Market Information
Southeast Asia

An Update on the Philippine 
Fastfood Industry ⁽¹⁾

Ana Cecilia S. Palma
Researcher
Center for Food and Agri Business UA&P

(First of Two Parts)

With the Filipinos' love for food, it is not unusual to find a rapidly increasing food service industry. The phenomenal growth is seen through the swift expansion of different food chains in Metro Manila, key cities and provinces.

Eating out has become part of the Filipino way of life. Higher disposable incomes and fast changing lifestyles are among the drivers.

Income per family for many households has increased and a large part of it is spent on food. More Filipinos are also working, including mothers. This means less time to cook meals and clean dishes. Thus, the better choice is to eat outside of the home or buy pre-cooked meals.

The popularity of the food service concept came in the 1980s and 1990s. The industry has been increasing by a steady double-digit growth till 1998. More and more Filipinos eat less at home. It has been observed that five (5) out of ten (10) Filipinos who eat out goes to fastfood chains, three (3) to fine dining restaurants and the rest go to bakeshops and small food outlets. Fastfoods became popular because they are convenient places where one gets hot meals fast at affordable prices.

Industry Performance

There is an estimated 50,000 restaurants in the country. The eating out spending of families, excluding corporate representation expenses, is currently valued at almost P90 billion (approximately $1.8 billion) with an average growth of 15% to 20% per annum over the last ten years. However, growth slowed down since 1998 following the Asian financial crisis.

The past five years saw the entry of many food players. Local store chains keep on expanding in major urban areas, while foreign food outlets are coming in. In 2000, thirty five percent (35%) of foreign franchises are in the food business. Meanwhile, local franchises have gone international like Red Ribbon Bakeshop, Max's Fried Chicken, Josephine's Restaurant, and Jollibee.

Food Spending

The food spending pattern of Filipino families continued to increase but its share to total spending had declined. The share of food to total spending went down from 44.2% in 1997 to 43.1% in 2000. Food spending amounted to P786 billion in 2000 , a 26% increase from 1997 (National Statistics Office-Family Income and Expenditure Survey - NSO-FIES). Food consumed at home comprised 38.3%, a decline from 39.2% in 1997.

By contrast, the share of eating out to total spending increased from 4.7% in 1997 to 4.9% in 2000.

SOURCE: NSO-FIES 1991, 1994, 1997, 2000

Industry Cluster Analysis

Eating out has become a brisk business. The entry of new players is proof that it is on the uptrend despite the economic slowdown. Growth translates to competition especially among the different categories of the food service business. In the quick service restaurant (fastfood) segment, the total market in 2000 was over P30 billion.

Core Companies

The dominant players in the fastfood industry are Jollibee, McDonald's, Wendy's, Kentucky Fried Chicken, Kenny Rogers Roasters, Pizza Hut, Greenwhich and Chowking.

Jollibee

Capturing 52% of the fastfood market, it maintains its aggressive marketing strategies through TV, radio and print ads. It is also being endorsed by one of the country's popular actor. Its main target is the kids.

The company's food is well loved by Filipinos because of its distinctly Filipino taste. It started out as a two-branch ice cream parlor in 1975 and was incorporated three years later, expanding into fastfood operations with the aim of providing Filipino consumers freshly cooked, high quality and affordable food.

The company is 100 percent Filipino owned with Tony Tan Caktiong as president and chief operating officer. It has managed to attain market dominance despite the presence of foreign food service giants. It acquired Greenwich Pizza in 1994 and Chowking Foods Corp., the country's top oriental food chain, in 2000. Now, it has more than 400 outlets nationwide. It also expanded overseas and has outlets in the Middle East, US West Coast, Brunei and Indonesia. In 2000, total system wide sales amounted to P20.3 billion, with Jollibee sales capturing 75% of the total, Greenwich, 11%; Chowking, 10%; and others, 4%.

It has a big commissary in Pasig City, which has its own hotdog making line and meat processing line for burger patties. It also has a commissary in Cebu City and is putting up a new one in Laguna.

McDonalds

The company, with franchise holder McGeorge Food Industries Inc., holds 28% of the fastfood market. Established in 1981, it took George Yang, McGeorge's president, 15 years to build the first 100 stores in the country.

Presently, it has 235 outlets nationwide. It does not have its own meat processing line because it taps another company, Genosi Inc. (a subsidiary of Alaska Milk), for its requirement. Most of its products are supplied to its commissary by different food firms.

Wendy's

It started operations in 1983 with Wenphil, Inc. as franchisee. With 48 stores in Luzon, it has an 8-9% share of the market. All stores outside the shopping malls operate 24 hours a day. It has one commissary in Marikina City.

Kentucky Fried Chicken

It was established in the country in 1967. Two successive companies managed the chain before Ramcar Inc. finally acquired it. It has 78 outlets nationwide. It is a major diversification thrust of the Siy family.

Kenny Rogers' Roasters

It was introduced in the country in 1995 and has managed to open 27 stores.

Shakey's

The local franchise is owned International Family Food Services Inc. (Prieto Family). Established in the country in 1975, it controls around 25% of the local pizza market. Presently, it has 95 full dine-in stores.

Pizza Hut

The Aranetas acquired the master franchise in 1984. Pizza Hut pioneered the pizza delivery service in the country and the selling of pizza by the slice. Presently, it has 84 outlets nationwide, with around 20% share of the local pizza market.

Greenwich

It has emerged as the top pizza outlet in the country. Jollibee acquired it in 1994. Presently, it has around 200 branches nationwide. This pizza chain plans to expand rapidly in 2001 despite the economic slowdown.

Chowking

It is the country's leading Chinese food chain. It was established in 1985 and was acquired by Jollibee Foods Corp. in 2000. It has 164 outlets nationwide. It plans to put up more stores abroad after successfully opening stores in the US and the Middle East.

Supporting Industries and Services

Given the tight competition in the industry, players buy their ingredients from the best and cheapest sources available. They directly negotiate with producers, manufacturers and distributors for food, beverage and packaging products to ensure freshness and uniform quality at competitive prices.

The industry has become a lucrative market for the agriculture and food manufacturing sectors as well as other food import firms. Major local suppliers are San Miguel Foods, Coca-Cola, California Manufacturing Corporation, Dole Phils., Phil. Dairy Products Corp., Kraft Foods, Purefoods, General Milling, Goldilocks and Nestle Corp.

Many raw materials and ingredients, however, have to be imported. These include beef, potato, cheese and other dairy items that are not available in the country. Local beef supply is not adequate while local potatoes are not good enough for French fries processing.

The local food chains seldom export. The commonly exported products for their overseas branches are cooking equipment and utensils that are specifically made for their products.

Support Providers

Support providers are the government agencies, academe and the private sector. Government support in agriculture affects the industry since farming is part of the supply chain. The government agencies include the Department of Agriculture, the Department of Trade and Industry, Securities and Exchange Commission, the local government units that issue building permits and other agencies involved in the environmental and social permits.

Other companies provide services like research, market survey, seminars and training of food service personnel. Among them are: Asia Research Organization (usage, attitude and interests studies), AC Nielsen, Gensen, McCormick research and development team, and the Center for Food and Agri Business of the UA&P.

to be continued ...

1.^*This industry brief was published by the Manila-based University of Asia and the Pacific, Center for Food and Agribusiness in the October 2001 issue of the Food and Agribusiness Monitor, primarily for a Philippine audience. This industry brief is being made available to Canadian businesspeople in order to provide basic market information should there be export interest in this sector.