Thailand Country Profile

Market Overview:

Euromonitor reports that Thailand’s economy is performing below potential but grew moderately in 2016. In 2016, real Gross Domestic Product (GDP) grew by 3.1% after gains of 3.4% in 2015. Growth of 3.1% is forecast for 2017 as well. An increase in government spending is a key driver.  Lackluster exports and weaknesses in private investment are problems. The king’s death jeopardizes Thailand’s fragile economic prospects.  To offsets these drags, the junta will likely introduce a fiscal stimulus. Growth of real GDP will average about 3.6% per year during the remaining years of this decade.

Private final consumption continues to grow feebly. In 2015, final consumption rose by just 1.7% in real terms and growth of 2.5% was expected in 2016. High levels of household debt, a struggling farm sector and slow growth in wages are drags. Unemployment was just 0.9% in 2015 and it will stay at that level in 2016. Businesses face increasing difficulty recruiting both skilled and unskilled workers. Thailand’s labor scarcity will continue as the population ages.

An ageing population could slow economic growth in the longer term. Thailand is one of the world’s poorest countries to face the phenomenon of ageing. The country’s workforce is already beginning to contract as a result, creating pressure to improve productivity if Thailand is to continue to grow. Thailand’s population was 68.2 million in 2016, an increase of 7.1 million since 2000. Growth of population has been relatively rapid in recent decades but is decelerating. The slowdown means the country’s pool of young workers will shrink in the medium term. Median age in 2016 was 37.2 years, up from 30.1 years in 2000. Median age will reach 41.8 years in 2030. The number of elderly (those over 65 years) was 10.2% of the total in 2015 but their number will nearly double by 2030 when this group will represent 17.6% of total population.

Thailand is currently the 4th largest export market for U.S. agricultural products in Southeast Asia. 2016 U.S. exports of agricultural products decreased 6% to US$1.6 billion. Of that amount, 21.4% or US$342.9 million were of the consumer oriented variety. That represented a drop of 4% over that of 2016. Thailand is also the 4th   largest importer of U.S. processed foods in the region, totaling US$408.4 million in 2016, and a decline of 22%. Top U.S. processed food exports to Thailand included food preparations, prepared/preserved seafood, processed/prepared dairy products, processed vegetables and pulses, non-alcoholic beverages and processed fruit.  

The USDA Office of Agricultural Affairs, OAA, in Bangkok, hereinafter referred to as “Post” reports that there are a number of trends that make Thailand a high potential market for U.S. food exports. There are about 37 million middle-to-upper income consumers are eager to purchase imported food products. A dynamic and eager younger population (between ages of 15 and 35, representing 30% of the total population) is willing to try new products and is receptive to trends that fit their westernized lifestyles. Thais in urban areas (52% of the population) increasingly spend more on imported food items and have become relatively brand conscious and are changing their eating habits to accept more western style foods. 

Post adds that increasing purchasing power of consumers in rural areas translates into more discretionary spending on non-traditional agricultural products. The Thai food processing industry is looking for new ingredients and shows a strong interest in importing health and functional food ingredients. There are a growing number of retail outlets and a well-developed food service industry. Growth in the tourism industry and an increase in the number of hotels lead to greater demand for imported hotel, restaurant, and institutional (HRI) food products.

But with such a high potential for success the Thai food market remains a challenge for U.S. suppliers. U.S. products are not always price-competitive due to high tariffs and shipping costs. Free trade agreements with China, Australia, New Zealand, Chile, Japan, and Korea have made U.S. products less competitive especially for high value consumer products such as meats, processed meat, wine, spirits, cherries, peaches, plums, pears, frozen potatoes, and cheeses. Local production is increasingly substituting food imports. Locally produced snack foods, salad dressings, sauces, jams and other processed foods are relatively inexpensive. 

In addition, market penetration for imported products is mostly concentrated in Bangkok and major tourist-destination areas. Imports of some U.S. food products are currently subject to restrictive trade barriers, including high import tariffs, rigid food import procedures, and burdensome documentation requirements. The oligopolistic nature of hypermarkets exerts some control over prices, while convenience stores prefer low priced locally or regionally sourced products.

