GLOBAL TRENDS IN FOOD AND CONSUMPTION

Income Patterns

The changing income patterns of consumers are expected to affect consumption

particularly in developing countries as income gets higher. There is also an observed
global trend that as income levels rise; subsequent shift towards greater consumption of
processed products will result. Furthermore, it is predicted that per capita consumption
of meats, dairy and fish products will continue to rise in developing countries up to the
year 2030. Trade in processed foods is expected to grow faster than trade in agricultural
commodities as consumer tastes widen. At low income levels, cereals and basic
packaged foods tend to be consumed most. At high income levels, fresh and healthy
products and foods processed for convenience are favored.

Competition

A sector with numerous, small-scale, family-owned enterprises will coexist

alongside a large-scale, modern technological-intensive sector. Traditional local brands
may become national ones and compete with global brands of multinational companies.

Demand

Consumers are demanding fresher, healthier and more nutritious foods. Whatever
the level of processing, consumers want products with flavor that contain quality and
nutritious ingredients. Increased consumer awareness of product and ingredient origins is
driving growth for minimally-processed foods. Food quality and safety issues are
becoming more important to consumers. This has triggered developments leading to an
increased application of quality assurance program to ensure product traceability and
safety.

In the case of the Philippine market, growing health awareness among Filipinos
has made them more conscious of their fat and sodium intake. Food items labeled as low
fat and low sodium have started to gain a stronger presence in retail outlets. Food
fortified with Vitamin A, iron and iodine is likewise making an impact among Filipinos.

The Western culture greatly affects the eating habits of Filipinos especially those
in the urban areas. Most of these urban dwellers were opting for food that is convenient
to prepare. The hurried lifestyle has resulted to less time for food preparation, thus,
affecting their eating habits and food choices.

Asian Americans represent the fastest-growing segment of the U.S. population, according
to Promar International. Six major nationalities comprise 85% of the Asian population in
the U.S.: Chinese, Filipino, Indian, Japanese, Korean and Vietnamese. Of these, Chinese
form the largest group, followed by Filipinos, while Vietnamese Americans are the
fastest-growing and most recent group addition. The Asian American population will
continue to grow, increasing one percentage point to 5% of the U.S. population in 2010.

As Americans increasingly become educated about Asian cuisines beyond Chinese and
Japanese foods, they are exploring a greater variety of Asian foods and ingredients. Due
to factors such as widespread Asian immigration to the U.S., an increased number of
Americans traveling to Asia, and a significant number of new Asian restaurants opening,
the demand for Asian food is growing rapidly. These distinctive cuisines are defined by
diverse cooking methods and the use of exotic spices and sauces.

While it has been a gradual process, American consumers are finding some exotic Asian
ingredients on their grocery store shelves and trying them. One such vegetable is ginger,
which is gaining popularity here with its widespread use in sauces, salad dressings and
beverages.

Packaging

Various product categories in the market nowadays seem to be getting smaller,

sleeker and more sensational. Marketing gurus termed this strategy as micro-selling or
affordable sachet marketing. This move is not more of a fashion statement but more of
serving up products and services in smaller and lighter portions, sizes and versions.

Sachet marketing started in early 1990s in developed countries such as Japan,

Europe, USA and Australia. Recently, this trend is up and seen in most Asian countries.
Sachet marketing was developed for both aesthetic and practical reasons. Smaller
version is an indicative of some sense of minimalism yet sophisticated. By providing
low-cost versions of the actual product, more people can get to experience the brand
without having to pay too much.

Trade Barriers

Exports of food will continue to play a key role in the development paths of
ASEAN countries. ASEAN producers and governments will need to monitor increased
technical standards governing trade. It is likely to alter the international market for
ASEAN exports in many cases by increasing trade restrictions and in others by
generating demand for products which meet these new tougher standards.

Under the ASEAN Free Trade Area (AFTA) tariff barriers are lower. However, it
does not reflect greater liberalization since not all traded products are listed and therefore
not subject to commitments. Amongst the other ASEAN member economies, Thailand
maintains relatively high levels of tariff protection of key-traded products. Tariff levels in
Malaysia and Indonesia on most key-traded products are lower.
Industry Structure of Laing and Bikol Express

The Pasalubong Industry where laing and bikol express belong, comprises the
producers, manufacturers, traders, suppliers and buyers of exotic yet indigenous, native
products of a specific locality where production and sources of materials are abundant.

Five Forces Affecting the Industry

Threat of Entry

Pasalubong industry would normally start as a micro or small-scale enterprise

since the main raw materials used are home-grown. For exotic foods like laing and bikol
express, the sources of gabi, sili and alamang can be found anywhere in the area, making
them easy and cheap to produce. For a minimum capitalization of P10,000, a micro
enterprise can be developed. This, therefore, makes the industry vulnerable to potential
entrants.

Up to date, there is one established company (Moondish) commercially producing

laing and bikol express. However, several small-scale producers are trying to penetrate
the untapped market of the Moondish. Producers might still increase in number
depending on the growth of the industry and the ability to secure permits from BFAD.
Maintaining cost efficiency and establishing a regular market are the two most important
factors to survive in the industry.

Threat of Substitutes

Laing and bikol express are both native foods of Bicol region. These products are
what Bicol is known for. Hence, this speaks of the culture and tradition of Bicol.
Substitute products would mean a taste of a different culture.

Rivalry among Existing Competition

Competition of differentiated products like laing and bikol express lies on price
and quality. There is no clear vision of competition in the industry since only one brand is
seen in the market. Other small producers are not yet fully commercializing their brands
because production is by orders. In addition, they cater to a different market segment.
Moondish is targeting the ABC consumers while small producers are concentrating on
local and foreign tourist and export market.

Bargaining Power of Customers

The pasalubong industry covers a wide range of products from different localities.
The bargaining power of consumers is high for two reasons. One, the products are highly
differentiated indigenous processed food. Choosing laing and bikol express over other
pasalubong products depends on the food preference of the buyer. Two, the products
have elastic demand because they are not a basic need. Pasalubong products are sought
after all basic products have been bought. Buyers are price sensitive to products they do
not usually buy.

Institutional buyers would normally negotiate for better deals, better terms, better
concessions. If this would be sold in malls and supermarkets, they would only enjoy
small margins. That is why suppliers have to bear the costs for promotion and
merchandising especially if the product is in the introductory stage of its life cycle.

Brand preference plays a key role in selecting a product. Well-known brands

enjoy a higher status than unknown brands as they simply become weak alternative of the
other. Moondish enjoys market visibility because they have invested so much in
promotions. Other unknown brands remain to be unfamiliar and unavailable because
they have yet to establish their own market.

There is also a possible threat of backward integration for individual and

institutional buyers like hotels and restaurants. If they cannot haggle for a better price
and if attaining economies of scale could put them at risk, they can supply their own
requirements at a better cost.

Bargaining Power of Suppliers

The primary reason why native delicacies are produced is the abundance of raw
materials used in its production. Thus, there is not much problem in input sourcing.
Suppliers of gabi and sili can be found anywhere. Even backyard growers can be a
source of a regular supply. For alamang, there is yet no reported shortage of this aquatic
resource.

The bottling companies have a higher bargaining power than the firms because
they only comprise a very small percentage of buyers in the food sector.

Market Niche

The primary target market will be the balikbayans, local and foreign tourists and
the Filipino stores abroad.

The Balikbayans refers to Filipinos residing, studying and/or working abroad who
are temporarily staying in the Philippines for a short period of time. This market segment
craves for Filipino dishes which they could bring back abroad.