The Philippine Bakery Sector A market research report by Mollie Woods and Suzanne Thornsbury Submitted as a final grant report to Jamie Zmitko-Somers, MDA Staff Paper 2009‐05 August 2009
Department of Agricultural, Food and Resource Economics MICHIGAN STATE UNIVERSITY East Lansing, Michigan 48824 MSU is an Affirmative Action/Equal Opportunity Employer
The Philippine Bakery Sector A market research report by Mollie Woods and Suzanne Thornsbury
Executive Summary Like much of Southeast Asia, the Philippines provides a growing market for premium food products. The economy has grown steadily by at least 5% per year every year since 2001. Urban population in the Philippines is estimated to be growing at three-times the rate of overall population growth – concentrating food demand geographically. Economic growth, and especially employment in service sector jobs, is driving demand for more convenient and prepared foods. The Philippines is a member of the Association of Southeast Asian Nations (ASEAN). The Philippines is also a member of the World Trade Organization (WTO). The U.S. and Philippine Free Trade Agreement, though negotiated for many years, has yet to be finalized. White bread is the most commonly eaten baked item in the Philippines, though rising health consciousness is increasing demand for more healthful options. The global recession and rising flour and transport prices have had effects across the entire food sector in the Philippines. Small portion or single serve bakery items are becoming more popular as consumers become more cost conscious. Sales of all baked goods in the Philippines have increased over the past five years. Artisanal, independent bakeries command the largest share of bread and cake sales, but not pastry sales. The supply and distribution system for bakery ingredients, specifically fruit ingredients, is not well documented, however two major European bakery ingredient companies have an established presence in the Philippines. Rising levels of obesity, heart disease, and diabetes in the Philippines have prompted increased consumer interest in healthy and nutritionally enhanced foods and government interest in promoting healthier eating and lifestyles. Food service is increasingly important in the Philippine market with growth in the number of service based jobs, especially business process outsourcing centers. In 2008, demand for canned preserved fruits led growth among all products in the food service sector.
Introduction Like much of Southeast Asia, the Philippines provides a growing market for premium food products targeted toward consumers desiring more convenience, less at-home food preparation, and foods designed to improve health. Despite their ranking as a lower-middle income economy, per capita gross national income increased from $1,060 to $1,420 between 2000 and 2006. National GDP growth was 7.3 percent in the first half of 2007, among the highest of Southeast Asia middle-income countries. Population demographics are also changing. Urban population in the Philippines is estimated to be growing at three-times the rate of overall population growth – concentrating food demand geographically. Life expectancies continue to increase, increasing emphasis on health benefits potential of foods and lifestyle. The Philippines is an important trading partner with the U.S. and overall U.S. agricultural exports to the Philippines have been growing steadily in recent years. For the Michigan fruit ingredient industries, the Philippines represents potential for international market expansion. Several industry products meet the needs of new-economy Filipino consumers. Ingredients for the active (and growing) Philippine bakery industry include canned, individually quick frozen (IQF), and dried fruit. These could fit well with demand for new “western” style baked goods. Finding a new emerging...