Market Information
Southeast Asia

Wheating the Filipino Appetite⁽¹⁾

Senen U. Reyes
Senior Management Specialist
Center for Food and Agri Business
University of Asia and the Pacific

Wheat, though not indigenously grown in the Philippines, has become one of the most consumed commodities in the country. Products derived from wheat are almost staples although not as much as rice. Consequently, it is the country's biggest agricultural import averaging $373 million a year.

From its sole use in the preparation of Eucharistic wafers in the 17^th century, it has evolved into one of the most versatile agricultural imports of the country. In its processed form (flour), wheat is used as the main raw material in the manufacture of foods such as the everyday pan de sal, donuts, tasty bread, biscuits, cookies, cakes, other bakery products, noodles, pasta, pizza crust, pastries, fish crackers, and extruded products. It is also used as a feed substitute for yellow corn in cases of corn shortage and high corn prices.

Supply

Almost all flour supply comes from imported wheat which is locally milled into flour. Imports of flour are minimal at less than one percent of total equivalent flour imports. Supply has generally been growing with the growth in demand although there were a few years of negative growth.

In 1996, the high prices of US wheat caused a drop in supply compounded by the health issue on the use of potassium bromate in pan de sal and other bakery products. Two years later, the severest El Niño phenomenon to hit the country saw agricultural production drop by over 13%. This told heavily on the demand for flour-based products, drastically reducing wheat import volumes. According to one biscuit manufacturer, one gauge of good demand for biscuits, cookies, and packed snacks is the good output in agriculture. Although government figures have not been closed for 2002, it is estimated that supply will again be headed south due to the continuing economic slowdown, among other things.

Table 1. Philippine Wheat Imports
Year	Volume (tons)	Value ($ '000 CIF)	Est. Price ($/ton)
1990	1,531,465	260,441	170
1991	1,470,369	206,087	140
1992	1,745,098	271,826	156
1993	1,797,851	297,757	166
1994	2,146,889	368,859	172
1995	2,061,406	401,068	195
1996	1,898,098	430,309	227
1997	2,392,003	482,407	202
1998	1,389,314	285,203	205
1999	1,936,665	387,022	200
2000	2,500,632	373,114	149
2001	2,740,094	429,222	157
2002	1,992,209	333,715	168

Note: 2002 figures cover Jan.-Oct. only
Source: Foreign Trade Statistics of the Philippines
National Statistics Office (NSO)

Table 2. Flour Production and Imports (tons)
Year	Production	Imports	Total Supply	% Change
1990	1,148,599	47,539	1,196,138	25.9
1991	1,102,777	20,156	1,122,933	(6.1)
1992	1,308,824	30,616	1,339,440	19.3
1993	1,348,388	19,354	1,367,742	2.1
1994	1,610,167	16,941	1,627,108	19.0
1995	1,546,054	20,144	1,566,198	(3.7)
1996	1,423,573	17,754	1,441,328	(8.0)
1997	1,794,002	5,188	1,799,189	24.8
1998	1,041,985	3,153	1,045,138	(41.9)
1999	1,465,363	4,848	1,470,212	39.4
2000	1,875,474	2,259	1,877,732	28.8
2001	2,055,071	2,327	2,057,397	9.6
2002	1,494,157	5,721	1,499,878	(27.1)

Note: Production is estimated as 75% of total wheat imports.
2002 figures cover Jan.-Oct. only
Source: Foreign Trade Statistics of the Philippines
National Statistics Office
PAFMIL Reports

The United States of America has been the country's biggest supplier of wheat accounting for over 80% in 1998. However, it was noted that while the absolute figure was still increasing, the relative share of the USA has been decreasing over the last five years. In the last two years, India has been exporting strongly besting Australia in the process.

