Philippines Country Profile

Market Overview:

Euromonitor reports that though the economy will slow, the Philippines is still one of the fastest-growing countries in Asia. Real Gross Domestic Product (GDP) should grow by 6.6% in 2017 after gains of 6.9% in 2016. The main drivers are robust private consumption and an increase in both public and private investment. A prolonged slowdown in Japan and China – two of the Philippines’ largest export markets – is a drag. Poor infrastructure is another serious problem. The construction and real estate sectors are both growing at a double-digit pace.  Growth of real GDP will average about 6.9% per year in 2018-2020.

The real value of private final consumption rose by 6.7% in 2016 and an increase of 5.5% is expected in 2017. Steady growth in employment and public sector spending provide support. The Philippine economy suffers from yawning gaps in infrastructure. Chronic power shortages and port congestion are especially serious issues. The government boosted infrastructure investment to 5% of GDP in 2016. The Philippines also lags behind its regional peers in terms of Foreign Direct Investment (FDI) inflows.

The USDA Office of Agricultural Affairs, OAA, in Manila hereinafter referred to as “Post” reports that the U.S. continues to be the Philippines’ number one supplier of agricultural products and the Philippines is its 11th largest U.S. export market in the world. Competition has intensified and new challenges have emerged for U.S. exporters due to bilateral and regional free-trade agreements. Consumer-oriented food & beverage products remain the best prospects for future export growth fueled by consumer familiarity with American brands and the steady expansion of the country’s retail, food service and food processing sectors.

The bilateral relationship between the United States and the Philippines is unique because of the depth of historical and human ties, and a shared commitment to upholding democracy. Around 1.8 million Filipino-Americans constitute a major immigrant group in the U.S., while more than 250,000 U.S. citizens reside in the Philippines. The U.S. Embassy in Manila is one of the largest overseas posts in the world which reflects the importance of this relationship. While the Philippine government structure is similar to that of the United States, Philippine political life is more freewheeling and centered on the personal charisma of individual political leaders.

The Philippines ranks as the 2nd largest U.S. agricultural market in Southeast Asia. In 2016, export sales increased 11% to US$2.5 billion. Of the 2016 amount, 36% or US$926.2 million were in the consumer ready category, an increase of 3% from the previous year, still the largest market for those products in Southeast Asia. The Philippines is an active importer of U.S. processed foods and the 7th largest U.S. market for them. In 2016 U.S. processed food exports went up 10% totaling just over US$1.1 billion. Top 2016 U.S. processed food exports included food preparations, processed/prepared dairy products, snack foods, processed vegetables and pulses, prepared/preserved meats, chocolate and confectionery, condiments and sauces and non-alcoholic beverages. 

Retail Sector:

According to Euromonitor, retail sales in the packaged food market in the Philippines had been estimated to reach US$11.4 billion in 2016. That represents a growth rate of 26.2% or over US$2.3 billion million since 2012. The forecast for growth in this market is also quite promising. By the year 2021, the retail sales in the packaged food market in the Philippines is expected to reach nearly US$15.8 billion, a growth rate of 30.1% or nearly US$3.6 billion. High growth categories in the forecast include ready meals, sweet biscuits, snack bars and fruit snacks, savory snacks, breakfast cereals, rice pasta and noodles, ice cream and frozen desserts and baby food.

Post reports that the Philippine food retail sector continues to modernize and expand, fostering steady sales of a wide range of U.S. food and beverage (F&B) products. Supermarket chains are opening large, Western-style stores in Metro Manila, Cebu, Davao and other key provincial cities including Bacolod, Cagayan de Oro and Iloilo.  This expansion is driven by the continued economic growth, which has led to a boom in consumer spending. Markets continue to be dominated by national chains, due to investment regulations that limit ownership by foreign investors. Rapid growth in retail sales are creating new opportunities for imported food & beverage products, with many U.S. brands already widely recognized by Philippine consumers.

