Competitive Industry Report on the Philippines Market for Imported Dry Peas and Chickpeas

Transcription

1 Competitive Industry Report on the Philippines Market for Imported Dry Peas and Chickpeas A Guide for Canadian Exporters *Abbreviated Prepared for: The Embassy of Canada in The Philippines & Office of Southeast Asia Regional Agri Food Trade Commissioner Agriculture and Agri Food Canada Prepared by: Stanton, Emms & Sia 80 Raffles Place, Level UOB Plaza 1, Singapore Tel: Fax: emmsia@pacific.net.sg Website: February 2010 This report contains market information collected by Stanton, Emms & Sia. The Government of Canada assumes no liability for the accuracy and reliability of the market information and intelligence provided herein. *For the complete report, Canadians are invited to contact Ms. Yvette Buendia at the Embassy of Canada in the Philippines : yvette.buendia@international.gc.ca

2 1. Introduction This guide for Canadian exporters is prepared by Stanton, Emms & Sia for the Embassy of Canada in the Philippines and the ASEAN Agri Food Trade Commissioner, Agriculture and Agri Food Canada. It covers the Philippine markets for: imported dry peas, specifically dry yellow peas; and imported chick peas. It has been researched in January and February The report is prepared to provide Canada s ASEAN based Agri Food Team of Trade Commissioners and Canadian producers and exporters with an up to date understanding of the target market and opportunities in the Philippines for Canadian dry peas and chickpeas. It should be noted that at the time of the research, there was no data available on dry peas and chickpeas imports for the whole of Market size, nature of supply and development trends 2.1 Overview of domestic supplies The Philippines produces very small quantities of dry peas, i.e. less than 1,000 tonnes per annum according to the government. It does not produce any chickpeas. It also produces around 50,000 tonnes of indigenous dry beans and pulses every year. These products do not compete in the same area of the market, or on functionality, as imported dry peas or chickpeas. According to government data, local production of dry beans and pulses is quite stagnant and has not grown much over the past 5 years. Local production accounts for only about 30% of the total consumption of dry beans, peas, pulses and lentils today. While this is the case, local products are a key part of the market scenario, especially when it comes to user and consumer awareness about products and their uses. Locally produced beans and pulses, e.g. Mung Beans and Adzuki type Beans, are well entrenched in local food culture. 1

3 2.2 Overview of imported supplies Based on volumes imported, the Philippines has one of the larger markets for imported dry beans, peas, pulses and lentils in the ASEAN region today. It imported just over 116,000 tonnes of dry beans, peas, pulses and lentils valued at C$ 19.3 million in 2008 (see Chart below). Philippine Imports of Dry Beans, Peas, Pulses and Lentils in ,000 Tonnes Source: Philippine External Trade Statistics (Officially Reported) The bulk of imports are: mung beans (known locally as Green Mongo) and red/brown coloured beans, i.e. Kidney beans and Adzuki beans (also referred to as Red Mongo), which are deeply embedded in Philippine food culture; and dried peas, which are used by some segments of the food processing industry. Some users have longstanding demand that originally developed from Spanish and American colonial influence on local food culture. These inherent demands continue to be key drivers in the markets for imported dry beans, peas, pulses and lentils today. 2

4 The market for imported dry beans, peas, pulses and lentils has been in a growth phase of its development over the past 5 years (see Chart below). Trends in the Philippines Imports of Dry Beans, Peas, Pulses and Lentils 2004 to 2008 (All Products) Source: Philippine External Trade Statistics (Officially Reported) Trade sources comment the growth in demand is underpinned by two basic factors: continued population growth and the status of some dry beans, peas, pulses and lentils as staple food items; and shortfalls in local supplies of the imported products. It should be noted that the Philippines has one of the fastest growing populations in the world. According to the World Bank, its population will exceed 100 million persons in 2015, up from around 86 million today. 2.2 Review of markets for the specific products covered by the study Overview The Philippines imports of the products covered by this study were variable between 2004 and Imports were totalled C$ 10.1 million in The equivalent figure in 2004 was C$ 10.9 million (see Table below). 3