Table 3. Wheat Imports by Country of Origin (tons)
	1998		1999		2000
COU NTRY	Quantity	% Share	Quantity	% Share	Quantity	% Share
U.S.A	1, 130, 454	81.4	1, 422, 719	73.5	1, 787, 616	71.5
Canada	189, 538	13.6	222, 574	11.5	430, 447	17.2
Australia	42, 140	3.0	214, 050	11.1	278, 468	11.1
India	-	-	-	-	-	-
New Zealand	-	-	-	-	-	-
China	-	-	-	-	-	-
Others	27, 182	2.0	77, 321	4.0	4, 100	0.2
TOTAL	1, 389, 314		1, 936, 665		2, 500, 631

Table 3. Wheat Imports by Country of Origin (tons)
	2001		2002
COU NTRY	Quantity	% Share	Quantity	% Share
U.S.A	1, 834, 236	66.9	1, 074, 107	53.9
Canada	622, 826	22.7	393, 188	19.7
Australia	53, 087	1.9	56, 573	2.8
India	188, 653	6.9	371, 116	18.6
New Zealand	16, 500	0.6	53, 499	2.7
China	21, 267	0.8	15, 689	0.8
Others	3, 524	0.1	28, 037	1.4
TOTAL	2, 740, 094		1, 992, 209

Note: 2002 figures cover Jan.-Oct. only
Source: Foreign Trade Statistics of the Philippines - NSO

The Major Products

Based on the 2000 Family Income and Expenditures Survey, the major flour-based products patronized by Philippine households include bread (P23 billion), biscuits (P4.7 billion), noodles (P3.7 billion), and flour (P1 billion). Noodles have been losing its share of the household spending to bread and biscuits since 1994 from 15% down to 11% in 2000.

In terms of absolute values, bread would seem to be the fastest growing segment increasing by P6 billion and P5 billion in 1997 and 2000, respectively. However, it is growing at a decreasing rate like biscuits and noodles. It is flour which has been growing at over 70% from 1994.

Family Expenditure on Flour-based Products, 1994

Family Expenditure on Flour-based products, 2000

Source: Family Income and Expenditures Survey - NSO

Table 4. Family Expenditures on Flour-based Products
(In million pesos)
	1994	1997		2000
	Value	Value	% Change	Value	% Change
Biscuits	2,508	4,300	71.45	4,736	10.14
Flour	297	509	71.38	1,045	105.30
Noodles	2,649	3,300	24.58	3,721	12.76

Source of basic data: Family Income and Expenditure Survey - NSO

Trade

A small part of expenditures on flour-based products is accounted for by imported items averaging $15 million (P750 million) over the last five years. The largest flour based product import is sweet biscuits, waffles, and wafers, with share of over half of the total import value in 2002.

Table 5. Flour-Based Product Imports
	1998		1999		2000
ITEM	Volume	Value	Volume	Va lue	Volume	Value
Macaroni, Spaghetti and Lasagna, uncooked	884, 031	514, 530	566, 822	404, 207	2, 088, 263	999, 878
Other uncooked pasta	1, 166, 904	996, 058	683, 226	669, 332	2, 109, 254	1, 142, 872
Sweet Biscuits, Waffles & Wafers	2, 543, 144	5, 533, 349	4, 235, 761	8, 367, 766	4, 462, 493	7, 573, 793
Cookies	906, 326	2, 278, 327	793, 191	2, 141, 071	476, 607	854, 263
Other Fine Bakers' Products	1, 534, 453	3, 015, 531	1, 724, 221	4, 171, 663	1, 581, 906	3, 042, 984
Others	334, 436	315, 314	447, 996	364, 750	553, 089	739, 031
TOTAL	7, 369, 294	12, 653, 109	8, 451, 217	16, 118, 789	11, 271, 612	14, 352, 821

Table 5. Flour-Based Product Imports
	2001		2002
ITEM	Volume	Value	Volume	Value
Macaroni, Spaghetti and Lasagna, uncooked	2, 988, 965	1, 361, 679	6, 059, 103	3, 068, 088
Other uncooked pasta	2, 427, 563	1, 391, 072	3, 916, 367	2, 140, 333
Sweet Biscuits, Waffles & Wafers	5, 054, 650	8, 580, 960	5, 269, 234	8, 911, 039
Cookies	519, 372	1, 089, 792	347, 253	615, 226
Other Fine Bakers' Products	1, 755, 502	2, 773, 122	1, 131, 589	1, 667, 754
Others	964, 626	1, 046, 612	877, 181	570, 570
TOTAL	13, 710, 678	16, 243, 237	17, 600, 727	16, 973, 010