The proliferation of modern convenience stores such as 7-Eleven, Mini-Stop and Mighty Mart are partly due to the bullish business process outsourcing (BPO) sector that operates around the clock. Products that can be classified as “convenient,” sweet and savory snack food products, meal-replacements and ready-to-drink beverages are in strong demand.

The food retail sector in the Philippines is well-established and continues to flourish. In 2015 sales of retail foods increased by 7% to US$45 billion. This growth is a result of increased consumer spending capacity, continued growth of the middle class segment, increased tourism activities within the country, and a positive outlook for economic growth. In 2015, food retail giants continued to expand as new stores were opened and acquisitions of smaller local supermarket chains were made. This strategy was perceived as an opportunity to minimize competition with smaller and single-proprietor supermarkets in the country that existed long before the retail giants dominated the food retail business.

Modern retail markets such as supermarkets, hypermarkets and convenience stores (including ‘minimarts) have become more essential especially to those living in Metro Manila and other large cities as customers demand more convenience and flexibility. These modern markets have expanded both in urban and rural areas, close to residential and commercial communities. This is because modern retail markets are usually cleaner, more comfortable, spacious and well-maintained. Moreover, supermarkets offer a wider range of choices for the consumers, including both perishable and non-perishable goods. Wet markets retain an advantage in fresh product, including meat and seafood, but especially fresh fruit and vegetables.

Super Value Inc. or SM Supermarket, the food retail arm of SM Investments, is the dominant player in the food retail industry in the Philippines. Having established its first store in 1985, SM Supermarket operates 40 branches across the Philippines. SM Supermarkets are primarily located inside SM Malls. SaveMore Market is a chain of neighborhood grocery stores under the SM Food Retail Group (other food retail formats under SM are SM Supermarket and SM Hypermarket). SaveMore stores are located outside an SM mall in either stand-alone outlets or as an anchor tenant of a commercial center/commercial building or non-SM mall. SM Hypermarket is a superstore combining a supermarket and a department store, offering more than 150,000 brands of merchandise or SKUs with the aim to allow customers to satisfy all their routine shopping needs in one trip. SM Hypermarkets are usually located within a mall and have 43 branches nationwide.

Puregold Price Club Inc. (PPCI) is a chain of supermarkets that was established in 1998 when the one-stop shopping philosophy was an emerging idea. PPCI, the second largest food retailer in the country has three store formats: Puregold Price Club (a hypermarket), Puregold Jr. (a neighborhood store), and Puregold Extra (discounter supermarket). Ranked as number two in food retail, Puregold Price Club Inc. has grown into a giant retail chain with more than 263 stores nationwide. Puregold Price Club Inc. also owns S&R Membership Shopping which used to be PriceSmart- the first U.S.-based chain to enter the Philippines in 2001 after the passage of the 2000 Philippine Retail Trade Liberalization Law. S&R Membership Shopping opened in 2006 and now has 11 stores nationwide, including their newest store in Cagayan De Oro which opened in November 2016.

Robinsons Supermarket, the third largest supermarket chain in the Philippines, is a subsidiary of Robinsons Retail Holdings Inc. Established in 1985; Robinson Supermarket is the first major retailer to promote health and wellness. Today, it has 136 stores all over the country. Robinsons Supermarket has also recently launched two new sub formats: Robinsons Easymart and Robinsons Selections. Robinsons Easymart is a network of compact neighborhood grocery stores, brings the grocery experience closer to communities in order to provide households ease of accessibility and convenience of shopping for their everyday needs while Robinsons Selections cater to the premium market and carry more imported merchandise than the usual Robinsons Supermarket. In addition to the essential supermarket sections, Robinsons Selections is also complete with a food-to-go section, a gourmet deli section, a health and wellness section, and a pharmacy.

