MARKET ACCESS SECRETARIAT Global Analysis Report

Foodservice Profile

Philippines

July 2014

EXECUTIVE SUMMARY CONTENTS

The Philippine economy has been posting fluctuating but positive Executive Summary ...... 1 growth, with strong upward surges in 2010, 2012 and 2013, to register a total value of US$167.5 billion in 2013. Increasing Sector Overview ...... 2 workforce participation, particularly among women, as well as a population of time-pressed, urban consumers eagerly seeking Subsectors ...... 4 convenient meal options, have supported growth in the country’s foodservice market, valued at just under US$9.7 billion in 2012 Locations ...... 5 (Euromonitor, 2014). Top Companies ...... 7 Independent operators represent the majority of the industry, but only by a slight margin. Chains are expected to post stronger Conclusion ...... 7 growth rates in terms of value sales, outlets, and transaction numbers, as they work to take advantage of the country’s strong Resources...... 7 economy and extend their presence in the market. Filipino consumers have a keen interest in foreign cuisine and international brands across all formats.

Fast food establishments remain the key subsector and are expected to continue registering strong sales growth, due largely to the wide product offering, convenience, and affordability they can provide consumers. However, other formats are quickly gaining favour in the market, including 100% home delivery/takeaway, which outpaced all other subsectors in terms of value growth over the 2008 to 2012 period.

Operators that can provide value-conscious consumers with a wide range of menu options including interesting international fare and familiar brands, which also cater to an increasingly busy lifestyle, will likely find favour in this market going forward. Source: Shutterstock.

SECTOR OVERVIEW

As shown in the table below, the Philippine foodservice sector was valued at US$9.7 billion in 2012. Between 2008 and 2012, the market recorded a compound annual growth rate (CAGR) of 4.2% and is expected to continue expanding with a CAGR of 5.6% until 2017, reaching total sales of US$12.7 billion. The top chained brands in the market include Jollibee, McDonald’s, Chowking, Mang Inasal, and Greenwich.

Foodservice subsectors consist of fast food, full-service restaurants, cafés/bars, street stalls/kiosks, self-service cafeterias (for which there is currently no Philippine market/data), and 100% home delivery/takeaway. Fast food was the dominant subsector in 2012, representing 30% of the total market. However, the fastest-growing subsector was 100% home delivery/takeaway, which increased its sales by a significant CAGR of 10.3% over the 2008 to 2012 period.

Historic Market Value and Growth of Philippine Foodservice by Subsector, US$ millions

CAGR % 2008 2009 2010 2011 2012 2008-12 Consumer Foodservice 8,202.3 8,447.3 8,843.8 9,195.4 9,686.4 4.2 Fast Food 2,105.5 2,221.4 2,402.4 2,594.4 2,875.1 8.1 Full-Service Restaurants 2,211.6 2,230.2 2,297.4 2,306.9 2,366.4 1.7 Cafés/Bars 2,026.1 2,017.0 2,058.5 2,131.3 2,190.9 2.0 Street Stalls/Kiosks 1,647.3 1,728.9 1,814.7 1,871.8 1,940.6 4.2 100% Home Delivery/Takeaway 211.8 249.8 270.8 290.9 313.4 10.3 Pizza* 355.4 374.7 393.3 422.0 452.1 6.2

Forecast Market Value and Growth of Philippine Foodservice by Subsector, US$ millions

CAGR % 2013 2014 2015 2016 2017 2013-17 Consumer Foodservice 10,195.3 10,760.4 11,364.3 11,996.7 12,660.5 5.6 Fast Food 3,086.0 3,312.2 3,547.3 3,788.7 4,036.5 6.9 Full-Service Restaurants 2,451.6 2,549.7 2,654.6 2,767.2 2,887.7 4.2 Cafés/Bars 2,280.3 2,383.5 2,500.3 2,621.7 2,748.8 4.8 Street Stalls/Kiosks 2,042.6 2,155.3 2,274.7 2,400.5 2,534.0 5.5 100% Home Delivery/Takeaway 334.8 359.7 387.5 418.7 453.6 7.9 Pizza* 483.5 518.2 554.6 593.1 633.3 7.0

Source for both: Euromonitor, 2014. CAGR = compound annual growth rate. *Pizza consumer foodservice data is compiled from three different subsectors (fast food, full-service restaurants, and 100% home delivery/takeaway) for the purposes of comparison, but remains reflected within the figures for these subsectors, and thus the consumer foodservice total. As such, pizza is not counted as its own sector within the consumer foodservice total.

In 2012, the Philippine foodservice sector had 80,813 outlets and recorded more than 3.6 billion transactions. By subsector, street stalls/kiosks had the most outlets and transactions at 38,146 and just over 2 million, respectively. Aside from pizza, which cuts across several formats in the industry, the 100% home delivery/takeaway subsector registered the fewest outlets and transactions in 2012.