5 Overview of Trends in the Value of Imports of the Products Covered by this Study Product C$ 000 C$ 000 C$ 000 C$ 000 C$ 000 Dry peas 10,389 7,471 10,704 8,556 9,740 Dried chickpeas Total 10,908 7,875 11,217 8,875 10,143 Source: Philippine external trade statistics (Official classifications) It should be noted that there is no specific trade data available on dry yellow peas because the import data on all forms of dried peas are reported under a single HS code. Another product, not within the scope of this study, which may also be relevant to Canadian exporters because of their reported production and export capabilities is the dried kidney bean. This product appears to have a sizeable and growing market. Imports of these beans were officially reported at 31,477 tonnes valued at C$ 11 million in Dry peas Overview of imports The Philippines imports of dry peas amounted to 26,411 tonnes valued at C$ 9.7 million in Imports in 2004 amounted to 27,404 tonnes valued at about C$ 10.4 million in 2004 (see Table below). Philippine Imports of Dry Peas 2004 to Tonnes Tonnes Tonnes Tonnes Tonnes Total 27,404 25,060 34,073 27,583 26,411 % change (8.6%) 35.9% (18.5%) (4.2%) Source: Philippine external trade statistics 4

6 Trade sources comment that the Philippines does have a long term growing demand for dry peas. This demand trend was, however, disrupted by the higher food prices of 2007 and This caused a drop in demand for processed food, including processed imported dry peas, and is the main reason for the decline in imports highlighted in the Table above. This market is price sensitive. Generally, the lowest priced supplier of the best quality products dominate market share, i.e. the USA (see Table below). Philippine Imports of Dry Peas: Review of Landed Cost Per Tonne and Market Share 2006 to C$ Per Tonne % Market Share C$ Per Tonne % Market Share C$ Per Tonne % Market Share USA Canada Australia China Argentina New Zealand All imports Source: Derived from Philippine External Trade Statistics Dry peas are being used in the Philippines to produce canned cooked peas; and snack foods, both non indigenous and indigenous types. No information is readily available on the volumes of dry peas being used by each of the food canning industry, the snack industry or manufacturers of dry pea flour. Total usage is between 25,000 and 30,000 tonnes per annum, which is valued at around C$ 10 million at the level of landed cost. 5

7 Market observations and discussions with some trade sources indicate that there are no yellow pea products in the retail market at the time of the research, i.e. February Discussions with trade sources indicate that a yellow pea based snack could be launched to the market over the next 18 months to 2 years. Yellow pea based flour may already be available in the market The Philippines food cannery industry and its usage Trade sources comment that canned cooked peas are mass market items that are demanded and consumed by all income groups. In view of this, there are basically two can sizes in the market, the smallest of which has a very low retail price (see Table below). Examples of Retail Prices of Canned Cooked Dry Peas in the Philippines Product Brand Pack Size Peso C$ Dry cooked green Gina 425 gm peas (Cenmaco Inc) Dry cooked green peas Gina (Cenmaco Inc) 155 gm Source: Supermarkets and hypermarkets (February 2010) The above pricing reveals that there is a mark up of between 250% and 300% for canned cooked green peas from landed cost of the ingredient to the price in the Philippines mainstream retail outlets. Green peas were introduced to the Philippines diet by the Spanish in the colonial era. Today, they have an entrenched place in the Filipino diet, even though they are difficult to grow in commercial quantities in the Philippines. This underpins one of Southeast Asia s largest markets for dry peas. By comparison, Thailand and Indonesia s imports of dry peas have only ranged between 4,000 and 9,000 per annum each over the past 5 years. Today, green peas are used in a number of traditional Filipino dishes, e.g. Afritada, Menudo, and Embutido, and other dishes including paella, pastas, samosas, salads and soups. The peas for these dishes are supplied to the mass market in canned form (made locally) and to the top end of the market in frozen form. Canned cooked green peas are readily available in the Philippine nationwide dry goods grocery channels. 6

