Baked Goods in the Philippines

BAKED GOODS IN THE PHILIPPINES Euromonitor International March 2013

BAKED GOODS IN THE PHILIPPINES

LIST OF CONTENTS AND TABLES Headlines ..................................................................................................................................... 1 Trends .......................................................................................................................................... 1 Competitive Landscape ................................................................................................................ 2 Prospects ..................................................................................................................................... 3 Category Data .............................................................................................................................. 4 Table 1 Table 2 Table 3 Table 4 Table 5 Table 6 Table 7 Table 8 Table 9 Table 10 Table 11 Table 12 Table 13

Sales of Baked Goods by Category: Volume 2007-2012 ............................. 4 Sales of Baked Goods by Category: Value 2007-2012 ................................ 5 Sales of Baked Goods by Category: % Volume Growth 2007-2012 ............ 5 Sales of Baked Goods by Category: % Value Growth 2007-2012 ............... 5 Packaged/Industrial Bread by Type: % Value Breakdown 2007-2012 ......... 6 Packaged/Industrial Cakes: Single Portion vs Multi-pack % Breakdown by Type 2007-2012 ................................................................... 6 Baked Goods Company Shares 2008-2012 ................................................. 6 Baked Goods Brand Shares 2009-2012....................................................... 7 Sales of Baked Goods by Distribution Format: % Analysis 2007-2012 ........ 7 Forecast Sales of Baked Goods by Category: Volume 2012-2017 .............. 8 Forecast Sales of Baked Goods by Category: Value 2012-2017 ................. 8 Forecast Sales of Baked Goods by Category: % Volume Growth 2012-2017 .................................................................................................... 9 Forecast Sales of Baked Goods by Category: % Value Growth 20122017 ............................................................................................................. 9

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BAKED GOODS IN THE PHILIPPINES HEADLINES  Baked goods grows steadily with retail volume set to increase by 2% in 2012  Premiumisation is a key driver for growth of artisanal baked goods  Packaged/industrial bread expected to see the highest current value growth in 2012 with a 9% increase  Average unit price edges forward by 3% in 2012  Continuing to account for the bulk of value sales, unpackaged/artisanal bread set to see a 26% value share  Retail volume and constant value sales of baked goods expected to rise CAGRs of 2% and 1%, respectively over the forecast period

TRENDS  In 2012 there was a notable increase in the number of independent small businesses that sold premium- quality artisanal baked goods. Entrepreneurs saw opportunity in higher quality products due to the success of chained premium baked goods stores such as Bread Talk. Better economic conditions in 2012 helped drive the trend for premiumisation.  Baked goods experienced healthier growth in 2012, and is set to record its fastest volume and value growth rates since 2008. Value sales benefited from the higher average unit price of the baked good products – most especially the breads and cakes. Volume growth will remain sluggish at 2%, although that is better than the 2009 and 2010 growth, when baked good products became less affordable and the presence of alternatives such as breakfast products, snack foods and sweets for special occasions limited demand for baked goods.  Packaged/industrial bread is expected to record the fastest current value growth of 9% in 2012. Growth of packaged/industrial bread was the driven by the demand for convenience in the growing urban population of the Philippines. Bread tends to be a common household item and is typically consumed during breakfast or for snacks by many Filipinos. Packaged/industrial bread continues to replace unpackaged/artisanal bread through improvement in distribution and more competitive price positioning.  Baked good products are set to post average unit price growth of 3% in 2012, which is attributed mainly to higher manufacturing costs, to brand manufacturers’ increased operational expenses due to raw materials price adjustments particularly in 2011 and to higher labour wages. Packaged/industrial pastries experienced the fastest average unit price growth, at about 5%, due to the movement towards higher quality brands such as Goldilocks and Red Ribbon.  Unpackaged/artisanal baked goods still take a significant portion of the market in the Philippines. Unpackaged/artisanal baked goods tend to focus on niche markets. Due to the numerous brands of both chained and independent bakeshop outlets, unpackaged/artisanal goods are able to target a wide range of consumers in low, middle and upper income segments. However, packaged/industrial baked goods has experienced faster growth due to improvement in distribution and deeper penetration in rural areas. The development of cheaper packaged/industrial brands such as Pinoy Tasty and SM Bonus (a private label brand) has helped generate stronger sales amongst the lower income segment. Higher


