storage.googleapis.comstorage.googleapis.com/request-attachments... · Web viewIn 2012, the Board of Investments-Department of Trade and Industry (BOI-DTI)initiated the shaping

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1. INTRODUCTION

1.1 Rationale and Objectives

1.1.1 Rationale

In 2012, the Board of Investments-Department of Trade and Industry (BOI-DTI)initiated the shaping of stakeholder-crafted industry roadmaps. Theroadmaps served as inputs to the development of DTI’s national comprehensive industrial strategy and annual Investment Priorities Plan. The roadmaps were intended to be crafted and supported by the private sector and expected to be catalyzed and facilitated by the government in the implementation of the action plansespecially in policy intervention.

With the assistance of the Advancing Philippine Competitiveness (COMPETE) Project of the USAID, the DTI identified five food manufacture industries to develop roadmaps. One of the highlights of the updated Philippine Development Plan is the manufacturing sector wherein food manufacturing industry contributed about 40 percent of the sector’s total gross value added in 2013. “Thus, there is great potential in investing in agribusiness supply value chain including food manufacturing, which ranges from grains and sugar milling to meat and fish processing to processed fruits, coffee and cocoa. Much of food manufacturing has strong linkages with agriculture and fisheries sector for their raw materials for both the domestic and export markets” (Compete-USAID).

The condiments and sauces was one of the selected industries. Arapid industry appraisal on condiments and sauces was conducted in July 2014. This road map aims to create a vehicle for the condiments and sauces industry to adapt to change, specifically to explore the possibility of developing existing and new products where the country can be competitive.

1.1.2 Objectives

The major objective was to come up with a condiments and sauces industry roadmap that is market-driven, stakeholder-crafted, and inclusive. The specific objectives were to:

a) provide a situational assessment of the local condiments and sauces industry;

b) analyze the supply/value chain of fish sauce;

c) analyze determinants of global competitiveness in terms of technical parameters of production, price and cost faced by the condiments and sauces, specifically fish saucemanufacturers and stakeholders;

d) analyze market trends and prospects;

Philippine Condiments And Sauces: An Industry Roadmap 1

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e) set goals and strategies as well as plan targets towards a competitive and sustainable condiments and sauces industry; and

f) recommend strategic directions and action programs.

1.2 Data Sources and Methodology

1.2.1 Data Sources

Data were obtained from both primary and secondary sources. Primary data were gathered from interviews with selected industry players as baseline information on the industry.Interviews were conducted in Metro Manila and Laguna from June to September 2014. The respondents comprised of major condiments and sauces manufacturers, namely, Nutriasia, Inc., Tentay Food Sauces, Inc., Rufina Patis Factory, Marigold Commodities Corporation and Lorenzana Food Corporation.

For the global benchmarking, primary data were gathered through the study visit in Thailand. Meetings and key informant interviews were conducted with different stakeholders (Annex 2). The study visit was arranged through the Special Agriculture Representative, Agriculture Office, Philippine Embassy in Bangkok.

To validate the draft final report, an industry consultation with industry players was held on September 3, 2015 in BOI-DTI, Makati City. The activity was attended by 28 participants, comprising of condiments and sauces manufacturers and relevant government agencies (Annex 3).

Secondary data, on the other hand, were gathered from government institutions such as the Department of Trade and Industry, Food and Nutrition Research Institute, International Trade Centre-Trade Map Statistics, Philippine Statistics Authority, Thai Custom Department and internet searches.

1.2.2 Area Coverage

The study focused on Metro Manila, where major condiments and sauces manufacturers are situated.

In terms of international benchmarking, the study focused on fish sauce andlooked intoThailand, one of the leading fish sauceexporters in the region.


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1.2.3 Analytics

The study conducted various types of analyses from industry situationer to supply/value chain analysis, benchmarking, competitive analysis, market analysis, SWOT analysis and strategy setting and target planning1.

Industry Situationer is an assessment of the industry structure and performance. It consisted of the condiments and sauces industry definition, structure, key players and performance. The latter analyzed the industryacross several parameters such as demand, prices and trade.

Supply/Value Chain Analysis. A supply chain is a network of connected and interdependent organizations from suppliers to end-users. It includes input subsystem, production, processing, marketing and distribution including the logistics between each subsystem. The value chain is an off shoot supply chain management. Value chain analysis describes the activities within and around each subsystem and relates them to an analysis of the competitive strength of the industry. The ability to perform certain activities and manage the linkages between these activities is a source of competitive advantage.

The supply/value chain analysis discussed the supply chain segments and players in producing fish sauce, one of the identified condiment products with potential in the export market.It will evaluate the cost-build up along the supply chain, including margins. It also looked into the factors supporting growth of the industry particularly key and support industries and institutions.

Benchmarking Analysis is the search for and implementation of best practices. The analysis will utilize both quantitative and qualitative measures such as price, cost, quality, supply reliability. It will also look into the “relative position of competitiveness” of the country in the production and trade of fish sauce compared to Thailand.

Price Competitive Analysis. Price competitiveness of the fish sauce will be analyzed under an export and import trade regime. Under price competitiveness, price structure analysis will be used. It will involve analyzing the changes in prices from the final markets (i.e. usually reference or wholesale) to the plant level adjusted for internal costs such as transport, storage, marketing margins, hidden costs, etc. The derived wholesale price from world reference price (import/export parity price) will be then compared to actual wholesale prices in the domestic market under an import/export scenario. The local product is considered price competitive if the derived wholesale price from world reference price is greater than the domestic wholesale price.

1Discussions on Analytics were heavily drawn from the roadmaps developed for the Department of Agriculture


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Market Trends and Prospectsdetermine the attractiveness of the market both now and in the future. The changes in the market are significant as they are the source of new opportunities and threats. It discussed market trends in terms of consumption by type of product and export market potentials.

SWOT Analysis assesses the strengths (S), weaknesses (W), opportunities (O) and threats (T) involved in an industry. It identified the internal (SW) and external factors (OT) that are favorable and unfavorable in achieving the industry objectives. To help minimize the weaknesses and threats faced by the industry, an analysis of the SWOT is essential.

Strategy Setting and Target Planning. “The process of scenario planning begins with long discussion about how participants think that big shifts in society, economics, politics and technology might affect a particular issue. From this the group aims to draw up a list of priorities, including things that will have the most impact on the issue under discussion and those outcome is most uncertain. These priorities then form the basis for sketching out rough pictures of the future. Scenario planning draws a wide range of discipline and interests, including economics, psychology, politics and demographics”.2

2Hindle (2008)


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2. INDUSTRY SITUATIONER (WHERE ARE WE?)

2.1 Definition

The term condiment originates from the Latin condimentum and condere. It refers to "spice, seasoning, sauce" and “preserve, pickle, season,” respectively. Condiment production can be traced back in the early Romans, when garum and liquamen were made byfermenting fish in salt andother flavorings that paved the way of the thriving condiments industry.3At present, condiment is defined as something usually pungent, acid, salty or spicy added to or served with food to enhance its flavor or to give added flavor. It is an appetizing substance of natural origin.4The industry is classified by the 2009 Philippine Standard Industry Classification under the class code 1079 and 1020.

2.2 Structure

The local condiments industry can be broadly categorized into: sauces, seasonings and mixes. It covers a wide range of products for example ketchup, fish sauce, soy sauce, vinegar, salt, pepper, liquid seasoning, broth cubes, mayonnaise, mustard, pickles, sweet and sour sauce, chili, hot sauce, barbecue sauce, lechon sauce, garlic, ginger and calamansi. The majority of these condiments is used as seasoning, flavoring, dipping sauce, preservative, dressing, soup stock base and marinate.