Duties on imported U.S. consumer-ready food products range between 30% and 60%. Tariffs on meats, fresh fruits and vegetables, and processed foods are equally high, even for items with little or no domestic production. Frozen potatoes, for example, are not produced in Thailand, but face a tariff of 30%. Under a new excise tax scheme, import duties, excise taxes, and other surcharges on imported wines could face a total tax burden of more than 300%-600%. The tariff on apples stands at 10% while pears and cherries face tariffs as high as 30% and 40% respectively.

Retail Sector:

Euromonitor has estimated the retail sales value of packaged foods in Thailand at nearly US$11 billion in 2016. This represents an increase of nearly 27.9% or US$2.4 billion since 2012. They have also forecast the packaged food retail sales to reach nearly US$15.7 billion by 2021, an increase of 33.4% or US$3.9 billion. High growth products in the forecast include ready meals, savory snacks, processed meat and seafood, ice cream baked goods, and sauces dressings and condiments.  

Post reports that the retail food market structure continues to evolve with hypermarkets, supermarkets, cash and carry, and convenience stores serving different segments. The latter is continuing to gain market share while traditional retailers gradually decline. Modern food retailing accounts for approximately 70% of total retail sales as the flow of local shoppers has been diverted from wet markets and grocery stores to hypermarkets and supermarkets. These changes began in 2000, when Thailand's retail sector experienced an increase in new investments from both local and foreign players. This made Thailand the second most dynamic retail market in Asia after China.  

The majority of these investments have come from the leading international retail chains, such as hypermarket UK-based Tesco with its Tesco Lotus stores, Big C Supercenter of Casino Group of France, and cash and carry Netherlands-based Siam Makro, which was acquired by the Thai company “CP All” in August 2013. Locally run supermarkets and convenience stores also have increased in numbers and include stores such as Villa Market, Tops Marketplace, Foodland Supermarket, and 7-Eleven.

In 2015, the total food retail sales from organized retail chain stores (modern trade retail) of about US$73 billion or 61% of total retail sales. Competition in the retail food business is expected to remain intense. Thailand’s supermarket segment has many players including Big C, Tesco Lotus, Central Food Retail (Tops/Central Food Hall), MaxValu, The Mall (Gourmet Market/Home Freshmart), Villa Market and Foodland. Although supermarkets have fewer number of outlets compared to larger hypermarkets, their influence on the lifestyles of urbanized Thais, expatriates, and upper-income communities has been significant.

This highly competitive segment is concentrated in Bangkok where consumers with greater disposable income and more discerning customers reside. The supermarket sector tends to cater to medium and upper income consumers by offering a wide range of premium products and a broader assortment of local and imported processed food, fruits and vegetables, meat and seafood, and beverage products. These companies, particularly because of the market segment on which they focus, offer excellent opportunities for U.S. exporters of consumer food items.

It is projected that competition in the retail food business will be more in the form of innovative channels that meet consumer demand. In addition, retailers will continue to maintain a focus on being able to more effectively serve core customer bases through strategic initiatives that include store layout enhancements, expansions, and improving product assortments that are in line with market demand trends. The hypermarket segment continued to grow and frequently visited by Thai shoppers at least once a week.

These hypermarkets offer a wide range of fresh food and packaged food and beverages, which generally account for 60% to 65% of their total product assortments. Major hypermarkets including Big C and Tesco Lotus have introduced a new store format called “Extra” which offers a greater range of premium products including a wide selection of imported products targeting middle and high income customers. Hypermarket operators are also diversifying their store formats and turning to smaller-scale retail stores including mini-supermarkets and convenience stores due to new government regulations and higher land prices.

Hypermarkets, supermarkets, and cash and carry establishments present excellent opportunities for U.S. exporters of consumer food items. The main factors U.S. exporters should consider before entering the Thai market are pricing, product shelf life, and consumer preferences. Intense competition in the retail food market, particularly from large-scale modern companies that use price strategies and loan extensions to low-income consumers, have led to the closure of many traditional stores. Thailand’s hypermarket sector is dominated by two large companies, which normally gives them bargaining power with suppliers. The convenience sector is not considered to be an attractive channel for U.S. products due to the pricing disadvantages as these stores mostly carry locally and regional produced goods. U.S. exporters should be aware that many U.S. branded food products such as snack foods, candy, chocolate, and breakfast cereals are already present in the market as locally or regionally produced food products.                                

