1. FUTURE FARMING
Analysis of the Food Sector in Philippines -
Opportunities for Victorian Exporters
June 2009

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Published by the Victorian Government, Department of Primary
Industries. June 2009
Also published on www.dpi.vic.gov.au/agribusiness
© The State of Victoria Department of Primary Industries 2009
This publication is copyright. No part may be reproduced by any
process except in accordance with the provisions of the Copyright
Act 1968.
Authorised by the Victorian Government, 1 Spring Street,
Melbourne, Victoria 3000, Australia
ISBN 978-1-74217-553-9 (print)
ISBN 978-1-74217-554-6 (online)
Disclaimer
This publication may be of assistance to you but the State of Victoria
and its employees do not guarantee that the publication is without flaw
of any kind or is wholly appropriate for your particular purposes and
therefore disclaims all liability for any error, loss or other consequence
which may arise from you relying on any information in this publication.
For more information about DPI visit www.dpi.vic.gov.au or call the
Customer Service Centre on 136 186
Cover picture: Fresh Fruit and Vegetable Market, Quezon City,
Philippines
For more information visit the website at www.dpi.vic.gov.au or
contact the DPI Customer Service Centre 136 186.
Produced by: Agribusiness Group
Department of Primary Industries
1 Spring Street
PO Box 4440
Melbourne
Victoria 3001
Author: Tim Roache
Manager Market Development, South East Asia
DPI Agribusiness Group
Editors: Kate Linden, John Naughtin, Fiona Culley,
Clare Balmer

3. Contents
Introduction 3
Overview of Current Economic Situation 4
Overall Trade Relationship with Victoria
and Australia 5
Victorian & Australian Food Exports
to the Philippines 6
Food Consumption Trends 7
Distribution Channels 8
Market Access 9
Opportunities for the Victorian Food Industry 10
Dairy 10
Grains 10
Meat 10
Prepared Foods 10
Horticulture 10
Conclusion 11
Reference List 12
List of tables and figures
Table 1: Population and economic data
for the Philippines, 2007 3
Figure 1: The Philippines 3
Figure 2: Trends in export of selected food
commodities from Australia
to the Philippines 6
Figure 3: Trends in export of selected food
commodities from Victoria
to the Philippines 6
Figure 4: Typical Filipino Food Distribution Channels
for Imported Australian Agrifood 8

4. 2

5. Introduction
3
The Philippines is one of the world’s fastest growing and
youngest populations, with 65% of its 96 million people under
30 years of age.
The gulf between the rich and poor is large with 30% of
Filipinos living below the poverty line (surviving on, or less
than, $US 1 per day). In urban areas poverty afflicts 20% of
the population whilst in rural areas it is 47%, which has led
to an estimated 10 million Filipinos being Overseas Workers.
The Philippines has the highest level of English literacy in
Asia (93%) and Christianity is the major religion (90%).
The Philippines has a volatile political history with civilian
unrest, coups and attempted coups a common situation.
However, since 2001 the Government, a Republic Nation
with a democratically elected President (Gloria Macapagal-
Arroyo, 2001-Current), has been relatively stable albeit
with continued high levels of corruption, lack of economic
legislation and judicial reforms, rapid population growth, and
ongoing insurgencies by terrorist and rebel groups which
continue to undermine this stability.
The Philippines consists of over 7,100 islands with a total
land area of 300,000 km2, making it the second largest
archipelago in the world. It can be divided into three main
island groups; Luzon (north), the Visayas (central) and
Mindanao (south). Four cities have populations exceeding
one million, Quezon City, Manila, Calcooan City (all within the
Philippines National Capital Region - NCR) and Davao City.
Figure 1: The Philippines Source: Maps.com
It is these metropolitan regions that present the opportunities
for Victorian agrifood products, particularly metropolitan
increasing food self sufficiency is a major concern for the
Manila and NCR.
Filipino government. Typically food produced from small land
Over 50% of the Philippines land mass is classified as holdings is consumed by the household or traded at local
agricultural land. Agricultural production is undertaken wet markets. Similarly, food produced from large agricultural
by small landholders who either lease or own their land estates results in the Philippines being a major producer
or companies with vast agricultural estates. Due to rapid and exporter of sugar, rice, corn, tropical fruits (coconuts,
population growth and escalating commodity prices, bananas, pineapples and mangoes), poultry and pork.
Table 1: Population and economic data for the Philippines, 2007 (in comparison to Australia)
National statistics (2007) Philippines Australia
Size 300,000 km2 7,686,850 km2
Population 96 million 21 million
Population growth 1.99% 0.801%
GDP $US 300 billion $US 773 billion
GDP per capita $US 3,200 $US 37,300
GDP growth rate 7.3% 3.9%
Food self sufficiency <100% >100%

