Market Information
Southeast Asia

Pasta! Pasta! (A Look into the Philippine Market for Imported and Local Pasta) *

Ronald G. Omaña
Researcher
Center for Food and Agri Business
University of Asia and the Pacific

More than a favorite dish for birthday celebrations and other occasions, pasta is also one of the most saleable items in fastfood chains and restaurants.

Pasta is the generic Italian term for many noodle-like doughs that are made in a wide variety of shapes and sizes. According to the National Pasta Association of the United States, more than 600 pasta shapes are produced around the world whose names come from their shape. Some of the popular pasta include: Spaghetti (from spago, “cord”), Linguini (“little tongues”), Lasagna (broad, sometime ruffled, ribbons of pasta - from Latin for “pot”), Fettucine (small ribbons), Fusilli (little spindles or spirals), Penne (quills), and Cannelloni (tube-or cane-shaped pasta).

HISTORY OF PASTA

The origin of pasta is traced back 6,000 years ago in China. There are reports, however, that it was already present in Egypt 1,000 years earlier.

Although its true beginnings are somewhat unclear, Italy is recognized as the home of pasta in modern times. This is attributed to the Italian traveler Marco Polo who is said to have brought pasta to Italy from China 700 years ago.

Pasta then reached the United Kingdom through aristocrats touring Europe. By the nineteenth century, immigrants brought with them their pasta-eating custom. The British are believed to have introduced pasta into the United States. They taught the practice of cooking noodles at least half an hour and mixing them with cream sauce and cheese.

The British Pasta Products Association explains that eventually, pasta made its way to many parts of the world because of its simple preparation. It is also the likely reason why the world has various versions of pasta.

TYPES OF PASTA

Pastas are classified into two types – dried and fresh. Leading food manufacturer Hormel Foods describes the two pasta types as follows:

Dried Pasta (Pasta Secca)

Dried pasta is readily available in many sizes and shapes. It is factory made and fully dried before it is packaged.

Dried pasta is most often made with semolina flour, water, salt, and seasoning. It can also be made from other flour types such as wheat flour, enriched flour, etc. It rarely contains eggs so it can be stored indefinitely without refrigerating or freezing. Its firmness also allows it to be stored easily without damage.

Fresh Pasta (Pasta Fresca)

Fresh pasta is available in a variety of sizes and shapes but not to the extent of dried pasta. It also comes in a greater variety of flavors. Fresh pasta most often contains eggs and has high water content, making refrigeration or freezing necessary to keep it from spoiling.

GLOBAL PRODUCTION

In 2003, Italy's pasta producer association, the Unione Industriali Pastai Italiani has estimated world pasta production at 9.3 million tons. The three leading producers are the European Union (EU) which accounted for 43% of total production, followed by Central and South America (19%), North America (16%), and other European countries (12%). Countries in North Africa, Asia, and Oceania regions contributed 5%, 3% and 1%, respectively.

THE PLAYERS

The Philippines pasta market is composed of big firms which are also players in other agri-food industries. These include Unilever Bestfoods (formerly California Manufacturing Co. Inc.), Del Monte Philippines Inc. (DMPI), RFM Corporation, Ideal Macaroni & Spaghetti Factory Inc., Universal Robina Corporation (URC) and General Milling Corporation (GMC). Major retailers Supervalue Inc. (SM Supermarkets) and Robinson's Supermarket Inc. also have pasta for their private labels SM Bonus and Supersavers, respectively. Food and beverage conglomerate Nestle Phils. Inc. is said to have its own pasta products under the Maggi brand which is sold only to the foodservice industry.

Some of the local players have developed separate brands to capture both the AB and CD markets. For instance, Unilever Bestfoods has Knorr Royal for the high-end market and Bestfoods for the low-end market. Ideal Macaroni & Spaghetti Factory, meanwhile, has Ideal (high-end), and Sunshine (low-end). General Milling Corporation also adopted this strategy with its Homepride (high-end) and Magnifico (low-end) brands.
Other companies like DMPI, RFM, and URC maintain only one brand each.

Source: Industry Players

Other foreign pasta brands (except Bestfoods, Del Monte and Knorr Royal) have also entered the market through importers like Benby Enterprises Inc., Fly Ace Corporation, PTC Commercial Corporation, Sysu International, among others.

NA – not available
Sources: Department of Trade and Industry
Leading Supermarkets

PRICES

Among more-known brands, Knorr Royal spaghetti was the most expensive at P56.25 per kilogram (kg) while Del Monte is sold at P50.75 and Ideal at P52.25. CD brands Sunshine and White King Fiesta were sold at only P40.75 and P42.25, respectively.