Table 2.1. General Category of Condiments and Sauces Category Description

Sauces Liquid, cream of semi-solid form Served on or used in preparing dishesNot usually consumed by themselvesAll package types but normally in bottlesAdd flavor, moisture and visual appeal to another dish

Seasonings Liquid or dry form such as salt, spice, herbsSomething added in a sprinkle or a dashNormally packaged in glass or plastic bottles and plastic packsNot normally consumed by themselves

Mixes Prepared mix of ingredients in liquid, powder or granule formUsed as an additive to achieve desired tasteUsually in foil packsAllows user to cook dishes easily

3Garum was the name applied to best quality fish sauce. Liquamenseems originally to have been a slightly inferior product to garum but later employed generically for fish sauce. Although it enjoyed its greatest popularity in the Roman world, the sauce was earlier used by the Greeks. Fish Food from the Waters: Proceedings of the Oxford Symposium on Food and Cooking 1997 (1998).4 Merriam-Webster. Definition of condiment. Merriam-Webster Dictionary. Retrieved June 12, 2014


http://en.wikipedia.org/wiki/Liquamen

http://en.wikipedia.org/wiki/Garum

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Table 2.2. Commonly Used Local CondimentsCondiment Local Name Description

Broth cubes Dry condiment shaped in cubes and added to meals especially soup to add flavor; Comes in chicken, pork beef, fish and shrimp variants.

Chili/Garlic/Ginger Sili/Bawang/Luya Often added to soy sauce or vinegar and food to enhance taste

Crab paste Burong Talangka A Kapampangan delicacy from crab fat/roe sautéed with garlic, calamansi or vinegar and salt

Fish sauce/paste Patis/Bagoong Fermented salted fish prepared to liquid or pasty consistency; Available in premium quality and low grade

Hot sauce Chili mixed with salt and vinegarKetchup A reddish sauce from banana, tomato and

apple; Available in classic, original and sweet blends

Pickles Atsara/Ensalada/Buro Pickled or vinegared vegetables and fruit; Commonly applied to papaya, bitter gourd, eggplants, cucumber and green mangoes

Philippine lime Calamsani Often added to soy sauce or vinegar with chili

Lechon sauce Sauce for roast pork, chickenSour soup Sinigang Powdered mix with sour taste; Added in

soup and comes in different variants Soy sauce Toyo Fermented soybeans and roasted grain;

Comes in light and dark colored liquidSoy sauce and lime Toyomansi Soy sauce mixed with calamansi juiceSweet chilli sauce Sauce made of vinegar, water, sugar, salt,

red bell pepper, chilli and garlicVinegar Suka Fermented liquids from sugarcane,

coconut, nipa palm, malt, pineapple and rice; Available in several variants such as sinamak, sukang iloko and sukang puti

Source: Various websites5

In terms of local preference, the commonly used condiments of Filipinos are fish sauce, soy sauce, vinegar and ketchup. There are different variants to these condiments.

The manufacturers of condiments consist of international companies, local multinationals, local companies and backyard producers. There are 527 listed manufacturers of condiments and seasonings.6 Majority of the producers are situated in NCR, accounting for about 27 percent of total. Calabarzon and Davao regions followed contributing 14 percent and 10 percent to total, respectively.

5 Condiments and sauces company websites6Food and Drug Administration


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Table 2.3. Number of FDA Listed Condiments and Sauces Manufacturers by RegionRegion Number of Manufacturers

Philippines 527NCR 140CAR 6Ilocos Region 25Cagayan Valley 38Central Luzon 33Calabarzon 76Mimaropa 27Bicol Region 14Western Visayas 11Central Visayas 15Eastern Visayas 49Zamboanga Peninsula 6Northern Mindanao 6Davao Region 53Soccsksargen 19ARMM 7Caraga 2Source: Food and Drug Administration (FDA)

2.3Key Players

The condiments industry is characterized by the presence of many players. According to an industry player, there are about 1,000 manufacturers of condiments from listed international companies to unlisted backyard producers. The major local companies involved in the production of condiments include NutriAsia, Tentay Food Sauces, Inc., Rufina Patis Factory, Marigold Manufacturing Corporation, Lorenzana Food Corporation, Silver Swan Manufacturing Corporation, Piñakamasarap Corporation and HDR Food Corporation.

International brands with strong local presence include Del Monte, McCormick, Knorr (Unilever), Lee Kum Kee and Kikkoman. Other imported condiments brands include Bragg, Sinsin, Yamasa, Kimlan and Jin. Notably, Thailand has improved its local presence under brand names Tiparos, Pantai, Dee Thai, Tropical Harvest and Ang Sarap.


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Table 2.4. Condiment Companies and Brands, 2014Company Products/Brands

Fish Sauce

Soy Sauce

Vinegar RedSauces

Mixes

NutriAsia DatuPutiNelicom

DatuPuti DatuPuti UFC (tomato sauce, ketchup, hot sauce)Papa (ketchup)Jufran (ketchup, sweet chilli sauce, hot sauce)

UFC (meal mixes)

Tentay Food Sauces, Inc.

Tentay Tentay Tentay Tentay (chili sauce and ketchup)

Rufina Patis Factory

Rufina

Marigold Manufacturing Corporation

Mama Sita’s

Mama Sita’s

Mama Sita’s (hot sauce, sweet chili sauce, sweet and sour sauce, tomato sauce,spaghetii sauce,caldereta sauce, kare-kare sauce, pasta sauce and menudo sauce)

Mama Sita’s (soup, stews and spice)

Lorenzana Food Corporation

Lorins Lorins Lorins

Silver Swan Manufacturing Corporation

Silver Swan Silver SwanGolden SwanUnoLauriat

Silver Swan

Silver Swan (chilli sauce, hot sauce, ketchup)

Silver Swan (marinade)

Piñakamasarap Corporation

Marca Piña Marca Piña Marca Piña

HDR Foods Corporation

Mother’s Best

Mother’s Best

Mother’s Best

Mother’s Best (chilli sauce, ketchup, sweet

Mother’s Best (mixes and


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and sour sauce) marinade)

Chuanchow Soy and Canning

Carp Carp

Company Products/BrandsFish

SauceSoy

SauceVinegar Red

SaucesMixes

Hoc Guan Manufacturing Corporation

CoconutChiu Ching

Metro Shanghai Corporation

Shanghai

Sysu International Inc.

Clara Ole (tomato sauce and pasta sauce)

Clara Ole (marinade)

Ajinomoto Philippines Corporation

Ajinomoto. Aji-Shio, PorkSavor (mixes)

Lee Kum Kee Lee Kum Kee

Lee Kum Kee (sauces and marinade)

Kikkoman Corporation

Kikkoman Kikkoman (marinade)

Del Monte Philippines

Del Monte (ketchup, tomato sauce, pasta sauces)

McCormick Philippines, Inc.

McCormick (spices, mixes, marinade)

Unilever Philippines, Inc.

Knorr (mixes)


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ConAgra Foods, Inc

Hunt’s (ketchup, tomato sauce, pasta sauces)

Source: Company websites

Box 2.1. Selected Local Key Players in the Condiments and Sauces Industry7

Tentay Food Sauces, Inc. Established in 1946 at Navotas, Manila, Tentay remained as one of the leading soy sauce manufacturers in the Philippines. The strict quality control standards of the company has enabled it to successfully penetrate other countries that exercise strict food importation, analysis and testing particularly on food additives and preservatives. Currently, Tentay covers a wide range of sauces and condiments for a variety of uses from marinating, basting, and pouring to dipping namely -patis, soy sauce, calamansoy, spiced vinegar, sweet chili sauce, banana sauce, fishball sauce and all-purpose sauce.

Silver Swan Manufacturing Company, Inc. is one of the country's leading providers of high-quality condiments and food products such as its popular soy sauce and vinegar. Silver Swan continuously raises the bar of the condiments sector of the country through active involvement in research and innovation. At present, Silver Swan offers wide range of condiments such as Silver Swan Soy Sauce, Lauriat Soy Sauce, SukangPuti, Old English Sauce and Banana Ketchup.

NutriAsia. Famous for its DatuPuti Soy Sauce, Mang Tomas, UFC, Papa, Jufran, andMafran. NutriAsia continues to be one of the leading players in the local sauces and condiments market and is known for producing iconic Filipino brands that continue to be part of every Filipino home. NutriAsia has been in the condiments and sauces business for almost forty years, and still, its products remain viable in the local and global market.

Lorenzana Food Corporation started as a bagoong manufacturer in 1908 and was later incorporated to produce other condiments and sauce in 1972. Lorenzana is one of the more popular and experienced Filipino food manufacturers in the Philippines. It is known for its LorinsPatis, Lorins Chili Patis and fish sauce which are commonly used by the Filipino households.