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demand for convenience has also played a key role in pushing sales for packaged/industrial baked goods.  White bread continues to contribute to the bulk of industrial/packaged bread in the Philippines. Set to account for 45% of value sales in 2012, white bread tends to be cheaper and its flavour tends to appeal to a majority of consumers in the Philippines. Wholewheat bread is set to account for only a 28% value share in 2012. Wholewheat bread tends to find a market niche amongst more health consumers as the majority of manufacturers continue to market the benefits of the high-fibre content of wholewheat bread. Burgers and hotdogs are not regular food staples in the Philippines. Therefore buns continue to have a limited share of the market at under 8%.  Single-portion cakes have higher volume sales than multi-portion cakes mainly because these are offered at lower prices and are widely available in the supermarkets and other common distribution channels. The single-portion cakes are also competitive in terms of quality and taste. Brands such as the Regent, Cup Keyk and Fadgee Bar were amongst the popular brands in 2012. Another reason for the higher consumption of single-portion cakes is that the multi-portion variety is mainly consumed only during special occasions, such as birthdays, in the Philippines.  In-store bakeries are available in the country but are still small in number. Hence its value sales are still lower compared to the sales of the branded packaged products and artisanal. As of 2012, the presence of in-store bakeries had no negative impact on packaged baked goods manufacturers and artisanal retailers, but in-store bakeries may gain share against them in the forecast period if they are able to compete with them in terms of price and quality.

COMPETITIVE LANDSCAPE  Gardenia Philippines continues to lead the Philippine baked goods industry and is set to account for 11% of value shares in 2012. The company’s strong distribution in the Philippines continues to be the main contributor to its strong performance. Gardenia Philippine also is able to compete for multiple market segments through its wide variety of product offerings ranging from low-cost products, such as its Pinoy Tasty bread, to more premium items such as blueberry muffins.  Goldilocks Bake Shop is expected to record the fastest value growth, up by 11% in 2012. Its main growth driver is its store outlet performance, specifically in provincial locations. The company has also improved sales through its home delivery service. Moreover, the company continues to invest highly in product innovation by regularly introducing new flavours and designs especially for cakes and pastries. The company has also been able to capitalise on providing high-quality Filipino traditional baked goods delicacies such as polvoron, ensaymada and pandesal.  Key strategies for the most successful brands revolve mainly around providing consumers with better value for money. This is due to the highly price-sensitive consumer base in the Philippines. Product development also plays a key role in keeping consumers interested in an otherwise mature market. Distribution is also a key sales driver, as many consumers tend not to have any brand loyalty when it comes to selecting baked goods and tend to choose based on what is available.  The Goldilocks Bakeshop company activities and marketing strategies in 2012 included competition sponsorships such as Goldilocks Intercollegiate Cake Decorating Challenge 2012. Company tie-in promotions such as those offered in partnership with SM Cinema, Fashion Diva and Drypers Diapers were also quite common. Gardenia Bakeries Philippines, on the other hand, used outreach programmes such as bread feeding programmes that