The prices of more established brands in the market were still lower compared to imported pasta brand San Remo whose 500-gram (g) spaghetti was sold at P53.75 while Italpasta's 454-g pack was sold at P44.75. The imported brands have relatively higher selling prices since they cater mainly to the high-end market.

For elbow macaroni, Knorr Royal was again the most expensive at P67.75 per kg. Del Monte was next at P61.75, then Ideal at P61.25, and Sunshine at P46.75. For the 400-gram pack, Knorr Royal was also the highest-priced brand at P29.75. Del Monte was second at P28.75, followed by Ideal at P27.25, White King Fiesta at P23.25, and Sunshine at P21.75.

For salad macaroni, Knorr Royal remained the most expensive at P67.75 per kg, followed by Del Monte (P61.75), Ideal (P61.25), and Sunshine (P46.75). The same pattern was observed for the selling prices of the 400-g packs.

MARKET

Industry sources estimate the overall market for pasta at P2.5 billion in 2003, up from about P1.5 billion in 2000. A key player, however, indicated that the value could be much higher.

Household spending on pasta, which is lumped together with bihon, miki, misua, sotanghon, etc., reached P3.7 billion in 2000, up by 12% from P3.3 billion in 1997. The amount accounted for about 2% of the entire household spending for cereals and cereal preparations for both years.

Research firm ACNielsen classified pasta under the slightly increasing food category - with growth of 5% to 9% per year. Pasta grew by 8% as of April 2005, an improvement from its stable rating (growth rate of -4% to 4%) in October 2003.

Despite the numerous kinds of pasta which could be offered in the market, the pasta products of the major local players are more often limited to spaghetti and macaroni (elbow and/or salad types). By contrast, the other imported brands have more diverse offerings such as lasagna, linguine, fettucine, bowtie, spirals, penne and small shells, etc.

In terms of overall market shares by brand in 2003, Unilever Bestfoods' Knorr Royal led with share of 25%, followed by RFM Corporation's White King Fiesta (17%) and DMPI's Del Monte (12%). Ideal Macaroni & Spaghetti Factory's Ideal brand captured 8% of the market while URC's El Real and GMC's Magnifico had 6% each of the market. Other brands which include the imported labels shared in the remaining 17% of the market.

Figure 1. Market Shares by Brand, 2003

Source: Industry Estimates

Although Unilever Bestfoods' Knorr Royal holds the top spot in the overall market for pasta, the market leadership varies depending on the market channel and on the target market.

In terms of market channel, sources say Knorr Royal, Del Monte and Ideal are the three leading brands in supermarkets and groceries. In the wet market, where pasta is placed in big plastic basins and sold on a per-scoop basis, Ideal is the undisputed leader followed by White King Fiesta. Ideal Macaroni & Spaghetti Factory Inc. claims leadership in the foodservice channel as it caters to many of the major players in the fast food industry.

By target market, Knorr Royal is the leader in the high-end market for spaghetti. Del Monte is next and then, Ideal. For the low-end market, White King Fiesta is on top, followed by Sunshine.

For the macaroni market, Ideal is the leading brand in the high-end category, followed by Knorr Royal. For the low-end market, White King Fiesta captures the lead, followed by Sunshine.

Interestingly, Ideal and Sunshine maker Ideal Macaroni & Spaghetti Factory Inc. also produces the SM Bonus spaghetti and macaroni for the SM supermarket chain.

For the imported brands, the main market channels are the hotels and restaurants and the major supermarkets.

Sources say the market for pasta is still influenced heavily by “occasions” as reflected by the product's lean and peak periods. Lean months are January, February, June, and July while the peak months include April and May where fiestas are usually held, and November and December, the holiday season.

As for the imported brands, retail outlets, specifically, major supermarkets, will remain as the main driver of sales, although hotels and restaurants, which require high-quality pasta, are also important. An importer explained that the sales of foreign pasta are driven mainly by this perception that the foreign brands have better quality compared to the major brands.

REASONS FOR PREFERENCE

A usage, attitude and image (UAI) study conducted about the business revealed the leading reasons why Filipinos preferred pasta. The top reason is firmness - pasta should be firm when cooked. Second is the price or affordability. Third is the texture - the pasta should not be sticky or not break easily. Fourth is taste, and fifth is the brand name.

TRADE

Pasta trade has been in favor of imports throughout the five-year period beginning 2000. The National Statistics Office (NSO) classifies pasta under five Philippine Standard Commodity Classification Codes: 0483009 - other uncooked pasta, not stuffed, containing eggs; 0483011 – macaroni, spaghetti and lasagna, uncooked, not stuffed, containing eggs; 0483019 – other uncooked pasta, not stuffed, not containing eggs; 0989101/0989105 – pasta (e.g. macaroni, spaghetti, reviolli, lasagna, vermicelli, cannelloni, tortellino, and the like); and 0989109 – other pasta.