6. Overview of Current Economic Situation
4
The Philippines economy is small and has one of the lowest The major industries contributing to the Philippines economy
GDP per capita rates ($US3,200) in the whole of Asia. include Manufacturing (50%), Agriculture (15%), Overseas
However, between 2003 and 2007, GDP grew by over 50% in Workers remittances (15%) and Services (10%). The Agrifood
terms of its local currency and in 2007 real GDP grew at over sector employs over one-third of the population, and in 2007
7% (although in 2008 GDP dropped to 4% as a result of the accounted for 14% of its GDP. The landscape is dominated
financial crisis), making it one of the world’s fastest growing by expansive estates that date back to colonisation, however
economies. This has largely been driven by strong domestic a national land re-distribution program, which began in
demand, economic reform, relative political stability, and the 1998, is currently underway transferring land ownership to
successful exports of services (e.g. telecommunications, local residents. The Philippines remains a net importer of
business outsourcing), labour, and manufactured goods and agrifood products with a trade deficit of $US 1.54 billion in
resources. 2007. Wheat replaced rice as the most imported commodity
followed by dairy ingredients in 2006, which are primarily
Whilst the general macroeconomic outlook has improved
used in the large processing sector.
dramatically over recent years, with economic growth
averaging 5% since Gloria Macapagal-Arroyo became The Philippines’ food processing sector is the most dominant
President in 2001, the Philippines needs to continue its manufacturing sector in the country. It accounts for 40%
economic reform agenda to ensure its long term fiscal of total manufacturing output, contributes 20% of GDP per
stability and ‘catch up’ to other South East (SE) Asian annum and is growing at 8%-10% per annum. The sector
economies. Continual reform and growth will be pivotal to comprises of fruits and vegetables, meat and poultry, flour
alleviating poverty rates, which are currently growing due to and bakery, dairy products, fish and marine, beverages,
the increasing population and unequal distribution of wealth. confectioneries, food condiments and seasonings, food
supplements, bottled water, snack foods, fats and oils. This
sector is heavily reliant on both domestically produced and
imported agrifood products.

7. Overall Trade Relationship with Victoria and Australia
5
Recent economic liberalisation by the Philippines Government exports to the Philippines (2007-08) include; crude petroleum
has resulted in a trading system that’s relatively open and - $195 million, copper ores and concentrates - $159 million,
has some of the lowest applied tariffs in the region. The medicaments (including veterinary) - $110 million and milk
Philippines is a member of the World Trade Organisation and cream - $106 million. Major Australian merchandise
(WTO) and Association South East Asian Nations (ASEAN) imports from the Philippines (2007-08) include; crude
and as such are party to the Australian – ASEAN - New petroleum - $228 million, copper - $44 million, electronic
Zealand (AANZFTA), signed in February 2009 (see below machinery and parts, other $37 million, telecommunications
for further detail). Tariff rates for most consumer-oriented equipment - $35 million. Total trade in services between
products range from 3%-15% and are undergoing unilateral Australia and the Philippines in 2007 comprised $266 million
reduction. However industries considered sensitive such in exports and $306 million in imports.
as poultry, pork, potatoes and coffee are exempt and have
The Australian Trade Commission (Austrade) has an office in
minimum access volumes and significantly higher tariff rates
the Philippines located in Manila with a focus on promoting
applied to them.
exports of Australian food and beverage and agribusiness
Australia maintains a good bilateral trade and economic products and services. The Victorian Government
relationship with the Philippines. Two-way merchandise (Department of Primary Industries) is undertaking a Market
trade was valued at $2 billion in 2007-08, 13% higher than Driven Responses Project with a focus on new and emerging
in 2006-07 and both governments consider there to be markets and accordingly a Market Development Manager with
significant potential for growth. Major Australian merchandise responsibility for South East Asia including the Philippines.
Image courtesy of Meat and Livestock Australia