In 2012, a typical foodservice outlet earned US$119,861 from about 45,000 transactions, or US$2.66 per transaction. Cafés/bars had the highest average transaction value at just US$7.33; however, with US$458,548 fast food recorded the highest average sales per outlet, showcasing consumers’ frequent use of this quick, convenient and generally affordable format.

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Outlets and Transactions of Philippine Foodservice by Subsector, 2012

Average Sales Average Sales Transactions Subsector Outlets per Outlet per Transaction (millions) (US$) (US$) Consumer Foodservice 80,813 3,644.1 119,861.9 2.66 Fast Food 6,270 832.2 458,548.6 3.45 Full-Service Restaurants 18,156 357.3 130,337.1 6.62 Cafés/Bars 15,568 299.0 140,731.0 7.33 Street Stalls/Kiosks 38,146 2,092.8 50,873.0 0.93 100% Home Delivery/Takeaway 2,673 62.9 117,246.5 4.98 Pizza* 1,552 73.6 291,301.5 6.14

Source: Euromonitor, 2014. **Pizza consumer foodservice data is compiled from three different subsectors (fast food, full-service restaurants, and 100% home delivery/takeaway) for the purposes of comparison, but remains reflected within the figures for these subsectors, and thus the consumer foodservice total. As such, pizza is not counted as its own sector within the consumer foodservice total.

Independent operators are the prevalent foodservice providers in the Philippines but only by a slight margin, accounting for US$5.6 billion or 58% of the total foodservice market in 2012, as shown in the table below. However, chained operators are expanding their sales presence in the country at triple the rate of their independent counterparts, registering a CAGR of 7.6% from 2008 to 2012. Chained operators are expected to continue gaining market share with a CAGR of 7.2% over the 2013-2017 forecast period, to reach sales of US$5.8 billion, or 46% of the overall foodservice market in 2017.

Historic Market Value and Growth of Philippine Foodservice by Type, US$ millions

CAGR % 2008 2009 2010 2011 2012 2008-12 Consumer Foodservice 8,202.3 8,447.3 8,843.8 9,195.4 9,686.4 4.2 Independent 5,148.0 5,228.7 5,368.6 5,451.5 5,587.0 2.1 Chained 3,054.3 3,218.5 3,475.2 3,743.9 4,099.4 7.6

Source: Euromonitor, 2014. CAGR = compound annual growth rate.

Forecast Market Value and Growth of Philippine Foodservice by Type, US$ millions

CAGR % 2013 2014 2015 2016 2017 2013-17 Consumer Foodservice 10,195.3 10,760.4 11,364.3 11,996.7 12,660.5 5.6 Independent 5,796.4 6,035.1 6,294.5 6,566.3 6,851.7 4.3 Chained 4,398.9 4,725.3 5,069.7 5,430.4 5,808.8 7.2

Source: Euromonitor, 2014. CAGR = compound annual growth rate.

Independent operators accounted for over 63,000 outlets and 2.3 billion transactions in 2012. However, on a per-outlet basis, chained outlets had over twice as many transactions, higher sales, and an average transaction value that was slightly higher than their independent counterparts.

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Outlets and Transactions of Philippine Foodservice by Type, 2012

Average Sales Average Sales Transactions Subsector Outlets per Outlet per Transaction (millions) (US$) (US$) Consumer Foodservice 80,813 3,644.1 119,861.9 2.66 Independent consumer foodservice 63,010 2,301.8 88,668.5 2.43 Chained consumer foodservice 17,803 1,342.3 230,264.6 3.05

Source: Euromonitor, 2014.

SUBSECTORS

The information in this section was sourced from Euromonitor, 2013. Please see the resources at the end of this report for a complete list of documents consulted.

Fast Food

The largest subsector within Philippine consumer foodservice, fast food saw a CAGR of 8.1% between 2008 and 2012, reaching total sales of about US$2.9 billion. Future sales growth is expected to slow slightly, with a CAGR of 6.9% forecast between 2013 and 2017. With the exception of McDonald’s, which ranked second in 2012, the top five brands in the fast food subsector are all owned by domestic player Jollibee: Jollibee (1st), Chowking (3rd), Mang Inasal (4th) and Greenwich (5th). Burger fast food is currently the largest category in terms of value sales, but chicken fast food establishments have shown the strongest growth, and ice cream fast food is quickly gaining favour among the Filipino population.

Over 6,200 fast food outlets recorded 832 million transactions in 2012, having grown by a compound annual rate of 7.0% and 6.0% respectively, since 2008. Per outlet, fast food saw sales of US$458,548, with an average transaction value of just US$3.45, the second-lowest across the entire sector.

