The milk in coffee

Inspired by their father, a doctor of curative medicine who believed that milk should be included in the diet of every Filipino, the four sons of Raymundo Katigbak put up a 500 square meter pasteurization plant called Batangas Agribusiness Center, Inc. in Lipa.

Now on its 11th year in business, BAC accounts for 1.2 million liters of the liquid milk consumed in the country. Of the local milk production of 4.8 million liters, which is 1% of total consumption, BAC accounts for 25%.

BAC’s only customer for fresh milk is Rustan’s Coffee Corp., which holds the sole Philippine license for the Starbucks coffee shop chain.

Sole supplier

"I got a tip from the people of Nestle Phils. that Starbucks was looking for a liquid milk supplier, which could deliver everyday, " said BAC president Johnny Katigbak. "When I entered their Makati office, one of the Americans connected with Starbucks exclaimed, ‘This is the milk we are looking for’, pointing to the bottle of milk I was holding."

Rustan’s Coffee placed a daily order of 100 to 200 liters of milk, which would be increased to 1,000 liters as the company opened 10 more Starbucks outlets in the next five years.

"I saw this as a break for BAC. They asked me if I could start delivery tomorrow and I gave a resounding yes even if I knew I had two problems," said Katigbak.

The company’s immediate problems boiled down to where to get the milk and where to get a refrigerated van to deliver them. BAC solved the first problem by contracting the Batangas Dairy Cooperative to supply fresh milk daily for processing. The refrigerated van was a more difficult problem and was resolved by putting an old refrigerator into a van that had the name, Milkjoy, glued to its side. The brand was not painted on but was printed on a continuous sheet of paper.

"Starbucks created an insatiable demand for fresh milk and we benefited from being the chain’s sole supplier," said Katigbak. "In less than a year, I was able to wipe off the company’s P13 million debt, which were incurred during the early years. And I gave dividends to the stockholders," said Katigbak.

Less than three years after the Starbucks deal, BAC has also paid off its P6.5 loan from the Technology and Livelihood Research Center, which (together with a P2 million investment from the Katigbak family) was used to put up the Lipa plant in 1992.

Today, BAC is 86% owned by the family and 14% owned by Batangas Dairy Cooperative, which supplies the milk. The company has a registered net worth of P15 million. From that first improvised delivery van, the company now has 10.

Diversification

Aside from its core product, BAC also produces kesong puti (which it has been supplying to high-end restaurant, Via Mare, since 1995) and chocolate milk. The company will soon be launching its own yogurt line.

"We are looking at new products to develop and new ways to reduce the cost without compromising the quality of our production," said Katigbak.

Recently, BAC took out a loan from Planters Development Bank to purchase a packaging equipment, which is scheduled to operate within the year.

"Business has not always been good. There was a time during the early years when we had to sell 500 liters of milk and save P5,000 per day just to break even," said Katigbak. "My chairman told me then to sell the business because we were going nowhere. But I persisted. I thought I had already lost everything so what more had I got to lose if I continued?"

Katigbak’s persistence has paid off in an import-flooded business like dairy.

"There is a 75% shortage in supply, which gives a lot of room for improvement. Besides, when I wake up in the morning, cows are being milk and I have sales. Before I go to bed at night, cows are being milked again and I have sales. That is not so bad," said Katigbak.