Food manufacturing including food and beverage processing remains as the Philippines’ most dominant industry in manufacturing accounting for 40.1% of total output. The industry represents a gross value added of more than $2.0 Billion and grew by 3.2% in 2007.

Most of the companies are owned by single proprietors that is common among micro, cottage and small industries; but large local companies such as San Miguel Corporation, FRM Corporation and Universal Robina Corporation, with diversified product lines dominate the sector and compete with multinationals. Big multinational companies include Dole and Del Monte.

Changes in today’s lifestyle and dietary preference, along with improvement in socio-economic status has resulted in significant increase in demand for processed fruits and vegetables and beverage products, tropical fruit juices included.

Philippine tropical fruits include banana, pineapple, mango, calamansi (lime), papaya, guava, soursops (guyabano) and mandarin processed into purees and juices.

Market Opportunity

Increase in Crops Production

• From 2005-2007, fruit crop production increased at an average annual rate of 7.54%.

• Top 3 fruits crops produced in these years were banana (at 9% average annual growth rate), pineapple (at 6.3% average annual growth rate) and mango (at 2.4% average annual growth rate).

• Other fruit crops include calamansi, papaya and mandarin.

• Assuming that the 7.54% average annual growth rate is maintained, 2010 production of tropical fruit crops can be projected to reach 13,600,000 MT.

• Mindanao remains as the major source of Philippine tropical fruits with 87.20% of pineapples harvested in Northern Mindanao and SOCCSKSARGEN, and 78.72% of bananas harvested in Davao in 2007.

• Mango remains as Luzon’s main fruit crop accounting for 6.22% of the total harvest in 2007(43.37% was harvested in Ilocos region). Mindanao produced about 20.92% of the crop in the same year.

Projected Global Demand for Processed Tropical Fruits & Beverages

• Overseas demand for Philippine fruit purees and juices from 2005-2008 is increasing at an annual average rate of 4.44%World Demand for Philippine Tropical Fruit Juices

• From January to June 2009 alone, export proceeds amounted to US$45.98 Million, which is about 50% of the full 2007 exports. At this rate, full year 2009 exports can estimated to reach US$85.11 Million.

• If the same rate for overseas demand will be maintained, the Philippines will need additional capacity to supply around US$105.75 Million worth of trade in the sector in the next five (5) years. This translates to an estimated additional capacity of about 42,000 tons per year.

• Major export markets include USA, Canada, The Netherlands, Japan, Singapore, Australia, Hong Kong, New Zealand, Spain and Great Britain covering about 50% of export revenues.

• World demand for tropical beverages has been projected to grow by 1% per year from 1999-2010, while world net exports is placed at 0.9% per year mostly coming from developing economies.

-Demand from developing economies is projected at 1.6% per year.

-Demand from economies in transition is projected at 2.9% per year.

-Demand from industrialized countries is projected at 0.6% per year.

Other Areas for Investment/Collaboration

• Soursop (guyabano) juice, which is especially popular in Canada, has been found to be a health drink and favorite flavor for ice cream;

• Calamansi (lime) juice proven to be a popular fruit drink in Japan;

• New fruit juices mixes – coconut water mixed with other fruit juices;

• High-fiber product such as nata de coco (a coconut product) mixed with fruit purees and juices to increase dietary fiber content;

• Packaging and labeling;

• High-yielding and tested technologies for fruit processing;

• Equipment for dehydration, filtration, juice extraction, refrigeration, etc.

Philippine Advantage

Natural resources

-The Philippines is a market leader in canned pineapple and juice market being a major processor of tropical fruits.

-Abundance of variety of Philippine tropical fruits for processing that are generally cheaper during peak seasons.

-Suitability of climate and soil fertility to grow a wide variety of agricultural products.

Strong Support from Government/Industry Association

• Processed food that includes processed fruits and vegetables is one of the 10 revenue streams and given support by the government through designation of brand management teams to supervise the export of the promotion of the sector.

Presence of dynamic industry associations

• Philippine Food Processors and Exporters Organization, Inc. – focuses on planning, development and sourcing of raw materials, improvement of manufacturing efficiency and productivity, promotion of sound trade practices, among others.

• Philippine Exporters Confederation, Inc. – mandated to strengthen the country’s export industry through its export promotion and development programs.

Support industries/infrastructure

• Contract growing arrangement or supply agreement with framers is encouraged to ensure continuous supply of raw materials and to maximize volume of production as well as support framer’s growth.

• Availability of post-harvest facilities and other logistical support facilities.

Government Support

Enabling laws/policies

• Medium-Term Philippine Development Plan 2004-2010

-Development of about 300,000 hectares of new areas for high-volume crops production by 2010

• Medium-Term Agricultural Development Plan (MTADP)

• Agriculture and Fisheries Modernization Act (AFMA)

• Philippine Export Development Plan 2008-2010

• Region 10: Northern Mindanao Development Investment Plan 2005-2010

• Continuous provision of technical assistance from Food Development Center (FDC), the Bureau of Food and Drug (BFAD), the Philippine Association of Food Technologist (PAFT) and the academe.

Market/Technical/R&D support

• Research and Development support from the Department of Science and Technology (DOST), particularly the Philippine Council for Agriculture, Forestry and Natural Resources Research and Development (PCARRD) and Industrial Technology and Development Institute (ITDI)

Incentives

Fiscal

• 4 to 8 years Income Tax Holiday (ITH);

• Special 5% tax rate on gross income after the lapse of ITH (for Eco-zone locators);

• Tax and duty exemption in imported capital equipment (for Eco-zone locators); Duty-free importation of capital equipment (for BOI-registered firms under E.O. 528);

• Exemption from 12% input VAT on allowable local purchase of goods and services, e.g., communication charges (for Eco-zone locators);

• Additional deduction for labor expense.


Non-fiscal

• Unrestricted use of consigned equipment;

• Exemption from wharfage dues and export tax, duty, impost and fees;

• Employment of foreign nationals;

• Special Investors Resident Visa

Cost of Doing Business

Estimated Investment Cost

• US$255-848 per ton of processed fruit/ vegetable

Salaries and wages (per day)

• NCR – Php 345.oo

• Regions/Provinces – Php 202.00-255.00

Rentals, lease, acquisition (per month)

• Commercial space lease – US$2.0-9.0/ sq.m.

• Office space rental – NCR: US$1-12/ sq.m.; Regional/Provincial: US$5-6/ sq.m.

• Within an economic zone – lease of lots – US$0.40/ sq.m

-lease of buildings – US$1.0/sq.m.

Business Permits

• License to Operate and Product Registration from the Bureau of Food and Drugs (BFAD);

• Environmental Compliance Certificate from Environmental Management Bureau (EMB);

• Registration of Incorporation from the Securities and Exchange Commission (SEC).