Marigold Manufacturing Corporation is the fruit of Mama Sita’s zealous vision of bringing the flavors of the Philippine Islands to the world. Established in 1980 as a cottage industry, the

7Sources: Company websites, Hong Kong Trade Development Council and My Malabon


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company now has state-of-the-art facilities manufacturing mixes and sauces sold in several parts of the world. Caring for the welfare of the Filipino people and all her patrons worldwide, Mama Sita’s carries on the legacy of good taste and natural ingredients.

Rufina Patis Factory came into being in the kitchen of an enterprising housewife in 1900 which has become a byword in homes and restaurants over the years. As front runner in the fish sauce industry in the Philippines, it has continued to develop its product scientifically while maintaining rigid quality control. This dedication to quality has made it very popular not only locally but also abroad.

Piñakamasarap Corporation began in the late 1940s as a soy sauce producer. Under the brand name Marca Piña, it was known for its one of a kind soy sauce. From its humble beginning to the present, the company’s commitment to quality has yielded generations of Marca Piña devotees all throughout the different countries of the world. Today, Marca Piña Soy Sauce, Marca Piña Vinegar and Marca Piña Patis are sold in over 20 countries.

2.4Performance

This section discussed the performance of the Philippine condiment industry, specifically on the condiments commonly used by Filipinos such as fish sauce, soy sauce and vinegar. Performance is examined in terms of demand, prices and trade. Production data of the industry is sketchy.

2.4.1 Demand

The Filipino households spent PhP30.3 billion (B) for sauces, other spices and seasonings in 2012 from PhP18.1 B in 2000.8It increased y 4.1 percent per annum and declined by 0.62 percent annually, if inflation-adjusted.

Households from the NCR, Calabarzon and Central Luzon contributed the largest shares to the total national spending on sauces, other spices and seasonings, although the aggregate share has slightly dropped from 53 percent in 2000 to 52 percent in 2012. Meanwhile, the highest recorded growths in spending during the period were Western Visayas, Central Visayas, Davao Region and Soccsksargen with over six percent yearly.

Figure 2.1. Total Family Spending on Sauces, Spices and Seasonings, Philippines and Selected Regions, 2000-2012

82012 Family Income and Expenditures Survey (PSA). The latest FIES data is 2012.


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0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

Philippines NCR Central Luzon

Calabarzon Western Visayas

Central Visayas

Davao Region

PhP

mill

ion

2000 2003 2006 2009 2012

Source: Family Income and Expenditure Survey-National Statistics Office-Philippine Statistics Authority (FIES-NSO-PSA)

In 2012, sauces, condiments and culinary accounted for 68 percent (PhP20.5 B) of the total sauces, spices and seasonings spending. Among the sauces and condiments, soy sauce accounted for 22 percent (PhP6.8 B) of the total household expenditures. This was followed by ketchup at 17 percent (PhP5.1 B) and fish sauce, 5 percent (PhP1.5 B). Figure 2.2. Total Family Spending on Sauces, Condiments and Culinary by

Product Philippines, 2012

spices and culinary herbs 32%

soy sauce 22%

ketchup 17%

fish sauce

5%

others 24%

sauces, condiments and culinary

68%

Source: PSA

The total spending was suggestive of per capita consumption. Based on the last 2008 National Nutrition Survey conducted every four to five years, Calabarzon, Central Luzon and Davao Region had the highest per capita consumption of some common condiments used by households. It was also noted that ARMM recorded high consumptions of soy sauce and vinegar while Central Luzon and Calabarzon for fish sauce.

Table 2.5. Mean One-Day per Capita Consumption (gm) of Selected Condiments, 2008


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Region Fish Sauce Soy Sauce Vinegar Condiments/SpicesPhilippines 1 3 4 2NCR N 3 4 1CAR N 2 2 1Ilocos Region N 2 4 1Cagayan Valley N 3 5 1Central Luzon 2 3 5 2Calabarzon 1 4 4 3Mimaropa N 2 3 1Bicol Region N 2 2 2Western Visayas N 2 4 1Central Visayas N 3 4 1Eastern Visayas N 3 3 1Zamboanga Peninsula 0 3 4 1Northern Mindanao N 3 4 2Davao Region N 5 5 1Soccsksargen N 3 4 1ARMM 0 4 6 nCaraga 0 2 2 1N - negligibleSource: Food and Nutrition Research Institute-Department of Science and Technology

2.4.2 Prices

Among the commonly traded Asian condiments to the USA (key market) are soy sauce and fish sauce. Philippine soy sauce export prices to the US grewby2.6 percent per annum to US$1.32 per kg in 2014 from US$0.71 per kg in 2005. According to an industry player, besides Filipino stores, the Philippine condiments are now found in mainstream stores in the US like Safeway, Wal-Mart and Albertsons.

Figure 2.3. Export Prices (FOB) of Soy Sauce to USA, 2005-2014

-

0.20

0.40

0.60

0.80

1.00

1.20

1.40

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Expo

rt Pr

ice

(US$

/kg)

Source:PSA


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Meanwhile, the export prices of fish sauceincreased by 1.9 percent from 2005 to 2012. AverageFOB price of fish sauce from the Philippines to the US over the period was US$0.91 per kg.

Figure 2.4. Export Prices (FOB) of Fish Sauce, 2005-2012

0.75

0.80

0.85

0.90

0.95

1.00

1.05

2005 2006 2007 2008 2009 2010 2011 2012

Expo

rt P

rice

(US$

/kg)

Source: PSA

2.4.3 Trade

The country is a net importer of condiments and sauces. From 2005 to 2011, export volumes and values were generally upward, with growths of 15 percent and 18 percent per annum, respectively. In the next two years, exports fell but bounced back in2014 with volume reaching33,242tons valued at US$108M. In 2014, condiments and sauces exports contributed 0.04 percent to the country’s Gross Domestic Product.

On the other hand, Thailand, one of the country’s competitors, exported US$592M in the same year.

Figure 2.5. Exports of Condiments and Sauces, Philippines, 2005-2014


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-

20,000

40,000

60,000

80,000

100,000

120,000

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Valu

e (US

$ '0

00)

Volu

me (

tons

)Volume Value

Source: PSA

Volume-wise, the top four condiments and sauces – vinegar, soy sauce, ketchup and fish sauce accounted for 48 percent to total Philippine exports in 2014. The biggest contributor was ketchup (tomato and banana) accounting for 31percent of total, followed by soy sauce with 10 percent, vinegar with four percent, and fish sauce, three percent.

Figure 2.6. Condiments and Sauces Exports by Product, 2014Total: 33,242 tons


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Ketchup31%

Soy Sauce10%

Vinegar4%Fish Sauce

3%Chili Sauce

0.05%

Others52%

Source: PSA

The leading buyers in 2014 were USA with about 13,999tons (36 percent), United Arab Emirates with 4,241 tons (13 percent), Canada with 3,281 tons (10 percent), Saudi Arabia with 2,234 tons (six percent), and Australia with 1,919 tons (6 percent).

Figure 2.7. Leading Buyers of Sauces, Mixed Condiments and Mixed Seasonings, 2014Total: 33,242 tons

USA36%

UAE13%

Canada10%

Saudi Arabia6%

Australia6%

Others29%

Source: PSA

By contrast, imports significantly increased during 2005 to 2014which grew by 27 percent per year, on average, in quantity and 47 percent per year in value. Shipment was highest in 2012 at 61,183 tons valued at US$108.3 M. However, this significantly declined to 31,127 tons (US$47.9 M) in 2013 and recovered by 2014 to 50,753 tons (US$116 M).

Figure 2.8. Imports of Condiments and Sauces, Philippines, 2005-2014


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-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Valu

e (U

S$ '0

00)

Volu

me

(tons

)Volume Value

Source: PSA

Based PSA data, the highest average annual growth rates in imports from 2008 to 2012 were registered by chili sauce at 42 percent, ketchup at 13 percent and mixed condiments and mixed seasonings in retail containers, 5 percent. In 2014, percentage shares of import volumes consisted of mixed condiments and mixed seasonings (34 percent), tomato ketchup (10 percent), soy sauce (seven percent), fish sauce and vinegar (two percent each) and chili sauce (one percent).

