Market Information
Southeast Asia

To dough or not to dough:
An Overview of the Philippine Bread Industry ⁽¹⁾

Ana Cecilia S. Palma
Researcher
Center for Food and Agri Business
University of Asia and the Pacific

Bread is one of the major segments of the food processing industry. It is typically made from flour, water and salt and then kneaded, allowed to rise, formed into loaf or another shape, and baked in an oven.

The product is available in many forms and types. The more popular ones are: monay, ensaymada, mamon, tasty (loaf bread), pan de coco, etc.

Bread is used in an endless variety of ways - from appetizers to desserts. It is the popular hot pan de sal in the morning or the fiber-packed wholemeal (granary) bread in the afternoon. It is added to soup (French onion soup, garlic soup) and is an integral part of cheesecake. Stale bread is dried and used as breading for fried chicken or pork chop, or it is transformed into a delicious pudding.

Bread is increasingly becoming a main part of Filipino diet. Per capita consumption is now almost 14 kilograms per year.

Consumer Spending on Bread

The latest Family Income and Expenditure Survey of the National Statistics Office (NSO) revealed a 44% increase on cereal and cereal preparations spending from P125.6 billion in 1994 to P181.1 billion in 1997. Total expenditure grew 13% annually over the period, or approximately 5% yearly without inflation. The bulk of cereal spending in 1997 went to rice (72%), bread (10%) and corn (8%).

Meanwhile, family spending on bread in 1997 amounted to P18 billion, up by more than P5 billion from 1994. Annual growth stood at 11.4%.

Trade

The NSO does not have a single trade classification for bread. Instead, it categorizes the product into toasted bread, gingerbread, hopia, sweet biscuits, wafers, cakes and pies. The country is both an importer and exporter of these products.

SOURCE: National Statistics Office

Exports grew by an average of 70% annually to 1,100 tons (US$ 3.2 million) in 2000 from 940 kilograms (US$2.2 million) in 1996. Sweet biscuits, waffles and wafers accounted for 70% of volume. Taiwan (43% volume share), United States (23%), Korea (11%), and Canada (8%) were the major buyers.

SOURCE: National Statistics Office

Meanwhile, imports rose by an average of 7% yearly to 4,700 tons (US$ 7.9 million) in 2000 from 4,300 tons (US$ 11.0 million) in 1996. Major suppliers were Indonesia (42%), Malaysia (21%), China (16%), and Singapore (6%).

Key Players

Based on NSO's Annual Survey of Establishments, there are about 1,500 companies engaged in bread baking. Small and home-based bakeries comprised about 90% of the industry. These bakeries produce mainly pan de sal and loaf bread. They are usually unable to introduce new products in bigger volumes due to the lack of modern equipment. Meanwhile, large manufacturers invest money - from dough mixing equipment to packaging systems--for efficient bulk bread production. Bread making today is highly mechanized to meet the increasing demand of consumers.

The large and relatively technologically sophisticated bread companies are:

Goldilocks Bakeshop. Goldilocks remains to be one of the most popular bakeshops in the country. It offers various kinds of baked products like ensaymada, chicken pie, meringue tart, cinnamon roll, brownies and jellyroll. The company first opened shop on May 1966. In 1992, it diversified into food service. To date, it has 100 outlets nationwide. It also has branches in North America specifically California (11) and Vancouver (1). Its stores are equipped with modern baking and packaging equipment.

Red Ribbon Bakeshop. The second largest bakeshop company in the country started as a family owned business. It was transformed into a professional company in 1999. To date, it has 40 local outlets plus seven (7) in California, USA. It caters mainly to the upper class segment and is famous for its delicious cakes and pastries.

Joni's Cakes & Pastries. The company was a husband and wife team when it ventured into baking. It sells different kinds of breads and cakes that suit the Filipino's love for sweet things. Aside, from bakeshops, the company is also into catering, meat processing, poultry-raising and vegetable farming. It has 30 outlets in Metro Manila.

Julie's Bakeshop. Started the concept of allowing the customers to see how the breads were being made by removing the wall that separates the display counter from the baking area. It has grown rapidly since its establishment in 1981. With 223 branches nationwide, its flour consumption amounts to over 2,000 bags a day.

Presently, Jullie's is the country's biggest network of neighborhood bakery. In 1999, it garnered the very first Success Story of the Year award given by the Cebu Chamber of Commerce and Industry.

Other key players include: Merced Bakeshop, The French Baker, Fortune Bakeshop, Sugarhouse Inc., Rolling Pin, Gardenia Phils., Delifrance, etc.

Issues and Concerns

The bread industry relies heavily on imported inputs. Its single biggest component - flour - is derived from imported wheat. Key inputs like cheese, milk, and chocolates are also imported, thus the industry is susceptible to fluctuations in the foreign exchange rate, which, in turn, affect the prices of finished products. The industry is also constrained by the high perishability of the products. The inefficient marketing system also affects product distribution.

Prospects

The economic slowdown in 2000 up to this date has had its impact on the bread industry. The market has softened while operating costs have increased. Despite these, however, majority of the large manufacturers believes that there will still be considerable growth in the medium term.

The Filipino diet has changed significantly over the last few years. Due to the availability of convenient alternatives like bread, noodles, etc., rice is no longer as dominant in the urban diet. There is also increased demand for healthy breads such as oatmeal, wheat, rye, multi-grain and others as more and more consumers are becoming health conscious.

Specialty breads like high fiber white bread are on the rise lately following increased patronage from consumers in the upper and middle-income classes. People are also becoming more focused on quality and nutritional contents. Further, the industry benefits from the government campaign on fortification of products like bread, salt, noodles, sardines and margarine.

The spread of coffee shops like Starbucks, Coffee California, Seattle's Best Coffee, etc. is expected to increase consumption of bread, a complement of coffee. Further, the expansion of specialty bakeshops in other urban centers outside Manila will improve access by consumers.

The optimistic outlook may serve as a magnet for more entrants that could further intensify competition. This may lead to expansion in product lines, competitive pricing, more outlets in areas outside Metro Manila and other innovative strategies and ideas, which augur well for the industry.

Finally, the growing consumer base of 76.5 million offer bright prospects on the medium term despite some short term market constraints.

References

"Specialty Breads on the Rise," Food Processing Magazine, November 1995, Vol. 56 No.11.
"Rocketing to the Top," Food Processing Magazine, December 1994, Vol. 55 No.12.
"Making Dough, Lots of It," The Philippine Star, April 4, 2001.
Foreign Trade Statistics, National Statistics Office, 1996-2000.
http://www.tradeport.org/ts/countries/philippines
http://www.newsflash.org
http://www.clickphilippines.com

1. This industry brief was published by the Manila-based University of Asia and the Pacific, Center for Food and Agribusiness in the July 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.