Market Information
Southeast Asia

Sizing up the Fruit Spreads Market ⁽¹⁾

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

When change comes to a country, its ripples may be felt for generations. Consider the processed fruit industry, which was, for many years, a top export winner.

That picture significantly changed with the Asian financial crisis in 1997. The industry was greatly affected by the depreciation of the peso and other economic and political factors. However, it is still among the country's main exports and a good source of the much-needed dollar earnings.

The Philippines, a tropical country, boasts of fruits that are abundant during peak months. This situation makes it conducive to processing or preserving fruits due to its low prices. Once processed, fruits are made available even during off-season especially in areas where supply may be limited or where the fruits are not available at all.

The processed fruit industry can be divided into three categories: preserved or prepared fruits, fruit juices, purees and concentrates, and dried or dehydrated fruits. Preserved or prepared fruits are used in salads or served as deserts or even act as bread fills or what is not popularly known as fruit spreads. Fruit juices, purees and concentrates are fruit beverages and sometimes categorized under the non-alcoholic beverages industry. Meanwhile dried or dehydrated fruits are used as an ingredient in muesli, breakfast cereals and mixed-fruit snacks.

This document, however, will focus on fruit spreads.

Fruit Spreads

Fruit spreads are bread fills that are fruit-based. They include jams, marmalades and jellies. They are commonly used with the pan de sal or loaf bread. Fruits spreads are also sometimes used for cooking, for enhancing flavors or can be simply taken as a dessert.

According to a study of the Ohio State University, "fruit spreads are all gelled or thickened fruit products." Jams, marmalades and jellies are all cooked and preserved with sugar. The distinct characteristics of each product depend on the kind of fruit used, its proportion to the mixture and the method of preparation.

SOURCE: http://ohioline.osu.edu

Production

With limited data available, the total production of fruit spreads is difficult to ascertain. However, one fruit spread manufacturer cited the average production capacity for jams and marmalades is around 60,000 cases a month, with a capacity utilization of about 70%. Normally, the plant operates six days a week but can easily adjust production schedules if there is a demand hike, especially during holiday season.

While fruit production is located in the rural areas, most processing plants are concentrated in Metro Manila particularly for fruit spreads.

Trade

The country imports and exports jams, marmalades and jellies.

Exports. In 2000, total fruit spreads exports amounted to $0.9 million (M), a 26% fall from 1999's $1.2M. The drop was attributed to the softening of the Japanese market.

The bulk of fruit spreads exports were jams and marmalades, accounting for 97% of export value in 2000.

Volume in kilograms; Value in FOB$
As of October 2001 only
SOURCE: National Statistics Office-Foreign Trade Statistics (NSO-FTS)

Jams and marmalades. Exports reached $0.85M in 2000 from $2.9M in 1996. It posted a negative growth of 24% yearly over the period. The fall in exports was largely due to the erratic buying of Japan in the past five years.

In 1996, more than sixty percent of the country's jams and marmalades exports went to Japan. However, in 1998, the Japanese market began to soften--acquiring only 20% ($0.25M) of total Philippine exports. Then in 1999, Japan accounted for only one percent ($15,000) of total exports. By 2000, it began to pick up again.

The largest markets in 2000 were United States (42% of total export value), Japan (17%), Hong Kong (10%), Canada (10%) and Saudi Arabia (4%).

Jellies. The country trades two kinds of jellies: (a) jellies, citrus fruit, cooked whether or not containing added sugar or sweetening; and (b) jellies, other than citrus fruit, being cooked preparations, whether or not containing added sugar.

Total exports amounted to $30,000 in 2000, supplying the Japanese, American and Taiwanese markets.

Imports. The country imported an average of $600,000 worth of fruit spreads in the past five years, though there was a notable increase in 1999. Imports of jellies other than citrus fruits jumped to $1.2M in 1999 from only $0.3M in 1998 while citrus jelly imports swelled to $23,000 in 1999 from only $1,050 in 1998. In 2000, importation softened.

From 1996 to 2000, total value of imports posted an average growth of 29%.

Volume in kilograms; Value in CIF$
As of October 2001 only
SOURCE: National Statistics Office-Foreign Trade Statistics (NSO-FTS)

Jams and marmalades. Imports fluctuated in the last five years. Average annual growth, in terms of value, was at negative 3.3%. Imports reached $0.5M in 1997 but nose-dived in 2000 to only $0.1M, a 61% drop from the year before.

The US market supplied 27% of total imports value in 2000, a big contrast to 1999's 70%. Other major suppliers include Taiwan (22%), Spain (17%), Singapore (17%) and United Kingdom (5%).

Jellies. Imports registered positive growth in the past five years. There was a notable hike in 1999 when import values jumped by more than 2,000 percent for citrus fruit jellies and a 100 percent gain for jellies other than citrus fruit. The surge in imports was attributed to the expansion of the institutional market in 1999.

China, Taiwan, Hong Kong and the United States were the main sources of jellies. These four countries supplied 96% of total import value in 2000.

Key Players

There are approximately 150 companies engaged in the manufacture and export of processed fruits, according to the 1994 Survey of Establishments (National Statistics Office). The major firms involved in the production and distribution of fruit spreads include California Manufacturing Co. Inc. (CMC) and Sysu International.

SOURCE: CFA Databank

California Manufacturing Corp. CMC is a subsidiary of Bestfoods Asia Ltd. (Hong Kong), which was recently acquired by Unilever worldwide. CMC in the Philippines was established in 1955 as a 50-50 percent venture between CPC International and Ajinomoto Japan. They manufacture a wide variety of products--from seasoning to hot cake syrup. The more popular brands are Knorr, Bestfoods, Lady's Choice, Royal Pasta, Alsa and Karo syrup.

