biscuits in the philippines

BISCUITS IN THE PHILIPPINES

Euromonitor International

March 2013

B I S C U I T S I N T H E P H I L I P P I N E S P a s s p o r t I

© E u r o m o n i t o r I n t e r n a t i o n a l

LIST OF CONTENTS AND TABLES

Headlines ..................................................................................................................................... 1 Trends .......................................................................................................................................... 1 Competitive Landscape ................................................................................................................ 2 Prospects ..................................................................................................................................... 3 Category Data .............................................................................................................................. 4

Table 1 Sales of Biscuits by Category: Volume 2007-2012 ...................................... 4 Table 2 Sales of Biscuits by Category: Value 2007-2012 ......................................... 4 Table 3 Sales of Biscuits by Category: % Volume Growth 2007-2012 ...................... 4 Table 4 Sales of Biscuits by Category: % Value Growth 2007-2012 ......................... 5 Table 5 Biscuits Company Shares 2008-2012 .......................................................... 5 Table 6 Biscuits Brand Shares 2009-2012 ................................................................ 5 Table 7 Sales of Biscuits by Distribution Format: % Analysis 2007-2012 ................. 6 Table 8 Forecast Sales of Biscuits by Category: Volume 2012-2017 ........................ 7 Table 9 Forecast Sales of Biscuits by Category: Value 2012-2017 ........................... 7 Table 10 Forecast Sales of Biscuits by Category: % Volume Growth 2012-2017 ....... 7 Table 11 Forecast Sales of Biscuits by Category: % Value Growth 2012-2017 .......... 8

B I S C U I T S I N T H E P H I L I P P I N E S P a s s p o r t 1


BISCUITS IN THE PHILIPPINES

HEADLINES Volume and value sales of biscuits set to grow by 5% and 8%, respectively in 2012

Biscuits continues to gain shares from chocolate confectionery

Sandwich biscuits expected to post fastest volume growth of 6% in 2012

Average unit price set to post 3% increase in 2012

Monde Nissin Corp to lead a 34% value share in 2012

Biscuits volume and constant value sales expected to increase at CAGRs of 5% and 4%,

respectively over the forecast period

TRENDS Biscuits in the Philippines continues to compete with chocolate confectionery. Many

consumers continue to consume biscuits, usually chocolate-coated biscuits, as a cheaper

alternative to chocolate confectionery. Brands such as Choco Knots, Knick Knacks and

Cubee tend to steal shares from brands such as Kit Kat and Gandour. Consumers tend to

perceive biscuits as a cheaper snack alternative and better value for money compared to

chocolate confectionery in the Philippines.

The biscuit category had a healthy value growth in 2012, thanks to the stable economic

growth, increasing children and student population, new product launches, multimedia

advertisements and higher unit prices. This registered value growth, set to be 8% in 2012, is

the highest since the economic recession in 2009 owing to the better fiscal condition and

improved disposable income.

Sandwich biscuits is expected to experience the fastest volume growth of 6% in 2012. The

low price positioning and strong distribution through sari-sari stores of local brands such Jack

„n‟ Jill Cream-O and Bingo continue to drive the growth of sandwich biscuits. Sandwich

biscuits also tend to be a snack time favourites amongst both the young and old attributed to

the long heritage of brands such as Bingo and Rebisco.

The average unit price of biscuits is expected to post a 3% current value increase in 2012 due

to general inflation, increased cost of commodities and higher marketing costs. Biscuit

ingredients are mainly locally sourced and hence prices were able to stay competitive. The

average unit price growth was slightly higher than it was in 2011 despite more stable oil prices

in 2012.

In 2012, plain biscuits experienced the slowest volume growth at 2%. The lack of innovation

amongst plain biscuit manufacturers continues to make their brands lose out against

sandwich biscuits and filled biscuit brands, where manufacturers continually innovate

products and introduce new flavours. Cookies also experienced slow volume growth in 2012

at just above 2%. The cookies industry is dominated by Chips Delight and Chips Ahoy!. The

dominance of these two brands makes it difficult for new brands to enter the market and

hence limits the growth of cookies.

The impact of health and wellness continued to have a limited effect on biscuits. Most biscuit

brands face the difficulty of changing their image from something tasty to something healthy.

In addition, consumers who purchase biscuits do not tend to be very health conscious and

price tends to hold greater weight when it comes to consumer purchasing decisions. Savoury

biscuits and cracker brands have made the greatest effort to leverage on the health and



wellness trend. Starting in 2009, brands such as Sky Flakes and Rebisco have developed

savoury biscuits and crackers out of whole wheat to provide consumers with a healthier

alternative.