Note: 2002 figures cover Jan. - Nov. only
Volume is in kg and value in US$ CIF.
Source of basic data: National Statistics Office

Contributing to the relative growth of flour-based products is the aggressive establishment and positioning of the players. From its first store in Mandaue in 1980, Julie's Bakeshop has grown to a little over 300 branches scattered nationwide. It plans to set up 80 branches annually until 2007. Fortune Bakeshop and Pan de Manila also added branches. Some supermarkets also have their own brand of bread products.

Specialty bakeshops have also been sprouting like French Baker, Delifrance, Sugarhouse, Le Coeur de France, Cinnabon, and Cinnzeo. Country Style Donuts is a relatively new addition to the donut segment while Domino's, Don Henrico's, Little Caesars, Lots-a-Pizza, and comebacking 3M Pizza are trying to make a dent in the pizza business.

In the biscuits, cookies and crackers segment, Monde Nissin bought M.Y. San Biscuits, with Rebisco and URC strengthening their presence.

Other than for local consumption, the country is also able to export flour based products averaging $11 million a year. The plain biscuits segment contributed the largest export revenue amounting to over P5 million in 2002.

Overall, the country is a net importer of flour based products with a negative trade balance of a little over $3 million in 2002. This is already the smallest deficit since 1993 when the country registered a positive balance of $74,000. The year 2002 also marks the highest export value over the last ten years.

Table 6. Flour-Based Product Exports
	1998		1999		2000
ITEM	Volume	Value	Volume	Value	Volume	Value
Sweet Biscuits, Waffles & Wafers	862, 953	1, 572, 104	890, 229	2, 054, 548	771, 642	2, 084, 700
Lumpia wrapper	992, 504	1, 710, 503	1, 644, 643	2, 964, 893	1, 162, 705	2, 060, 911
Biscuits, Plain	-	-	53	224	758, 489	2, 339, 511
Cookies	54, 116	223, 848	320, 319	818, 009	325, 765	914, 977
Other Fine Bakers' Products	1, 331, 499	3, 709, 687	1, 280, 833	3, 764, 542	634, 611	2, 006, 165
Others	450, 918	1, 040, 002	447, 260	1, 335, 566	537, 728	1, 424, 008
TOTAL	3, 691, 990	8, 256, 144	4, 583, 337	10, 937, 782	4, 190, 940	10, 830, 272

Table 6. Flour-Based Product Exports
	2001		2002
ITEM	Volume	Value	Volume	Value
Sweet Biscuits, Waffles & Wafers	912, 876	1, 927, 885	494, 191	1, 465, 025
Lumpia wrapper	955, 664	1, 667, 006	2, 025, 576	3, 626, 066
Biscuits, Plain	1, 503, 544	4, 540, 427	1, 874, 350	5, 233, 613
Cookies	190, 740	680, 875	303, 510	994, 181
Other Fine Bakers' Products	388, 284	959, 033	295, 774	941, 037
Others	489, 638	1, 408, 182	558, 679	1, 512, 263
TOTAL	4, 440, 746	11, 183, 408	5, 552, 080	13, 772, 185

Note: 2002 figures cover Jan. - Nov. only
Volume is in kg and value in US$ FOB.
Source of basic data: National Statistics Office

Table 7. Balance of Trade: Flour based Products
	EXPORTS	IMPORTS	TRADE
YEAR	Volume	BALANCE
1993	2, 942, 881	4, 775, 442	(1, 832, 561)
1994	3, 322, 810	6, 981, 101	(3, 658, 291)
1995	3, 323, 259	9, 103, 418	(5, 780, 159)
1996	4, 354, 542	8, 137, 813	(3, 783, 271)
1997	7, 243, 403	7, 678, 930	(435, 527)
1998	3, 691, 990	7, 369, 294	(3, 677, 304)
1999	4, 583, 337	8, 451, 217	(3, 867, 880)
2000	4, 190, 940	11, 271, 612	(7, 080, 672)
2001	4, 440, 746	13, 710, 678	(9, 269, 932)
2002	5, 552, 080	17, 600, 727	(12, 048, 647)