Figure 2.9. Condiments and Sauces Imports by Product, 2014Total: 50,753 tons

Ketchup10%

Soya Sauce7%

Vinegar2%

Fish sauce2%

Chili sauce1%

Mixed condiments and mixed

seasonings34%

Others44%

Source: PSA

The major suppliers of condiments and sauces, volume-wise, in 2014 were China with 22,479 tons or 44 percent, Thailand with 13,312 tons or 26 percent, USA with 4,780 tons or nine percent, Singapore with 2,022 tons or four percent, and Malaysia with 1,345 tons or three percent.

Figure 2.10. Leading Suppliers of Sauces, Mixed Condiments and Mixed Seasonings, 2014


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Total: 50,753 tons

China44%

Thailand26%

USA9%

Singapore4%

Malaysia3%

Others14%

Source: PSA

3. SUPPLY/VALUE CHAIN ANALYSIS


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This section discusses the supply chain segment as well as the cost build-up in producing fish sauce, one of the identified condiment products with potential in the export market. It also presents the support industries and key institutions related to the condiments and sauces industry.

3.1Supply Chain Segments and Players

Along the supply chain, the segments are identified by players and their main functions.

Inputs. The players include input suppliers who consist of fishermen, importers, salt producers and packaging companies who sell inputs condiments specifically fish sauce manufacturers on cash or credit basis. The selling and purchasing offish, salt and packaging materials carried out.

Processing.Condiment manufacturersprocess condiments products such as fish sauce for sale toinstitutional and households markets. For fish sauce production, the activities in the plantinvolveraw material receiving, fish salting, fermentation, fish sauce extraction, bottling, labeling and packaging.

Logistics. The logistic providers offer services for transport and storage of inputs and condiment products.

Trading. The players include the processors, distributors and traders who distribute and market f fish sauce at the domestic and global markets.

Markets.This segment includes the domestic and internationalusers of condiments specifically fish sauce. The major buyersare institutional and household markets.

Table 3.1. Fish Sauce Supply Chain Segments, Players and Activities


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Supply Chain Segment

Inputs Processing Logistics Trading Market

Player Input suppliers- Fishermen/

Consolidators- Importers- SaltProducers- Packaging

Companies

Manufacturers/Processors

Logistics Providers (handling, transport and storage)

ExportersLocal DistributorsWholesalersRetailers

InstitutionalHousehold

Activity Engage in selling of fish sauce inputs such as:- Fish/fish extract- Salt- Packaging

materials

Processing and manufacturing of fish sauce; Involves the following activities: raw material receiving, fish salting, fermentation, fish sauce extraction, bottling, labeling and packaging.

Relate to handling, transport and storage of inputs and final product

Relate to distribution and marketing at the domestic and export markets

Buying of condiments for domestic use and for export


INPUTSUPPLY

PROCESSING TRADING MARKET

Input suppliersFishermen/ ConsolidatorsImportersSalt ProducersPackaging Companies

Manufacturers/Processors

- Exporters- Local Distributors- Wholesalers- Retailers

DOMESTIC

EXPORTS

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Figure 3.1. Stakeholders and Players along the Fish Sauce Supply Chain

Other Related Cross Cutting Segments

Philippine Condiments And Sauces: An Industry Roadmap

Statistics/Market Info:PSA; DTI; Private sector

Training/Tech Assistance:BFAR; TESDA ;LGU; NGO/PO; SCUs

Research, Dev’t& Extension: BFAR; BAR; LGU; SCUs

Policy Advocacy:DTI; DA-BFAR; Industry Association

21

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3.2Cost Build-up

Fish sauce is a condiment derived from fish that have been allowed to ferment. It is used in many Southeast Asian cooking to add saltiness to the dishes. The major raw materials arefish, water, and salt. The three ingredients are mixed into large vats to ferment. Different grades of the product are commonly produced.

Of the total cost, raw materials accounted for about 74 percent, of which fish made up 85 percent. The cost of packaging has the second biggest shareat around 24 percent. Other cost items such as labor and utilities contributed only1.5 and one percent, respectively.The costs of fish and salt were estimated at PhP25.00 and PhP4.00 per liter of fish sauce, respectively. Labor, utilities and packaging were computed at PhP0.60, PhP0.40 and PhP9.50 per liter, correspondingly. The total production cost was estimated at PhP40.00 per liter. At ex-plant price of PhP60.00 per liter, the processor’s margin is approximated at PhP20.00 per liter. Meanwhile, the domestic wholesale price is estimated at PhP64.50 per liter

Table 3.2.Estimated Total Cost and Ex-Plant Price of Fish Sauce (Special), 2014

Item Amount (PhP/liter) Amount (PhP/kg) Raw materials Fish 25.00 20.83 Salt 4.00 3.33 Others 0.50 0.42Labor 0.60 0.50Utilities (electricity, water) 0.40 0.33Packaging 9.50 7.92Total product cost 40.00 33.33Other costs and processor’s margin 20.00 16.67Estimated ex-plant price 60.00 50.00Domestic wholesale price 64.50 53.75

Source: Key Informant Interviews (KIIs)

3.3Support Industries

Among the support industries of condiments and sauces are the agriculture, fishing and packaging.

The condiments industry highly depends on the agriculture and fishery sector for its raw materials. The main raw materials from fishery include mackerel (alumahan), roundscad (galunggong), anchovies (dilis), sardines (tamban) and oysters while from crops are calamansi, chili, peanut, ube, guava, garlic, onion, tamarind and annatto (achuete).

At present, the manufacturers of condiments source inputs locally and abroad. There is a preference for manufacturers to buy local raw materials if


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reliability of supply is assured. The sourcing of local inputs generally takes place in various localities and depends on the cost and availability. In the case of fishery products, buying areas include Navotas, Mindoro, Bicol and Roxas. The purchasing is either direct or through consolidators.

The buying prices at the wholesale level of some regularly used fishes for condiments manufacture increased by 2.8 percent (dilis), 7.1 percent (galunggong) and 6.3 percent (tamban) from 2005 to 2014. But when adjusted for inflation, growths of wholesale prices over the period were relatively stagnant.

Figure 3.2. Wholesale Prices of Selected Fishes, Philippines, 2005-2014

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Source: PSA

Meanwhile, the farm gate prices of some condiments grew by 15.7 percent (garlic), 9.1 percent (native onion), 14.8 percent (black pepper) and 17.2 percent (red labuyo) during 2005 to 2014.

Figure 3.3. Farmgate Prices of Selected Condiments, Philippines, 2005-2014

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Source: PSAThe local sourcing of inputs such as garlic, onion, hot pepper, oysters and

calamansi is one of the issues of the condiment industry. Thus, it is one aspect


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which has been raised by players where government can assist. It was suggested by industry players in the condiments and sauces industry that the government organizes producers who can supply the required raw materials and then processors will purchase their products.

Another major input in the manufacture of fish sauce is packaging. The commonly used packaging materials for condiments and sauces are plastic or PET and glass bottles.Packaging sizes come in different sizes from 350 ml to 20 liters. Based on the 2010 Annual Survey of Philippine Business and Industry, there are about 290 establishments into manufacturing plastic articles for packing goods including boxes; 80 establishment into manufacture of other plastic including industrial; and nine into glass bottle production.

3.4Key Institutions and Programs

The key institutions in the condiments and sauces industry arethe Department of Agriculture, Department of Trade and Industry, Department of Health, Department of Science and Technology, Department of Interior and Local Government, Bureau of Customs and thePhilippine Statistics Authority. The functions of these key institutions related to condiments and sauces are as follows. The specific programs and services, if any, are presented in the benchmarking section.

Table 3.3. Key Institutions of the Condiments and Sauces Industry, PhilippinesINSTITUTIONS/

WORKING GROUPFUNCTIONS

RELATED CONDIMENTS AND SAUCES


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Department of Agriculture-High Value Crops Development Program and Bureau of Fisheries and Aquatic Resources

Promote the production, processing, marketing and distribution of high value crops such garlic and onion

Provide extensive development support services in all aspects of fisheries production, processing and marketing

Implement and inspect system for import and export of fishery products and fish processing establishments consistent with international standards to ensure product quality and safety

Develop value-added fishing products for domestic consumption and export

Department of Trade and Industry Assist and advance interests of stakeholders or target clients—investors or businessmen, exporters, SMEs, and Filipino consumers

Accreditation and issuance of certificates

Initiate the development of the condiments and sauces industry roadmap

Department of Health -Food and Drug Administration

Ensure the safety, efficacy or quality of foods, drugs and devices and cosmetics and other health products

Department of Science and Technology

Ensure that the technology to be transferred is appropriate to the needs of the end-users, an improved production process is also developed, better products are produced, production costs are reduced, and business operations attain a stable status.