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support unprivileged children, orphans and former street kids. Social networking sites such as Facebook were also commonly used to build brand awareness.  The baked goods industry in the Philippines continue to be dominated by locally owned brands as a result of the numerous independently owned bake shops in the Philippines. Gardenia remains the only influential international brand with a significant impact on the Philippine market. Consumers tend to favour local brands mainly because they prefer the taste of locally made bread.  Manufacturers were active in developing new products over the review period. These included Crossini rolls with Bavarian filling by Suncrest Foods and For Him greeting cakes of Goldilocks Bakeshop which target men. Gardenia Bakeries Philippines and Red Ribbon Bakeshop focused mainly on developing new flavours for already existing brands; these included a triple-chocolate roll and butter mamon. New product developments continued to be key growth drivers in this relatively mature market.  Some of the key advertising campaigns of baked goods brand manufacturers in 2012 were “Celebrate the Joy of Filipino Food with Goldilocks” (Goldilocks Bakeshop), “Overflowing Pure Chocolate Taste”, “Butter Goodness Like No Other” and “The Chocolatiest Roll Ever” (Red Ribbon Bakeshop) and “Back to School” with Gardenia and Cheeze Whiz (Gardenia Bakeshop Philippines). These advertising campaigns appeal to taste, celebration habits and needs of local consumers and have proven effective in previous years.  The most common packaging used for baked good products in 2012 was flexible packaging and folding cartons. Aside from these packaging types, there are no current innovations seen in baked goods packaging yet. Flexible packaging and folding cartons are the most applicable packaging types since they are light and less likely to contaminate the baked products.  The high value share of artisanal players, Gardenia Bakeries Philippines, and Goldilocks Bakeshop reflects patronage of the economy and standard baked good brands whilst the smaller share of the French Baker and Boulangarie Franc shows low patronage of premium baked goods. In 2012, baked goods of standard brands generated the fastest sales growth because of the purchases from the middle-class segment. Continuous growth in employment from business process outsourcing and agriculture improved the number of households in the middle income segment.

PROSPECTS  The overall baked goods industry is likely to continue to perform well over the forecast period. Deeper penetration into provincial markets is likely to drive growth, specifically for packaged/industrial bread, cakes and pastries. The strengthening economy and higher purchasing power of consumers is also likely to help keep growth of baked goods positive.  Volume and constant value sales of baked goods are expected to rise at CAGRs of 2% and 1%, respectively over the forecast period, with the constant value growth being nearly twice as high compared to what was experienced over the historic period. All categories, except for unpackaged/artisanal cakes and pastries, are expected to be on the positive side. Unpackaged/artisanal cakes and pastries are expected to suffer due to the higher demand for more convenient packaged bread, cakes and pastries.  Packaged/industrial bread is expected to see the fastest growth over the forecast period at 3% constant value CAGR. Demand is likely to continue to remain steady amongst the markets that the industry has already penetrated, but further growth prospects are expected to come from provincial locations due to the improved distribution of packaged/industrial bread manufacturers. Lower-priced brands are also likely to help increase consumption amongst the lower income segment.


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 Overall baked goods is expected to experience a fall in average constant unit price at a -0.4% CAGR over the forecast period. All baked goods industries, except for unpackaged/artisanal bread, are expected to keep unit prices low as result of stiffer competition between both packaged/industrial and unpackaged artisanal manufacturers. However, average unit prices of unpackaged/artisanal bread are expected to see an increase of 2% in constant value due to the growing number of small and medium-size enterprises that focus on capturing the upscale market.  Distribution of baked good products in the Philippines is unlikely to see a significant change over the forecast period. Although declining, other grocery retailers is likely to continue to contribute to the bulk of sales for baked goods due to the numerous sari-sari stores (traditional street stores usually found in residential areas) scattered around the country. Hypermarkets and supermarkets are expected to become a more important distribution channel for baked goods manufacturers due to the number of outlets and increasing penetration in provinces.  Promotional activities of baked goods manufacturers are unlikely to change over the forecast period. Packaged/industrial bread, cake and pastry manufacturers are likely to continue to focus on providing better value for money and use in-store promotions to draw in customers. In contrast unpackaged/artisanal bread, cake and pastry manufacturers are likely to focus on providing more specialty products and constantly innovating their goods to attract customers.  Gardenia Bakeries Philippines’ new product developments may do well in the market in the forecast period as Gardenia brand has a large following and is an established brand. Red Ribbon’s new product development may gain patronage from the middle-class and upper middle-class consumers. Suncrest Foods’ Crossini rolls with Bavarian cream are innovative but may not succeed due to the intense competition in this area from other manufacturers. The competitors may also be able to produce similar variants at a more effective cost.