8 There is also a niche market for imported canned peas. Imports of frozen peas and canned peas (both of which are not in the scope of this study) amounted to 1,400 tonnes and 18 tonnes, respectively, in The staple nature of the market for canned cooked peas is exhibited by the fact that most cans in the market (more than 80%) are very small in size, i.e. 155gm. Trade sources comment that this situation exists as part of an industry strategy change made over the past 15 years. The canneries decided to shift away from large and medium sized cans to very small cans as part of their efforts to sustain a broad based mass market for their products. The Philippines has a number of brands of dry cooked peas, including Ram, Senorita Marca Sevilla, Temple, Mayon (Tosen Foods) and Jolly. Some of these products are marked as containing U.S. origin dry peas. Jolly, which is quite well distributed in middle income supermarkets, is an imported private label product owned by a Philippine company known as Fly Ace Corporation. The companies that can vegetables in the Philippines are small to medium sized businesses, when compared to the local food industry giants, such as San Miguel or Universal Robina. They include companies such as Ram Food Products, Cenmarco (also known as Central Macaroni Company), Tosen Foods and Hoc Guan Manufacturing. It should be noted that there are canneries that use other forms of dry beans, peas, pulses and lentils that do not appear to have green peas (or chickpeas) in their product portfolio. Baked beans using Great Northern Beans or Navy Beans are produced in the Philippines and marketed by Hunt Universal Robina. Interestingly, Ram branded canned pork and beans competes with this company s products and has the words Made from USA White Beans on its label. The highest profile players in the canned cooked green pea market are Ram Food Products, Cenmarco and Tosen Foods. Ram Food Products is a very close strategic industry partner for U.S. exporters and their export marketing organisations, i.e. United States Dry Bean Council and USA Dry Pea and Lentil Council. Ram Food Products also promotes the use of its canned green peas (and chickpeas) through promotions that feature their usage in Filipino and other dishes that can be cooked at home. 7

9 The Philippines snack industry and its usage The Philippines snack food market is highly complex and there is a wide range of products, both traditional and non indigenous, in the market. Trade sources comment that consumers in the Philippines love to snack and this trait has established a large market at various levels in society. The snacks that are consumed by Filipinos include: peanuts, which have a huge nationwide market; snack chips, both potato and corn based, which have a large market, with the bulk of demand being from urban area consumers; extruded snacks, which have solid and growing demand, especially amongst younger consumers in the urban areas; other nuts, e.g. cashew nuts and pili nuts; and other snack products, both traditional and modern, including fried pork skin, fish and seafood based snacks, fish and prawn crackers, dried mangoes, baked bread pieces (toastees), traditional corn based snacks which look like chickpeas, fried green peas, fried banana chips, cookies and small sized cakes. Green peas are used in traditional snacks (fried dried green peas) and modern type extruded snacks. Fried green peas are also an ingredient used in mixed nut products. Snacks derived from dried peas also have quite broad based demand because fried dried peas are a traditional snack with quite a long history in the Philippines. A sample of the retail pricing of such products is provided below. 8

10 Sample of Retail Pricing of Dry Green Pea Based Snacks in the Philippines Product Brand Pack Size Peso C$ Extruded green Regent (Regent 60 gm pea based snack Food Corp) Extruded green pea based snack, baked Fried green pea snack, coated Fried green pea snack, coated Fried green pea snack, uncoated Traditional fried green pea snacks, spicy Traditional fried green pea snacks, spicy Oishi (Liwayway) Muncher (W.L. Foods) Muncher (W.L. Foods) Muncher (W.L. Foods) Commodity packed Pinoy Pica Pica Commodity packed Pinoy Pica Pica 60 gm gm gm gm gm gm Source: Supermarkets and hypermarkets (February 2010) The above pricing reveals that there is a mark up of between 600% and 700% for fried green pea snacks from landed cost of the ingredients to their retail price in the Philippines. This markup is much higher than that for staple canned foods. This mark up scenario highlights the impact of price sensitivity in the staple canned food market in the Philippines, when compared to the more indulgent snack markets. Trade sources comment that: the non indigenous snack food market, including savoury and sweet snacks, is very large. The market is estimated to be valued at around C$ 650 million in Snacks in the Philippines are sold as branded products in modern packaging or as commodities in low end plastic bags marked with a simple brand; 9