Rustan Supercenters Inc. (RSI) is the retail arm of Rustan Commercial Corporation, the premier chain of upscale department stores, operating in the Philippines for almost 50 years. RSI is a pioneer in modern grocery retailing and is the operator of Rustan’s Supermarkets, the Shopwise chain of hypermarkets and Wellcome convenience stores. Rustan Supercenters Inc. is now a member of the Dairy Farm International Group -- a multinational company that brought Mannings, Giant, Jason’s Guardian, Ikea, Cold Storage, and many more retail superstores worldwide. At present, Rustan’s Supermarket is continuously expanding with 21 branches nationwide

Metro (Gaisano), formerly White Gold Department Store with supermarket business was a family-owned business way back in 1949 in Cebu. Incorporated and established in 1981, the first Metro department store and supermarket outlet opened in 1982. Through the years, Metro (both a department store and supermarket) expanded from Cebu to Manila and other nearby provinces in the region of Visayas and Mindanao, now with 16 branches nationwide.

Convenience stores continue to expand due to the bullish Business Process Outsourcing (BPO – call centers) sector and the increasing number of outlets opening in condominiums and areas outside Manila. These stores cover the business centers and BPO hubs and operate on a 24- hour basis, making them an ideal place for midnight shifters to grab food to eat during break time. Aside from well-stocked shelves of packaged food, beverages, and other basic household necessities, convenience stores also offer other services such as bill payment and mobile phone reloading transactions. Convenience Stores and Gas Marts which are mainly location-oriented are thus able to sell products at a premium in exchange for convenience.

Convenience stores led the growth of modern grocery retailers in 2015 with 20% growth on the number of outlets and 23% in terms of sales. This was driven by both the expansion of existing players such as 7-Eleven, Mercury Drug, and Ministop, coupled with the gaining popularity of various foreign brands such as Lawson and Family Mart.

7-Eleven is the country’s biggest convenience store chain in the Philippines with almost 2,000 stores nationwide. Acquired by Philippine Seven Corporation in 1982 and established in 1998, 7-Eleven is the first franchisor in convenience retailing. Aside from grocery /food retailing, 7-Eleven also offers telecom, bills payment and banking kiosk services. Ministop Philippines is a subsidiary of Robinsons Retail Holdings, Inc. that operates as a grocery and fast food diner combined. Established in 2000, Ministop now has almost 500 stores in Metro Manila and nearby provinces in Luzon.  FamilyMart was launched in the Philippines in 2013 in partnership with the Ayala and Rustan’s Group. Currently with 58 stores in Metro Manila, FamilyMart aims to increase its presence by opening more though franchising. Lawson, a convenience store giant in Japan, was launched in the Philippines last June 2015 through a joint venture by Puregold Price Club Inc. with Lawson Asia Pacific Inc. Now, with 25 stores, Lawson targets to roll out 500 branches in the next five years.

Post reports that Importer/distributors are in direct contact with big supermarkets, hyper-marts and wholesale clubs. Smaller stores, such as "mom and pop" or sari-sari stores are handled by agents or middle men. It may also be noted that there are big distributors which employ sub-distributors particularly for the rural areas or provinces. While this practice reduces the distributor's mark-up, it increases their sales volume. Although infrastructure has improved, there is a long way to go for improvement.  Traffic in urban areas, particularly in Metro Manila increases distribution cost. Communication between supplier and retailer has also improved. Major retail supermarket chains have already computerized their operations from front to back-end operations.

Best Prospects:

Post reports that below are the top growth prospects for U.S. agricultural high-value products based on interviews with Philippine food retail companies and importers: Healthy, natural and organic products, gourmet products, beef, lamb, deli meats and cheeses, snack foods dips and spreads as well as dried fruits and vegetables, tree nuts and wine and craft beer. Also included on the list are instant or “convenience” foods, breakfast cereals, preserved fruits and pie fillings, IQF fruits and vegetables and their juices, fresh vegetables, frozen potatoes (new cuts) and dehydrated potatoes as well.   