Full-Service Restaurants

Between 2008 and 2012, the full-service restaurant subsector registered a CAGR of 1.7% to reach sales of US$2.4 billion, making it the second-largest category within Philippine consumer foodservice. The subsector serves primarily Asian cuisine, but chained North American style restaurants have been the fastest-growing in terms of value sales in recent years, as consumers become increasingly welcoming of foreign brands and international cuisines. Much stronger growth is expected over the 2013-2017 forecast period, with a CAGR of 4.2% to reach anticipated sales of US$2.9 billion in 2017. The top chains in this subsector include Max’s, Pizza Hut, Shakey’s, Kenny Rogers Roasters, and Pancake House.

In 2012, full-service restaurants saw 357 million transactions among over 18,000 outlets, despite recording declines in both of these areas, with a CAGR of -0.7% and -1.5% respectively, since 2008. Full-service restaurants averaged sales of US$130,337 per outlet and the second-highest sales value per transaction of any subsector, with US$6.62 in 2012.

Cafés/Bars

The cafés/bars subsector was valued at US$2.2 billion in 2012. Between 2008 and 2012, this subsector saw a CAGR of 2.0%, facing stiff competition from fast food and full-service restaurant chains that also serve alcoholic beverages and café-type fare. However, the subsector is expected to more than double its growth rate over the forecast period of 2013 to 2017 with a CAGR of 4.8%, and reaching sales of US$2.7 billion. Growth will be led by the specialty coffee shop category, which generally caters to more

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affluent, young urbanites, seeking a casual atmosphere to gather with friends. The Philippine cafés/bars subsector is currently dominated by Starbucks, with a 55% brand share in 2012, followed by Figaro Coffee, The Coffee Bean and Tea Leaf, Padi’s Point, and Café France.

The over 15,500 cafés/bars outlets in the Philippines saw 299 million transactions in 2012. However, the number of outlets and transactions each recorded negative growth over the 2008 to 2012 period (CAGRs of -1.6% and -2.7%, respectively). A typical outlet earned US$140,731 and had about 19,000 transactions in 2012, with the highest average transaction value of any subsector, with US$7.33.

Street Stalls/Kiosks

The street stalls/kiosks subsector was valued at US$1.9 billion in 2012, having grown at a compound annual rate of 4.2% between 2008 and 2012. Dominated by independent operators, this subsector features a wide variety of traditional delicacies and unique offerings to stimulate on-the-go consumer interest. Growth is expected to accelerate just slightly over the forecast period of 2013-2017 as chained franchises extend their presence in this subsector, with an expected CAGR of 5.5%, to reach sales of US$2.5 billion in 2017. Top chains in the Philippine street stalls/kiosks subsector include Mister Donue, Dunkin’ Donuts, Burger Machine, Waffle Time, and Zagu.

In 2012, there were over 38,000 street stalls/kiosks with total transactions exceeding 2 billion in the Philippines. Between 2008 and 2012, outlets and transactions grew at annual rates of 1.7% and 0.8%, respectively. The average street stall/kiosk earned US$50,873 in 2012, or just US$0.93 per transaction, the lowest among all subsectors in both respects.

100% Home Delivery/Takeaway

The 100% home delivery/takeaway subsector is the smallest of the Philippine foodservice market, but is growing at a substantial pace as consumers have less time for meal preparation at home and operators introduce new product lines. Valued at US$313.4 million in 2012, sales registered a CAGR of 10.3% between 2008 and 2012, making it the fastest-growing foodservice subsector. Over the forecast period of 2013 to 2017, 100% home delivery/takeaway sales are expected to reach US$453.6 million and the subsector will maintain its status as the fastest-growing in the industry, with an anticipated CAGR of 7.9%. The top chained brands in the market are Chooks to Go, Andok’s, Ang Lechon Manok ni Sr. Pedro, Pizza Hut, and Lots’A Pizza.

In 2012, there were 2,673 outlets in the 100% home delivery/takeaway subsector, and just fewer than 63 million transactions. However, outlets and transactions grew at robust compound annual rates of 18.6% and 7.0% respectively, between 2008 and 2012. This subsector is expected to remain the leading area of outlet and transaction growth within Philippine consumer foodservice until 2017. A typical outlet earned US$117,246 in 2012, or US$4.98 per transaction.

LOCATIONS

The majority of the Philippine’s foodservice sector is represented by retail and standalone locations in terms of sales (US44.1 billion and US$3.9 billion, respectively) and outlets in 2012. The retail format has supported overall outlet growth in the industry, due to the expansion of shopping malls. However, travel locations saw the greatest expansion in terms of value sales and outlet growth from 2008 to 2012.