Provide research and development assistance Department of Interior and Local Government

Establish and prescribe rules, regulations and other issuances implementing laws on public order and safety

Bureau of Customs Facilitate trade in a secured manner Philippine Statistics Authority Generate agriculture, fishery and general-purpose statistics

such as trade, production, prices, expenditure surveys, etc.Source: Agency websites

4. BENCHMARKING ANALYSIS


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This section covers global benchmarking. It evaluated the Philippines relative to Thailand in terms of performance, practices and policies. The analysis focused only on fish sauce, the commonly identified local condiment with a potential in the export market. Fish sauce, a staple in many Asian countries, has become recognizable in non-Asian countries for its presence in most popular Asian food. Since 1999, Asian cuisine is the fastest growing food globally.9 Production of fish sauce is also largely native in the region.

4.1. Performance

4.1.1. Production

Philippines. The fishes used as raw material for fish sauce are anchovies, mackerel, sardines and roundscad. In some cases, fish sauce manufacturers buy fish extracts instead of fermenting the fish.

From 2005 to 2014, production growths were relatively flat for most fishes used in fish sauce making except for sardine which grew by two percent per year. Most of the fish catches serve the wet markets.The FDA has 86 listed fish sauce manufacturers.No official data is available for fish sauce production.

Figure 4.1. Fish Production by Type, Philippines, 2005-2014

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Anchovies (Dilis)Indian mackerel (Alumahan)Indian sardines (Tamban)Roundscad (Galunggong)

Source: PSA

Thailand. Fish sauce from anchovy is mostly produced in the country. Anchovies are mainly caught from the Gulf of Thailand and the Andaman Sea. The buying of fish extracts to produce fish sauce is also done by some manufacturers.

Based on the Department of Fisheries (DOF) data, theanchovy production in marine capture declined by 2.5 percent from 144,100 tons in 2008 to 129,400 tons in 2012.The dwindling supply of anchovy is one of the present concerns of the fish

9Asian Food: The Fastest Growing Food in the World by Roberto Ferdman, Washington Post. February 3, 2015.


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sauce industry. In 2012, there were 64 fish sauce processing plants in Thailand producing 69.1 M kg of fish sauce. By 2013, fish sauce production totaled 66.7 M kg.

Comparative.The Philippinesuses a variety of fishes in fish sauce processing due to supply concerns. Thailand, on the contrary, mainly uses anchovy, which gives the best quality fish sauce in terms of taste, odor and color.It is a key producer and exporter of fish sauce while the Philippines is a minor producer and exporter. Thelatter exports only about three percent, on average, of former’s export volume.

4.1.2. Fishing Costs

Philippines. Processors buy fish in large tubs which can accommodate 50 kilogram of fish. For roundscad, the buying price varied from PhP300 to PhP600 per 50 kg (US$0.14 to US$0.27 per kg)10. The price of fish is usually low during months of April to June and September to October.

Thailand. The buying price of processors for the fish ranged from Baht (Bt) 10 to Bt13 per kg (US$0.30 to US$0.39 per kg)11. The trader/middleman normally has Bt1 for every kilogram (US$0.03 per kg). On average, the fisherman earned Bt1.5 to Bt2 per kg (US$0.04 to US$0.06 per kg). Of the total fish production cost, about 70 percent went to fuel and labor.

Comparative. The cost of fishing in Thailand is lower compared to the Philippines. The costs of fuel and labor largely accounted for the fishing cost in both countries.

4.1.3. Processing Costs

Philippines. The average cost in fish sauce manufacturing is PhP40 per kg (US$0.91 per kg). It is mainly comprised of raw materials (74 percent) of which fish accounted for 85 percent. It was followed by packaging (24 percent) and labor (1.5 percent) and utilities (one percent).

Thailand. Processors were not open to sharing information related to costs as the industry is highly competitive. According to industry players, average total production cost can be broken down into - fish (45 percent), packaging (30 percent) and labor, power and other costs (25 percent).

Processing cost was estimated using FOB price of fish sauce to USA of US$0.95 per kg. With the ex-plant price at US$0.90 per kg and assuming a 40 percent manufacturer’s mark-up, the processing cost is estimated at US$0.64 per kg (PhP28.00 per kg).

10 At PhP44/US111 At Bt33/US$1


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Comparative.The cost of processing fish sauce in Thailand is lower than the Philippines. The major processing cost components, i.e. fish and packaging materials are relatively cheaper in Thailand. In addition, there is a wider range of selection in terms of cost and quality of packaging materials in Thailand than in the Philippines.

4.1.4. Prices

Philippines. The USA is a key market for Asian fish sauce manufacturers. The country exported an average of 1,300 tons per year of fish sauce to USA since 2007. Philippine fish sauce export prices to the USA were relatively stable increasing by only 0.8 percent per annum, averaging US$0.89 per kg from 2005 to 2011. By 2012, it increased by 8.3 percent to US$1.00 per kg.

Figure 4.2. Fish Sauce: Export Prices (FOB) to USA by Country, 2005-2014

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Source of basic data: PSA(Philippines) and International Trade Centre-Trademap (Thailand)

Thailand. Official records showed that Thai prices grew by 4.1 percent per annum from US$0.69 per kg in 2005 to US$0.97 per kg in 2014. From 2005 to 2014, Thailand sold an average of 10,000 tons of fish sauce per year to USA.

Comparative.Fish sauce export prices to the USA were lower in Thailand than the Philippines except in 2011. Of the 21,250 tons (US$34.3 M) fish sauce bought by USA in 2014, Thailand contributed 77 percent while Philippine exports accounted for only four percent.

4.1.5. Domestic Consumption

Philippines. Fish sauce caters mainly the domestic market. Central Luzon has the highest per capita consumption based on the 2008 survey of FNRI. National per capita consumption was at 1 g per capita per day.


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Thailand. Domestic sales accounted for 90 percent of production. An estimated daily consumption of fish sauce is per day 30 ml.12

Comparative.Fish sauce is a staple in Thai cuisine compared to Filipino cooking. It is said to be the one key ingredient that is critical in preparing Thai food. Thus, daily consumption of fish sauce in Thailand is significantly higher compared to the Philippines.

4.1.6. Trade

4.1.6.1. Exports

Philippines. During 2005 to 2012, exports of fish sauce grew by 4.4 percent annually, volume-wise from 1,159 tons (US$1 M) in 2005 to 1,469 tons (US$1.5 M) in 2012. It significantly declined in 2013 reaching its lowest at 269 tons (US$0.8M) but recovered in 2014.

Export earnings averaged US$1.3 Mwherein 75 percent was sold to USA in 2014.The minor buyers includedCanada (13 percent), UAE (eight percent) and Saudi Arabia (two percent).

Thailand. The country is one of the biggest exporters of fish sauce in the world. Exports increased by 2.7 percent from 39.5 M kg (US$24 M) in 2005 to 49.1 M kg (US$48 M) in 2014.Its main marketsin volume-termswere USA(22 percent) and Myanmar (nine percent) in 2014. The other buyers included Malaysia (eight percent), Lao PDR (seven percent) and Australia (six percent).

Figure 4.3. Fish Sauce Exports by Country, 2005-2014

12Personal interview with Ms. WarachitSoonbonyarit of the Department of Fisheries (Thailand), May 2015.


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Source: PSA (Philippines) and International Trade Centre-Trademap (Thailand)

Comparative.Fish sauce is a long-time staple in Asian cooking but is gaining popularity outside Asia. Being a necessary ingredient in Asian food, it is internationally traded.Thailand is among the top exporters of fish sauce mainly to USA, Asia and Australia. The Philippines is a minor exporter of fish sauce serving non-Asian countries.

4.1.6.2. Imports

Philippines. Philippine imports continued to increase since 2005. In 2014, imports reached 811 tons(US$683,000) from only 103 tons(US$45,000) in 2005. Around 87 percent were bought from Thailand in 2014. The other sources included USA, Vietnam (five percent each) and Korea (two percent).