COMPETITIVE LANDSCAPE The Monde Nissin Corp is the leading biscuits brand manufacturer and is set to post a 34%

value share in 2012, thanks to its wide product portfolio, popularity of its brands and

continuous large investment on marketing and product innovation. The company had

numerous multimedia advertisements in 2012 with about seven different television

commercials promoting its various brands. Monde Nissin is one of the oldest manufacturers of

biscuits and is proven to be a producer of quality biscuit products. Its Sky Flakes brand is the

main driver of its growth and the major contributor of its value sales.

Being the leading manufacturer of chocolate-coated biscuits, second ranked Universal Robina

Corp registered the fastest value share growth in 2012 owing to the robust sales of its Jack 'n'

Jill brands. Its brands such as Choco Knots, Magic Flakes and Cream-O are all top

performers their respective markets. Universal Robina is a leader in innovation. Its brands are

also well advertised, enabling it to communicate the unique positioning or advantage of

particular brand. For example, the Jack 'n' Jill Magic competes with Sky Flakes by providing

more value for money, whilst the Jack 'n' Jill Cream-O is available in various flavours and is

significantly cheaper compared to its foreign brand counterpart, Oreo. Jack 'n' Jill Drewberry

is the first local biscuit with tasty and pasty fruity filling.

Biscuit manufacturers continue to focus on improving its distribution and providing consumers

with better value for money. Distribution through sari-sari stores continues to be an extremely

important channel for brands as it assists in penetrating less developed provinces in the

Philippines. Advertising was also heavily used amongst competitors to continuously remind

consumers of brand availability.

The top three biscuit companies in the Philippines are all domestically owned, namely Monde

Nissin, Universal Robina and Republic Biscuit Corp. Together they will comprise a 69% value

share in 2012. International players find it difficult to compete with these companies due to

their extensive distribution networks and low price positions. In addition, domestic companies

tend to have a better understanding of the local market.

Universal Robina‟s Jack „n‟ Jill Filled Stix Nutty Choco Delight was one of the products

launched in 2012. It is a chocolate-coated biscuit, filled with peanut butter. The brand uses a

low price positioning, with a suggested retail price of Ps6 per package. The brand‟s target

market is mainly children. The brand is able to compete both against biscuit brands and

chocolate confectionery brands. In 2012, the brand was mainly distributed through

hypermarkets and supermarkets.

Monde Nissin and Universal Robina were the most aggressive in advertising in 2012. Monde

Nissin launched several campaigns for its different biscuit brands. These included its “This is

your break” campaign for Sky Flakes. To compete, Universal Robina used famous celebrities

to endorse its brands in TV commercials and print advertisements. Both manufacturers tend

to compete for the same target market and needed to do aggressive marketing campaigns to

gain or retain their market share.

There have been no major trends for packaging innovation in the biscuits industry. The

majority of manufacturers continue to use smaller, single-serve flexible packaging, containing

2-4 biscuits. This tends to be the preferred packaging format as it allows consumers to

purchase products as needed and lesser cash layout is necessary when making a purchase.



Distribution also becomes easier when using this packaging as it allows manufacturers utilise

sari-sari stores.

Even in biscuits the standard and economy brands are the most saleable in the local market

due to their affordability and also because these brands are able to maintain quality. The

higher priced brands, though tasty, seldom achieve market leadership in various biscuit

categories mainly because they are less affordable, have a limited market niche and are

challenged by competition from cheaper biscuit products. In 2012, there was no private label

brand yet present within biscuits.

PROSPECTS Competition between chocolate confectionery and biscuits is likely to intensify because both

industries tend to target a similar market niche and use similar strategies to gain market

share. Over the forecast period, both industries will be driven by innovation to keep

consumers interested. Manufacturers are also likely to restrict unit price growth to stay

competitive.

Biscuits volume is expected to grow at a 5% CAGR over the forecast period, similar to what

was experienced over the review period. Growth is likely to continue to come from consumers

who purchase biscuits as a cheaper alternative to chocolate confectionery. Constant value

growth is estimated to reach a 4% CAGR, about twice what was experienced over the review

period. Higher average unit prices are expected to have the greatest effect on value growth

due to the movement to smaller pack sizes. Smaller packages tend to be more expensive

compared to larger packages when the price is compared in equal volumes.

