Competitive Industry Report on the Philippines Market for Imported Meat and Poultry [2010]

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  • CompetitiveIndustryReportonthePhilippinesMarketforImportedMeatandPoultry

    AGuideforCanadianExporters

    *Abbreviated

    Preparedfor:TheEmbassyofCanadainThePhilippines

    &OfficeofSoutheastAsiaRegionalAgriFoodTradeCommissioner

    AgricultureandAgriFoodCanada

    Preparedby:Stanton,Emms&Sia

    80RafflesPlace,Level3601UOBPlaza1,

    Singapore048624Tel:+6563347030Fax:+6562232010

    Email:emmsia@pacific.net.sgWebsite:http://stantonemmsandsia.foodandbeverage.biz

    March2010

    ThisreportcontainsmarketinformationcollectedbyStanton,Emms&Sia.

    TheGovernmentofCanadaassumesnoliabilityfortheaccuracyandreliabilityofthemarketinformationandintelligenceprovidedherein.

    *Forthecompletereport,CanadiansareinvitedtocontactMs.YvetteBuendiaattheEmbassyofCanadainthePhilippines:yvette.buendia@international.gc.ca

  • ThePhilippinesMarketforImportedMeatandPoultry

    1Stanton,Emms&Sia(March2010)

    1. IntroductionThis guide for Canadian exporters is prepared by Stanton, Emms& Sia for the Embassy ofCanadainthePhilippinesandtheASEANAgriFoodTradeCommissioner,AgricultureandAgriFoodCanada.ItcoversthePhilippinemarketsfor: fresh/chilledbeef; frozenbeef; freshchilledpork; frozenpork; frozenpigsoffal;and, frozenchickenparts.Itwasresearched inFebruaryandMarch2010.ThereportwaspreparedtoprovideCanadasASEANbasedAgrifoodTeamofTradeCommissionersandCanadianproducersandexporterswithanuptodateunderstandingofthetargetmarketandopportunitiesinthePhilippinesforselectedCanadianmeatandpoultryproducts.Themain focus of the study is on the size and development trends of themarkets for theselectedproductsmentioned above, thebasisofdemand, the competitors and thebasisofcompetition,andfutureprospectsandopportunitiesforCanadianexporters.Itshouldbenotedthatatthetimeoftheresearch(March2010),therewasnoPhilippinedataavailableonmeatandpoultryimportsforthewholeof2009.2. Marketsize,natureofsupplyanddevelopmenttrends2.1 OverviewofdomesticsuppliesThere are currently two datasets available on livestock production in the Philippines. Oneshows the industry producing around 3.6 million tonnes of meat and poultry and beingrelatively stagnant. The other, that production is around 2.7 million tonnes and has beengrowingataround2.7%perannumoverthepast5years(seeChartbelow).

  • ThePhilippinesMarketforImportedMeatandPoultry

    2Stanton,Emms&Sia(March2010)

    ProductionofMeatandPoultryinthePhilippines2003to2008

    Source:GovernmentofthePhilippines

    Thebulkofmeatandpoultryproductioninvolvesporkandchicken(seeChartbelow).

    MeatandPoultryProductioninthePhilippinesbyProductTypein2008

    Source:GovernmentofthePhilippines

    LocallyproducedmeatandpoultryisanimportantpartofthePhilippineseconomy,bothatthelevelofruralSMEproducersandbigbusinesses,whichhaveaverystrongcompetitivepositioninthemarket.Thereare industryreportsofaslump inmeatandpoultryproduction in2008,althoughthisisnotreflectedinthedatasetsthatareavailable.

  • ThePhilippinesMarketforImportedMeatandPoultry

    3Stanton,Emms&Sia(March2010)

    TradesourcescommentthatthereisnowgrowthindemandforhalalmeatsinthePhilippinesbecausetheMuslimpopulation,whichaccounts for5%oftotalpopulation, isgrowing insizeandalsoexperiencinghigherincomes.One of the countrys largest meat processors, Swift Foods (RFM Foods Corporation), hasrecently converted all of its sausage manufacturing to halal certified status. The rationalebehindthisconversionalso includestheASEANFreeTradeArea(AFTA)andhalalmeatexportmarketsinMalaysia,Singapore,BruneiDarussalamandIndonesiaskeycities.TheMiddleEastisalso regardedasavery important targetmarket,andSwiftFoodshasalready launched itsproductsinsomecountriesinthisregion.According to thegovernment, localmeatandpoultryproductscomprisearound94%of totalconsumption.Tradesourcescommentthat2009wasamorepositiveyearfor localproducersbecause the price of inputs, e.g. animal feed, was lower due to the collapse of globalcommodityprices.2.2 OverviewofimportedsuppliesofmeatandpoultryThePhilippineshasalargemarketforimportedmeatandpoultryproducts.In2008,itimportedabout294,000tonnesofmeatandpoultryproductsvaluedatC$354million,upfrom213,000tonnesvaluedatC$229millionin2004(seeChartbelow).