Imports. From about 10,000 tons worth US$7.4 million in 2000, imports rose by 37% in 2001 to almost 12,000 tons amounting to US$6.5 million. By 2002, shipments to the country increased further by 37% to 16,000 tons (US$8.7 million). In 2003, however, a sharp decline of 50% was registered as purchases reached only 8,000 tons; value dropped by nearly the same rate to US$4.6 million. The contraction was brought about by the decrease in imports in all categories. By 2004, import volumes rose by a huge 82% to nearly 15,000 tons equivalent to US$8.0 million. Overall, imports grew by an average rate of 31% per year while value expanded by 21% per annum from 2000-2004.

Source: NSO

In 2004, the leading supplier was Indonesia, which accounted for more than half of the entire value of imports. This could be attributed to Del Monte Phils. Inc.'s importation of its spaghetti pasta from that country. Australia was the second largest supplier contributing 28% of total import value. Interestingly, leading player Unilever Bestfoods buys its spaghetti from this country. Australia was followed by Italy (4%), Taiwan (3%), and South Korea (2%). Other countries shared in the remaining 9% of total value of imports.

Figure 2. Imports of Pasta by Country of Origin, 2004

Source: NSO

Exports. Pasta exports ballooned from only a little over 500 tons (US$1.5 million) in 2000 to 1,600 tons (US$4.0 million) in 2001. Shipments grew further by 22% to 2,000 tons (US$5.1 million) the following year but moved at a slower pace of only 11% to 2,200 tons (US$5.8 million) in 2003. In 2004, volumes improved by 13% to 2,500 tons (US$6.9 million).

From 2000-2004, exports grew by more than 200% annually on volume and by 300% yearly on value. This was because of the very low base in 1999 of only 57 tons amounting to US$91,000 as compared to 979 tons worth US$1.6 million in 2000.

The largest country-buyers of pasta in 2004 were the USA, accouting for 51% of total pasta export value, followed by Canada (12%), Italy (7%), and the Netherlands, and the United Kingdom with 4% each. Other countries accounted for 22% of total export value.

Figure 3. Exports of Pasta by Country of Destination, 2004

Source: NSO

PROSPECTS

Players see the pasta market to maintain its growth of 8% to 10% in the next three to five years.

Performance will still be driven by the numerous fiestas and celebrations all over the country. The growth in population and incomes are also seen to help the business keep its uphill climb.

A main challenge, however, is the continuous growth in demand for instant noodles, which the industry considers as its main competing product. The edge of instant noodles over pasta is its ease of preparation (3-5 minutes) compared to pasta which normally requires 10 to 15 minutes. To address this concern, players say the consumers must be taught innovative ways of using pasta aside from the usual spaghetti or baked macaroni.

In recent years, the marketing strategies used to boost sales included bundling pasta with a complementing product – sauces. RFM Corporation, meanwhile, utilized a celebrity to endorse its product and placed her picture on the packaging. Another strategy, employed by Unilever Bestfoods, is the emphasis on the vitamin and mineral content of pasta to attract health-conscious consumers.

Another growth factor for the industry is the expanding fast food industry where spaghetti remains as a favorite menu item.

Importers, meanwhile, expect slower expansion rate for imported pasta as it competes with local pasta in terms of quality but sold at more affordable prices.

Lastly, the growing consciousness among consumers of healthy foods is also expected to help grow, albeit not dramatically, the demand for pasta.

As more and more consumers enjoy eating pasta, the industry would definitely enjoy a more than an ‘al dente' pasta business.

REFERENCES:

British Pasta Products Association (www.ilovepasta.co.uk)
Department of Trade and Industry (www.dti.gov.ph)
F&B World Magazine January-February 2004 Issue (www.fandbworld.com)
F&B World Magazine November-December 2004 Issue (www.fandbworld.com)
Fly Ace Corporation (www.flyacecorp.com)
Hormel Foods (www.hormel.com)
National Pasta Association (www.ilovepasta.com)
National Statistics Office (www.census.gov.ph)
PTC Commercial Corporation
RFM Corporation (www.rfm.com.ph)
Unione Industriali Pastai Italiani (www.unipi-pasta.it)
www.askdrsears.com
www.italtrade.com/countries/asia/philippines/presence.htm
www.mangiabenepasta.com
Interviews with selected players.

* This industry brief was published by the Manila-based University of Asia & the Pacific, Center for Food & Agribusiness in the May 2005 issue of the Food & 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 relevant agrifood commodities.