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Required Report: Required - Public Distribution Date: April 06, 2021 Report Number: RP2021-0012 Report Name: Food Processing Ingredients Country: Philippines Post: Manila Report Category: Food Processing Ingredients Prepared By: Approved By: Morgan Haas Report Highlights: Following two years of contraction, the Philippine food manufacturing sector is expected to expand 1 percent in 2021. Household consumption expenditures of food and non-alcoholic beverages remain relatively strong, up 5.3 percent year-over-year in the fourth quarter of 2020. Philippine food manufacturing continues to offer excellent opportunities for a number of U.S. products, including but not limited to dairy, milling wheat, and raw materials for processed meat products. THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY Market Fact Sheet: Philippines Market Outlook Philippines: Quick Facts CY 2020 Demographics The Philippines is an emerging market with a young, 110 million population (July 2021 est.) growing working-age population. GDP is expected to 1.49% population annual growth (July 2021 est.) grow 5.5 percent in 2021. 52% under 24 years old & median age of 24 years old 47% urbanization rate Agricultural Exports to the Philippines 13% resides in Metro Manila (capital city) 76% speaks English & 98% literacy rate The Philippines Gross Domestic Product (GDP) is the ninth GDP: $370 billion GDP per capita: $3,330 largest export GDP growth rate: -9.5% GDP PPP: $1,025 billion market of U.S. agricultural Agricultural & Related Trade products. The Exports to PH: $12.9 billion PH Exports: $6.8 billion United States remains the Consumer-Oriented Agricultural Products: largest single- - Pork - Beverages country supplier - Beef - Confectionary - Poultry - Fruits & vegetables of agricultural - Dairy - Food preparations products with a 22 percent market share. U.S. agricultural exports Top Quick Service Restaurants: Jollibee, Mc Donald’s, Mang remained resilient in 2020, reaching a record $3.2 Inasal, Chowking, Shakey’s, KFC and Burger King billion. Top Supermarkets: SM, Robinson’s, Puregold Price Club, Metro, Gaisano, and Landmark Food Processing Sector Following a second year of contraction in 2020, the Top Convenience Stores: 7-Eleven, Mercury Drug, Ministop, Alfamart, and All Day food manufacturing sector is expected to remain relatively stagnant with upside potential in 2021, Top Warehouse Clubs: S&R and Landers growing 0-3 percent. Around 90 percent of food production is consumed domestically. Sources: Euromonitor, Global Agricultural Trade System, International Monetary Fund, The World Factbook, Trade Retail Food Sector Data Monitor, The Economist, World Bank Philippine Statistics Office, Department of Trade and Retail was positively affected by COVID-19 and Industry, FAS Manila research expected to further increase 10 percent in 2021 over Strengths Weaknesses 2020 levels. Convenience stores, supermarkets, and hypermarkets made headway during COVID with Strong preference for U.S. High cost of shipping ingredients. Continued freight compared to Asian online shopping. An increase in purchasing power patronization due to perceived countries boosted warehouse clubs and awareness of imported higher standard and quality products and have at times faced shortages due to COVID-related supply and demand shocks. Opportunities Challenges A strong growing economy and a Effects of COVID 19 in young and growing working-age the economy and Food Service Sector population ensures an increase in government regulations COVID-19 related measures greatly hurt the purchasing power from on-line impose restrictions on shopping and food delivery transportation and foodservice sector, which declined -34 percent in 2020, applications logistical concerns and there is no current prospect of recovery in 2021. Food service providers that still remain in operation have generally shifted to online delivery platforms and Contact: FAS/Manila <[email protected]> curbside pickups. 2 I. MARKET SUMMARY According to industry sources, the outlook for 2021 food manufacturing performance remains relatively stagnant at 0-3 percent growth, which while below the long-term 6 percent Average Capacity Utilization Rate by Major Sector average would be an improvement over the 80 previous two down years. 75 70 Following supply disruptions in March-April 65 2020 and designation as an essential industry, 60 capacity utilization rates continue to fall. 55 .Food Manufacturing Value of production in January 2021 dropped 50 .Beverages 18 percent year-over-year. 45 40 Meanwhile, the sector remains buoyed by 35 household consumption expenditures of food 30 Jul Jul Jul Jan Jan Jan Jan Sep Sep Sep Mar Mar Mar Nov Nov Nov May May and non-alcoholic beverages, which were up May 5.3 percent in fourth-quarter 2020 over 20191. 