    TrendsinthePhilippinesImportsofMeatandPoultry2004to2008(AllProducts)

    Source:PhilippinesExternalTradeStatisticsforImports

  • ThePhilippinesMarketforImportedMeatandPoultry

    4Stanton,Emms&Sia(March2010)

    Overtheperiodbetween2004and2008,importvolumesgrewatanaverageofabout7.5%perannum,drivenbybuoyanteconomicconditions,strongerendconsumerdemandformeatandpoultry,shortfalls in localsuppliesofsomeproductsduetodiseaseoutbreaks,and improvedmarketaccessarisingfromtradeliberalisationbythegovernment.These trendshave takenplaceagainstabackgroundwhere localmeatandpoultryproducts,especially thoseof the largerbusinessesand localisedSME suppliers,are competitivewithinlocalmarketscenarios.The state of local competition is reflected in the profile of imports, because imports aregenerallyhigherinsegmentswherelocalproducersarechallengedtomeetlocaldemand,e.g.lowercostbeefandoffal(seeChartbelow)

    PhilippineImportsofMeatandPoultryProductsin2008293,734Tonnes

    Source:PhilippinesExternalTradeStatisticsforImports

    ThePhilippinesisimportingmeatandpoultryproductsfromaround30differentcountriesandterritories(seeChartbelow).

  • ThePhilippinesMarketforImportedMeatandPoultry

    5Stanton,Emms&Sia(March2010)

    MainOriginsofthePhilippinesImportsofMeatandPoultryin2008293,734Tonnes

    Source:PhilippinesExternalTradeStatisticsforImports

    OriginsvaryfromDevelopingWorldcountries,e.g.India,BrazilandChina,tovariousDevelopedWorldcountries,withCanadaasthemainplayeramongstthemin2008.2.3 Reviewofmarketsforthespecificproductscoveredbythestudy2.3.1 OverviewofimportsThePhilippinesimportsofthespecificproductscoveredbythisstudywerevaluedatatotalofC$312millionin2008,upfromaboutC$197millionin2004(seeTablebelow).

    OverviewofTrendsintheValueofImportsoftheProductsCoveredbythisStudyProduct 2004 2005 2006 2007 2008 C$000 C$000 C$000 C$000 C$000 Fresh/chilledbeef 226 434 402 99 59Frozenbeef 155,151 142,616 134,679 148,348 219,798Fresh/chilledpork 10 15 59 Frozenpork 10,506 8,241 4,052 8,863 28,784Pigsoffal 15,172 15,398 18,064 23,365 33,168Frozenchickenparts 15,621 20,277 23,456 25,166 29,744 Total 196,686 186,966 180,668 205,900 311,553 Source:Philippineexternaltradestatistics(Officialclassifications)

  • ThePhilippinesMarketforImportedMeatandPoultry

    6Stanton,Emms&Sia(March2010)

    Four of the markets covered by this study are large, one very large and all, except thefresh/chilledmarkets,havebeengrowingoverthepast5years.Themarketsforfresh/chilledmeatsareverydifficulttodevelopbecauseof: general price sensitivity in the meat and poultry markets and, for imports, related

    weaknessesinthePeso,thelocalcurrency; strongcompetitionfrommajorbusinessesthatcontrolthemarketforfresh/chilledmeats;

    and, regulatorybarriersandconstraints,especiallyforproductswithTariffRateQuotasinplace.2.3.2 Fresh/chilledbeefThe Philippines has a very small market for imported fresh/chilled beef. Imports of suchproductsamountedtojust29tonnesvaluedatC$59,000in2008,downsubstantiallyfrom206tonnesvaluedataboutC$226,000in2004(seeTablebelow).

    PhilippineImportsofFresh/ChilledBeef2004to2008

    2004 2005 2006 2007 2008 Tonnes Tonnes Tonnes Tonnes Tonnes Total 206 307 250 31 29 %change 49.0% (18.6%) (87.6%) (6.5%) Source:PhilippinesexternaltradestatisticsImports of fresh/chilled beef have aminuscule share of the Philippines beefmarket,whichinvolved consumption of around 292,000 tonnes in 2008. Trade sources comment that thisdemandscenarioishighlyunlikelytochangeintheforeseeablefuture.Thekeyreasonsbeing: thestructureof theTariffRateQuota forbeefand itsoperationalaspects,whichmake it

    more viable for an importer to bring in frozen beef. More information on the TRQ isprovidedinafollowingchapterofthisbriefing;and,

    pricesensitivity,sohigherpricedimportedfresh/chilledbeefonlyhaslimitedopportunities.