Thailand. Fish sauceimportation increased by 80 percent from US$23,000 in 2005 to US$255,000 in 2014.But more than halfwere mostly re-imports or fish sauce that were exported and were brought in for home use.13 Minimal amounts were bought from Vietnam.

Comparative.With the near zero Association of Southeast Asian Nations(ASEAN)tariff, fish sauce importation of the Philippines has significantly increased. Thailand, on the other hand, registered re-import activities.

Figure 4.4. Fish Sauce Imports by Country, 2005-2014

13Re-imports as defined in the glossary of ITC-Trademap


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Source: PSA (Philippines) and International Trade Centre-Trademap (Thailand)

4.1.7. Tariffs

Philippines.The tariff levels under the Normal Trade Relations (NTR) scheme, formerly Most Favored Nation, ranges from seven percent to 10 percent.Meanwhile, most ASEAN free trade agreements (FTAs)have reduced tariffs on condiments and sauces from four to two percent in 2015 except forthe ASEAN-India trade agreement which imposes a nine percent tariff for soya and seven percent for tomato ketchup and mustard. Majority of the import duties will be zero percent by 2018 to 2020.

Thailand.The country imposes a tariff rate of30 to 40 percentunder WTOfor condiments and sauces. On the other hand, Thailand implements a zero percent duty under all ASEAN Free Trade Agreements.

Meanwhile, the condiments and sauces bound for importto major markets use the following rates of duty:USA imposeszero to 7.5 percent under general or normal trade relations rates while special rates apply under special tariff treatment programs such as Generalized System of Preferences, North American FTA and USA-Australia FTA. In Canada, the duties range from three to 12.5 percent under the NTR while applicable preferential tariffs are from zero to 10 percent.

Comparative.The NTR tariffs on condiments and sauces of the Philippines are lower than Thailand. But the latter has already imposed zero percent duty under ASEAN FTAs. In the case of the Philippines, the import duties on sauces and condiments under ASEAN FTAs will be zero not later than 2020.

4.2. Practices


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4.2.1. Input Supply

Philippines. Fish sauce is a key flavoring, especially in the northern part of the country. It is mostly made from roundscad, sardines and mackerel given the limited supply of anchovy in the country. Fish are sourced from areas like Navotas, Mindoro and Bicol. It is also a practice of local processors to buy and use fish extracts for the production of fish sauce.

Thailand. Fish sauce is a traditional fish product in the country. It can be made from marine or freshwater fish. Anchovy of eight to 10 cm in length is the most popular marine fish used in fish sauce production. Fish sauce made from anchovy is typically produced in coastal provinces which cater both domestic and export markets. Some small to medium commercial scale fish sauce processors supply fish extracts to other processors and blended before selling. In some instances, the dwindling supply of anchovy was mentioned by processors. Also, the fish sellers prioritize other fish processors like those into drying.

Comparative.Thailand has the advantage in the production of fish sauce with the availability of local anchovy supply. Although fish sauce can be processed from several kinds of fish, anchovy yields the high quality fish sauce with strong nice aroma and reddish brown color compared to other fishes. In both countries, fish sauce production is typically situated incoastal areas.

4.2.2. Processing

Philippines. Fish sauce production is a tradition to some of the key players being in the business for at least 50 years. For processors who do fish fermentation, fish and salt are mixed in varying ratios. The fish and salt mixture must be in the fermentation tanks within 24 hours and fermented for nine months to a year. Other processors buy fish extracts to manufacture fish sauce. This method however poses some risk to the quality of the fish sauce. Products are available in PET and glass bottles in regular and special types. The processing activities are mostly done by men. The women usually involved in the inspection of bottles and sealers and quality assurance.

Thailand. The methods of processing of fish sauce are different in each area as processors commonly take on the method that has been passed on from generation to generation. The general method starts with a mixing of fresh fish with salt. The fish to salt ratio varies from 2:1 to 3:1. The mixture is fermented in a covered container for an appropriate period ranging from six to 18 months, depending on size of the fish. At the end of the fermentation, the mixture of liquid and residue or only the liquid obtained may be boiled. Fish sauce is filtered if it meets certain quality specifications and prepared for retail. Moreover, the residue from the first fermentation is used for the second fermentation by adding brine and


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left for three to six months. The mixture is also filtered before bottling. Fish sauce is normally packed in glass bottles. The first batch of fermentation of the fish sauce is considered top grade or “Grade A or 1” while succeeding batches of the fish sauce is considered as lower grades. The processing activities in Thailand are normally done by both men and women from washing to mixing to bottling.

Comparative.Fish sauce is obtained from fermentation of fish and salt mixture. The processes are usually handed down from generation to generation. In the Philippines, varying proportions of the fish and salt mixture are used and certain concerns are posed in theproduction process like food safety.

4.2.3. Marketing

Philippines. Fish sauce processors have distributors from the national to the provincial areas. The products are available in most retailers. The local products compete with a variety of imported fish sauce in leading supermarkets like SM Supermarket, Rustan’s Supermarket, Robinsons-Supermarket and Shopwise.

Thailand. Fish sauce is produced from an industrial scale to village scale by farmer groups. It is a food product that must be controlled of quality standard, thus processors should label grade of fish sauce before selling in a market. Fish sauce produced in a commercial scale is distributed to key retailers like Siam Makro, Tesco Lotus and Tops (Central Food Retail), supermarkets, hypermarkets and convenience stores and export markets. The typical route from processors to markets is through distributors.

Comparative.Asian food as well as fish sauce has reached other parts of the world. Thailand produces and exports most of the fish sauce supplied in the global market while Philippines is a small player. Fish sauce is increasingly consumed globally.

4.2.4. Research and Development

Philippines. The research and development (R & D)are sometimes conducted by the academe such as the University of the Philippines Los Baños. On the government side, the Department of Agriculture through its Bureau of Agricultural Research (BAR) and Bureau of Fisheries and Aquatic Resources (BFAR)provides training on values enhancement, proper fish handling, Good Manufacturing Practices/Sanitation Standard Operating Procedures (GMP/SSOP), labelling and packaging. The limited public funding with weak credit system to provide investment for agricultural research has led to weak knowledge and innovation system in its industries.14

Thailand. The Fishery Technological Development Division of the Department of Fisheries is responsible for researches on fish post harvesting

14 Briones (2006) as cited by Ragasa (2008)


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technology and development of fishery products. It also provides knowledge to groups of farmer community in order to improve the standard of processes and product quality. Research on fish sauce includes characteristics and quality of fish sauce produced in Thailand. Moreover, the private sector actively participates in modern biotechnology like such as the development of new enzymes for fish sauce fermentation that have reduced production time and produced higher quality products.15

Comparative.Research and development on fish sauce is meager in the Philippines. In Thailand, the private sector is actively engaged in research and development such as the study on the acceleration of the fermentation process. Moreover, the DOF, Thailand’s lead government agency in the research and development of fish products continues to provide technical advice to the local processors.

4.2.5. Government Organizations and Industry Associations

Philippines. Among the agencies involved in the fish sauce industryare BFAR of the Department of Agriculture, Department of Trade and Industry (DTI), Department of Science and Technology (DOST), Food and Drug Administration (FDA) of the Department of Health (DOH) and theDepartment of Interior and Local Government (DILG).

The BFAR is the government agency responsible for the development, improvement, management and conservation of the country’s fisheries and aquatic resources. Under its Post-Harvest and other Agriculture Infrastructure/Support Services, the units–Hazard Analysis and Critical Control Points (HACCP)-Based Fish Inspection, Administrative Support and Product Development, Fish Processing,Maintenance of BFAR Quality Assurance Laboratories and Promotion of Value-Added Products -relate to fish sauce manufacturing.

The DTI is the primary agency of the country in the coordination, promotion, facilitation, and regulation related to trade, industry, and investment activities.

The DOST is the principalagency for promoting science and technology and through its Special Order Nos. 282 and 175, it provides technical assistance, trainings and consultancy services.Among of which are the Packaging Technology Assistance Program which presently focuses on food processing sector and Food Safety Consultancy Service. The DOSTequips practitioners with the knowledge and skills practiced and adheredto in the global market. Moreover, it deploys specialists on food safety to food manufacturers to improve compliance to requirements of GMP, SSOP, HACCP, Food Safety Management Systems and other Food Standards.