11 consumption per capita is low at between 1.2 and 1.5 kilograms in This reflects the fact that the Philippines has a very large low income group (more 75% of the population) that is not a major feature in the market for non indigenous snacks; demand for all products over the 5 years ended 2008 had been growing at between 4% and 5% per annum, largely because the Philippines had experienced good economic growth over much of that period; it is likely that consumption growth stalled in 2009 due to the weaker consumer confidence and economic uncertainty. A rebound in growth is being forecast in 2010 because of the impact of the Presidential election on spending power, and also because of improving conditions in the global economy. The state of global economy has impacts on: o the level of remittances by overseas workers to their relatives in the Philippines, which are significant to the economy and consumer market; and o on employment and wages in the Philippines export oriented industries; the nut and bean segment of the Philippines snack food market is the largest segment because it includes traditional products that are lower cost than extruded snacks or snack chips. This segment includes fried green peas; This segment is valued at about C$ 200 million in 2008, with per capita consumption at between 0.5 and 0.6 kilograms in that year. the other savoury snack segments in this market comprise: o Extruded snacks with a market value of around C$ 180 million and per capita consumption of around 0.3 kilograms in This segment includes baked extruded green pea based snacks, e.g. Oishi Pods Pea Snack, which is made by Liwayway Marketing Corporation; o snack chips with a market value of around C$ 130 million and per capita consumption of less than 0.2 kilograms in 2008 The largest snack food manufacturers in the Philippines are listed as follows. These companies are dominant in the snack chip and extruded snack markets. 10

12 Universal Robina Corporation (Total group sales: C$ 1,130 million), which has a snack production unit within its group of companies. Its core brand is the market leading Jack n Jill brand. This company does not have any dry pea based snacks in its product portfolio. Liwayway Marketing Corp (Total sales in 2008: C$ 50.1 million). This company has a green pea based extruded snack in its Oishi branded product portfolio. This product is marketed as a healthy vegetarian snack that is baked not fried, rich in fibre, an excellent source of iron, with no added MSG or artificial colouring. The product contains 55% dry peas, with corn starch being the other main ingredient. Leslie Corp (Total sales in 2008: C$ 25.2 million). This company does not have any dry pea based snacks in its product portfolio. Other players in the snack food industry are: W.L. Foods. This company is one of the larger snack food manufacturers in the Philippines, although it is not listed in the Philippines top 1,000 corporations like the above named companies. This company manufactures the Muncher brand of fried green pea snacks, which have a high profile in retail channels. These products are produced in uncoated and flour coated forms. They are available in a number of different flavours, e.g. spicy pizza, original, chilli cheese and spicy beef. W.L. Foods is a strategic partner of the U.S. Dry Pea & Lentil Council. The Muncher product labels display this organisation s logo along with the words USA Dry Peas, Lentils and Chickpeas The Standard for Quality. Stateline Snack Food Corporation, which is an important second line player in the snack chip and extruded snack market. It operates a large number of brands (more than 20), unlike the larger players in the industry that have a more specific focus on 1 to 3 different brands. This company has no green pea based snack in its product portfolio. Food Industries Inc. This company is a snack peanut and pretzel manufacturer that uses the Nagaraya brand, which is a market leader in its segment. Its products are high profile and well distributed. This company has no green pea based snack in its product portfolio. 11