  • ThePhilippinesMarketforImportedMeatandPoultry

    7Stanton,Emms&Sia(March2010)

    Challengesalsoexistbecause thePhilippines cool chaindistribution systemhasweaknesses,includinginMetroManila,whichstillmakeimportsoffresh/chilledmeatquiterisky.TherealityoftheimportedbeefmarkettodayisthatthePhilippinesisprincipallyamarketforfrozenbeef.Itshouldbenotedthat importedbeef isbeingretailedaschilledbeef,alongside localbeef inthehigherendretailersinMetroManila.Itisnotknownwhetherthisisimportedfresh/chilledbeefordefrostedfrozenbeef.TheTablebelowprovidesasampleofsomeindicativepricesofsomeofthebeefcutsavailableinFebruary2010.

    IndicativeRetailPricesofChilledBeefinFebruary2010

    Product CountryofOriginandBrand

    PesoPerKilogram C$PerKilogram Tenderloin Local(FarmFresh) 775 17.37Porterhouse Local(FarmFresh) 500 11.20TBone Local(FarmFresh) 450 10.08Ribeye Local(FarmFresh) 435 9.75Sirloin Local(Nobrand) 290 6.50Sirloin Australia* 378 8.47Brisket Local(Nobrand) 212 4.75Brisket Australia* 254 5.69Shank Local(Nobrand) 200 4.48Shank Australia* 264 5.92Leanbeefcubes Local(Nobrand) 218 4.88Leanbeefcubes Australia* 265 5.94Mincedbeef** Local(Nobrand) 169or187 3.79or4.19Mincedbeef** Australia* 189or205 4.23or4.59Striploin,boneless Australia* 675 15.12Striploin,boneless Local(Nobrand) 405 9.07Shin,bonein Australia* 340 7.62Yakinikubeef USA 229 5.13 *:TheseproductsarenotbeingmarketedusinganAustralianbrandaswouldbethecaseinotherASEANmarkets,e.g.Singapore(Australiancorporatebrands)orMalaysia(theAussieBeefbrand).**:Thehigherpriceisforleanmincedbeef.Source:SupermarketsandhypermarketsinMetroManila

    Ascanbeseen from theabove, importedbeefgenerallyretailsatapremium to thepriceoflocal beef, unless the local product is subjected to strong local branding. Trade sourcescomment that this situation ispossiblebecause there is aperception amongst Filipinos thatforeignbeefisofbetterqualitythanlocalbeef.

  • ThePhilippinesMarketforImportedMeatandPoultry

    8Stanton,Emms&Sia(March2010)

    2.3.3 FrozenbeefFrozenbeefhasthehighestdemandamongstimportsofmeatandpoultry.ThissituationexistsbecausetherearemajorconstraintsovertheproductionofbeefinthePhilippines,inamarketenvironmentwherethereisalsohighleveldemandfortheproduct.ThePhilippinesimportsoffrozenbeefamountedto112,066tonnesvaluedatC$219.8millionin 2008, down slightly in an erraticmanner from 113,730 tonnes valued at about C$ 155.2millionin2004(seeTablebelow).

    PhilippineImportsofFrozenBeef2004to2008

    2004 2005 2006 2007 2008 Tonnes Tonnes Tonnes Tonnes Tonnes Boneless 113,123 95,975 94,075 106,197 109,281Bonein 588 770 625 1,329 2,468Carcass or halfcarcass 19 144 348 317 Total 113,730 96,745 94,844 107,874 112,066 %change (14.9) (2.0) 13.7 3.9 Source:PhilippinesexternaltradestatisticsBonelessbeefaccountsforcloseto100%ofimportsinmostyears.ThePhilippinesisimportingfrozenbeeffromupto18countries,althoughthebulkofimportscome from6 countries. India is themarket leader (see Tablesbelow formarket shares andimporttrends).

  • ThePhilippinesMarketforImportedMeatandPoultry

    9Stanton,Emms&Sia(March2010)

    ImportsofFrozenBeefbyKeySupplyCountryin2008 112,066Tonnes

    Source:PhilippinesExternalTradeStatistics(Allcuts)

    TrendsinImportsofFrozenBonelessBeeffromKeySupplyCountries

    2004to2008InTonnes

    Source:PhilippinesExternalTradeStatistics

    IndiahaslongledthemarketbecauseitisthelowestcostsupplierofbeefthatisacceptabletousersinthePhilippinemeatprocessingindustry,whichhasveryhighvolumedemandforfrozenbeef.