Most food retailers recently modified their marketing strategies by expanding their private label product offerings, instituting money promotions, providing discounts, and starting loyalty programs in order to attract customers and maintain market share. Some supermarkets and hypermarkets have their own private label brands for ready-to-eat foods, ready-to-cook prepared foods, home-made bakery items, sausages, water, cooking oil, rice, sauces, dairy products, and fruit juices. These private label products provide a good market opportunity for U.S. food ingredients such as raisin, fish and seafood, although some U.S. ingredients, such as frozen potatoes, are not competitive due to lower tariff rates provided by Free Trade Agreements (FTAs) with other competing countries.

Best Product Prospects:

Post reports that the best product prospects for U.S. suppliers include fresh fruits (cherries, grapes, strawberries, oranges, apples, berries), nuts (walnuts, hazel nuts, and pistachios), breakfast cereal, frozen seafood (scallop, lobster, fish, mussel), dried fruits (raisin), fruit juices, jam, vegetable oils, candy, chocolate, chocolate milk mix, dairy products (cheese, cheese spread, cream cheese, whipped cream, cheese sticks, cheese dip and ice-cream), pie fillings, processed meat, American spices, seasonings and sauces, snack foods, crisp bread, syrup, vinegar, wine, spirits and pet food.

Food Service Sector:

Post reports that Thailand’s large hotel and restaurant industry (HRI) food service sector comprises approximately 150,000 outlets including some 100,000 restaurants and more than 5,000 hotels and resorts. However, the official registered number of restaurant operators grew 27% from the previous year. As of February 2016, there were 11,020 restaurant operators. The industry has steadily expanded in recent years driven by continuous growth in the country’s tourism industry as well as a change in consumer behavior as modern urban families tend to eat out more regularly. Hotels, resorts, restaurants and institutional contractors are heavy users of imported food for food preparation and ready-to-eat meals. This sector attracts middle to higher income Thais, Thai corporate businessmen, resident expatriates, and tourists. In 2015, consumer expenditures on hotels and catering per capita were $491, which accounted for 15% of total consumer spending.

In the first nine months of 2016, this sector grew by 14.8%. Thailand’s tourism industry remains one of the strongest in the competitive Asia region and considered to be an important component of the service sector. Thailand’s HRI food service sector is reliant on the tourism industry. Thus, the increase in tourist arrivals contributed to the growth in Thailand’s HRI sector. Thailand’s high tourism levels and increasing food consumption are expected to continue fueling the growth of the country’s HRI food service sector. In addition, many on-going construction projects involving new community shopping malls are expected to serve as perfect venues for global food chains and premium restaurants.

According to Euromonitor, the overall full-service restaurant market value in 2015 was US$4.9 billion, steady for most of the year until consumer confidence rebounded in the last quarter, following a series of government stimulus measures which enhanced economic growth prospects. Sales of food and beverages account for about 30% of Thailand’s hotel and resort revenues. On average, 30% of Thailand’s HRI food and beverages are imported.  The United States has a 15%-20% market share.  U.S. beef, seafood, cheeses, wines, beers, frozen potatoes, seasonings, etc., are well known in Thailand’s hotel and restaurant trade and with airline catering companies.

Within the restaurant business, there is more competition between existing competitors who are expanding the number of outlets and introducing new brands into the market, and with new comers.  Sidewalk restaurants are gradually being replaced by food centers and food courts, which are more hygienic and more convenient. Food centers and food courts can be seen in most department stores and office buildings. Fast food, chain restaurants, pop-up restaurants, and food trucks have boomed in the last few years with this expected to continue in the future. Hot and cold drinks including coffee and ready-to-eat foods are served in convenience stores and stand-alone outlets. As Thais are becoming more health conscious, this trend has forced the restaurant operators to develop more new healthy food and beverage menus such as S&P introduced new menus made of quinoa such as quinoa fried rice with grilled mushroom; papaya salad with quinoa sticky rice and healthy drinks such as cold press fresh juices are available as alternative drinks.

Best Product Prospects:

Post advises the best prospects for U.S. suppliers in this sector include frozen and chilled beef, poultry, processed meats (ham, sausage, deli meats), frozen French Fries, hash browns, shoestrings, etc., fresh and frozen seafood such as fish fillets, scallop, lobster, mussel, oyster, halibut, cod fish, Alaska king crab, etc., cheese, processed cheese, whipped topping, sour cream, ice-cream, dips and American spices and seasonings.