Food Service Sector:

Post reports that the hotel restaurant institutional (HRI) food service industry in the Philippines continuous to expand as more and more shopping malls and new hotels are being opened throughout the country. The influx of foreign-branded restaurants coupled with the growing affluence of Filipino consumers has also contributed to the growth of the HRI sector. This growth in the food service industry provides greater opportunities for exports of U.S. food and beverage products to the Philippines.

With continued strong economic performance in 2015, the number of food service establishments and sales in the Philippines continued to increase. Food service establishments increased by 2% in number and sales grew dramatically by almost 7% from 2014 due to increasing frequency of eating out brought by the growing affluence, increasingly busy lifestyles, the desire for convenience and the entry of several international brands in the food service industry.

The food service industry in the Philippines is dominated by independent players, most of which have outlets in stand-alone locations. Among chain players, local operator Jollibee Foods Corporation leads through its wide portfolio of leading fast food brands. Other important players include Golden Arches Dev Corp (with the McDonald’s brand), Ramcar Inc. (Mister Donut and KFC), Pizza Hut, and Shakey’s. For casual dining, Bistro Group, Moment Group, Global Restaurant Concepts, Inc., and LJC Restaurants, are the main players.

Food service through retail posted the highest growth in 2015 with 7.7% increase in sales with 44% market share. This strong position is the result of the common practice among Filipinos to head to shopping centers during weekends or after work. As such, food service outlets located in retail establishments benefit from high foot traffic and are able to serve the requirements of mall-goers after they shop or watch a movie. This, in turn, is driving the consistent expansion of chained shopping malls such as SM and Robinsons, especially those outside Metro Manila.

Food service through travel, meanwhile, generated a significant growth as it expanded by 7% in current value terms. This growth was supported by the availability of low airfares from budget airlines and promotions by the Department of Tourism to expand in both domestic and inbound tourism. It is common for consumer food service brands located in airport terminals, bus stations and gas stations that service areas alongside motorways and expressways to charge slightly higher prices, which contributed to the strong value growth, recorded in food service through travel in 2015.

Food service through lodging posed an increase of 5% in 2015. This growth was driven by the increasing number of hotels being opened every year. In Metro Manila alone, seven large hotels opened between 2015 and 2016. These hotels have in-house restaurants and bars that continued to be the location with the highest spend per transaction in 2015 since meals and drinks in hotel restaurants are expensive. Moreover, consumers who dine in hotels tend to opt for full meals or buffets. Affluent consumers who frequently dine in this location tend to splurge on food and drinks more as they usually celebrate special occasions whenever they visit.

The number of foreign brands continues to grow in the food service industry in the Philippines through franchising or joint venture. Local food service companies prefer to bring in a foreign brand rather than create their own local restaurant. This strategy seems to provide better prospects for success since less effort is required to build an established foreign brand restaurant. This approach in the food service industry seems to work as Filipinos in general have high regard for imported brands, which they become familiar with either through their travels abroad or through social media. 

The range of foreign brands present in the country are diverse and are not limited to full-service restaurants, it also include fast food, cafes and street stalls/kiosks. Some of the popular brands in the industry that opened since 2015 include Din Tai Fung, The Halal Guys, Denny’s Diner, Pink’s Hotdogs, Fatburger, Texas Roadhouse, Moe’s Southwest Grill, Costa Coffee, and Applebee’s.

Euromonitor reports that the heightened competition in consumer food service has also led some players to offer more premium products. Such is the case of 7-Eleven, which partnered with a prominent local chef, Claude Tayag, in the creation of rice meals which are slow-cooked and which do not use flavor mixes in a bid to make them healthier. This appears to be the brand’s response to the recent entries of new players such as Family Mart and All Day and the possible entry of Alfamart and Lawson.  