13 JBC Food Corporation, which is principally a snack nut and seed specialist. It uses fried dry green peas in its snack nut mixes. Regent Food Corporation, a second line snack producer that has an extruded green pea based snack in its product portfolio. This product competes directly with the Oishi branded product mentioned earlier in this section. In addition to these brands, retailer label snacks are a developing feature of the snack food market, e.g. SM Bonus products Other uses of dry peas in the Philippines Aside from dry pea usage by the canners, snack producers and pea flour manufacturers, there appear to be no other uses today. Some points to note are as follows: the Philippines is importing pea starch based noodles, i.e. vermicelli, from China. Competing vermicelli made in the Philippines is made from rice or corn starch. The producers are all small and medium sized businesses, some of which have a higher profile in the market than others, e.g. Bee Ann s and Sotang How (Cebu Special); and the Philippines has a large branded instant noodle industry, which involves Monde Nissin (Total sales in 2008: C$ 527 million), Universal Robina Corp and Zesto Corp (Total sales in 2008: C$ 66.9 million). None of the products manufactured by the industry contain dry pea inputs. This industry is reported to be highly price sensitive because its main focus is on the lower income groups. Market observations also indicate that there is no significant industrial usage of dry peas by manufacturers of retail packed beverages, porridge type products, pasta sauces or soups Dried chickpeas Dried chickpeas are commonly known as Garbanzos in the Philippines. Imports were variable between 2004 and Imports amounted to 768 tonnes valued at C$ 403,000 in The equivalent figure for 2004 was 819 tonnes valued at C$ 519,000. Dried chickpeas have two different markets in the Philippines: the cannery industry, which produces for the Philippines mass urban area market; and 12

14 the food service industry, which has both low end and high end demand. Philippine Imports of Dried Chickpeas 2004 to Tonnes Tonnes Tonnes Tonnes Tonnes Total % change 14.2% (3.4%) (20.0%) 6.4% Source: Philippine external trade statistics The market for dried chickpeas in small and appears to have entered in some level of decline since imports peaked in This situation has developed because of the higher pricing of U.S. chickpeas, which are reported to be preferred by the canneries, and also the impact of a weakening Peso (local currency). Philippine Imports of Dried Chickpeas: Review of Landed Cost Per Tonne and Market Share 2006 to C$ Per % Market C$ Per % Market C$ Per Tonne Share Tonne Share Tonne % Market Share USA India Canada Total N: Negligible. Source: Philippine External Trade Statistics Retail packed dried chickpeas are rare in Philippine retail channels. They are available in some of the higher end supermarkets, although they even in these, they are not common. A 300 gm commodity (unbranded) pack of dried chickpeas has a retail price of Peso (C$ 0.80). Three of the Philippines canneries have chickpeas in the product portfolios. It should be noted that chickpeas are not canned in micro sized 155 gm cans. 13

15 The smallest can is 225 gm, which means that they do not have as broad a target market as cooked dry green peas, which use the 155 gm can. Examples of retail packed chickpeas are provided in the Table below, along with their retail prices. Examples of Retail Pricing of Canned Chickpeas (Garbanzos) Product Brand Pack Size Peso C$ Garbanzos Gina (Cenmaco 425 gm Inc) U.S. Chickpeas Ram (Ram Food 225 gm Products Inc) Chickpeas Mayon (Tosen Foods Inc) 225 gm Source: Hypermarkets and supermarkets (February 2010) The above pricing reveals that there is a mark up of around 300% for canned chickpeas from landed cost of the ingredient to the price of the canned product in the Philippines mainstream retail outlets. This is slightly higher than that achieved in the market for canned dry green peas. Canned chickpeas (not in the scope of this study) are also being imported to the Philippines from the USA (S&W brand), Molinera (Italy) and Malaysia (Kimball brand by Campbell Soup). These products have very small niches within the existing canned chickpea market. According to retailers, they are mainly purchased by expatriates and high income local consumers. Chickpeas have an entrenched place in Filipino food culture, which developed during the Spanish colonial era. Traditionally, they are used in Halo Halo, a local dessert, a stew known as Menudo, a tripe, sausage and chickpea dish known as Callos, and other dishes, e.g. Paella, soups, salads and some Spanish dishes that are cooked in some homes. They are also preserved in syrup and eaten as sweet confectionery items. As mentioned above, they also have a diverse range of uses in the food service industry. They are used by: mass market Halo Halo and confectionery suppliers; and mid level to high restaurants, examples of which include: 14

