A thesis proposal submitted to the Faculty of the Department of Management, College of Economics, Management and Development Studies, Cavite State University, Indang, Cavite, in partial fulfillment of the requirements for graduation with the degree of Bachelor of Science in Business Management, major in Business Economics. Prepared under the supervision of Dr. Nelia C. Cresino.
Soft drinks can trace their history back to the mineral water found in natural springs. Bathing in natural springs has long been considered a healthy thing to do and mineral water is said to have curative powers.
Scientists soon discovered that gas carbonium or carbon dioxide is behind the bubbles in natural mineral water. Soft drinks by its term are beverages that are not alcoholic drinks. Carbonated soft drinks are also referred to as soda (About. com, 2011). What is special about soft drinks is that it is very easy to find and that all people could avail it. It is really good in satisfying thirst of an individual.
It gives a refreshing feeling especially on a very hot weather. According to the research conducted by the Gale Group Farmington Hills Michigan (2008), the soft drink industry began in the mid-1880s.
During the early years, soft drinks were sold only in stores that could provide fountain service. Increasing distribution was tied to building additional syrup manufacturing plants. The first marketed soft drinks appeared in the 17th century as a mixture of water and lemon juice sweetened with honey. In 1676 the Compagnie de Limonadiers was formed in Paris and granted a monopoly for the sale of its products.
Vendors carried tanks on their backs from which they dispensed cups of lemonade.
Sari-sari stores remains the largest distribution channel in 2011, small neighborhood retail outlets called sari-sari stores accounted for the largest proportion of sales in soft drinks. Located in neighborhoods, these outlets make products easily accessible to lower- and middle-income consumers, especially in provincial areas where modern channels such as convenience stores and supermarkets are located in retail centers that are far from residential areas. It should also be noted that Filipino consumers typically do not buy in bulk and store soft drinks products at home.
Thus, sari-sari stores become a convenient channel for buying soft drinks in the favored smaller and returnable glass packaging (euromonitor, 2011). For dealership one will need a lot of collateral. The amount is based on the area of distribution. Soft drink dealership is profitable, but one should have to watch out for a lot of things where one can lose money like breakage, theft, etc. The dealer should be 200% hands-on because of the cash and lots of credit that will be handled. Based on the visitation on the sales office of Coca-cola, Pepsi-cola as well as Royal Crown in Cavite there are 52 soft drinks dealers in the province.
Soft drink dealerships as well as other businesses contribute to the improvement in the economic condition of people in a certain area or field and the community in general. Thus, the profitability of its operation is worth studying. Statement of the Problem Specifically, the study seeks to answer the following questions:
The framework of the study which is composed of the socio-economic characteristics as the input, the dealership as the process and the net income as the output is shown in Figure 1. The socio-economic characteristics of the soft drink dealers such as age, gender and educational background will be the used as input in operating a dealership business. The output which is the net income of the business will be based from the input which will be processed in operating the business to generate the profit. Conceptual framework of the profitability of the soft drinks dealership in Cavite.
Objectives of the Study Generally, the study will be undertaken to determine the profitability of soft drinks dealership in Cavite. Specifically, it aims to:
The prospective investors can use this information as basis in deciding to enter into the soft drinks dealership business.
This will provide a good source of data for their feasibility study. The student and researchers can use the result of the study as reference to have a deeper study about soft drink dealership in Cavite and other related researches. From the result of the study, the soft drinks dealer will have an idea of the current situation of other dealers and compare their pricing strategies with the other soft drink dealers in Cavite. Scope and Limitation of the Study This study will be conducted to analyze the profitability of soft drink dealership in Cavite. It will be conducted from October to December 2012.
The respondents will be the owners, managers, or owner-managers of soft drink dealership business. The study focused mainly on the socio-economic characteristics of the respondents, income of soft drink dealers and problems encountered in soft drinks dealership business. Only dealers of soft drinks such as Coca-cola, Pepsi- cola and Royal Crown will be interviewed. Accounting transactions for one year period, 2011 will be included in the analysis of income. The data that will be used in the study will be limited to what the respondents will provide during the interview.
