Transcript: East Asia Market Realities - The Philippines

Mica Guevera, NZTE Business Development Manager, The Philippines: Let me begin by asking you a question: who would like to gain a share of the $1 billion US market in the Philippines – show of hands, please? Thank you. I mean, just imagine 1 percent share of this pie. So for this morning I will take you through a journey of exploring the potential, as well as the challenges, of the Philippines F&B market and also how finding the right channel partner could help you gain a share of this market.

To begin with, the US is the largest exporter of Food and Beverage products in the Philippines. The Philippines is highly US-centric given our historical bias, which also influences our preference for Western food. I mean every typical Philippines family would have Spam, Pringles or Kellogg’s in their pantry. As you can see, almost 20 percent of the market is captured by the US. The top products that they export to the market are dairy, red meat, poultry, snacks, processed foods and vegetables. So wouldn’t it be nice to get some of this away from the US? And how? By finding the right product to the market. 

So now you might be wondering is there additional room for additional players to come in? Well, we’ve seen recent trends that are currently shaping the market that would allow additional players to come in. First, retailers are now moving beyond Metro Manila, which is the capital city. As you can see, the Philippines is an archipelago and composed of many islands, so growth and prosperity are now moving into the region, specifically Cebu. In Cebu we’ve seen a number of resorts and hotels that are setting up in this area; even back offices and call centres are also setting up the operations, which increase the purchasing power of the consumers that are living here. Devao is also considered as the next big city.

Another retail trend: Filipinos are now becoming health conscious. As of the moment there are currently 6 million Filipinos that are afflicted with diabetes. In fact, the Philippines government recently passed a law which increases the taxes on sugar, sweet and beverages, which encourages Filipinos to make more healthier lifestyle choices. 

Another growth area, the Philippines is now considered the 10th fastest growing food service market. One of our fast-food chains, locally known as Jollibee, has just opened their one-thousandth branch in the Philippines. This is mainly because of the rising numbers of dual income families, as well as the increasing amount of overseas foreign workers’ remittances averaging about $31 billion every year which increases the disposable income in the Philippines economy. 

So given these opportunities, finding the right channel partner in the market greatly increases the opportunity for market access and success. So how do we go about this journey? First, you must have a clear understanding of where you want to be positioned in the market. Do I want to go in retail? Do I want to be in food service or do I want to supply to the manufacturing sector? Do I value margins? Or do I value volume? 

So, for example, a typical retail New Zealand product would normally come in as a premium item in the Philippines so they will be introduced in premium supermarkets and then you will need to find a distributor that caters to these channels so finding the right channel is also important in your search for distributors.

Now to begin your search you must consider three things. First, you must check the experience of your distributor in the sector. Because they will be responsible for registering your products, they would know how to leverage on zero-rated tariff, they know the local regulations, they would know what storage conditions that their products would need, they also would know your competitors and basically how to distribute to their network. 

Second, you must check the geographical sales area. As mentioned earlier we’re developing more big cities so they need to be strategically positioned in these regions as well. And third, and most important, be patient. Finding the right distributor is like finding a life partner so you must visit the market several times, you must be able to sell your unique selling proposition to your distributor first before they can sell it to your end-users so you must be able to communicate with them what you really want to introduce in the market because it’s never enough that you will just say to them that I want to sell this product because it’s premium, it’s from New Zealand. 

You can just imagine the number of foreign companies that approach these distributors every day so you must be able to woo and wow them at the same time so you’ll be able to stand out because what are the consequences going with the wrong distributor? You will need to pull out your products in the market, you need to position again, you need to introduce the product again and you need to register the products again which could be cumbersome in the long-term. 

And finally, the most important in finding your suitable distributor is relationship-building. It is never enough that your products are already on the shelves. You must show that you are committed in developing your brand. You must also be prepared to invest in your brand in the market. You must be able to establish trust and commitment because your distributor holds strategic information about the market. They know your sales channels, they know your competitors, they know the right distribution channels for you, so you must have an open relationship to be able to put together a good strategy for your products on the market. 

An ideal New Zealand local distributor relationship would be you still visit the market several times a year, find out what’s happening with your products, work on a strategy, a marketing or a digital strategy and then support your distributor in implementing these strategies.

So what are the current challenges that you find in the market? Price sensitivity: so you must be able to speak to your distributors on what would be the proper positioning of your products in the market. The market is price-sensitive so you must be able to also be flexible in adjusting your packaging that suits the snacking consumption of the Filipinos, not only because they want smaller ... they want lower prices but also they want convenience. So these are the things that you should be able to be prepared when talking to the distributors in market. 

So in summary, finding the right distributor could be a complex and daunting task in the market but just remember the three things that I mentioned: first, find your positioning in the market; second, find the distributor that matches your needs, find someone who shares the same values and vision as you are; and third, grow with your distributor because they are your company’s extension in the market. As you may know, NZTE is here to help you make these key choices.