Market Information
Southeast Asia

A Bite of the Philippine Chocolate Industry ⁽¹⁾

Marie Annette S. Galvez
Agribusiness Specialist
Center for Food and Agri Business UA&P

Chocolate, derived from the Aztec (Central America) word xocoatl (cocoa-based drink), is made from the fruit of the cocoa (Theobroma cacao) tree. Columbus first brought cocoa beans to Europe out of curiosity. Today, it is one of the most exotic foods the whole world enjoys.

Chocolate confectionery refers to pre-packed chocolate bars, bites and candies made primarily from cocoa powder and/or butter, mixed with powdered milk and sugar.

In the Asia Pacific region, chocolate sales are estimated at $3.9 billion. The Philippines accounts for less than 3% ($111 million) of the total (Van Melle, Phils., 1998). These already included sales in duty-free shops.

Moreover, in the 1997 Family Income and Expenditure Survey, spending on chocolates and candies reached P3 billion with regular buyers from middle to high-income urban families. The purchases usually surge during the holiday (i.e. Christmas) season.

Types of Chocolates

The processing of chocolates begins with the mixing of cocoa powder with sugar, milk, cocoa butter and flavoring before refining. The mixture then undergoes conching, a flavor developing procedure until the right consistency is reached. At this point, different by-products - compound (pure) and chocolate - are attained.

SOURCE: So, Wendy. April 2001 (UA & P).

Trade

Imports of chocolate confectionery were volatile during 1996 to 2000, peaking at 5,810 tons ($24.2 million) in 1997 and lowest at 3,670 tons ($15 million) in 2000.

SOURCE: National Statistics Office

The US was the major source in 2000 with a 60% volume share. Other sources were Australia and Malaysia.

The US-imported chocolates in the market include Hershey's Kisses, M&M milk chocolates and peanuts, Mars, Three Musketeers, Snickers, Milky Way, and Babyruth.

Imports from Australia and Switzerland are Cadbury and Lindt and Toblerone, respectively.

Also in the market are Malaysian products such as Van Houten, Gandour's Pik-One and Sahara. Those from Saudi Arabia include Tofiluk, Safari and Soudan.

Exports, on the other hand, generated a total of about US$14 million over the five-year period. Shipments, however, contracted by 33% annually from 1,410 tons in 1996 to 160 tons in 1999. Volume increased to 320 tons in 2000 from 160 in 1999.

Among the leading buyers were Malaysia, Korea and USA.

Key Players

Universal Robina Corp. One of the largest and leading food companies in the country. URC Branded Consumers Foods Division manufactures and distributes chocolates along with its instant coffee products, snack foods, candies, biscuits and ready-to drink beverages. URC captures about one-third (in volume) of the chocolate market. Among the best sellers are Cloud 9 Classic and Cloud 9 Chooey Choco. Other brands include Big Bang and Nips.

Commonwealth Foods, Inc. The company started in 1951 with coffee as the main product. Now, it has two more divisions - biscuits and chocolates. About 60% of sales come from Manila and the remaining from the provinces. It manufactures Ricoa Chocolates with the following brands Roll-O-Nut, Flat Tops, Curly Tops, RicoNut and Big Top.

Serg's Products, Inc. The country's oldest and Southeast Asia's first modern chocolate confectionery manufacturer. It started in 1954 selling chocolates in Divisoria (a trading center). At present, its chocolate processing plant has a capacity of 7 tons/day. In the mid-90's, it built its own cocoa processing plant. The current plant capacity is about 15 tons/day. Among the best selling products are its panned Moonbits chocolates and bite-size Egg chocolates. The company's market belongs to the middle- and low- income segments.

Goya, Inc. Formerly the Philippine Cocoa Corporation, it is now a subsidiary of Nestle Phils. Inc. It manages the confectionery business of the latter since 1997. It has a wide target market and offers varied products, both imported and local. Its chocolate products are subdivided into four categories: adult, teen, kid and family. Among its popular products are Goya, Crunch and KitKat.

Issues and Concerns

A key concern is the high input costs, i.e., sugar and cocoa beans, which are imported, and packaging materials. The industry heavily relies on imports since supply is scant. The increasing influx of imported chocolates is also a growing challenge to the local industry. Further, these are aggravated by poor transport infrastructure, which raises logistic costs. In a country with relatively low incomes, these can dramatically affect demand.

In order to address these concerns, the industry must improve product quality through product development, new investment and increase in production efficiency. Thus far, there have been efforts to adopt computer aided-design and -manufacturing processes including bar coding, thus, enhancing productivity.

Prospects

One of the competitive edges of the local manufacturers is the ability to cater to the large low-income segment (about 70% of the 15 million households) with low-priced retail packs. Thus, expanding product lines, improving distribution networks along with the growing young population will drive demand in the years to come. However, growth will be moderate in the next five years due to slow economic growth. At the same time, the industry competition will continue to be intense.

References

Palma, Ana Cecilia. 1996. "Chocolate: Manufacturers Aim for Sweet Success." Food and Agri Business Papers. University of Asia and the Pacific.
Purseglove, J.W. 1981. Tropical Crops: Dicotyledons. Volumes 1 and 2 combined. United Kingdom: ELBS and Longman.
So, Wendy. 2001. "An Industry Analysis of Chocolate Confectionery." University of Asia and the Pacific. Unpublished Industry Report.
www.athenapub.com/chocolat.htm
www.materstech-home.com

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