THE Philippine baking industry’s retail sales are expected to grow 5% a year to $2.5 billion by 2027, according to the US Department of Agriculture (USDA).
“Driven by moderate inflation, population growth, and urbanization, the value is expected to grow at a compound annual growth rate (CAGR) of 5%, reaching $2.5 billion by 2027,” the USDA said in a report.
Headline inflation in June slowed to 5.4% from 6.1% in May, the lowest level in 14 months, which the Philippine Statistics Authority attributed to easing food and transport prices.
“This presents an excellent opportunity for US exporters of baking ingredients to enter the market, maximize promotions, and constantly introduce new products,” the USDA said.
The USDA tracks agricultural developments in other countries as a service to its farmers, who are major food exporters.
Its estimate for baked goods sales in the Philippines last year was $1.9 billion.
In 2022, Philippine bakers spent roughly $1.5 billion on ingredients, with 77% or $1.2 billion being imported. The US accounted for about $845 million of those ingredients.
“Traders believe the US is well-positioned to increase its exports of baking ingredients to the Philippines in the coming years by leveraging the Filipino consumer’s general preference for high-quality US-origin products” it said.
Of the bakery ingredients, flour accounted for 50%, while add-in ingredients such as fruits, nuts, and chocolate accounted for 15%.
Dairy products, eggs, sugar and sweeteners made up 9% each. The remaining 8% consisted of oils, shortening, yeast, baking powder, and flavorings.
According to the USDA, exports of milling wheat to the Philippines rose at a CAGR of 11% to nearly $1.3 billion in the five years to 2022. The US accounted for 78% of the Philippine market for imported wheat.
In terms of finished product imports, the Philippine baking industry was estimated to have used imported wheat flour worth $8 million, followed by mixes and doughs ($11 million), dairy products ($100 million), egg products (roughly $4.5 million), sugar and sweeteners ($135 million), leavening agents ($20 million), and flavorings ($8 million).
“Consumers are feeling the impact of an ongoing sugar crisis, as the current prices of baked goods have increased by at least 6% when compared to prices in June 2022,” the USDA said.
“Low- to middle-income consumers have reduced their consumption of baked goods or have turned to cheaper alternatives,” it added.
Imported baking add-on ingredients totaled $32 million while another $20 million worth of add-ons were sourced locally, including bananas, cassava, coconuts, mangoes, mung beans, pineapples, and purple yam.
The USDA said that the supply and quality of local products have been affected due to “poor post-harvest capacity, lack of robust cold chain infrastructure, and high transportation cost.” This has opened opportunities for US exports to present a wide variety of baking add-on ingredients.
Despite “strong competition due to a tariff disadvantage,” the USDA said Philippine bakers prefer products from the US “due to their superior quality and availability.” — Sheldeen Joy Talavera