8. Victorian & Australian Food Exports to the Philippines
6
The Philippines has been, and to a large extent still is, an $AU million
importer of agricultural commodities that are predominantly 140
used as raw materials in its large food manufacturing sector.
Australian exports to the Philippines reflect this trend with 120
dairy, meat and cereal ingredients forming the majority of
total agricultural trade (Figure 2).
100
The Philippines is Victoria’s 13th most valuable agrifood
export market valued at $175 million in 2008, increasing 80
by 45% from 2007 (due largely to record commodity prices
during 2008). However total value has decreased by $42 60
million since 2004, largely driven by a decrease in dairy
exports due to price sensitivity and increased competition. 40
Despite this is also a reflection of the inherent volatility of
trade with Philippines which is a very price sensitive market 20
and often viewed by exporters as a ‘spot’ market as opposed
to a consistent long term export market. Dairy still remains 0
the major export industry from Victoria valued at $130 million, 2004 2005 2006 2007 2008
followed by red meat (mainly beef) $16 million and cereals
valued at $13 million (Figure 3). Powdered milk
Malt Beef Cheese
and cream
Australian food products are held in high regard in the
Milled products Wheat Live animals Confectionery
Philippines food manufacturing, retail and service sectors.
They are perceived as being of very high quality and safe,
Figure 2: Trends in export of selected food commodities
but expensive. The Philippines is a particularly price sensitive
from Australia to the Philippines Source: GTIS (2008)
market, and as such Australia faces fierce competition from
a number of agricultural commodity and food exporters from
around the world.
$AU million
The United States of America (USA) is the major exporter of
140
agrifood commodities such as wheat, soy, dairy, meat and
fruit as well a wide range of further value added food products
120
into the Philippines. The US has a long standing relationship
with the Philippines due largely to their association during
war time efforts spanning back to 1898. The Philippines 100
also imports similar products, but to a lesser extent, from
New Zealand (NZ), Canada and the European Union (EU). 80
However due to the significant price sensitivity of Filipinos,
countries such as China and other ASEAN nations are also 60
very prominent exporters to the Phillipines, trading in large
volumes of low price products such as fruit (particularly from 40
China), vegetables, processed foods and dry goods.
Due to the diversity and size of the Filipino market, there 20
are segments for the lowest value products (e.g. beef offal)
through to high value products (e.g. primary beef cuts) and 0
Australian exports compete in all of these segments. In 2004 2005 2006 2007 2008
general agrifood commodities (e.g. wheat, dairy ingredients)
Powdered milk
compete in low value and high value segments in the food Cheese Wheat Beef
and cream
processing sector with all of the countries mentioned above
Whey products Butter Ingredients
(in addition to others). Conversely, Australian exports of
further value added food products (eg. cheese, portion Figure 3: Trends in export of selected food commodities
controlled lamb), generally targeted at higher value modern from Victoria to the Philippines Source: GTIS (2008)
retailing and food service markets, compete with imported
products from the US, Canada, NZ and the EU.