Table 7a. Balance of Trade: Flour based Products
	EXPORTS	IMPORTS	TRADE
YEAR	Value	BALANCE
1993	6, 174, 587	6, 100, 903	73, 684
1994	7, 588, 661	15, 972, 087	(8, 383, 426)
1995	8, 185, 317	15, 998, 095	(7, 812, 778)
1996	10, 141, 733	18, 078, 325	(7, 936, 592)
1997	12, 664, 981	23, 346, 413	(10, 681, 432)
1998	8, 256, 144	12, 653, 109	(4, 396, 965)
1999	10, 937, 782	16, 118, 789	(5, 181, 007)
2000	10, 830, 272	14, 352, 821	(3, 522, 549)
2001	11, 183, 408	16, 243, 237	(5, 059, 829)
2002	13, 772, 185	16, 973, 010	(3, 200, 825)

Note: 2002 figures cover Jan. - Nov. only
Volume is in kg and value in US$; FOB for exports and CIF for imports.
Source of basic data: National Statistics Office

The increased arrivals of imported flour-based products from 2001 can be traced in part to the reduction of tariff rates as part of the country's commitment to the World Trade Organization. By 2004, wheat will only have a two-percent tariff advantage over finished products which may further increase imports of the same to the disadvantage of flour millers.

Table 8. Tariff Rates on Wheat, Flour, and Flour-based Imports
Year	Durum Wheat	Other Wheat	Wheat used as Feed	Flour	Pasta products	Bread products
1993	10	10	30	30	40	40
1994	10	10	30	30	35	35
1995	10	10	30	30	30	30
1996	3	10	50	20	30	30
1997	3	10	40	20	30	30
1998	3	3	20	10	20	20
1999	3	3	15	10	20	20
2000	3	3	10	7	15	15
2001	3	3	10	7	15	15
2002	3	3	7	7	10	10
2003	3	3	7	5	7	7
2004	3	3	5	5	5	5

Note:
1. Pasta, whether or not cooked or stuffed or otherwise prepared, such as spaghetti, macaroni, noodles, lasagne, gnocchi, ravioli, cannelloni; couscous, whether or not prepared
2. Bread, pastry, cakes, biscuits and other bakers' wares, whether or not containing cocoa; communion wafers, empty cachets of a kind suitable for pharmaceutical use sealing wafers, rice paper and similar products
Source: Tariff and Customs Code of the Philippines, various issues

Future Scenarios

Wheat will always be part of the Filipino dining table, whether in the form of a pan de sal, pancit, biscuits, hamburger, pasta, pizza, donut, cake, instant noodles, or extruded flour snacks. The growth of the fastfood industry and the fast paced lifestyle has institutionalized instant foods and ready to eat meals. Industry estimates indicate that market growth will be around 2-3% over the medium term.

What is likely to change is the form in which wheat will be entering the country. Given the opening up of markets and a likely tariff of less than 5% over the medium term, local flour millers will be faced with the question of importing wheat for milling into flour versus the entry of imported flour itself. Moreover, the entry of imported pasta and bread products at very low tariff will put additional pressure on the flour milling industry. Fortunately, if the numbers are right, the value of imports is less than 5% of the expenditures on flour based products, which still indicates the Filipinos' preference for local flour based products.

References:

" Julie's Bakeshop eyes 80 outlets by '07," BusinessWorld, January 22, 2003.

Family Income and Expenditures Survey, various issues

Food and Agri Business Monitor, 2000-2001 issues

Food and Agri Business Papers, 1997

Tariff and Customs Code of the Philippines, various issues

The Food and Agriculture Centennial Book

http://tradelinephil.dti.gov.ph/betp/statmimp4.sumctry

http://www.generalmilling.com.ph

http://www.urc.com.ph

http://www.inq7.net

1. * This industry brief was published by the Manila-based University of Asia & the Pacific, Center for Food & Agribusiness in the January 2003 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.

Date Modified: 2003-06-16