MANILA, Philippines - Food giant San Miguel Pure Foods Company's (SMPFC) shift to branded products such as ice cream, coffee and chicken nuggets is paying off.

In a disclosure to the local stock exchange, SMPFC said the company has been shifting from commodity products to value-added and branded products to assure greater price stability and higher margins.

More than half of SMPFC's consolidated revenues came from these value-added products, marking a significant shft from the 33% share in 2003 and 27% in 2000.

SMPFC has successfully developed new products such as ice cream, coffee and nuggets, which has been warmly received by the market.

"Market acceptance for chicken nuggets has been especially strong and as a result, the company has quickly doubled production capacity," it said.

Ice cream is also a growing segment for SMPFC.

"One product category where the company has seen steady growth of market share has been in ice cream, which was relaunched in 2004 under the Magnolia brand. An increase in market share was achieved ebem with minimal marketing and advertising support," the company said.

SMPFC has also increased the number of its branded distribution outlets --  Monterey Meatshops and Magnolia Chicken Stations.

Despite competition, SMPFC said it has maintained market leadership in non-refrigerated margarine (96% market share by volume), refrigerated margarine (89%), hotdogs (49%), butter (44%), fresh meats (42%), feeds (41%), poultry (41%) and flour (17%).

Among its brands that are number 1 in its categories are Star Margarine, Dari Creme, Monterey, Purefoods Tender Juicy, Magnolia Gold Butter, BMEG Feeds, Magnolia Chicken, San Miguel Mills Flour, Magnolia Quickmelt, Purefoods Fiesta Ham, Purefoods Bacon, Purefoods Nuggets and SanMig Coffee Sugar-free.

Products that are number 2 in the market are Magnolia Cheezee, Magnolia Cheddar, Magnolia Fresh Milk and Magnolia Full Cream Milk.

P2.5 billion for bulk grains terminal

SMPFC has been continuing to find ways to control production costs and protect margins. This includes following an "asset-light" model where most farms, feed mills and processing plants are outsourced to third parties; and the use of cassava as a substitute for higher-priced corn. It estimates it saved nearly P500 million in 2011, just from substitutin cassava for corn.

The company is also investing P2.5 billion in a bulk grains terminal in Mabini, Batangas.  The new terminal, which would start operations in the fourth quarter of 2013, is located close to its two flour mills and seaports. It said freight costs for the flour and feeds milling operations are expected to significantly decrease.

"The company is confident its strategies and initiatives, coupled with a young and growing population and a strong Philippine economy, will ensure steady growth in revenues and earnings," SMPFC said.

SMPFC posted a net income of P4.21 billion in 2011, a 4% increase from the previous year despite higher prices of raw materials. The company reported consolidated net income of P89.6 billion, a 13% jump from 2010 revenues of P79.3 billion.