9. Food Consumption Trends
7
Traditional food retail and service formats, particularly wet
and dry markets and local ‘sari-sari’ stores are the most
commonly frequented by Filipino consumers. Modern retailing
and food service is very much in its infancy, but transforming
quickly. These factors coupled with the large and growing
divide between the rich and poor result in very contrasting
food consumption trends in the Philippines. In general, locally
produced and/or manufactured products and low-medium
priced imported products are consumed via traditional
markets. Medium-high priced imported products are
predominantly found in foreign owned supermarkets and five
star hotel restaurants in major urban centres such as Manila.
The majority of food consumed in the Philippines is
manufactured by local companies, 11,000 in total (such
as San Miguel and RFM Corporation), that produce food
across all major food sectors, such as noodles, processed
meat products (poultry, pork beef), processed fruit and
vegetable products, dairy products and snack foods. These
manufactured foods combined with fresh fruit, vegetables,
meat and rice form the staple diet for low-middle class
Filipino’s, who are the dominant consumer segment in the
Philippines.
However, middle-high income earners are demanding
non-traditional and imported ‘ready-to-eat’ foods and in
turn are driving modernisation of the Filipino food retailing
sector. The modern retail sector is undergoing significant
transformation with supermarkets, hypermarkets and
convenience stores developing rapidly, along with the quality
of product offered. The majority of retailers are local (laws
prohibiting international retailers operating in the Philippines
were only removed in 2000) and include SM Supermarkets/
Hypermarkets, Robinsons, Rustans, Makro and Pricesmart.
Modern retailing is a relatively new concept in the Philippines
and as such is primarily located in major urban centres
alongside its customers.
Despite this, the Philippines is widely regarded as one of
Asia’s most attractive retail growth markets. Continued
economic growth combined with a deregulated and
highly fragmented market, along with interest from major
international retailers such as Wal-Mart, Casino, Carrefour
and Tesco, will accelerate growth and opportunities in this
sector to satisfy the growing consumer demand for retail
ready food products in the medium-long term.
Filipinos spend approximately 12% of total income eating
out and the sector is valued at $US3 billion, with growth of
10%-15% in the last decade. Traditional food service formats
still enjoy a majority market share in the Philippines, but the
modern food service market, driven by convenience and
price and dominated by fast food restaurants/chains such as
Jolibee, McDonalds and ChowKing, is increasing its presence
with speed. High end restaurants and hotels are found in
metropolitan Manila and service wealthy local and expatriate
consumers. Both of these segments are heavily reliant upon
imported foods.

10. Distribution Channels
8
The food sector in the Philippines is extremely fragmented expensive. Maintaining cool chain distribution is a significant
due to the excessive numbers of food retail and service issue and often leads to excessive spoilage, particularly for
outlets; the convoluted supply chains; under-developed inter-island distribution.
warehousing, distribution, cool chain and transport
Distribution channels in the Philippines food processing, retail
infrastructure; and the archipelagic nature of the country.
and food service sectors resemble the disjointed nature of
These factors lead to inefficient and costly distribution,
the food sector. Figure 4 below depicts the flow of imported
particularly outside of Manila.
goods into the Philippines. As is illustrated, there are a
In general, imported food from Australia enters the number of members in the supply chain with very limited
Philippines in Manila, either at the Manila seaport (frozen product going direct to retail or food service. Most imported
and shelf stable products) or the Ninoy Aquino International food moves into the food processing sector before making
airport (fresh short shelf-life products). However, there are its way into the various food retail/service outlets. Likewise
many other entry points into the Philippines including Cebu, imported ready-to-eat foods are typically imported by an
Iloilo, Davao, Cagayan de Oro, and Zamboanga seaports and import/distribution company before further distribution. It is
Diosdado Macapagal, Mactan-Cebu, and Francisco Bangoy rare for retailers, including modern retailers, to import directly.
international airports. Although, in the medium-long term, direct importation is
expected to increase particularly as global retailers enhance
Once in the Philippines the main mode of freight is via road
their presence in the Philippines.
transport and “roll-on, roll-off” inter-island ferry shipping. Rail
freight is poorly developed and air freight is generally too
Australian
supplier
Australian
consolidator
Filipino Filipino
food importer trader
Filipino
food processor
Filipino Filipino Filipino
major retailer wholesalers/ small retail
distributors
Filipino
wet market
Figure 4: Typical Filipino Food Distribution Channels for Imported Australian Agrifood Source: DPI, 2009