2018 2019 2020 2021 400 Value of Production Index (VaPI) Value of Production Index (VaPI) for Food Manufacturing & for Food Manufacturing and Beverages (2000=100) Beverages (2000=100) 300 375 y = 6.2143x + 203.53 275 200 y = 17.018x + 80.457 175 .Food Manufacturing .Food Manufacturing .Beverages .Beverages 100 75 Jul Jul Jul Jul Jul Jan Jan Jan Jan Jan Oct Oct Oct Oct Oct Apr Apr Apr Apr Apr 2016 2017 2018 2019 2020 Source: Philippine Statistics Authority Advantages and Challenges of U.S. Supplier in the Philippines: Advantages Challenges Philippine food manufacturers have Competition from alternative suppliers to the demonstrated a willingness to pay a premium Philippines with preferential market access for U.S. raw materials and ingredients. agreements. Higher patronization to warehouse clubs has Competition from more efficient regional increased familiarity with imported products, manufacturers for U.S. supplies. including ingredients, often sold in bulk/family size. 1 National Accounts of the Philippines, Philippine Statistics Authority. https://psa.gov.ph/national- accounts/sector/Household%20Final%20Consumption 3 II. ROAD MAP FOR MARKET ENTRY Entry Strategy Trade events, all of which remain Date Event virtual, still present good platforms to June 16-19, 20201 Manila Food and Beverages Expo meet Philippine food manufacturers. August 4-7, 2021 World Food Expo Autumn Import Procedure For information on the import procedure, please consult the following reports: Philippines: FAIRS Annual Country Report Exporter Guide Distribution Channels As an archipelago the Philippines has several ports, though chief among them are Manila for the island of Luzon in the north, Cebu for the Visayas in the center, and Davao for Mindanao in the south. Special Economic Zones The Philippine Economic Zone Authority (PEZA) provides incentives, including duty-free entry, for agricultural raw materials and ingredients used for the manufacture of products primarily destined for re-export. For detailed information on the Philippine special economic zones, access the PEZA website. Market Structure Dairy is the Philippines’ leading food manufacturing sector, and given the Philippines is an insignificant producer, this has presented strong opportunities for a variety of imported dairy ingredients, particularly as incomes have risen. Declining animal feed production reflects the Philippines ongoing battle with African Swine Fever, which has greatly reduced swine inventories and local pork production. It has also directly impacted opportunities within the processed meat industry, which has grown increasingly reliant on imported raw materials, including mechanically-deboned meat. 4 The Philippines has adopted Value of Production Index (VaPI) for Food a wheat-based food culture Manufacturing Sub-Sector (2000=100) as shown by the relative growth of the bakery 500 industry in recent decades. 450 400 Wheat-based products, such 350 as noodles, also represent a 300 near majority of 250 miscellaneous foods. As 200 such, the majority of the 150 local milling industry is 100 Jul Jul Jul Jul Jul Jan Jan Jan Jan Jan Sep Sep Sep Sep Sep Mar Mar Mar Mar Mar Nov Nov Nov Nov built for wheat (as opposed Nov May May May May May to rice) and has 2016 2017 2018 2019 2020 demonstrated strong ..Processed meat and fish ..Dairy products ..Animal feeds preference for U.S. quality. Processed fruits and Value of Production Index (VaPI) for Food Manufacturing Sub-Sector (2000=100) vegetables generally reflect the processing of local 800 700 produce and has presented 600 only niche opportunities for 500 imported raw materials to- 400 date. 300 200 100 Local production of coconut 0 Jul Jul Jul Jul Jul Jan Jan Jan Jan oil and high competition of Jan Sep Sep Sep Sep Sep Mar Mar Mar Mar Mar Nov Nov Nov Nov Nov May May May May May vegetable oils within the 2016 2017 2018 2019 2020 region have present little opportunity for the United ..Bakery products ..Rice, corn and flour milling States. ..Miscellaneous foods ..Vegetable/animal oils and fats A break-down of the key Value of Production Index (VaPI) for Food sub-sectors follows below. Manufacturing Sub-Sector (2000=100) 1600 1400 1200 1000 800 600 400 200 0 Jul Jul Jul Jul Jul Jan Jan Jan Jan Jan Sep Sep Sep Sep Sep Mar Mar Mar Mar Mar Nov Nov Nov Nov Nov May May May May May 2016 2017 2018 2019 2020 ..Sugar ..Coconut products ..Processed fruits & vegetables 5 Processed Meat & Fish Dairy Products Slaughtering and meat packing 1% Processing of fresh milk and cream Production processing and 1% preserving of meat and meat 0% products Canning/packing of fish and other Manufacture of powdered milk marine products 4%
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