THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY
USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT
POLICY
Date:
GAIN Report Number:
Approved By:
Prepared By:
Report Highlights:
The U.S. continues to be the Philippines’ number one supplier of agricultural products, and the
Philippines is its 9
th
largest market in the world. In 2013, export sales increased six percent to a record
$2.5 billion. Despite congestion at the port of Manila and other distribution challenges, sales are up 15
percent from January to October 2014 and are expected to reach $2.9 billion by the end of the year. The
top ten U.S. exports by value through October 2014 were wheat, soybean meal, dairy products, red
meats, poultry meat, prepared food, processed fruit & vegetables, sugar, sweeteners & beverage bases,
snack foods, and fresh fruit. Competition has greatly intensified and new challenges have emerged for
U.S. exporters due to bilateral and regional free-trade agreements. Good sales opportunities abound
because of the robust Philippine economy, steady growth in the country’s retail, foodservice and food
processing sectors, and consumer familiarity with American brands. U.S. exports of consumer oriented
food & beverage products remain particularly strong and are the best prospects for future growth.
Post:
Manila
Maria Ramona C. Singian
Ralph Bean
2014 Annual
Exporter Guide
Philippines
1/6/2015
Required Report - public distribution
I. MARKET OVERVIEW
The bilateral relationship between the U.S. and the Philippines is unique because of the depth of
historical and cultural ties between the two countries. Around four million Filipino-Americans
constitute a major immigrant group in the U.S., while 250,000 U.S. citizens reside in the Philippines.
The Philippine government structure is similar to that of the U.S. The country has had five presidential
transitions since the removal of President Ferdinand Marcos in 1986. The current president, Benigno
Aquino III, was elected in 2010 on an anti-corruption and good-governance platform. A broad range of
reports indicate the anti-corruption campaign of the Aquino Administration (2010-2016) has contributed
to investor confidence and has enhanced the overall business environment. According to published
opinion polls, the Aquino Administration enjoys popular support and has maintained high approval
ratings.
In the third quarter of 2014, the Philippine economy slowed to its weakest pace in more than five years
to 5.3 percent; however, it remains one of the best-performing economies in Asia. The Aquino
administration is confident the Philippines will reach its 2014 economic growth target of 6.5-7.5
percent. The economic expansion is broad-based with almost all sectors posting higher year-on-year
growth rates led by the service sector. The World Bank projected remittances to the Philippines will hit
$28 billion in 2014, up 11 percent from the previous year, making the country the third-largest recipient
of money in the world sent by overseas workers. The country’s business process outsourcing (BPO)
sector expects profits to reach $18 billion in 2014, up 20 percent from the previous year. While the
Philippine Peso remains resilient, it is expected to weaken in the first quarter of 2015, and trade in the
range of PhP45.00 to a dollar as the U.S. economy strengthens.
The more than 7,000 islands that comprise the Philippines are classified under three major island
groups: Luzon, Visayas and Mindanao. The land area of the combined islands of the Philippines is
about the same size as Arizona with roughly 107.6 million inhabitants.
The country remains characterized by broad income disparity. In 2012 (latest available data), Filipino
families earned an average annual income of $5,222. Families in the richest decile earned an average
annual income of $15,888. On the other hand, families in the poorest decile, earned an average annual
income of $1,533. The income of families in the richest decile is 10 times that of the poorest decile. At
the same time, the number of consumers entering the middle class has been increasing. According to
the International Monetary Fund, Philippine GDP per capita in 2014 based on purchasing power parity
is estimated at $6,985.
Notes:
1. Exchange rate: Php45.00 to $1.00
2. Philippine population is estimated at 107.6 million as of July 2014 (The World Factbook)
Agricultural Trade Environment
The Philippines is a key market in Southeast Asia and the 9th largest market in the world for exports of
U.S. agricultural products through October 2014 (latest available data). Post estimates total agricultural
product export sales to the Philippines will reach $2.9 billion by the end of 2014, up 15 percent from the
previous year. All indicators point towards continued growth. Export sales are forecast to reach $3.3
billion in 2015.