Best Product Prospects:

Post reports that based on industry interviews, roughly 25% of all F&B imports flow through the HRI sector. With most analysts projecting sustained growth in the Philippine economy and the HRI sector, Post anticipates continued growth in F&B import demand through 2016 (and beyond) across a wide spectrum of products, with some of the fastest growth potential in convenience, gourmet, and “healthy, natural, and organic” categories. Top product prospects in this sector currently include beef, wines, preserved fruits & pie fillings, pork, craft beers, individually quick frozen (IQF) fruits & vegetables, lamb tree nuts and fruit & vegetable juices. Other high potential products include chicken and turkey, cheeses and dairy products frozen potatoes (new cuts), gourmet products, fresh fruits and vegetables and dehydrated potatoes.

Food-Processing Sector:

Post reports that the Philippines’ rapidly expanding production of processed F&B presents robust opportunities for U.S. exporters of agricultural raw materials and high-value ingredients. In 2015, the F&B processing industry’s gross value-added output increased 3% over the previous year and reached US$27.8 billion.  Roughly 90% of the Philippine F&B processing industry’s output is consumed domestically, with excellent growth prospects stemming from the country’s resilient economy and strong consumer base. In addition, as quality and efficiency continue to improve, the Philippines will be in a position to exploit export opportunities due to its strategic location and membership in various free trade agreements, such as the ASEAN Free Trade Area and the EFTA Philippines Free Trade.

As the quality and competitiveness of Philippine processed F&B products improve, exports are expected to rise. While exports to major trading partners such as the U.S. should continue to grow, prospects for the lucrative East and Southeast Asian markets are especially strong because of the country’s strategic location. The nation’s capital, Manila, is situated within a six-day trip by sea or a four-hour trip by air to any major port in the region. The short transit time makes it an ideal staging area, especially for frozen and chilled products.  The Philippines’ membership in regional free trade agreements further augments the industry’s export prospects. Exemplifying a classic win-win trade scenario, the Philippine F&B processing industry’s growing use of U.S. agricultural ingredients provides a valuable path for these U.S. products to grow in tandem with Philippine exports and expand market share throughout the region.  

Aside from trade liberalization, future trade of processed F&B products in the region will be driven by strong economic growth and rising incomes, increasing urbanization, demand for greater product variety, quality, convenience and safety and the proliferation of bigger and more sophisticated retail and food service formats.

A majority of the large F&B processors in the Philippines import full-container loads of agricultural raw materials and ingredients directly, while smaller companies including “mom-and-pop” processors purchase from importers and distributors. Most of the importers are based in Metro Manila and manage their own distribution, while others appoint independent distributors to cover the country’s key provincial areas. The most common entry strategy for new-to market U.S. exporters is to offer products to large processors and importers.    

Some exporters have been able to successfully penetrate the Philippine market by providing technical assistance to Philippine F&B processors on the applications of raw materials and ingredients. This is especially true for more “advanced” ingredients such as protein isolates, and less familiar ingredients such as dehydrated potatoes and pea flour. Other areas for knowledge transfer include: product development and innovation, automation of the production process, product preservation and packaging.  

Best Product Prospects:

Based on interviews with Philippine F&B processors the top growth prospects for U.S. agricultural raw materials for further processing include poultry cuts including chicken feet; mechanically de-boned poultry meat; trimmings and beef offal’s for sausage manufacturing; milk and whey powder; cheeses and other dairy products; fresh fruits and vegetables; frozen concentrated fruit and vegetable juices; dried and dehydrated fruits, vegetables and nuts. Additional products include grape must; specialty flours (e.g. soy, pea and potato); condiments and sauces; seafood products (e.g. salmon heads and bellies, squid, crab claws); sweeteners and beverage bases; grains and cereals; protein isolates and concentrates; and fats and edible oils.  

Loading...

View Calendar

U.S. Food Showcase at FMI
June 20-23, 2016
Chicago, Illinois

Food Ingredients Asia-China
June 21-23, 2016
Shanghai, China

Specialty Coffee Association of Europe
June 23-14, 2016
Dublin, Ireland

Imbibe Live 2016
July 4-5, 2016
London, United Kingdom

View Calendar

Export Intelligence Video Series -Philippines

See more videos