Foodservice Profile – Philippines

Macroeconomic profile and consumer trends

The Philippines is Canada's 17th largest export market of agricultural and seafood products, showing resilience in 2021 by reaching a record CA$565.4 million. Meanwhile, Canada is Philippines' 14th largest supplier of agricultural seafood products with a 2.0% market share (CA$ 431.9 million) in 2021.

The Philippine economic growth was significantly negatively impacted in 2020, mainly due to the COVID-19 pandemic and strict lockdown measures. However, the economy is forecast to remain one of the most dynamic in Asia Pacific over the long term. In April 2022, the Asian Development Bank forecasted the Philippine economy to grow by 6.0% in 2022 and will rise further by 6.3% in 2023 (Asian Development Bank, April 2022).

Rapid population expansion of 20.5% in the Philippines over 2022-2040 will be led by high, yet slowing, rates of natural increase. In contrast, Asia Pacific's population will expand by only 8.0% in the same period. When the population reaches 136.0 million in 2040, the Philippines will be the sixth largest country in the Asia Pacific region. With such a large population and rising incomes, the Philippines will become a progressively more attractive consumer market up to 2040.

Busy lifestyles and rising incomes encouraged Philippine consumers to eat out more often prior to the COVID-19 pandemic, but lockdown measures forced consumers to cook ay home. However, many became tired of their own cooking and sought out restaurant meals. According to a survey conducted in 2021, 68.0% of respondents cook or bake at home at least weekly, but 44% of respondents order food for takeaway or pick (Euromonitor International, September 2021).

The Philippines foodservice market

The Philippines was the fourth largest foodservice market within the Association of Southeast Asian Nations (ASEAN) region with a sales value of US$ 8.5 billion in 2021, behind Indonesia, Thailand, and Vietnam.

The Philippine foodservice sector has seen a sales value decrease of a CAGR of −7.1% between the period of 2016 to 2021. The COVID-19 pandemic related measures had a drastic negative impact on all categories of consumer foodservice in the Philippines. However, consumer foodservice in the Philippines is forecasted to see positive growth in value sales in 2022 and is expected to reach US$ 14.2 billion in 2026 (a CAGR of 10.8% from 2021 to 2026). This will be in part due to the continuous easing of COVID-19 related restrictions and to a desire to eat out again after two years of home seclusion. As Filipinos gradually return to the office, at least for part of the time, this will also help boost value sales in consumer foodservice as people are more likely to have lunch in a restaurant when spending the day at the office (Euromonitor International, March 2022)

In 2021, consumer foodservice through standalone was the Philippines' largest distribution channel by location with value sales of US$ 3.9 billion, representing a total share of 45.4% with a CAGR of −3.8% between the period of 2016-2021.The pandemic intensified the notion amongst consumers that an outdoor or al fresco setting was safer, to the benefit of standalone locations. With these beliefs, standalone locations became preferred by consumer foodservice players, as they allowed for more flexibility in terms of modifying the store and creating more open spaces (Euromonitor International, March 2022). Throughout the forecast period, more standalone outlets are expected to emerge in the Philippines. This will likely be a result of consumer foodservice players recognising the flexibility offered by such locations, especially in terms of operating hours, compatibility with alternative channels, and especially outdoor set up (Euromonitor International, March 2022).

Retail consumer foodservice was the second largest in value sales, totalling to US$ 3.4 billion, representing a total share of 39.4% with a CAGR of −9.3%. It is important to note that shopping centres also responded to consumer demand for outdoor dining spaces. As a result, consumer foodservice through retail was able to experience a slightly moderated decline in comparison to other locations (Euromonitor International, March 2022). Filipino's love for shopping centres is embedded in their culture, so once consumers feel safe again, consumer foodservice through retail will recover and will represent a higher contribution than standalone again by the end of the forecast period (Euromonitor International, March 2022).

Smaller foodservice channels include travel with value sales of US$ 602.8 million, followed by leisure (US$ 430.5 million), and lodging (US$ 261.0 million). With the aftermath of the pandemic, and the lessening of restrictions, all subsectors are expected to rebound and grow by a CAGR ranging from approximately 9.3-13.0% (2021-2026).

Limited-service restaurants (LSRs) were the largest category with a sales value of US$ 4.8 billion, which accounted to 56.2% of total consumer foodservice sales in 2021. LSRs is in general fared better amidst the COVID-19 pandemic than full-service restaurants and cafés/bars. Within the LSRs category, chicken restaurants held the largest sales, valued at US$ 2.3 billion, or 48.4% of sales within LSRs. This was followed by burger restaurants (US$ 881.1 million), bakery products restaurants (US$ 425.3 million) and Asian restaurants (US$ 400.9 million). Latin American restaurants experienced the most decline with a CAGR of −18.1% while convenience stores restaurants experienced the highest growth, with a CAGR of 1.3%. All LSRs are expected to experience growth from a range of 4.0-12.8% from 2021-2026.