CATEGORY DATA Table 1

Sales of Baked Goods by Category: Volume 2007-2012

'000 tonnes

Bread - Bread Substitutes - Packaged/Industrial Bread - Unpackaged/Artisanal Bread Cakes - Packaged/Industrial Cakes - Unpackaged/Artisanal Cakes Pastries - Packaged/Industrial Pastries - Unpackaged/Artisanal Pastries Baked Goods Source:

2007

2008

2009

2010

2011

2012

127.3 50.1

131.0 51.8

130.6 52.6

132.0 53.6

135.6 56.8

139.5 60.2

77.2

79.2

78.0

78.4

78.8

79.2

29.7 13.8

30.2 14.0

30.1 14.1

30.4 14.2

30.6 14.3

30.9 14.5

15.9

16.2

16.0

16.2

16.3

16.4

43.0 27.7

43.6 28.3

43.6 28.5

44.2 29.0

44.9 29.6

45.7 30.2

15.3

15.4

15.1

15.2

15.4

15.5

200.1

204.8

204.3

206.6

211.2

216.1

Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources


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Table 2

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Sales of Baked Goods by Category: Value 2007-2012

Ps million


2007

2008

2009

2010

2011

2012

12,189.6 5,396.8

13,272.7 5,936.5

13,908.3 6,352.0

14,649.2 6,828.4

15,566.6 7,511.3

16,618.8 8,187.3

6,792.8

7,336.2

7,556.3

7,820.7

8,055.4

8,431.5

7,625.5 3,109.2

8,067.5 3,280.2

8,302.0 3,395.1

8,578.2 3,524.1

8,896.0 3,665.0

9,202.5 3,836.2

4,516.2

4,787.2

4,906.9

5,054.1

5,231.0

5,366.3

5,398.4 3,434.1

5,827.8 3,726.0

6,093.4 3,949.6

6,382.2 4,206.3

6,720.2 4,500.8

7,103.6 4,838.3

1,964.2

2,101.7

2,143.8

2,175.9

2,219.4

2,265.3

25,213.4

27,167.9

28,303.6

29,609.6

31,182.9

32,924.9


Table 3

Sales of Baked Goods by Category: % Volume Growth 2007-2012

% volume growth

Bread - Bread Substitutes - Packaged/Industrial Bread - Unpackaged/Artisanal Bread Cakes - Packaged/Industrial Cakes - Unpackaged/Artisanal Cakes Pastries - Packaged/Industrial Pastries - Unpackaged/Artisanal Pastries Baked Goods

2011/12

2007-12 CAGR

2007/12 Total

2.9 6.1 0.5 0.9 1.1 0.7 1.7 2.2 0.8 2.3

1.8 3.8 0.5 0.8 1.0 0.6 1.2 1.7 0.2 1.6

9.6 20.3 2.6 3.9 5.0 3.0 6.2 9.0 1.2 8.0

Source:


Table 4

Sales of Baked Goods by Category: % Value Growth 2007-2012

% current value growth

Bread - Bread Substitutes - Packaged/Industrial Bread - Unpackaged/Artisanal Bread Cakes


2011/12

2007-12 CAGR

2007/12 Total

6.8 9.0 4.7 3.4

6.4 8.7 4.4 3.8

36.3 51.7 24.1 20.7

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- Packaged/Industrial Cakes - Unpackaged/Artisanal Cakes Pastries - Packaged/Industrial Pastries - Unpackaged/Artisanal Pastries Baked Goods Source:

4.7 2.6 5.7 7.5 2.1 5.6

4.3 3.5 5.6 7.1 2.9 5.5

23.4 18.8 31.6 40.9 15.3 30.6


Table 5

Packaged/Industrial Bread by Type: % Value Breakdown 2007-2012

% retail value rsp

Buns White Wholewheat Bread Others Total Source:

2007

2008

2009

2010

2011

2012

8.2 45.5 27.3 19.0 100.0

8.5 45.0 27.5 19.0 100.0

8.3 45.2 27.5 19.0 100.0

8.0 45.2 27.8 19.0 100.0

7.8 45.2 28.0 19.0 100.0

7.7 45.3 28.0 19.0 100.0


Table 6

Packaged/Industrial Cakes: Single Portion vs Multi-pack % Breakdown by Type 2007-2012

% retail value rsp

Single Portion Multi Portion Total Source:

2007

2008

2009

2010

2011

2012

86.0 14.0 100.0

87.0 13.0 100.0

87.5 12.5 100.0

88.2 11.8 100.0

88.4 11.6 100.0

88.6 11.4 100.0


Table 7

Baked Goods Company Shares 2008-2012

% retail value rsp Company Gardenia Philippines Inc Goldilocks Bake Shop Inc MLM Foods Inc Regent Foods Corp Big E Food Products Suncrest Foods Inc Red Ribbon Bake Shop Inc Universal Robina Corp SM Retail Inc Boulangerie Francaise Inc French Baker Inc Galactica Corp Marby Food Ventures Corp Barley's Foods Corp Filia Foods Inc Joni's Cakes & Pastries


2008

2009

2010

2011

2012

9.5 7.9 4.5 3.1 2.9 2.7 2.2 1.7 0.8 0.6 0.5 0.4 0.0 0.1 -

8.8 8.6 4.8 3.1 2.9 2.7 2.4 1.7 1.0 0.8 0.6 0.3 0.0 -

9.1 8.9 5.0 3.1 2.9 2.7 2.5 1.7 1.0 0.8 0.6 0.3 0.0 -

10.3 9.2 4.7 3.1 2.8 2.7 2.5 1.7 1.0 0.8 0.6 0.3 0.0 -

10.7 9.6 4.8 3.1 2.8 2.6 2.6 1.7 1.0 0.8 0.6 0.3 0.0 -

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Inc Artisanal Others Total Source:

52.4 10.8 100.0

50.8 10.6 100.0

49.7 10.5 100.0

48.8 10.5 100.0


Table 8

Baked Goods Brand Shares 2009-2012

% retail value rsp Brand

Company

Gardenia Goldilocks Fortune Regent Lemon Square Red Ribbon Jack 'n' Jill SM Bonus Fudgee Barr Jam Bites Le Coeur de France French Baker Cupp Keyk Mini Keyk Pan-A-Cup Marby Barley's Whammos Jo-Ni

Gardenia Philippines Inc Goldilocks Bake Shop Inc MLM Foods Inc Regent Foods Corp Big E Food Products Red Ribbon Bake Shop Inc Universal Robina Corp SM Retail Inc Suncrest Foods Inc Suncrest Foods Inc Boulangerie Francaise Inc French Baker Inc Suncrest Foods Inc Suncrest Foods Inc Galactica Corp Marby Food Ventures Corp Barley's Foods Corp Filia Foods Inc Joni's Cakes & Pastries Inc

Artisanal Others Total Source:

51.6 10.8 100.0

2009

2010

2011

2012

8.8 8.6 4.8 3.1 2.9 2.4 1.7 1.0 1.0 0.9 0.8 0.6 0.5 0.4 0.3 0.0 -

9.1 8.9 5.0 3.1 2.9 2.5 1.7 1.0 1.0 0.9 0.8 0.6 0.5 0.4 0.3 0.0 -

10.3 9.2 4.7 3.1 2.8 2.5 1.7 1.0 1.0 0.9 0.8 0.6 0.4 0.4 0.3 0.0 -

10.7 9.6 4.8 3.1 2.8 2.6 1.7 1.0 1.0 0.9 0.8 0.6 0.4 0.4 0.3 0.0 -

51.6 10.8 100.0

50.8 10.6 100.0

49.7 10.5 100.0

48.8 10.5 100.0


Table 9

Sales of Baked Goods by Distribution Format: % Analysis 2007-2012

% retail value rsp

Store-Based Retailing - Grocery Retailers -- Supermarkets -- Hypermarkets -- Discounters -- Small Grocery Retailers --- Convenience Stores --- Independent Small Grocers --- Forecourt Retailers -- Other Grocery Retailers - Non-Grocery Retailers