The top ten U.S. agricultural exports by value through October 2014 were wheat at $564 million,
soybean meal at $454 million, dairy products at $387 million*, red meats at $152 million, poultry meat
& products (excluding eggs) at $80 million, prepared food at $75 million*, processed fruit & vegetables
at $72 million*, sugar, sweeteners & beverage bases at $63 million*, snack foods at $45 million*, and
fresh fruit at $44 million.
Historical data of U.S. agricultural product exports can be accessed online through the FAS homepage
at www.fas.usda.gov.
Note: *Denote Highest Export Levels Since at Least CY 1970
Export Growth of Consumer Oriented Food & Beverage Products (a Sub-Sector of Total
Agricultural Products)
The Philippines continues to be the largest U.S. food & beverage (f&b) export market in Southeast Asia
and one of the fastest growing markets in the world. Export sales of U.S. f&b products to the
Philippines are expected to reach a record $1.2 billion by the end of 2014, up 20 percent from the
previous year. Due to the robust Philippine economy, steady growth in the country’s retail, foodservice
and food processing sectors, and consumer familiarity with American brands, export sales are forecast
to reach $1.4 billion in 2015.
The top U.S. f&b exports through October 2014 were dairy products, red meats, poultry meat, prepared
food, and processed fruit & vegetables. A detailed report entitled, “Philippines-A Billion Dollar Market
for US Food and Beverage Exports” is available through the FAS homepage at www.fas.usda.gov.
II. REGULATORY SYSTEMS & IMPORT REQUIREMENTS
For detailed information regarding standards and regulations for importing food and agricultural
products into the Philippines, please refer to the report entitled, “Philippines: Food and Agricultural
Import Regulations and Standards – Narrative” available through the FAS homepage at
www.fas.usda.gov.
III. TARIFFS & DUTIES
In the Philippines, the simple average most favored nation (MFN) tariff applied to imports is 6.71
percent. Five percent of applied Philippine tariffs are 20 percent and above. All agricultural tariffs are
bound except for fish. The simple average bound tariff in the Philippines is 25.6 percent.
The Philippine government also imposes a tariff rate quota (TRQ) known as Minimum Access Volume
(MAV) on several agricultural products including corn, coffee/coffee extracts, potatoes, pork and
poultry. Since 2005, the Philippine government has maintained MAV levels at its WTO Uruguay
Round commitments despite a continued rise in market demand for MAV products. The high in-quota
tariffs, which range from 30-50 percent, significantly inhibit U.S. exports of MAV products to the
Philippines. Sugar has the highest in-quota tariff at 50 percent, followed by potatoes and poultry at 40
percent, rice and corn at 35 percent, and pork and coffee at 30 percent. Since 2002, the Philippines has
invoked a price-based special safeguard (SSG) on imports of chicken meat, essentially doubling the
MAV rate of protection for out-of-quota imports.
Applied tariffs on fresh citrus fruits, including grapes, apples, oranges, lemons, grapefruits, and
strawberries are at 7-15 percent. Their bound rates are at 40-45 percent. While the reduced applied rate
provides increased export potential, U.S. stakeholders report frequent changes in the applied rate for
these products make it difficult to consistently take advantage of identified opportunities.
The reduction of tariffs to below MFN rates for regional competitors with preferential trade agreements
threatens to reduce the competitiveness of U.S. products and erode U.S. market share in the Philippines.
U.S. beef, for example, is subject to a 10 percent MFN duty, while Australian beef enters the Philippine
market duty free. The Philippines has also eliminated tariffs on approximately 99 percent of all goods
from ASEAN trading partners.
The amended Tariff and Customs Code of the Philippines can be viewed online at:
http://www.tariffcommission.gov.ph/eo_61.htm
IV. EXPORTER BUSINESS TIPS
Filipino businessmen value trust and personal relations. U.S. exporters are encouraged to
maintain close contact with their Philippine importers. Regular market visits are favored by
Philippine importers and regarded as a show of support.
Some Philippine importers maintain buying offices in the U.S. and consolidate their shipments
through third-party consolidators on the West Coast.
Exclusive distributorship agreements are preferred by Philippine importers. U.S. exporters can
work with one or several importers provided the market coverage of each importer is properly
identified.
Only a few retail supermarkets have the capacity to import directly.
Philippine food regulations and standards generally follow the U.S. Food and Drug
Administration. All food products must be registered with the Philippine Food and Drug
Administration. Imported products may be registered only by a Filipino entity. Products from
the U.S. do not require special labeling and may be sold in the Philippines in the same
commercial packaging.