Full-service restaurants (FSRs) were the Philippines' second largest category by foodservice sales with a sales value of US$ 1.5 billion or 17.1% of total sales in 2021. Within the FSRs sector, Asian restaurants represented the largest sales, valued at US$ 840.1 million or 57.7% of FSRs sales, followed by pizza restaurants at 17.5% (US$ 255.6 million), and North American restaurants at 15.6% (US$ 226.9 million). All categories under FSRs are expected to grow at a range between 8.1-18.8% from 2021-2026.

In 2021, Street stalls/kiosks were the Philippines' third largest subsector within the foodservice industry with a sales value of US$ 1.2 billion (14.0% of total sales). This subsector saw decreases in CAGR between 2016-2021 and are expected to rebound and experience growth with a CAGR of 10.6% from 2021-2026.

Foodservice: chain franchises versus independent operators

Chained foodservice operators dominated the foodservice industry in the Philippines with value sales of US$ 5.9 billion in 2021. However, it saw a decrease in growth rate of −2.4% from the sales value of US$ 6.6 billion in 2016. This was influenced by the effects of the pandemic crisis as operators were forced to close doors to eat-in customers and prescribe and implement more stringent health and hygiene processes to avoid the spread of infection. Chained operators are expected to rebound, with a CAGR of 10.6% during the period of 2021-2026.

In 2021, independent operators in the Philippines foodservice industry had a total value sale of US$2.6 billion with a CAGR of −14.1% (2016-2021) and an expected CAGR of 11.2% (2021-2026). Independent operators are expected to see strong growth as foodservice sales rebound following the pandemic crisis, experiencing greater growth in the next period (2021-2026) than chained operators, to reach US$ 4.5 billion by 2025.

In 2021, independent foodservice sales was US$ 2.6 billion, decreasing by a CAGR of −14.1% from US$ 5.6 billion in 2016. However, it is expected to bounce back in the next period 2021 to 2026, with an expected CAGR of 11.2% from a predicted US$ 3.0 billion in 2022 to US$ 4.5 billion in 2026. Independent full-Service restaurants were the largest independent operator category, with sales of US$ 891.2 million, representing 33.9% of total independent foodservice sales in 2021. This was followed by street stalls/kiosks, with a sales value of US$ 861.9 million, representing 32.8% of total sales, and cafés/bars with a sales value of US$ 769.3 million, representing 29.3% of total sales in 2021. All operators within independent foodservices experienced a negative CAGR from 2016-2021, attributed to the pandemic crisis, with cafés/bars being hit the hardest, suffering a decrease in CAGR of −17.2% from 2016-2021, while limited-Service restaurants suffered the least decrease by a CAGR of −10.3% from US$ 178.8 million in 2016 to US$ 103.8 million in 2021.

Within independent full-service restaurants, Asian restaurants held the largest foodservice sales, amounting to US$ 665.1 million or 74.6% of full-service restaurant sales in 2021. This was followed by North American restaurants, which held a 12.3% (US$ 109.6 million) sales share, and European restaurants, which held a 5.9% (US$ 53.0 million) sales share. European restaurants experienced the worst decrease with a CAGR of −16.6% from 2016 to 2021 while pizza restaurants experienced the least decrease with a CAGR of −5.2% for the same period. Asian and European restaurants are expected to experience the greatest growth in the next period with an expected CAGR of 19.4% and 13.2% respectively from 2021-2026.

Under independently operated cafés/bars, bars/pubs dominated foodservice sales despite the pandemic crisis, with sales valued at US$ 418.6 million, amounting to 54.4% of cafés/bar sales in 2021. Bars/pubs, however, saw the greatest decrease in sales growth as attributed to the pandemic and represented by a CAGR of −20.3% from 2016 to 2021. Cafés bars saw the second greatest decrease in growth with a CAGR of −12.4% during the same period.

For independently operated limited-service restaurants, pizza restaurants held the largest sales, valued at US$ 34.7 million or 33.4% of total limited-service restaurant sales in 2021. This is followed by other restaurants at 23.5% (US$ 24.4 million) of sales and burger services at 12.9% (US$ 13.4 million) of sales.

In 2021, chained foodservice sales amounted to US$ 5.9 billion, decreasing by a CAGR of −2.4% from US$ 6.6 billion in 2016. However, it is expected to bounce back in the next period 2021 to 2026, with an expected CAGR of 10.6% from a predicted US$ 5.9 billion in 2021 to US$ 9.7 billion in 2026. Limited-service restaurants were the largest chained operator category, with sales of US$ 4.7 billion, representing 79.5% of total chained foodservice sales in 2021. This was followed by full-service restaurants, with a sales value of US$ 565.5 million, representing 9.6% of total sales, and cafés/bars with a sales value of US$ 308.7 million, representing 5.3% of total sales in 2021. Most operators within chained foodservices experienced a negative CAGR from 2016-2021, attributed to the pandemic crisis, with full-service restaurants being hit the hardest, suffering a decrease in CAGR of −6.8% from 2016-2021.

