Thriving on IP Protection

After graduating medical school in 1985, newlyweds Dr. Rolando Hortaleza and Dr. Rosalinda Ang-Hortaleza saw a lot of potential in a special cuticle remover formula that their cousin had invented. Not content to let the opportunity pass them by, they decided to pool together the 12,000 Philippine Pesos (₱) they received as wedding presents to use as start-up capital for a small cosmetic repacking business called RBH Cosmetics. They purchased the cuticle formula from their cousin for ₱5,000 and spent the rest on necessary inventory and packaging materials. With the help of a newly hired assistant, the fledgling company packaged and distributed the special cuticle remover, ordinary acetone and cold wave lotion to local beauty parlors.

Complemented by the couple’s strong entrepreneurial spirit, demand for their products grew, and by 1987 they had already made their first ₱1 million. Their small business eventually became Splash Corporation (Splash), which is now a multi-billion peso conglomerate of companies that develops, manufactures, bottles, packs and markets cosmetic, beauty, personal care and pharmaceutical products for domestic and international markets. In 1996 Splash enjoyed revenues of over ₱1 billion and it became one of the top 300 corporations in the Philippines in 1998. In 2007 it was listed on the Philippines Stock Exchange. This has firmly established Splash as one of the most formidable and successful companies in the Philippine personal care industry.

Inspired by the outcome of this first innovation, Splash launched another pioneering product in 1988—the Philippines’ first fruit-based facial cleanser. The new astringent (a chemical compound that protects skin) formula was a mild but effective facial cleanser with a moisturizing and natural healing effect because it was based on natural ingredients. This new product was marketed in avocado and cucumber variants under the Extract® brand name. Splash quickly began making waves with this innovation, and in 1989 sales reached ₱40 million and Splash became the second largest company in this industry in the Philippines, knocking on the door of long-established multinational corporations.

These two early successes solidified the importance of R&D to Splash, and it began setting aside funds specifically for R&D of new products. Its next success came quickly, when in 1991 it developed an exfoliant (a chemical that removes dead cells from the skin’s surface) that is effective in lightening skin, preventing skin ageing, controlling pimples and smoothing skin by hiding scars left by pimples. Marketed as Extradem®, it was a success and changed the Philippine facial care market, which at that time was considered to be in decline. Another successful product developed was Skin White®, which is now the leading skin whitener in the Philippines.

The success of Extraderm brought Splash to the attention of its competitors, and they started copying many of Splash’s innovations. Two years after the launch of Extraderm, Splash lost its edge and position as a market leader as its competitors started making and selling the same products. When this copying was taking place, Splash had yet to secure any intellectual property rights (IPRs) for its invention or innovative exfoliant formula. There was little the company could do and its business lost momentum.

Upon realization of the importance of securing IPRs, Splash wasted no time in developing an IP strategy. Innovation and product differentiation is vital to Splash’s business strategy, and therefore so is IP protection. Splash began securing IPRs by filing patent applications and registering utility models for all of its major inventions in its domestic and international markets. The company also maintains a strong brand management strategy through registering trademarks for its brand names. Splash believes that brand names are particularly important, and that the protection of innovation and brands are inseparable. First, as long as a product does not lose importance or become obsolete, a brand can exist for a near indefinite time. Second, easily identifiable trademarks can be associated with Splash’s reputation for quality, which allows customers to quickly recognize Splash products and fosters brand loyalty.

Splash has grown from a small startup with three employees into a large corporation with over 400 catering to customers all over the world. Splash was the first Filipino company to successfully compete with large multinational corporations in the Philippines cosmetics industry. For five consecutive years starting from 1991, Splash grew 60% annually, which is a direct result of its IP protected Extraderm product. By 2002, Splash was generating an annual revenue of ₱3 billion, and Euromonitor International (an industry market research organization) ranked it as number six in the top ten most successful cosmetic and toiletry companies in the world, with it being the only Filipino company on the list. In the same year, Splash’s success enabled it to open a ₱400 million state-of-the-art manufacturing complex in Canumay, Valenzuela City, to meet the company’s increased capacity requirements. In 2007, the AC Nielsen Philippine Retail Index Report showed that with two of its core products, exfoliants and skin whiteners, Splash enjoyed an 86% and 41% market share, respectively. Splash is now one of the largest cosmetic companies in the Philippines.