Sandwich biscuits is likely to experience the fastest volume growth at a 7% CAGR over the

forecast period. Sales will be driven mainly by its low price points and an improvement in

distribution to provincial regions in the Philippines. As a result of this, plain biscuits and

cookies are likely to suffer; these are expected to register volume CAGRs of 2% and 3%,

respectively. The lack of innovation and the higher price position of brands in plain biscuits

and cookies are likely to make it difficult for them to compete with sandwich biscuits.

The average unit price of the biscuits is expected to decline at a constant value CAGR of -1%

due to stiffer competition. Leading manufacturers such as Monde Nissin and Universal Robina

are likely to use a lot of sales promotions to encourage purchases. The development of

cheaper local brands is also likely to keep average unit prices low.

The key distribution channels for biscuit products are likely to see negligible change over the

forecast period. Other grocery retailers is likely to contribute to a majority of the sales due to

the high dependence of manufacturers on using sari-sari stores to reach less developed

areas of the Philippines. Hypermarkets and supermarkets are also likely to continue to grow

due to the expansion of key grocery retailers such as SM, Puregold and Robinsons.

Marketing activities are likely to remain unchanged over the forecast period. TV commercials

and print advertisements should remain the main sources of information for consumers.

However, use of social networking site advertising and independent blog reviews is becoming

more prevalent. Manufacturers are also likely to continue using in-store sales promotions to

encourage impulse purchases amongst consumers.

Jack „n‟ Jill Filled Stix Nutty Choco Delight is likely to have limited growth over the forecast

period. The new development does not really have any distinct differentiation compared to its

competitors. There are numerous brands that compete for the same market that Jack „n‟ Jill

Filled Stix Nutty Choco Delight is targeting. In addition, it is likely that other manufacturers will

develop similar or better products in the future.



CATEGORY DATA

Table 1 Sales of Biscuits by Category: Volume 2007-2012

'000 tonnes 2007 2008 2009 2010 2011 2012 Savoury Biscuits and 48.2 50.7 53.2 55.7 58.5 61.5 Crackers Sweet Biscuits 59.7 63.4 66.0 68.9 72.0 75.3 - Chocolate Coated 4.5 4.8 4.9 5.1 5.3 5.5 Biscuits - Cookies 6.1 6.3 6.3 6.4 6.6 6.7 - Filled Biscuits 8.0 8.5 8.9 9.3 9.7 10.1 - Plain Biscuits 14.3 14.8 14.9 15.2 15.5 15.8 - Sandwich Biscuits 26.8 29.1 31.0 32.9 34.9 37.1 Biscuits 107.8 114.0 119.2 124.7 130.5 136.8

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

Table 2 Sales of Biscuits by Category: Value 2007-2012

Ps million 2007 2008 2009 2010 2011 2012 Savoury Biscuits and 6,628.1 7,125.3 7,517.1 7,968.2 8,605.6 9,337.1 Crackers Sweet Biscuits 10,815.9 11,766.1 12,521.3 13,387.0 14,300.7 15,349.0 - Chocolate Coated 1,352.2 1,494.1 1,583.8 1,670.9 1,771.2 1,886.3 Biscuits - Cookies 1,250.7 1,325.7 1,365.5 1,420.1 1,484.0 1,558.2 - Filled Biscuits 2,317.1 2,525.6 2,677.2 2,864.6 3,093.7 3,356.7 - Plain Biscuits 2,478.7 2,627.5 2,798.3 2,966.2 3,129.3 3,324.3 - Sandwich Biscuits 3,417.3 3,793.2 4,096.7 4,465.4 4,822.6 5,223.6 Biscuits 17,444.1 18,891.4 20,038.5 21,355.2 22,906.4 24,686.1


Table 3 Sales of Biscuits by Category: % Volume Growth 2007-2012

% volume growth 2011/12 2007-12 CAGR 2007/12 Total Savoury Biscuits and Crackers 5.1 5.0 27.7 Sweet Biscuits 4.5 4.8 26.1 - Chocolate Coated Biscuits 4.0 4.1 22.4 - Cookies 2.2 2.0 10.4 - Filled Biscuits 4.7 4.9 27.2 - Plain Biscuits 1.9 2.0 10.4 - Sandwich Biscuits 6.2 6.7 38.4 Biscuits 4.8 4.9 26.9