U.S. exporters are advised to require payment of goods via letter of credit especially for initial
transactions. Credit terms may be extended to the importer after conducting a thorough
background and credit investigation, and after payment habits have been established.
There are no distribution hubs. It is key to identify importers that can distribute to the three
major cities (Manila, Cebu and Davao). Most importers distribute on their own while some
appoint distributors.
General Pricing Structure
From Landed Cost (CIF + Duties & Taxes)
Add 30 percent to arrive at the wholesale price for food service customers
Add 20-40 percent to arrive at the price for retail supermarkets
Supermarkets add a 6-15 percent mark-up to arrive at the price sold to end-consumers
For food manufacturing, importers usually act as indentors and earn a 2-5 percent mark-up for
importing and releasing the products.
Credit Terms
For retail, products are mostly on a consignment basis. Importers collect payment after
30 days. For products purchased outright, retailers demand 60-90 days credit terms from
importers.
Hotels and restaurants request for 30-60 days credit.
Food processors request for 30 days credit.
Retailers demand high slotting fees (about $120 per stock keeping unit or SKU) + year-round
marketing support ($1,000-$2,000 per annum). U.S. exporters should, as much as possible,
support marketing and promotional efforts.
Filipino consumers generally prefer smaller packaging sizes.
Due to insufficient cold chain infrastructure in the Philippines, products should be packed to
withstand extreme heat and humidity.
The high cost of inter-island shipping makes imported products more expensive in areas outside
Manila.
The release of imported goods from Philippine Customs sometimes poses a challenge.
V. MARKET SECTOR STRUCTURE & TRENDS
General Market Profile
Large population: estimated at 107.6 million as of July 2014 (The World Factbook)
Income: 10-15 million “real customers”
Urban population: 49%
High literacy: 90% of the 67 million Filipinos between the age of 10 to 64 years old are
functionally literate (can read, write, compute and comprehend)
High awareness & preference for U.S. f&b products
Growing demand for “healthy”, organic, gourmet and convenience foods
Steady growth in retail, foodservice and food processing industries
Food Retail Sector
The Philippine food retail sector continues to modernize and expand, fostering steady sales of a wide
range of U.S. 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 being driven by continued strong 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 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.
Food Service Sector
The Philippine foodservice sector continues to grow driven by the robust economy, the growing
disposable income among the upper and middle class, the proliferation of retail shopping centers and
hotels, the steady influx of tourists, the rapid growth of the BPO sector, and the increase in number of
women joining the workforce have resulted in increased food service sales. Dining out continues to be
an important aspect of Filipino family bonding and celebration.
Restaurants in five-star hotels and upscale malls, fast-food chains, cafes and Western-style diners
require high-quality f&b products such as meats, poultry, seafood, dairy products, processed fruits &
vegetables, fruit juices, dried fruits, nuts, wines and craft beers. Restaurant operators are keen on
introducing new and exciting menu offerings to attract customers.
Food Processing Sector
The Philippines’ rapidly expanding production of processed food and beverage (f&b) products present
robust opportunities for U.S. exporters of agricultural raw materials and high value ingredients.
Quadrupling in recent years to over $27 billion, f&b processing comprised 50 percent of the
Philippines’ total manufactured output in 2013. Roughly 90 percent 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. The Philippine f&b processing industry’s
growing use of U.S. agricultural ingredients provides a valuable path for U.S. and Philippine exports to
grow in tandem. About 65 percent of U.S. agricultural exports to the Philippines flow through the f&b
processing industry. Wheat, dairy, red meats, red meats, and poultry meat comprise the bulk of sales,
but other items such as dried fruits and nuts play a vital and increasingly important role.
The following detailed reports are available through the FAS homepage at www.fas.usda.gov:
Philippine Food Retail-A Growing Opportunity for U.S. F&B
Philippines: 2014 HRI Food Service Sector
Booming Philippine Food Processing Industry Provides Opportunities for U.S. Ingredients
VI. ACTIVE U.S. COOPERATORS IN THE MARKET
California Table Grape Commission, California Milk Advisory Board and U.S. Potato Board
Represented in the Philippines by Synergy Asia Marketing Services, Inc.
