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Philippines Food and Drink Report 2008
Business Monitor International, April 2008, Pages: 76
This Philippines Food Drink Report provides independent forecasts and competitive intelligence on Philippines food and drink industry.
Executive Summary
Activity in the Philippines food and beverage sector continues to be dominated by expansionary regional giant San Miguel Corporation (SMC). The company has hardly been out of the news in the last 12 months and yet its activity has overshadowed other key events which show a high potential food and beverage market, but one blighted by existing low consumption and some major challenges for producers. In this report we identify these opportunities and challenges, both for existing investors and interested parties.
The presence of SMC represents both an opportunity and a challenge. The work the behemoth has done in establishing an audience for branded food and beverage products in the country, and in introducing industry best practices, has eased the workload of would-be investors. However, on the flipside, the company continues to represent a formidable opponent, and competing with the company in terms of market share, sales, branding, distribution and new product development has been viewed by many in the past as simply too big a challenge.
SMC, however, faces its own challenges. Dominating beer sales and with a strong liquor, snack food and agri-business presence, the company is now searching for new challenges. Having targeted so-called heavy industries - mining, power and infrastructure among others - SMC spent the latter half of 2007 planning how it would fund its new enterprises, the result being the sale of its Australian businesses and the separate listing of its domestic beer and packaging divisions.
Nonetheless, SMC being so dominant that it is forced to look elsewhere for growth has not stopped a number of other big names from investing in the Philippines. Soft drink majors The Coca-Cola Company (formerly in partnership with SMC but now alone after a 2007 falling out) and PepsiCo are both present and continue to invest in expansion and new product development, even though BMI estimates that per capita soft drink consumption in the country stands at just US$7.50. Likewise, local major Universal Robina Corp continues to plough money into new product development, even though per capita food consumption of just US$261 in 2007 suggests a fairly small audience for these products and even though such investments are having a negative effect on profitability.
The willingness of these companies to invest, despite the small returns presently on offer, suggests confidence in industry growth in the Philippines, and BMI lends cautious support to this view. We expect annual GDP growth to average 5.7% to 2012, while population growth of 9.5% to 96.3mn in 2012 will greatly enlarge the potential audience size of these companies. Nonetheless, we expect total food consumption to increase by just 5.7% to 2012, as lower income rural groups continue to drag down the rising urban average. Within this climate, investment in the Philippines’ food and beverage industry is likely to remain fairly steady as opposed to explosive.
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