2007

2008

2009

2010

2011

2012

100.0 99.6 24.3 2.2 6.3

100.0 99.5 24.4 2.5 5.9

100.0 99.6 24.3 2.7 5.4

100.0 99.5 24.4 3.0 5.0

100.0 99.6 24.5 3.3 4.8

100.0 99.6 24.8 3.4 4.6

0.3 6.0

0.3 5.6

0.3 5.1

0.3 4.7

0.3 4.5

0.3 4.3

66.8

66.7

67.2

67.1

67.0

66.8

0.4

0.5

0.4

0.5

0.4

0.4

7


-- Health and Beauty Retailers -- Other Non-Grocery Retailers Non-Store Retailing - Vending - Homeshopping - Internet Retailing - Direct Selling Total Source:

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0.4

0.5

0.4

0.5

0.4

0.4

-

-

-

-

-

-

100.0

100.0

100.0

100.0

100.0

100.0


Table 10

Forecast Sales of Baked Goods by Category: Volume 2012-2017

'000 tonnes


2012

2013

2014

2015

2016

2017

139.5 60.2

141.4 61.8

143.6 63.5

146.1 65.4

148.9 67.5

152.0 69.9

79.2

79.7

80.2

80.7

81.4

82.1

30.9 14.5

31.2 14.6

31.4 14.8

31.7 15.0

32.0 15.3

32.3 15.5

16.4

16.5

16.6

16.7

16.7

16.8

45.7 30.2

46.5 30.9

47.4 31.7

48.4 32.6

49.4 33.6

50.6 34.7

15.5

15.6

15.7

15.8

15.8

15.9

216.1

219.1

222.5

226.2

230.3

234.8

Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources

Table 11

Forecast Sales of Baked Goods by Category: Value 2012-2017

Ps million

Bread - Bread Substitutes - Packaged/Industrial Bread - Unpackaged/Artisanal Bread Cakes - Packaged/Industrial Cakes - Unpackaged/Artisanal Cakes Pastries - Packaged/Industrial Pastries


2012

2013

2014

2015

2016

2017

16,618.8 8,187.3

16,866.1 8,375.6

17,151.9 8,585.0

17,486.6 8,825.4

17,863.9 9,090.1

18,295.5 9,390.1

8,431.5

8,490.5

8,567.0

8,661.2

8,773.8

8,905.4

9,202.5 3,836.2

9,168.8 3,866.9

9,163.6 3,909.4

9,182.9 3,960.2

9,226.6 4,019.6

9,297.1 4,088.0

5,366.3

5,301.9

5,254.2

5,222.7

5,207.0

5,209.2

7,103.6 4,838.3

7,129.3 4,886.7

7,174.9 4,950.2

7,235.8 5,024.5

7,312.4 5,109.9

7,415.5 5,212.1

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- Unpackaged/Artisanal Pastries Baked Goods Source:

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2,265.3

2,242.6

2,224.7

2,211.3

2,202.5

2,203.4

32,924.9

33,164.3

33,490.5

33,905.3

34,403.0

35,008.1


Table 12

Forecast Sales of Baked Goods by Category: % Volume Growth 2012-2017

% volume growth


Table 13

2016/17

2012-17 CAGR

2012/17 Total

2.1 3.5 0.9 0.9 1.6 0.2 2.3 3.2 0.3 2.0

1.7 3.0 0.7 0.9 1.4 0.4 2.0 2.8 0.5 1.7

9.0 16.0 3.6 4.4 7.2 2.0 10.6 14.8 2.5 8.7


Forecast Sales of Baked Goods by Category: % Value Growth 2012-2017

% constant value growth


2012-17 CAGR

2012/17 TOTAL

1.9 2.8 1.1 0.2 1.3 -0.6 0.9 1.5 -0.6 1.2

10.1 14.7 5.6 1.0 6.6 -2.9 4.4 7.7 -2.7 6.3



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Baked Goods in the Philippines

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