SOURCE: CFA Databank

The company has three processing plants in Luzon. The pickles and Knorr brand liquid seasoning are manufactured in Parañaque City; pasta noodles, soups, preserves, corn oil, and syrup in Las Piñas; and salad aids and dressings in Cavite City.

In the bread fill category, particularly peanut butter, CMC's Lady's Choice products are considered the market leader. Their peanut butter production accounts for around 60% of the company's bread fill production while the remaining 40% are jams, jellies and marmalades.

Sysu International. The company's main business is distribution of imported products. Its major products are Hershey's chocolates, Kikkoman soy sauce, San Remo pasta, Lee Kum Kee seasonings and Clara Ole jams, jellies and marmalades.

The company manufactures jams in its Novaliches plant. The production of Clara Ole, though, was stopped for two years in the early 1980s because there was no brand manager to handle it. However, the company brought it back because it could still generate revenues in the existing market. They still have institutional accounts. And instead of giving up these accounts, Sysu decided to reservice the existing accounts than allow competitors to service them. Thus, Clara Ole was brought back to the market in the late 1980s. Presently, it is the main competitor of Lady's Choice in the fruit spreads category. Clara Ole, though, is considered a small brand because of the very limited market.

Government Policies

Food processors are required to comply with the regulations set by the Department of Health - Bureau of Food and Drugs (DOH-BFAD). All unregistered imported food products sold or offered for sale may be confiscated by BFAD. Product registration is aimed at preventing misbranding and adulteration. Imported products may also be labeled with the name and address of the importer or they may be subject to confiscation. Stickering is currently permitted. Each Philippine importer of a product should make application for registration directly to BFAD. Registrations can be renewed for a minimal cost for either one or five years.

Processed commodities for export also have to adhere with international standards as specified by the Food and Agriculture Organization-Codex Alimentarius Commission.

The effective tariff rate for jams, marmalades and jellies range from 3 to 15% in 2001.

Key Concerns

A major concern of the fruit spreads industry is the inconsistent supply of raw materials. The seasonality of fruit production prevents the industry from boosting its capacity as the production schedule is more often than not dictated by the fruits in season. Poor roads and high freight costs also hinder the movement of raw materials from source to processing plants. Other constraints include the high prices of major raw materials like sugar, packaging and preservatives.

Meanwhile, fruit spreads are also not very popular with the children because of the other bread fills available in the market. Instead of purchasing fruit spreads, mothers either buy bread with fillings or bread with peanut butter or liver spread, which are a lot cheaper than fruit spreads.

Aside from the competition within the same category, fruits spreads are also outdone by the other substitute goods like biscuits, cookies, instant noodles, rice porridge, etc. The substitute goods are more popular and a lot inexpensive than fruit spreads. They can also be as nutritious as fruit spreads. In the supermarkets, fruit spreads occupy only a minor portion of the shelf because of slow movement.

Another hitch is the constant changes in regulations and market conditions in other countries that put the industry in a disadvantage. The fluctuations in trade may be brought about by changing conditions in the international market.

Prospects

According to industry players, the fruit spreads industry registered steady growth in the last few years. Unfortunately, they sense a high probability of the market going down. Recently, sales have not been doing well. In supermarkets, fruit spreads are not given good positioning because of slow movement.

Considering also that not many people consume breakfast at home because of the changing demands of their working environment, the over-all bread fill category does not have new markets. The industry is simply trying to maintain its existing market.

Further, it is more expensive to eat bread during breakfast than instant noodles and porridges. This is why the 'substitutes' like biscuits, instant noodles and instant porridges are rapidly eating a bigger slice of the breakfast market. Aside from the price advantage, 'substitutes' are also more convenient because they are ready to eat.

However, the institutional market is an area that manufacturers can explore more. In 1999, there was an expansion in imported jellies attributed to the increased demand by the institutional market. There is also a need to have some product development and promotion to increase demand and consumer awareness of fruit spreads.

All in all, the market is bearish but manufacturers have high hopes for the industry. Fruits spreads are becoming less popular as replaced by the more convenient products and more affordable ones. However, there are still some untapped markets as logistics improve. There is always room also, for new products in totally new markets, with the proper technology and government support.

Hopefully, with joint efforts by the private sector and the government, the fruit spreads market in the country will expand and become more popular. Such a sweet thing to waste!

References:

Ampo Jr., Sofronio. "The Processed Fruits Industry: in Bloom," Food and Agri Business Papers No. 4, 1994. Center for Food and Agri Business-University of Asia and the Pacific.
A Profile of the Processed Fruits Industry. 1999. Department of Trade and Industry-Cebu.
Francisco, Carol Grace. An Analysis of the Peanut Butter, Jams, Jellies and Marmalades Industry. 2001. A Research Paper submitted to the Center for Food and Agri Business-University of Asia and the Pacific.
National Statistics Office-Foreign Trade Statistics.
National Statistics Office-Survey of Establishments. 1994.
University of Minnesota Extension Service
http://www.fda.gov/opacom/morechoices/smallbusiness/blubook/jams
http://www.uaex.edu
http://mofpi.nic.in/annual report
http://ohioline.osu.edu
http://www.msue.edu/imp

1.^* This industry brief was published by the Manila-based University of Asia & the Pacific, Center for Food & Agribusiness in the January 2002 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 this sector.