11. Market Access
9
The Philippines’ Department of Agriculture and Bureau of
Agriculture and Fisheries (animal and horticultural products)
and the Department of Health and Bureau of Food and
Drugs (processed foods) are the main agencies tasked with
developing, regulating and enforcing food safety standards for
all imported foods. Food products must be registered with the
relevant agency, which can only be done by a Filipino entity
and typically takes three months. Accordingly a reputable
importing company that best suits a Victorian company’s
exporting needs is essential in the Philippines and crucial for
market access and market success.
All imported foods and agricultural products are required to
comply with the Philippines food health and phytosanitary
laws. Similarly packaging, labelling and other specific
standard must be adhered to (for more detailed information
refer to references packaging and labelling).
AANZFTA provides for the progressive reduction or, for
most products, elimination of tariffs facing Australian goods
exported to ASEAN countries, over a transition period. The
following list is a summary of key sectoral outcomes for the
Philippines (for more detailed information refer to references,
tariffs to ASEAN countries):
Meat and livestock: existing liberal access for live bovine
animals will be guaranteed through tariffs bound at 0% or
phased to 0% or 2.5%. Tariffs on most meat tariff lines are
bound at 0% on entry-into-force (EIF) or phased to 0%,
although some lines are subject to tariff reductions only, and
a few lines are excluded from tariff commitments in some
countries.
Fish: tariffs on the vast majority of tariff lines are bound at
0% or phased to 0%, with tariffs on remaining lines mainly
reduced to 5% or less.
Dairy products: tariffs on all tariff lines are bound at 0%
on EIF or phased to 0%, except two lines that will be phased
to 5%.
Grains: for most products tariffs are bound at 0% on EIF or
phased to 0%. Rice is excluded from tariff commitments.
Fruit and nuts: tariffs on most products phased to 0%
Vegetables: Tariffs on most products phased to 0%, but
there will only be modest reductions on some products with
high tariffs, including potatoes, celery, carrots, cauliflowers,
broccoli and lettuce.
Fruit and vegetable juices: prepared and processed fruit
and vegetables: tariffs on all products are bound at 0% on
EIF or phased to 0%.

12. Opportunities for the Victorian Food Industry
10
Even though the Philippines presents a number of challenges
including its high price sensitivity, it also presents significant
opportunities for Victorian agrifood exporters in the short,
medium and long term. Due to the level of economic
development, population growth and importance of the food
manufacturing sector in the Philippines, export of agrifood
commodities such as dairy ingredients, wheat and meat
products pose as very good long term prospects. Higher
priced value-added products such as ready-to-eat retail
products and fresh produce will increasingly develop into
substantial opportunities, more so in the medium to long term
and this will be driven by growing consumer demand and
modernisation of the retail, and to a lesser extent, the food
service sectors.
Dairy
Dairy ingredients represent the bulk of the value and volume
of Victoria’s food exports to the Philippines. Milk powders,
cheddar, whey and butter amongst others will remain long
term growth opportunities, which will also be aided by the
lack of development in the Filipino dairy industry. Filipinos are
the largest per capita consumer of dairy products in Asia and
with increases in household incomes there is large scope to
further increase demand for value-added products such as,
cheeses, yoghurts and desserts as per capita consumption is
still well below that of western countries.
Prepared Foods (Ingredients)
Specialised ingredients such as manufacturing grade herbs
Grains and spices, fats and oils and confectionaries are vital inputs
Grains, particularly wheat, are a major imported commodity to the Filipino food manufacturing sector. Imported directly
into the Philippines. Whilst not truly reflected in the export by manufacturers, or more commonly by traders, these
figures due to confidentiality agreements, a large volume of products tend to be more niche in nature but offer Victorian
Australian wheat is imported for the manufacture of noodles food exporters (with the capability to be flexible) good
and flour for other bakery products. There is a very large opportunities in the short to long term to supply into the
wheat milling industry in the Philippines which relies solely Philippines food manufacturing sector.
on imported products. The short to long term opportunities
for wheat exports to the Philippines are very good and this
market offers good opportunities for Victorian and Australian
Horticulture (Fruit)
wheat exporters in the new deregulated wheat market. Technically the only Australian fruit with access into the
Philippines is processed fruit and due to the domestic and
import competition very little Australian product is exported
Meat into the market. However, there is a considerable volume
The Philippines is self sufficent in pork and poultry and is a of table grapes and citrus (no tropical fruits) from Australia
strong exporter of these products. However, the opportunities that enters the Philippines via a grey channel that is widely
for red meat, particularly beef, are good. Manufacturing grade recognised in the market. Discussions are taking place
beef, offals and trim for processing into products for fast food government to government and in the event market access
chains and retail meat products offer very good short to long is granted for fruit product, significant opportunity exists for
term opportunities. Primary and secondary cuts of meat are Victorian exporters of table grapes, citrus and to a lesser
currently supplying niche high-end food service and retail extent stone fruit. Fruit is a very large part of the Filipino diet,
outlets. However over the medium to long term the demand particularly for special occasions.
for higher quality beef and lamb products can be expected to
grow with the enhanced modern retail offer and growing high-
end food service sector.

