, we conducted a clinical study on the use of C2 Envidia and results allowed us to claim “reduce at least 2 inches on your waistline in just 6 weeks.” Finally, on price, C2 Envidia had the same price as C2 at P15 versus DM FnR, being fruit juice based was priced at P22 per bottle. Armed with these competitive advantages versus DM FnR, we developed TVCs that claimed “Let the countdown begin to a slimmer body: TWO-ONE-ZERO: Introducing C2 Envidia with TWO (L-Carnitine and EGCG) slimming ingredients, in ONE (C2 strong brand) delicious green tea, and ZERO sugar. Lose up to two inches off your waist in 6 weeks.” With these strong competitive claims we supported on TV and print. In the trade, we ensured to position C2 Envidia beside DM FnR and farthest away from the C2 brand. In cases where space was limited, we ensured that C2 Envidia was at least in between C2 and DM FnR, effectively flanking the latter.

DM FnR reacted to C2 Envidia’s launch by doing the following:

Reformulated DM FnR to reduce sugar and caloric content;
Reduced prices promotionally to about P20/bottle (still higher than C2 Envidia’s P15, and
Also introduced a tea-based drink with L-Carnitine branded as Del Monte, a copy of C2 Envidia at parity price as well.

However, these reactive measures actually back-fired on DM FnR. By reducing the caloric content through sugar elimination on the formula drastically changed the taste of the products, thus, effectively, alienating consumers who buy DM FnR not for weight reduction but more for taste. The price reduction and the introduction of a Tea-based product like C2 Envidia did not do much harm at all. Their change in formula was the major step that did them in. DM FnR sales began to drop dramatically till where it is now, (at less than 200k cases a month), thus effectively eliminating it as a threat to C2. DM may have “shot themselves on the foot” on this one. I believe that Del Monte would have been better off introducing a “flanker” product to its main line-up of delicious FnR with sugar; the same way that C2 introduced C2 Envidia.

We have since de-listed C2 Envidia from the C2 portfolio. It has done its job of defending against DM FnR and eliminating it as a threat. C2 Envidia effectively defended DM FnR even without selling beyond 5K a month!

While we were defending against Del Monte Fit N Right, we simultaneously developed our OFFENSIVE STRATEGY against our source of business, Coca-Cola. This strategy was composed of the following elements

Pack-Price Strategy – introducing specific pack sizes in specific channels
Increasing Consumption – a new thematic “Sarap ng Bukas” campaign
Encouraging consumption with meals – “Sarap Kumain” campaign

Q5: In Indonesia, Zozro’s Tehbotol is the market leader in various packaging types beyond returnable bottles, do you see a time when tea will be the leading drink in the Philippines?

Sosro’s Teh Botol is the market leader in Indonesia in various packaging formats. However, I do not see a time in the near future when the same situation will be for the Philippines. Despite C2’s success in generating business at the expense of carbonated soft drinks, the huge gap in markets continue to be so wide that C2 will continue its growth by sourcing business from there. On the other hand, in Indonesia, the carbonated soft drink market is only about as large as the tea market, thus market leadership in tea is so much more feasible. In the Philippines, after my first year with C2, I estimated that Coca-Cola was then about 25X bigger. Now, after 10 years, C2 has grown, but Coca-Cola, per my estimate is still 15X bigger!! Thus, it will not happen in the near future.

Q6: What does the early success of your solo bottle Indicate despite being higher priced versus the leading cola?

The early and continued success of C2 Solo should not been seen only as a size reduction for price affordability. Take note that the Solo introduction was part of the overall Pack-Price Strategy, which also included the introduction of the Litro and the 1.5L sizes.

Some key points on the Solo success are as follows:

We had a clear and conscious effort that the Solo was meant, not for key accounts or supermarkets, but for sari-sari stores where Coca-Cola continued to dominate. Thus, we did not put a “bar code” on the packs of Solo so it will not find itself in supermarkets that need a bar code;
Despite being priced P10/ 230ml bottle versus Coke’s P8/ 237ml returnable glass bottle, C2 was beginning to gain traction, which indicated that consumers were willing to shift and pay the price for a “healthier alternative”;
Realizing that sari-sari stores also source their supply from supermarkets, we allowed sales of C2 Solo if full cases of 24s only; only recently have we also introduced the C2 Solo in 6s as a competitive alternative for mothers who buy Zesto’s juice drinks in cartons of 10s;
We will never sell C2 Solo in singles in supermarkets in order not to cannibalize our 355ml and 500ml sizes in that trade segment. That is how we properly execute the Pack-Price Strategy.

To date, C2 Solo sales continue to grow and only limited by production capacity.

Note:  This is Part 1 of our interview with Mr. Edwin Totanes. Part 2 will be posted subsequently.