  • ThePhilippinesMarketforImportedMeatandPoultry

    10Stanton,Emms&Sia(March2010)

    Tradesourcescomment that Indianbeef (Carabeef)supply fell intoshortfalls in2008,mainlybecauseofboomingdemandfromtheIslamicWorld.ThistippedtheequilibriuminitsmarketandledtohigherpricesforIndianbeef(seeTablebelow).

    PhilippineImportsofFrozenBonelessBeef:ReviewofLandedCostPerTonneandMarketShare2006to2008

    2006 2007 2008 C$Per

    Tonne%Market

    ShareC$PerTonne

    %MarketShare

    C$PerTonne

    %MarketShare

    India 1,368 65.4 1,365 59.6 2,182 59.0Australia 1,974 2.7 1,952 3.0 1,790 12.3Brazil 1,486 28.8 1,327 33.9 1,617 12.0Canada 1,731 0.1 1,127 0.3 1,647 7.4NewZealand 1,137 1.6 1,071 1.7 1,382 6.2USA 1,595 0.8 2,118 1.0 2,013 2.5 Allimports 1,418 100.0 1,370 100.0 1,970 100.0 Tonnes 94,844 107,874 112,066 Source:DerivedfromthePhilippinesExternalTradeStatisticsThemarket has been growing despite the fact that landed costs of frozen beef frommostcountries,includingthemarketleader,India,increasedin2008.Thisgrowthisunderpinnedbycontinuedhighdemandfromthemeatprocessorsformanufacturingbeefforuseinlowercostprocessedmeatproducts,e.g.cornedbeef,sausagesandburgerpatties.The demand for Indian beef remained strong because of supply chain inertia and strongrelationships. This prevented amajor switch away from Indian beef to other products. ThehigherpriceofBrazilianbeefandfreightcostsalsotendedtosupportdemandforIndianbeefin2008.ThemainstreamretailchannelsinthePhilippinesurbanareasarenotmajorchannelsforfrozenbeef. Themain focusof themeat retailers in these channels isonmarketinghighermarginchilledbeef,whichmayincludedefrostedimportedfrozenbeef.

  • ThePhilippinesMarketforImportedMeatandPoultry

    11Stanton,Emms&Sia(March2010)

    2.3.4 Fresh/chilledporkThePhilippinesmarketfor importedfresh/chilledpork isminusculeand is inherentlyunstablein itsdevelopment trends. The countrysofficial importdata indicates thatno fresh/chilledporkwasimportedin2008(seeTablebelow).

    PhilippineImportsofFresh/ChilledPork2004to2008

    2004 2005 2006 2007 2008 Tonnes Tonnes Tonnes Tonnes Tonnes Total 21 11 77 Source:PhilippinesexternaltradestatisticsThismarketishighlyundevelopedbecauseofthewayinwhichporkimportsare: managed by the government under the PhilippinesWTO commitments,which include a

    TariffRateQuota(TRQ)andMinimumAccessVolumes(MAV);and, strategisedforbyimportersofmeatimportsundertheTRQsandMAVs.MoreinformationontheTRQsandMAVsareprovidedinafollowingchapterofthisbriefing.The other issue that severely undermines themarket for imported fresh/chilled pork is thestrength of the local pork producers in their local market and supply chain. As highlightedearlier,thePhilippinepigindustryproducesinexcessof1.6milliontonnesofporkperannum.FreshlocalporkisverywidelyavailableinthePhilippinesandthereisabroadbasedperceptioningovernmentandtheindustrythatimportedporkisnotneeded,unlessthereareshortfallsinsupplywhichneedtobefilledtomeetdemand.Such demand is only filled by frozen pork and offal. Trade sources comment that importedfresh/chilledpork isnotattractivebecauseof itshighprice (pork isabasicstaplemeat),andcomplicationsindistributingitundertheconditionsthatprevailinthePhilippinechannels.TheTablebelowprovidessomeindicativepricesforlocalfreshpork,asretailedinmainstreamsupermarketsinFebruary2010.

  • ThePhilippinesMarketforImportedMeatandPoultry

    12Stanton,Emms&Sia(March2010)

    RetailPriceofFresh/ChilledPorkinFebruary2010

    Product PesoPerKilogram C$PerKilogram Belly 175 3.92Steak 189to200 4.23to4.48Chop 168to180 3.76to4.03Mincedpork 160to175 3.59to3.92Frontleg(Hock) 147 3.29Ribs 199to225 4.46to5.04 Source:LeadingsupermarketsinMetroManila

    2.3.5 FrozenporkPhilippineimportsoffrozenporkamountedto29,817tonnesvaluedatC$28.8millionin2008,upinanerraticmannerfrom11,092tonnesvaluedataboutC$10.5millionin2004(seeTablebelow).

    PhilippineImp...