Module 15: ASEAN Food Production and Supply

Table of Contents

Activities

Activity 5

Read the article and answer the questions.

 

The ASEAN food industry

The food industry has emerged as one of the fastest growing industries in the ASEAN region over the past couple of years and is among the key strategic markets. At present the ASEAN food industry is at a nascent stage, with a market size of nearly US$200 billion, much of it is concentrated in the more developed economies of Indonesia, Thailand, the Philippines, Malaysia, and Singapore. The total packaged food and non-alcoholic beverages market in the five major ASEAN countries reached US$67.9 billion in 2011. Indonesia had the highest packaged food sales in the region, whereas Singapore had the highest per capita retail sales of packaged food and beverages.

In terms of investments; Private equity firm KKR & Co. has sealed its first deal in Indonesia to buy a 9.5% stake in PT Tiga Pilar Sejahtera Food Tbk. Indonesian food retailer Tiga Pilar Sejahtera Group, which owns several popular brands of Indonesian snack foods, including Taro dried fish and Gulas tamarind candy.  Also, global food and agriculture company Cargill has set aside nearly US$750 million to finance its business expansion in Indonesia, particularly in the food processing industry.

With the growing Muslim population and increasing awareness of the halal standard, the demand for halal products and services is expected to increase in Malaysia. The Malaysian government revealed their plans for a US$500 million (RM1.5 billion) private equity fund to focus on global opportunities in the halal industry. Investments will be made via Azka Capital, a Kuala Lumpur-based private equity advisory firm focused on halal industry initiatives.

In the cities and suburban areas of Southeast Asia today, Western influences in the form of fast-food restaurants are becoming more common. McDonalds, Wendy’s, Shakey’s Pizza, and Kentucky Fried Chicken are among the more common fast food chains that have penetrated Southeast Asia.

The main drivers behind the up-tick in market growth include

  • changing demographics which have a major impact on the development and variety of food products
  • increasing demand and changing consumer preferences
  • expansion of multinational retail and food service outlets
  • rapid urbanization, globalization, and economic development have also transformed the industry’s dynamics

Key Highlights

  • Food consumption in Thailand is forecast to increase 36% to US$ 50.86 billion by 2015, driven by the increasing spread of mass grocery retail, which is making higher priced goods available to a wider consumer base. Total food exports are expected to touch US$31 billion by the end of 2014, a 7% increase from the previous year, according to the Thai Chamber of Commerce.
  • The Indonesian food and beverage industry association estimated the total investment for the industry reached Rp 16 trillion (US$ 1.65 billion) in 2013 from Rp 15 trillion in 2012.
  • Singapore’s food and beverage (F&B) services industry contributed approximately SG$11.98 billion or 3.5% to the country’s total GDP in 2012.
  • Malaysia has a packaged foods industry worth US$5.5 billion in 2011, led by dried processed food, dairy, and bakery, and is forecast to grow to $5.9 billion by 2016.
  • Vietnam’s Ministry of Industry and Trade (MIT) indicated that there would be a significant increase of food consumption in Vietnam till 2016 with 5.1%/ year, which is forecasted to reach 29.5 billion USD. The food and beverage retail sector was estimated to be worth US$33.7 billion for 2011 and is expected to grow at a compound annual growth rate of 18.9% until 2014.

However, the most crucial challenges faced by this industry include

  • Shortage of food standardization laboratories that are necessary for the successful implementation of the ASEAN Economic Community (AEC’s) food standardization plan.
  • There is a shortage of sound, cost-effective methods for identifying specific food safety problems.
  • Specific food safety policies are either nonexistent, inadequate or of low priority in most of the ASEAN countries.
(Source: http://mergeralpha.com/articles/asean-food-industry/  retrieved 17/4/ 2014)
Question Answer

1. Which country in ASEAN had the highest packaged food sales in the region?

2. What kind of food business is becoming popular in the cities and suburban areas of South East Asia? Give examples.

3. Which country in ASEAN is the leader of  the Halal food industry?

4. What factors drive ASEAN food industry growth?

5. What is the prediction for food consumption in Thailand?

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