15www.biotec.or.th/en/images/stories/News/2012/editorialsection2011.pdf


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FDA serves as DOH’s key regulatory agency and implementer of the food control system in the Philippines. It is mandated to ensure safe and good quality processed food and to regulate the production, sale and distribution of it to protect consumers’ health. FDA has been ensuring food safety by enforcing inspection and licensing of food establishments, product registration and continuous post marketing surveillance.

The DILG in collaboration of the other government agencies is responsible to supervise the enforcement of the rules and regulations, inspection as well as compliance related to condiments and sauces industry within its jurisdiction.

The condiments and sauces industry, which includes fish sauce, is part of the Philippine Food Processors and Exporters Organization, Inc. (PHILFOODEX).

Thailand. Several government agencies carry out the fish sauce administration. The DOF of the Ministry of Agriculture and Cooperatives (MOAC) is the principal government agency responsible for managing and developing fisheries and aquaculture. The Fisheries Act of 1947 authorize the DOF to apply, implement and enforce the Fisheries Act and other relevant laws to fishery matter such as registering and applying for permission before undertaking fishing and trade in fishery products.

Other involved agencies include Ministry of Public Health (MOPH) which executes of the Food Act of 1979, the major law that regulates food safety standards and consumer protection. The FDA of the MOPH and the Provincial Offices of Public Health administers the legal food control operations. Meanwhile, the Department of Medical Science of FDA-MOPH (with 12 regional centers including laboratory for product testing), Ministry of Industry and the Department of Science Service of the Ministry of Science and Technology regulate the food packaging materials in Thailand. The Fish Inspection and Quality Control Division within DOF is in charge for quality control, postharvest handling and processing development concerning fish and fishery products. The National Bureau of Agricultural Commodity and Food Standard regulates and certifies standards of agriculture commodities and foods for all consumers.

In addition, the Ministry of Commerce is committed to the rapid and sustained expansion of international trade. It is an ally of entrepreneurs in the Thai market or abroad, providing the information, networks and services that businesses need. It is also responsible for organizing promotions and trade fairs such as the Thaifex, in-store promotions and trade missions in target markets. Its Department of International Trade Promotion has six regional trade promotion offices, 61 Trade Offices worldwide and 54 Honorary Trade Advisor worldwide. Under the Investment Promotion Act, the Board of Investment is authorized agency to grant the incentives, guarantees and protection.


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Meanwhile, the Thai Fish Sauce Association (TFSA) is an organization of small and medium enterprises (SMEs) as well as big manufacturers/exporters of fish sauce. It has been in existence for the past 40 years. Given that fish sauce has a growing popularity in markets like China, USA and European Union (EU) over the last five years, it presents an excellent opportunity for increased exports. Since small and medium-sized fish sauce members of TFSA have limited capability to export, the large-sized members who are more experienced in exporting assist and provide guidance.

Comparative.In both countries, several institutions play an important role in executing government programs concerning the condiments and sauces industry. Thailand has developed an industry association in fish sauce to enhance their ability as a global exporter. The fish sauce players in the Philippines are organized under a food industry representing various segments.

4.1. Policies

4.1.1. Cost of Labor

Philippines. The National Wages and Productivity Commission (NWPC) determine the minimum wage in the country. Most of the fish sauce players are situated in NCR where the daily wage rate of workers is at PHP444 to PhP481 (US$9.96 to US$10.78). It has the highest rate across the country.

Thailand. The nationwide minimum daily wage policy stipulates that all workers of Thailand receive PhP399 per day (Bt300 or US$8.93 per day) since 2013. Foreign workers like Burmese and Cambodians are commonly found in processing plants.

Table 4.1. Comparative Costs of Labor, Fuel and Power by CountryItems Philippines Thailand

Labor PhP444 to PhP481 per day(US$9.96 to US$10.78 per day) (a)

PhP399 per day(US$8.93/day)


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(Bt300/day)Power PhP6.63 to PhP8.17 per kwh (a)

(US$0.15 to US$0.18 per kwh)PhP10.80 per kwh (b)(US$0.24 per kwh)

PhP3.59 per kwh(US$0.08/kwh)(Bt2.7/kwh)

Fuel (Diesel) PhP28.70 to PhP31.95 per liter (c)(US$0.64 to US$0.72 per liter)

PhP34.00 per liter (US$0.76/li) (Bt25.59/li)

(a) National average (b) Based on KII in Metro Manila(c) NCR as of June 25, 2015Exchange Rates (average for May 2015): PhP44.6/US$1; Bt33.6/US$1; PhP1.3/Bt1Source of basic data: NWPC, National Electrification Administration, Department of Energy and Bangko Sentral ng Pilipinas (for Philippines); Thailand Board of Investment, Energy Policy and Planning Office, Provincial Electric Authority and Bank of Thailand (for Thailand)

4.1.2. Cost of Power and Fuel

Philippines. Electricity cost contributes a minimal share to cost of fish sauce production. The national average of energy cost in the Philippines is PhP6.63 to PhP8.17 per kwh (US$0.15 to US$0.18 per kwh) in 2012-2013. The high cost of electricity in the Philippines is partly due to lack of government funding to subsidize electric companies. The dominant transportation in the condiments and sauces industry is by road utilizing diesel fuel.As of June 2015, the price of diesel is PhP28.70 to PhP31.95 per liter (US$0.64 to US$0.72 per liter).

Thailand.Thailand has a long history of controlling important energy prices.Energy charge from 2012 to 2015 is only PhP3.59 per kwh (Bt2.7 or US$0.08 per kwh). Its“decision to stabilize and subsidize electricity prices has made products more reasonably priced for consumers and lessened the effect of changes in world energy prices.”16 In terms of fuel cost, the price of diesel was PhP34.00 per liter (Bt25.59 or US$0.76 per liter) across gasoline stations in key cities as of June 2015.

Comparative.The costs of laborand power in the Philippines aremore expensive than Thailand. Although labor cost outside the National Capital Region will be cheaper when compared to Thailand.Meanwhile, the cost of fuel is slightly cheaperin the Philippines during the study period.

4.1.3. Food Safety Standards

Philippines. The FDA recognizes the concern for food safety. However, it continues to face challenges in implementing the food safety program in the country. Some of the long-identified gaps are the insufficient infrastructure and laboratory services, lack of coordination among different agencies involvedin Food Safety Program and insufficient source of reliable information on food safety for consumers.

16International Institute for Sustainable Development Global Subsidies Initiative (2013)


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In 2013, the Food Safety Act of 2013 was signed into law. It outlines the country’s benchmark for food safety along the supply chain to “ensure the safety of food all the way from the farm to the dinner table.” The law aims to strengthen the food safety regulatory system of the country which covers regulations, food safety standards, inspection, testing, data collection, monitoring and other activities carried out of the regulatory agencies in food safety. The key food safety regulatory agencies are the Department of Agriculture (DA) and Department of Health. The BFAR of the DA is responsible for the certification and inspection of the production and processing establishments of fresh and frozen fishery products. The DA and DOH operate the Good Manufacturing Practices and Standard Sanitary Operating Procedures of the processing establishments for processed products. Other identified key agencies in ensuring food safety are the DILG and local government units.

For fish sauce, the current minimum requirement for analysis and standard for fish sauce are: total solids (min 32 percent), NaCl (20 to 25 percent) and protein (min 8 percent for special - domestic and export; min 4.5 percent for regular domestic; and min 6 percent for regular export). In addition, the FDA has drafted a Philippine National Standard entitled Standard for fish sauce (patis) and fish flavored sauce. The draft is available at FDA’s website (www.fda.gov.ph) for comments.

Thailand. Quality and hygiene standards are the major focus areas in the processed food sector like condiments and sauces. The following food safety standards are typically required in Thailand when trading food items: Good Manufacturing Practice (a general standard), Hazard Analysis at Critical Control Points (an internationally accredited standard) and food products must be approved and registered with the Food and Drug Administration (FDA) of the Ministry of Public Health (MOPH) prior to trading.17

For fish sauce, there are two types of standard: compulsory and voluntary. The compulsory standard is the Notification of the Ministry of Public Health (No. 203) of 2000 Re: fish sauce. The quality of fish sauce must meet this standard before it is sold in a market. In this standard, fish sauce is categorized into three types: authentic fish sauce, fish sauce from other kind of animal and blended fish sauce.