Table 4 Sales of Biscuits by Category: % Value Growth 2007-2012

% current value growth 2011/12 2007-12 CAGR 2007/12 Total Savoury Biscuits and Crackers 8.5 7.1 40.9 Sweet Biscuits 7.3 7.3 41.9 - Chocolate Coated Biscuits 6.5 6.9 39.5 - Cookies 5.0 4.5 24.6 - Filled Biscuits 8.5 7.7 44.9 - Plain Biscuits 6.2 6.0 34.1 - Sandwich Biscuits 8.3 8.9 52.9 Biscuits 7.8 7.2 41.5


Table 5 Biscuits Company Shares 2008-2012

% retail value rsp Company 2008 2009 2010 2011 2012 Monde Nissin Corp 29.6 32.5 33.3 33.5 33.6 Universal Robina Corp 21.2 22.1 23.2 24.0 24.9 Republic Biscuit Corp 10.3 10.6 10.9 10.8 10.8 Kraft Foods 5.1 5.4 6.1 6.2 6.2 (Philippines) Inc Grand Alphatech 3.3 3.3 3.2 3.1 3.0 International Corp Martinez & Co Inc, 3.6 3.2 3.0 2.8 2.8 Felicisimo Delfi Foods Philippines 2.4 2.5 2.6 2.6 2.6 Inc Campbell Soup Co 1.8 1.6 1.4 1.4 1.4 Commonwealth Foods Inc 1.1 1.1 1.0 1.0 1.0 Meiji Seika Kaisha Ltd 0.6 0.4 0.3 0.3 0.3 Loacker SpA, A 0.3 0.3 0.3 0.3 0.3 Kraft Foods Inc - 0.4 0.3 0.3 0.3 Croley Foods Mfg Corp 0.3 0.3 0.2 0.2 0.2 Meiji Holdings Co Ltd - 0.1 0.1 0.1 0.1 First Choice Food Corp 6.4 2.6 - - - Nestlé Philippines Inc - - - - - Metro Biscuit Corp - - - - - Others 13.9 13.7 13.9 13.3 12.7 Total 100.0 100.0 100.0 100.0 100.0


Table 6 Biscuits Brand Shares 2009-2012

% retail value rsp Brand Company 2009 2010 2011 2012 Jack 'n' Jill Universal Robina Corp 22.1 23.2 24.0 24.9 Sky Flakes Monde Nissin Corp 16.5 17.2 17.5 17.6 Rebisco Republic Biscuit Corp 8.7 8.8 8.8 8.7



Eggnog Monde Nissin Corp 4.7 4.7 4.6 4.5 Bingo Monde Nissin Corp 3.6 3.8 3.9 4.0 Fita Monde Nissin Corp 3.5 3.5 3.6 3.6 Oreo Kraft Foods 2.8 2.9 3.0 3.0 (Philippines) Inc Chips Delight Grand Alphatech 3.3 3.2 3.1 3.0 International Corp La Pacita Martinez & Co Inc, 3.2 3.0 2.8 2.8 Felicisimo Knick Knacks Delfi Foods Philippines 2.5 2.6 2.6 2.6 Inc Cubee Monde Nissin Corp 2.4 2.5 2.4 2.4 Frooteez Republic Biscuit Corp 1.9 2.0 2.1 2.1 Tiger Kraft Foods 1.1 1.7 1.8 1.8 (Philippines) Inc Chips Ahoy! Kraft Foods 1.4 1.4 1.4 1.4 (Philippines) Inc Arnott's Campbell Soup Co 1.6 1.4 1.4 1.4 Fibisco Commonwealth Foods Inc 1.1 1.0 1.0 1.0 MY San Grahams Monde Nissin Corp 1.0 1.0 1.0 0.9 Hello Panda Meiji Seika Kaisha Ltd 0.4 0.3 0.3 0.3 Loacker Loacker SpA, A 0.3 0.3 0.3 0.3 Ritz Kraft Foods Inc 0.4 0.3 0.3 0.3 Sunflower Croley Foods Mfg Corp 0.3 0.2 0.2 0.2 Yan Yan Meiji Holdings Co Ltd 0.1 0.1 0.1 0.1 BluSkies First Choice Food Corp 2.6 - - - Nabisco Kraft Foods - - - - (Philippines) Inc Ritz Kraft Foods - - - - (Philippines) Inc Yan Yan Meiji Seika Kaisha Ltd - - - - Marie Metro Biscuit Corp - - - - Nuggets Monde Nissin Corp - - - - Knick Knacks Nestlé Philippines Inc - - - - Others 14.4 14.7 13.9 13.3 Total 100.0 100.0 100.0 100.0