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Historic Market Value and Growth of Philippine Foodservice by Location, US$ Millions

CAGR % 2008 2009 2010 2011 2012 2008-12 Consumer Foodservice 8,202.3 8,447.3 8,843.8 9,195.4 9,686.4 4.2 Retail 3,251.2 3,379.6 3,608.2 3,845.5 4,113.8 6.1 Standalone 3,640.7 3,692.6 3,769.2 3,786.5 3,903.5 1.8 Travel 556.1 599.5 647.5 702.5 762.1 8.2 Leisure 469.0 482.5 512.0 539.9 571.0 5.0 Lodging 285.2 293.1 306.9 321.1 336.0 4.2

Source: Euromonitor, 2014. CAGR = compound annual growth rate.

Forecast Market Value and Growth of Philippine Foodservice by Location, US$ Millions

CAGR % 2013 2014 2015 2016 2017 2013-17 Consumer Foodservice 10,195.3 10,760.4 11,364.3 11,996.7 12,660.5 5.6 Retail 4,358.6 4,608.9 4,881.8 5,164.1 5,461.7 5.8 Standalone 4,062.8 4,271.3 4,493.6 4,748.5 4,999.5 5.3 Travel 814.6 868.3 920.9 964.3 1,015.6 5.7 Leisure 598.0 625.7 660.6 691.4 729.9 5.1 Lodging 361.3 386.1 407.4 428.5 453.8 5.9

Source: Euromonitor, 2013. CAGR = compound annual growth rate.

In 2012, lodging outlets were the best performers in terms of average sales per outlet (US$237,539) and per transaction (US$14.64), largely due to their higher prices. Lodging foodservice establishments tend to charge more than their standalone counterparts, as rental fees are more costly in such locations. As well, patrons of lodging establishments, which include hotels and resorts, are generally willing to pay more for the convenience offered by on-site dining.

Outlets and Transactions of Philippine Foodservice by Location, 2012

Average Sales Average Sales Transactions Subsector Outlets per Outlet per Transaction (millions) (US$) (US$) Consumer Foodservice 80,813 3,644.1 119,861.9 2.66 Retail 25,588 1,093.0 160,770.7 3.76 Standalone 44,344 2,190.0 88,027.3 1.78 Travel 5,810 223.5 131,163.6 3.41 Leisure 3,656 114.7 156,181.6 4.98 Lodging 1,415 22.9 237,539.8 14.64

Source: Euromonitor, 2014.

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TOP COMPANIES

As shown in the table below, international companies are prominent in the overall Philippine foodservice industry. Chains continue making the most of a positive economy as they enter the market in increasing numbers, largely targeting urban city-centres and their higher-income residents. However, the market continues to be led by domestic Jollibee Foods Corp, with sales totalling US$1.67 billion in 2012, or 17.3% of the total foodservice market. The second-largest player is McDonald’s with a 5.5% share and total sales of US$390.4 million, followed by Yum! Brands (KFC, Pizza Hut) with a 2.1% share, and sales of US$135.7 million in 2012.

Top 10 Companies in Philippine Consumer Foodservice

Foodservice Value Sales (US$ millions) Total Market Company CAGR (%) Outlets 2008 2012 Share (%) 2008-12 2012 2012 Jollibee Foods Corp 1,160.9 1,671.5 9.5 17.3 2,001 McDonald's Corp 390.4 533.0 8.1 5.5 396 Yum! Brands Inc 135.7 200.8 10.3 2.1 369 Starbucks Corp 70.7 107.4 11.0 1.1 225 Duskin Co Ltd 81.4 99.4 5.1 1.0 1,998 Pancake House Inc 40.2 93.7 23.6 1.0 242 Dunkin' Brands Group Inc 41.3 61.0 10.3 0.6 1,094 Seven & I Holdings Co Ltd 29.4 58.7 18.8 0.6 829 Max's Inc 41.6 56.0 7.7 0.6 135 Bounty Agro Ventures, Inc 2.7 47.5 104.1 0.5 913

Source: Euromonitor, 2014. CAGR = compound annual growth rate.

CONCLUSION

Changing consumer lifestyles and strong economic growth combine to create potential opportunities for Canadian agri-food exporters seeking to access the Philippine market. In recent years, the foodservice sector has posted strong growth and is expected to continue doing so over the next five years, as time-pressed consumers utilize restaurants as a convenient and time-saving alternative to cooking food at home. Furthermore, as Filipinos grow increasingly interested in foreign foods and multinational brands, more chains are eager to enter the market and harness this demand, creating opportunities for suppliers. However, consumers remain very value-conscious, so affordability and variety remain key factors.

RESOURCES

Euromonitor International (2014). Foodservice data.

Euromonitor International (2013). - Consumer Foodservice in the Philippines - Full-Service Restaurants in the Philippines - Cafés/Bars in the Philippines - Street Stalls/Kiosks in the Philippines - Fast Food in the Philippines - 100% Home Delivery/Takeaway in the Philippines

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