16 o Hossein s, a chain of 4 fine dining restaurants serving Persian, Arabian and Indian cuisine that uses chickpeas in its menu items; o The Café Mediterranean, which has 9 outlets providing a range of Mediterranean dishes, some of which also contain chickpeas; and o Spanish restaurants of which there are a sizeable number in the Philippines. These outlets commonly have demand for chickpeas for use in their stews and soups. There are also Filipino Spanish fusion outlets that also use chickpeas in such dishes. 3. Import tariffs and regulations, including market access limitations for Canada The Philippines levies a 3% import duty on dry peas and dried chickpeas under its current MFN tariff schedule. While this is the case, an exemption from the tariff can be obtained by eligible agricultural enterprises for a 5 year period under Executive Order No 133. The duty on imports from Australia and New Zealand under the AANZFTA was reduced to 0% in January 2010, after implementation of this FTA. Although 3% is a low import duty, the state of extreme price sensitivity that exists in Philippines means that it could be a disadvantage to Canadian exporters when: in keen competition with exporters from Australia or New Zealand; and under circumstances where the importer did not have an exemption in place from the MFN import duty. Trade sources comment that it is not difficult to import dry beans, peas, pulses and lentils from a Developed Country such as Canada. Unless there is a specific undetected breach of standards on a technical matter such as pesticide residues in Canada, compliance with the Philippines import procedures is quite routine. The Bureau of Plant and Industry (BPI) regulates the imports of all vegetables. Under its regulations only accredited and/or registered Philippine individuals or businesses may import such products into the Philippines. Imports are subjected to an import permit being issued before the export is undertaken and to provision, and inspection, of the Phytosanitary Certificate issued by the country of origin at the port of entry into the Philippines. 15

17 The BPI also has pest risk analysis procedures that can come into play when imported vegetables are perceived to be a risk to Philippine agriculture. 4. Distribution channels The structure of demand for dry peas and chickpeas means that the import and distribution channels are oriented around industrial rather than consumer market demands. Importers of dry peas and chickpeas include: commodity traders that import for further sale to users, packers and processors. These companies are generally highly price sensitive and so will procure their suppliers from the lowest priced source, e.g. India; and companies, such as Ram Food Products, who import on a direct basis for use in their canning operations, and for sale to other users. This company is reported to be a major importer of U.S. dry peas and chickpeas. Most users of dry peas in the Philippines today, e.g. the snack companies, are too small at the level of their usage to import their ingredients on a direct basis from overseas suppliers. For this reason, they purchase their ingredients from the above types of companies. 5. Future best prospects and opportunities for Canada, based on current Canadian capacities and penetration Trade sources comment that the prospects for the future of the dry peas and chickpeas market in the Philippines over the next 3 to 5 years will be underpinned by two very basic factors: population growth; and economic growth and the related growth in disposable incomes. This situation exists because the bulk of these products are used in staple canned foods and snack foods, which are well loved by Filipino consumers. As a source from one cannery commented: More people more desserts sold more cans of chickpeas used. The same comment could also be made for dry green peas. 16

18 Another positive point made by one trade commentator is that the middle income group (around 10 million persons today) will likely grow and so stimulate higher demand for healthier snacks. The current forecasts for population growth and the economy are generally positive: the population will grow to about 100 million persons by 2015; and the economy is likely to grow at rates of between 2.5% to 4.5% (and possibly higher) over the next 3 years, subject to the state of the global and East Asian economies. The main downside in this forecast lies in the structure of the population and in retail price inflation: most of the Philippines new citizens are going to be born into the lower income groups; and retail price inflation is being forecast at rates of between 5% and 7% per annum in Unlike in some other ASEAN countries, retail price inflation is a perennial challenge in the Philippines. When considered together with the weak state of the Peso (local currency), retail price inflation is a key reason why the Philippines has weak demand for higher priced imported products and why such products are sold in micro sized packages, e.g. canned cooked dry green peas. While there are downsides to this forecast, the Philippines is one of the largest dry pea and chickpea markets in South East Asia. Dry pea demand exceeds 25,000 tonnes per annum. This, and the above forecast growth potential, should make it a key target for committed Canadian exporters to develop for their dry green peas, yellow peas and chickpeas over the next 3 to 5 years. 17

19 Canadian producers with other products related to opportunities in the markets profiled in this report, and who would like more market information or contacts, may contact the Agri Food Trade Commissioner at the Embassy of Canada in the Philippines at: 18