Cost of sale refers to an expense incurred by soft drinks dealers which is obtained by multiplying the monthly sales volume by unit cost. Gross income refers to the monthly total cash amount received by soft drink dealers from the business. Net profit refers to the total cash amount left to the soft drink dealer after deducting all relevant expenses from the total sales. Profitability is the ability of soft drink dealers to improve the financial position of the business. The ratios that will be used are: Gross Profit Margin, Operating Profit Margin and Net Profit Margin.
Sales volume refers to the monthly quantity of soft drink sold by soft drink dealers. Soft drinks is the main product traded by the soft drink dealers to their consumers. This include carbonated drinks such as Coca-cola, Pepsi- cola and Royal Crown. Soft drinks dealers refer to the person who sells soft drinks for cash. Total cost/ expense refers to all expenses incurred by soft drink dealers in a month. Total sales refers to the total amount of soft drinks sold in a month. It is obtained by multiplying the unit selling price by the monthly sales volume.
METHODOLOGY.
This chapter will discuss the research procedure to be used in the study. This will be presented in the following section:
The cross- sectional survey research design will be used in studying the profitability of soft drink dealership in Cavite. This design will facilitate finding the answers to questions on socio-economic characteristics of soft drink dealers, income of soft drink dealers, profitability of soft drinks dealership and the problems encountered in soft drink dealership business.
In the cross sectional survey design, data will be collected at one point in time from October to December 2012 from a sample selected from a population at the particular time. Sources of Data The respondents for this study will be the soft drinks dealers in Cavite. A list of soft drink dealers in every town was requested from the sales office of the different companies such as Coca-cola, Pepsi- cola and Royal Crown cola in Cavite, namely: Alfonso, Amadeo, Bacoor, Carmona, Cavite City, Dasmarinas City, Gen. Trias, Imus, Indang, Kawit, Maragondon Naic, Noveleta, Rosario, Tagaytay, Tanza and Trece Martirez City.
Only towns that have soft drink dealers will be included in the study. Data Gathering Procedure The data to be used in the study will be gathered through interviews with the aid of questionnaires. Visitation to the different towns of Cavite will be done to determine the number of soft drinks dealers. Table 1 shows the distribution of respondents by products and by towns. A total of 52 respondents will be included in the study. Table 1. Distribution of respondents by products and by towns.
The first part is about the general information of the respondents. The second part will focus on the form of business organization, and the third part will center on the practices and strategies in making profit. The fourth and the last part include the business income and expenditures of the soft drink dealers and the problems encountered in soft drink dealership. Method of Analysis Frequency count and percentage will be used to describe the socio-economic characteristics of soft drink dealers, factors affecting the income of soft drink dealers and problems encountered by soft drinks dealers.
Financial tool such as profitability ratios will be used to measure the earning capacity of the business. The ratios that will be used are: Gross Profit Margin, Operating Profit Margin and Net Profit Margin. Gross profit margin. Measures the percentage of each peso sales remaining after the firm has paid for its goods. The higher the gross profit margin, the better, the lower the relative cost of merchandize sale. Gross profit margin = Gross profit Sales Operating profit margin. It determines the percentage of each peso sales that is represented by operating profits.
It measures the overall operating efficiency and incorporates all the expenses associated with the ordinary or normal business activities. Operating profit margin =net operating income Net sales Net profit margin. Consider income after cost. Operating cost and taxes have been deducted. Net profit margin is divided by net income after taxes by net sales. In analyzing the income of soft drink dealers the formula that will used to solve the net income is: NI =TS – TC Where : NI = net income TS = total sales TC =total cost Return on expenses.
Measures the earning power of the business for every peso spent. It is obtained by dividing the net income after taxes by the total expenses. ROE= net income after taxes Total expense
Soft drinks are liquids which contains carbon dioxide. In the years that followed, many variations of carbonated beverages, the process of carbonation can occur naturally underground or artificially, it is through pressurizing. Examples of carbonated beverages include spring water, beer and soda, or pop.