Within chained limited-service restaurants, chicken restaurants held the largest foodservice sales, amounting to US$ 2.3 billion or 49.2% of limited-service restaurant sales in 2021. This was followed by burger products restaurants, which held a 18.6% (US$ 867.7 million) sales share, and bakery products restaurants, which held a 9.0% (US$ 421.4 million) sales share. Latin American restaurants experienced the worst decrease with a CAGR of −18.1% from 2016 to 2021 while convenience stores restaurants experienced a growth in CAGR of 1.3% for the same period. Other restaurants are expected to experience the greatest growth in the next period with an expected CAGR of 13.4% from 2021-2026.

Especially with the new online and cheaper franchising models, street stalls/kiosks were able to address the rising unemployment in the Philippines due to the pandemic. In fact, some Filipinos turned to franchises as an alternative source of income. Therefore, street stalls/kiosks was not only able to serve customers directly during the COVID-19 pandemic, but also address other needs of Filipinos, especially in terms of owning a business through franchising and dealerships (Euromonitor International, March 2022).

Foodservice channels

Although overall foodservice value sales and the number of transactions both considerably decreased in 2021 because of the pandemic, foodservice establishments continued to strengthen their digital presence, online sales and delivery services. In 2021, online foodservice sales grew from US$ 311.2 million in 2016 to US$ 1.8 billion in 2021 representing 20.9% of total foodservice sales and oversaw a growth in CAGR of 41.7% from 2016-2021. All subcategories experienced double digit growth in online sales during the period, with growth from a range of 34.3-97.6% from 2016-2021.Despite the extensive improvement in and focus on off-premises consumption channels, especially delivery, dine-in is still needed to be able to achieve pre-pandemic sales levels. Home delivery and take-out sales comprise only a small percentage for most restaurant types (Euromonitor International, March 2022 ), and there are currently no expectations of any self-service cafeterias entering the Philippines over the forecast period.

Although eat-in sales fell considerably as outlets were forced to close during the COVID-19 pandemic, sales through home delivery and to a lesser extent takeaways spiked as consumers looked online for obtaining meals. Many players, especially those in the street stalls/kiosks were able to quickly adapt to home delivery in order to meet customer demand in 2021.

In 2021, home delivery was the most popular service sub-channel with sales reaching US$ 2.9 billion or 34.6% of total foodservice sales, followed by takeaway at 33.3% (US$ 2.8 billion) of total sales and eat-in at 24.7% (US$ 2.1 billion) of total sales. Overall, foodservice sales decreased as a result to the global pandemic in the Philippines however drive-through experienced the fastest growth, with a CAGR of 20.1% between 2016-2021, as opposed to eat-in services which experienced the greatest decrease, with a CAGR of −23.1% during the same period. Eat-in is expected to rebound in the next period (2021-2026) with a CAGR of 30.0%.

Top 10 foodservice companies in the Philippines

In 2021, Jollibee Foods Corp was the Philippines' top food service company with value sales of US$ 2.5 billion, representing a 29.7% share of the foodservice market. Jollibee is particularly focused on remaining relevant to Millennial and Gen Z consumers, utilising technological innovations such as the touch-screen menu boards being installed at several outlets. The company also allowed customers to purchase products using a credit or debit card, or mobile payment. During 2021, the company focused on enhancing its delivery services both in-house and through third party operators, in addition to a drive-through channel (Euromonitor International, March 2022 )

McDonald's Corp was the second largest foodservice company with value sales of US$ 796.6 million, followed by Yum! Brands Inc (US$ 235.7 million), Seven & I Holdings Co Ltd (US$ 189.7 million), and Max's Group Inc (US$ 180.4 million). These top-five companies accounted for 46.2% of the total foodservice market in the Philippines.

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Resources

• Euromonitor International, 2022
• Euromonitor International, March 2022. Consumer foodservice in the Philippines
• Euromonitor International, March 2022. Consumer foodservice by location in the Philippines
• Euromonitor International, March 2022. Limited-service restaurants in the Philippines
• Euromonitor International, March 2022. Street stalls/kiosks in the Philippines
• Euromonitor International, March 2021. Economy, finance and trade: The Philippines
• Euromonitor International, September 2021. Consumer lifestyle in the Philippines
• Euromonitor International, (April 2022) PEST Analysis: The Philippines
• The Asian Development Bank (April  6, 2022) Stronger Domestic Demand to Fuel Philippine Economic Growth in 2022, 2023 — ADB

Foodservice Profile – Philippines
Global Analysis Report

Prepared by: Zhiduo Wang, Market Analyst

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