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Philippines Food and Drink Report 2010
Market |
Food and Drink |
Report Type |
Market Research |
Country |
Philippines |
Published |
18 January 2010 |
Number of Pages |
60 |
Download |
|
Immediate |
|
Publisher |
Business Monitor International |
As in previous report updates, San Miguel Corporation (SMC) has dominated the news over the last 12 months, its ongoing commitment to diversification and accordant activities warranting a chapter of its own. SMC has continued to unveil plans to offload minority stakes in its food and beverage units in order to fund its aggressive push into heavy industries, such as infrastructure and power. Meanwhile, with a new investor in place, the first of these of subsidiaries to be shed, San Miguel Brewery, has been similarly active, investing in a new bottling plant and seeking further international growth in line with the geographic diversification strategy of 48.3% shareholder Kirin.
SMC’s desire to move into heavy industries is not, however, an indication of domestic food and drink market weakness, rather an indication of the company’s dominance and its need to diversify in order to secure stronger future growth opportunities. Indeed, alcoholic drink sales in the Philippines in local currency value terms are forecast to increase by 38.3% through to 2014, while soft drink sales are forecast to rise by 34.2% over the same period. This second forecast ably explains why two other companies have also dominated the industry news agenda over the last months; the local subsidiaries of US beverage giants The Coca-Cola Company and PepsiCo battling it out for market share by making pledges of significant investments in the domestic market over the next few years.
Interest from major industry players, such as Kirin, Pepsi and Coca-Cola is illustrative of some of the key strengths that the domestic market enjoys; notably high alcoholic beverage consumption, a reasonably large population and the acceptance of consumer goods and the establishment of manufacturing best practices thanks to SMC’s long history. However, in spite of this, the rumoured arrival of grocery retail multinationals continues to fail to bear fruit, while the Philippines remains stubbornly towards the foot of our Asia Pacific Food & Drink Business Environment Ratings. So why?
In spite of its enormous potential, and the obvious dynamism of some subsectors, the industry has some inherent weakness, such as food import dependency, low GDP per capita and low existing food consumption levels. Similarly, even in those categories where opportunities are present, the risks that exist continue to deter many investors; these include weak physical infrastructure (a particular challenge for perishable food and beverage producers), bureaucracy and perceived corruption. However, while the Philippines remains near the foot of the ratings and while investment continues to be dominated by the existing majors, it is worth noting the likelihood of the country climbing up the ratings table in the near future, as food consumption steadily climbs and investment leads to improved distribution infrastructure.
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