Unit 602-C, Summit Office Tower
530 Shaw Boulevard, Mandaluyong City
Metro Manila, Philippines
Tel: (63) 2534 8534, 534 8223
Fax: (63) 2534 8234
Contact: Ms. Reji Retugal and Ms. Evelyn Mercurio
Cotton Council International
Represented in the Philippines by Strategic Edge, Inc.
5/F Emmanuel House, 115 Aguirre St.,
Legaspi Village, Makati City
Metro Manila, Philippines
Tel: (63) 2892 0247, 2892 0250
Fax: (63) 2892 0223
Contact: Ms. Ana Marie Gonzalez Marques, Managing Partner
Email: [email protected]
Raisin Administrative Committee, Food Export-Midwest, Food Export-Northeast and Western
United States Agricultural Trade Association
Represented in Southeast Asia by Lieu Marketing Associates Pte Ltd
48 Toh Guan Road East
#02-129 Enterprise Hub
Singapore
Tel: (65) 6515 6113
Fax: (65) 6278 4372
Contact: Mr. Richard Lieu and Ms. Siew Keat Chuah
USA Poultry and Egg Export Council
#15-04 Liat Towers, 541 Orchard Road
Singapore
Tel: (65) 6737 1726
Fax: (65) 6737 1727
Contact: Ms. Margaret Say, Regional Director
Email: [email protected], [email protected]
Website: http://www.usapeec.org
USA Dry Pea & Lentil Council and U.S. Dry Bean Council
Represented in Southeast Asia by AgriSource Co., Ltd.
Ambassador's Court, 4th Floor, No. 416
76/1 Soi Lang Suan, Ploenchit Road
Bangkok, Thailand
Tel: (66) 2251 8655/6, (66) 2251 8669 & 8772
Fax: (66) 2251 0390
Contact: Ms. Jenny Lumain, Philippine Representative
Dr. Dee Richmond, Southeast Asia Representative
U.S. Dairy Export Council
80 Raffles Place, #36-01 UOB Plaza 1,
Singapore
Tel: (65) 6334 7030
Fax: (65) 6248 4531
Contact: Mac Macatangay, Philippine Representative
Ms. Dalilah Ghazalay, Regional Director, SEA Marketing & Operations
Mr. Tony Emms, Regional Director, SEA Strategy & Market Access
Website: www.usdec.org
U.S. Grains Council
Suite 3B-7-3A
Block 3B, Level 7
Plaza Sentral
Jalan Stesen Sentral 5
Kuala Lumpur, Malaysia
Tel: (60) 32273 6826
Fax: (60) 32273 2052
Contact: Mr. Adrian Morales, Technical Director - Philippines
Mr. Adel Yusupov, Regional Director
Website: www.grains.org
U.S. Meat Export Federation
627A Alijunied Road
# 04-04 Biztech Centre
Singapore
Tel: (65) 6733 4255
Fax: (65) 6732 1977
Contact: Ms. Sabrina Yin, Regional Director
Email: [email protected], [email protected]
Website: http://www.usmef.org
U.S. Soybean Export Council
Represented in the Philippines by Ted M. Cortes Consultancy Svcs.
Unit 10-1, One Global Place
25th Street corner 5th Avenue
Bonifacio Global City, Taguig
Metro Manila, Philippines
Tel: (63) 2224 4106
Fax: (63) 2224 4107
Contact: Mr. Teodoro M. Cortes, Philippine Representative
Email: [email protected]
URL: http://ussec.org
U.S. Wheat Associates
28/F Ayala-FGU Center
6811 Ayala Avenue, Makati City
Metro Manila, Philippines
Tel: (63) 2818 4610
Fax: (63) 2815 4026
Contact: Mr. Joseph Sowers, Country Director
Email: [email protected], [email protected]
Website: http://www.uswheat.org
VII. FURTHER INFORMATION AND ASSISTANCE
USDA-FAS at the U.S. Embassy in Manila is ready to help exporters of U.S. agricultural products
achieve their objectives in the Philippines. For further information or assistance, please contact:
U.S. Department of Agriculture
Foreign Agricultural Service
Embassy of the United States of America
1201 Roxas Boulevard
Manila, Philippines
Trunk Line: (632) 301-2000
Email: [email protected]