Table 7 Sales of Biscuits by Distribution Format: % Analysis 2007-2012

% retail value rsp 2007 2008 2009 2010 2011 2012 Store-Based Retailing 100.0 100.0 100.0 100.0 100.0 100.0 - Grocery Retailers 97.5 97.5 97.3 97.5 97.3 97.1 -- Supermarkets 19.2 19.5 19.5 20.3 20.5 20.7 -- Hypermarkets 1.8 2.0 2.2 2.6 2.8 3.0 -- Discounters - - - - - - -- Small Grocery 8.1 7.9 7.6 6.9 6.8 6.7 Retailers --- Convenience Stores 0.5 0.5 0.5 0.5 0.5 0.5 --- Independent Small 7.0 6.8 6.5 5.8 5.6 5.4 Grocers --- Forecourt Retailers 0.6 0.6 0.6 0.6 0.7 0.8 -- Other Grocery 68.4 68.1 68.0 67.7 67.2 66.7 Retailers - Non-Grocery Retailers 2.5 2.5 2.7 2.5 2.7 2.9 -- Health and Beauty 2.5 2.5 2.7 2.5 2.7 2.9



Retailers -- Other Non-Grocery - - - - - - Retailers Non-Store Retailing - - - - - - - Vending - - - - - - - Homeshopping - - - - - - - Internet Retailing - - - - - - - Direct Selling - - - - - - Total 100.0 100.0 100.0 100.0 100.0 100.0


Table 8 Forecast Sales of Biscuits by Category: Volume 2012-2017

'000 tonnes 2012 2013 2014 2015 2016 2017 Savoury Biscuits and 61.5 64.4 67.3 70.2 73.0 75.7 Crackers Sweet Biscuits 75.3 78.8 82.6 86.8 91.3 96.2 - Chocolate Coated 5.5 5.8 6.0 6.3 6.5 6.8 Biscuits - Cookies 6.7 6.9 7.0 7.2 7.4 7.7 - Filled Biscuits 10.1 10.6 11.2 11.8 12.5 13.3 - Plain Biscuits 15.8 16.1 16.4 16.8 17.2 17.6 - Sandwich Biscuits 37.1 39.4 41.9 44.7 47.6 50.8 Biscuits 136.8 143.2 149.9 157.0 164.3 171.9

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

Table 9 Forecast Sales of Biscuits by Category: Value 2012-2017

Ps million 2012 2013 2014 2015 2016 2017 Savoury Biscuits and 9,337.1 9,710.6 10,069.9 10,422.3 10,735.0 11,024.8 Crackers Sweet Biscuits 15,349.0 15,884.4 16,511.4 17,229.5 18,053.3 19,005.9 - Chocolate Coated 1,886.3 1,948.5 2,016.7 2,091.3 2,172.9 2,262.0 Biscuits - Cookies 1,558.2 1,577.7 1,608.0 1,646.7 1,694.2 1,760.0 - Filled Biscuits 3,356.7 3,517.8 3,721.8 3,971.2 4,277.0 4,649.0 - Plain Biscuits 3,324.3 3,397.4 3,482.4 3,576.4 3,680.1 3,794.2 - Sandwich Biscuits 5,223.6 5,443.0 5,682.5 5,943.8 6,229.2 6,540.6 Biscuits 24,686.1 25,595.0 26,581.3 27,651.8 28,788.3 30,030.7


Table 10 Forecast Sales of Biscuits by Category: % Volume Growth 2012-2017

% volume growth 2016/17 2012-17 CAGR 2012/17 Total Savoury Biscuits and Crackers 3.7 4.2 23.1 Sweet Biscuits 5.4 5.0 27.8



- Chocolate Coated Biscuits 4.5 4.3 23.4 - Cookies 3.1 2.7 14.4 - Filled Biscuits 6.1 5.6 31.1 - Plain Biscuits 2.4 2.2 11.4 - Sandwich Biscuits 6.7 6.5 36.9 Biscuits 4.6 4.7 25.7


Table 11 Forecast Sales of Biscuits by Category: % Value Growth 2012-2017

% constant value growth 2012-17 CAGR 2012/17 TOTAL Savoury Biscuits and Crackers 3.4 18.1 Sweet Biscuits 4.4 23.8 - Chocolate Coated Biscuits 3.7 19.9 - Cookies 2.5 13.0 - Filled Biscuits 6.7 38.5 - Plain Biscuits 2.7 14.1 - Sandwich Biscuits 4.6 25.2 Biscuits 4.0 21.7


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