13. Conclusion
11
The Philippines is currently a good market for Victorian
agrifood exporters with the potential for growth in the
medium to long term. This potential will be achieved if the
fundamentals driving demand can outweigh the challenges
that the Philippines faces. The drivers of demand have
been the strong consistent economic growth (current global
financial crisis aside), continual economic and trade reform
(e.g. AANZFTA), political stability, strong domestic demand,
young population, the growing appetite for non-traditional
foods and a very strong food manufacturing sector. The
challenges include the maintenance of economic and political
stability, continual economic growth to alleviate poverty, poor
transport and cool chain infrastructure and corruption.
Currently major opportunities exist for agrifood commodities
such as dairy ingredients, wheat and meat. It is anticipated
that, for the foreseeable future, this demand will continue and
potentially, experience growth.
Filipinos have a growing demand for western style food
products and with sizeable exposure to multinational fast food
chains, high-end dining (for those who can afford it) and the
increasing presence of modern retailing and international
retailers, the demand for value added ready-to-eat and high
value fresh food products will develop.

14. Reference List
12
• Australian Department of Foreign Affairs and Trade (DFAT):
http://www.dfat.gov.au/geo/philippines/philippines_brief.
html
http://www.dfat.gov.au/trade/fta/asean/aanzfta/
http://www.dfat.gov.au/trade/fta/asean/aanzfta/factsheets/
index.html
• Department of Primary Industries Victoria (DPI); Food
and Fibre Report 2008, www.dpi.vic.gov.au
• Euromonitor International; Philippines Country Fact File:
www.euromonitor.com
• Google: http://images.google.com.au/
• Planet Retail; Grocery retailing in the Philippines:
www.planetretail.net/markets
• United States Central Intelligence Agency (CIA):
https://www.cia.gov/library/publications/the-world-
factbook/
• United States Department of Agriculture (USDA); GAIN
Reports RP8049, RP8015, RP8041, RP7064, RP8043:
http://www.fas.usda.gov/scriptsw/attacherep/default.asp
Packaging and labelling
• Bureau of Animal Industry (Department of Agriculture):
http://bai.da.gov.ph/baimainframe.html
• Bureau of Plant Industry (Department of Agriculture):
http://bpi.da.gov.ph/services.html
• Bureau of Food and Drugs (Department of Health):
http://www.bfad.gov.ph
• Bureau of Agriculture & Fisheries Product Standards
(Department of Agriculture):
http://www.bafps.da.gov.ph
Tariffs to ASEAN countries
• Department of Foreign Affairs and Trade:
http://www.dfat.gov.au/trade/fta/asean/aanzfta/
• Department of Foreign Affairs and Trade:
http://www.dfat.gov.au/trade/fta/asean/aanzfta/factsheets/
index.html