Best example is Coca-Cola which is the household name all over the world. Makers of carbonated drinks use caramel coloring more than any other color in the food industry. Carbonated beverages can generally be 90 percent water. They are most commonly associated with being non-alcoholic, although by definition beer is also a carbonated drink (Jeanne, 2011). According to the Pinoy Progress Philippines. Com, The Philippine Beverage Industry is composed of companies producing ice tea drinks, soft drinks and colas, energy drinks, milk, juice drinks and mineral water.
In the soft drinks or soda category Coca-Cola and Pepsi of the US dominate. The soft drinks segment of this industry right now is dominated still by the two American giants–Coke and Pepsi (pinoyprogress. com2012). Royal crown soft drinks are also the leading brand of soft drinks for the Filipinos. Getting Filipinos to appreciate RC Cola, a century-old brand founded in Columbus, Georgia is something that the local bottlers of RC Cola have been doing daily for the past eight years (Manila Bulletin, May16, 2011).
Pepsi Cola Products Philippines reported its sales figured being down to $2. 74 million in 2008 from $3 million in 2007. This is expected to be a result of people’s growing orientation towards healthier drink options (Philippine Beverage Industry,2009). Consumption of and Sales of soft drinks The consumption of carbonated soft drinks is high, and is fast reaching saturation. So future growth in the Philippine soft drinks market is expected to come from non-carbonated soft drinks, says “Philippines Food and Drinks Market: Emerging Opportunities”, the latest research on the Philippine food and drinks market (Philippines Food and Drinks Market: Emerging Opportunities, Feb. 2009).
Status of sales in soft drink industry has been good performance over the recent years. Enjoying high per capita consumption among Asian countries. The sales of soft drinks are expected to come to reach 6 Billion Liters in 2008, 23% up over 2005 (Philippines Food and Drinks Market: Emerging Opportunities,Feb. 2009). Small retail outlet which is called sari- sari stores is accounted for the largest proportion of sales in soft drinks.
Because it is easily accessible to lower- and middle-income consumers, especially in provincial areas where modern channels such as convenience stores and supermarkets are located in retail centres that are far from residential areas (Euromonitor. com2012). In the Philippines, the competition in the carbonated drinks becomes stronger. The Coca-Cola Export Corp remains the undisputed leader in the Philippine soft drinks category. The Coca-Cola Co is able to cater to lower-income consumers through its fully-owned subsidiary Cosmos Bottling Corp, which manufacturer’s competitively-priced regional brands (Euromonitor.com2012).
According to the research conducted by the Canadian Beverage Association (2009), sales tend to be seasonal, with higher consumption occurring during the hotter summer months. Unusually cold or rainy weather during the summer months can have a negative impact on sales. Aside for carbonated drinks, bottled water and fruit juice will be the most profitable in the non carbonated soft drinks in the market. Many factors affecting the sales of soft drinks industry “Growing health awareness and health safety concerns among Filipinos will be the key deciding factors of this growth” ”, says an analyst at RNCOS.
Other factors, including growing young population, rising income and shifting consumer preference are also likely to add to the growth of health drink market in the country (S. C 2009).
According to the research conducted by the Euromonitor’s team, the year of 2011 is a very challenging year for the soft drinks industry in the Philippines. Because of the economic back drop, shorter summer periods and higher inflationary pressure, the industry’s total volume sales contracted (Euromonitor.com, 2012).
Increased competition from other non-alcoholic beverages, in particular bottled water, but also beverages such as fruit/vegetable-based drinks, energy drinks, sports drinks and relaxation drinks, has given consumers more beverage choices. Changing consumer preferences and demographics, with a larger segment of older consumers who are increasingly concerned about their own health, and concerns about obesity have resulted in an increased demand for new products (Canadian Beverage Association, 2009).
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