Other high potential products include flour, biscuits, pancake mixes, waffles, French toast, cookies, muffins, cakes, frosting and icings, and puff pastry, fruit and vegetable juice, wine, liquor, whisky, beer, cocktail mixes, and mineral water, canned foods (soup, fruit and vegetables), bacon bits & toppings, barbecue and cocktail sauce, dips, hot sauce/pepper sauce, mayonnaise, mustard, olives, salsa and taco sauce, pickles, steak sauce, syrups, salad dressing, and vinegar.  Fresh fruit and vegetables (organic and specialty vegetables, apples, grapes, cherries, kiwi fruit, blueberries, grapefruit, oranges), and jams, jellies, and spreads are also noteworthy of high export potential.

Food-Processing Sector:

Post reports that Thailand’s food processing industry has developed rapidly over the past decade and is one of the most developed in South East Asia.  Additionally, Thailand is a leading supplier of a wide variety of commodities and products including rice, rubber, cassava, sugar, seafood, poultry meat, frozen and ready-to-eat foods, and processed fruits and vegetables. Thailand has more than 10,000 food and beverage processing factories consisting of small, medium, and large scale plants. Most of these factories, which are small to medium size, serve mostly the domestic market, while medium to large food processors tend to produce higher-value products for the domestic and export markets.

Thailand’s food processing sector is heavily export-oriented with more than 50% of production sold outside the country. Despite the global economic situation, Thai food manufacturers still seek high-quality food ingredients at reasonable prices. The United States is considered to be a world leader in food ingredient technology and one of the major food ingredient suppliers to the world. In this market, U.S. suppliers should focus their attention on new functional food ingredients, flavors, and other ingredients that promote the health and wellness benefits in foods.

Thailand imported food ingredients were valued at $2.3 billion in 2015. Although domestic producers hold the greatest share of the ingredients market, these items tends to be of low-value, raw and semi-processed. These products include grains, vegetable oils, and starches. High-value and more technology-based ingredients are generally not available locally and must be imported, providing an opportunity for U.S. exporters. The food ingredient market continues to grow due to an increase in the population, purchasing power, the number of dual income families, and new product developments.

Demand for food products is shifting away from unprocessed foods found in fresh markets to a wider array of processed foods available in large supermarkets. Thailand’s exposure to international food products has led to significant changes in attitudes and consumption patterns. Moreover, the rapid urbanization and the growing number of women in the workforce have also increased demand for processed foods and ready-to-eat meals. Frozen food products, particularly frozen ready meals, desserts, and seafood show the biggest growth. As a result, retail food outlets are increasing their product lines of ready-to-eat food products that are normally found in convenience stores like 7-Eleven, Family Mart, and Lawson 108. Demand for these ready-to-eat products is also fueling interests in western processed food products as they are perceived as being higher quality than domestically processed food.

The snack food market is another market that is considered to be highly competitive with major players being the leaders in each type of snack.  Frito-Lay Co., Ltd. is the leader in potato chip segment. P.M. Food Co., Ltd is the leader in fish snack category under “Taro” brand. Tao Kae Noi is the market leader for crispy seaweed snack. With intense market competition and rising demand for processed foods, Thai food processors continue to look for food ingredients that are not locally available in order to develop new products to stimulate sales and create brand recognition among consumers.

Moreover, the Thai health food market still shows signs of growth due to a strong desire among Thai consumers to maintain a healthy lifestyle. As a result, there is growing awareness of functional ingredients such as herbs, fibers, collagen, L-carnitine, minerals, vitamins, omega fatty acids, and probiotics. Sales of health and wellness products reached $4.7 billion in 2015.

Best Product Prospects:

Post advises the best market prospects for the food processing sector include dried fruit and nuts, wheat, starches, dehydrated potatoes, soybeans, food additives, colorings, flavorings, starch, meat, whey, milk powder, juice concentrates, and other baking ingredients. Products that can substitute for traditional ingredients, such as preservative-free ingredients that provide extended shelf life and nutrient/functional ingredients have strong potential in Thailand. Thai consumers prefer new foods that are healthy, flavor-intensive, and palate-pleasing. Food ingredients that maximize flavor and healthful benefits will continue to experience growth in Thailand. 

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