Meanwhile, the voluntary standard is the Thai Industrial Standard for Local Fish Sauce (1983) and the Community Product Standard (2004) for Traditional Fish Sauce. The standards are implemented by the Thailand Industrial Standard Institute of the Ministry of Industry. Fish sauce products that are able to meet this standard are able to display specific quality mark. In addition, fish sauce standard is adopted as a Codex Standard18.

Before a fish sauce product enters into markets, pre-marketing approvals and post marketing activities are undertaken by the Food Control Division of FDA.

17Australian Food and Grocery Council (2014)18Kongpun, O. (2012)


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Initially, a factory lay-out/floor plan and processing or procedural flow must be submitted. A factory is defined as having seven workers or five machineries. Both factory and non-factory are subjected to the same regulations but no fee is charged with the latter. Subsequently, the fish sauce product is graded based on total nitrogen content, salt content, amino nitrogen, glutamic acid/nitrogen ratio, aroma, and color. For fish sauce, the application for product approval is the setback but according to MOPH, the reported cases are few.

Comparative.The quality of fish sauce is affected by the quality of raw material, process of fermentation, and practices in sanitation and hygiene. To ensure quality and safety of fish sauce produced, Thailand has a Q Mark logo subject to the inspection and certification of several practices. Although there are two types of standard, stakeholders willingly conform due to the benefits of compliance. On the other hand, the Philippines lags behind in the food safety and quality systems primarily because of the lack of coordination between the private and public sectors, ineffective institutional infrastructure and in adequate resource human capability. A comprehensive reform of the Philippine food safety laws was the signing into law of the Food Safety Act 2013.

4.1.4. Investment Promotion

Philippines. The Board of Investments of the Department of Trade and Industry take the lead in the promotion of investments in the country. It develops and implements an investments promotion strategy as well as registers and monitors qualified enterprises and administers investment incentives to registered enterprises.

Fish sauce manufacturing is not an investment priority area of the country but is eligible of the incentives if the investment is approved. Qualified enterprises can avail of fiscal and non-fiscal incentives. Fiscal incentives includes income tax holiday, exemption from taxes and duties on imported spare parts, exemption from wharfage dues and export tax, duty, impost and fees, reduction of the rates of duty on capital equipment, spare parts and accessories, tax exemption on breeding stocks, tax credits and additional deductions from taxable income. On the other hand, non-fiscal incentives are employment of foreign nationals, simplification of customs procedures, importation of consigned equipment and privilege to operate a bonded manufacturing/trading warehouse.

Thailand. Condiments and sauces like fish sauce are eligible for investment promotion as specified under the activity (section 1.17) – manufacture or preservation of food using modern technology. A qualified investor shall receive the incentives such as - 5 year corporate income tax exemption, accounting 100 percent of investment; exemption of import duty on machinery which is new and cannot be produced in Thailand; exemption of import duty on raw or essential materials used in manufacturing export products for one year. Additionally, it shall receive non-tax incentives like right to own land and right fir visa and work permit for foreigners. The project approval normally takes 40 to 90 days from document submission depending on the cost of the project. A project cost ranging from Bt5 to Bt10 B normally takes


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40 days to approval. Among the considerations of the Thailand Board of Investments before awarding the incentives are the availability of raw materials environmental impact of manufacturing activity. According to BOI, fish sauce manufacturers are not so keen in availing incentives as only one fish sauce company got promoted.

Comparative.As part of the stimulus policies of the government, theThailand Board of Investment recently approved the “Seven Year Investment Strategy” covering the period 2015-2021. The main objectives are to encourage inbound value added investment and Thai investments abroad so as to enhance competitiveness and help the country overcome the middle income trap. It is in initiatives like this that government can promote the country’s role and explore opportunities in the ASEAN Community. Meanwhile, the Philippines is also stepping up to the plate with the crafting of its 2014-2016 Investments Priorities Plan. Serious commitment however from both the private andgovernment sectors is imperative.

5. PRICE COMPETITIVE ANALYSIS

Price competitiveness analysis was used to measure how competitive fish sauce is in the export and import markets. The prevailing free on board (FOB) and cost insurance and freight (CIF) prices were the starting point in our parity pricing calculation to measure the competitiveness of fish sauce. “Parity pricing is making


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the price of a particular commodity equal or equivalent to a reference price for the same commodity in another location (USAID).” The export parity/domestic price and the import parity/domestic price ratios are separately estimated.

5.1. Export Trade Scenario

Under export trade scenario, the average FOB prices of fish sauce at Manila would be US$1.47 per kg less insurance and freight. At the exchange rate of PhP44.50/US$1, this would be about PhP65.40per kg. Subtracting the estimated handling and transport costs as well as exporter’s margin and cost, the derived wholesale prices per kg of fish sauce was PhP55.40. The analysis indicated that the Philippine fish sauce was price competitive for export as domestic wholesale price was lesser which was estimated at PhP53.75 per kg.

Note: Export products are always price competitive unless there are export quotas and taxes which favor processing in the local market. Under a competitive regime, farm prices adjust to world prices. However, at low productivity, farmers may not sustain production even if the product is “competitive”.

Table 5.1 Price Competitiveness of Fish Sauce with Exports, Manila Market, 2014Item Amount

In US$ per kgFOB Manila 1.47In PhP per kg (PhP44.50 per kg)= FOB Manila 65.40- Handling and Transport 3.50- Exporter's Cost and Margin 6.50= Derived Wholesale Price 55.40Domestic Wholesale Price (P/kg) 53.75Export parity/Domestic wholesale price 1.03

*To be updatedCompetitiveness exists if the ratio of the derived wholesale price (or import parity price) to the domestic wholesale price is greater than one.Source of basic data: International Trade Centre-Trademap, BangkoSentral ng Pilipinas (BSP) and UA&P estimates


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5.2. Import Substitution Trade Scenario

To determine the competitiveness of fish sauce with imports, Thailand was considered as a competitor being one of the key exporters in the region and its proximity to the country. The average landed CIF price in Manila of fish sauce from Thailand was US$0.98 per kg in 2014. At the exchange rate of PhP44.50/US$1, this would be about PhP43.79 per kg. With costs of handling and transport plus importer’s cost and margin, the derived wholesale price of fish sauce was PhP53.79 per kg. Since the wholesale price of local fish sauce (premium) was almost the same at PhP53.75 per kg, local production was not price competitivewith imports.The price of imported fish sauce is usuallyhigher because of better quality.

Table 5.2 Price Competitiveness of Fish Sauce with Imports, Manila Market, 2014Item Amount

In US$ per kgFOB Price 0.93+ Freight and Insurance 0.05= CIF Manila 0.98In PhP per kg (PhP44.50/US$1)= CIF Manila 43.79+ Handling and Transport 3.50+ Importer's Cost and Margin 6.50= Derived Wholesale Price at Manila 53.79Domestic Wholesale Price* 53.75Import parity price/Domestic wholesale price 1.00

*To be updatedCompetitiveness exists if the ratio of the derived wholesale price (or import parity price) to the domestic wholesale price is greater than one.Source of basic data: International Trade Centre-Trademap, BSP and UA&P estimates

6. MARKET TRENDS AND PROSPECTS


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6.1 Market Trends

The largest exporters of condiments and saucesin Asia are China and Thailand, accounting for 10 percent and five percent of the total volume of world exports in 2014. On the other hand, the main markets include the USA, United Kingdom and Canada, contributing around 10 percent, nine percent and seven percent, respectively, to total volume of world imports.

In 2014, China sold about US$810M of condiments and sauces products. Thailand followed with exports amounting to US$592M. Bulk of the condiments and sauces exportsof China were soya sauce, tomato ketchup and other tomato sauces and gourmet powder while Thailand mainly soldchili sauce, fish sauce and soya sauce.

On the other hand, the largest market, USA,imports condiments and sauces from Asian exporters like China, Thailand, and Philippines.In 2014, it imported US$991M of condiments and sauces products.Of the total volume of USA imports,China accounted about 11 percent, Thailand at nine percent and Philippines, two percent. In the same year, Canada imported about US$685M. Among the Asian exports, China contributedthe biggest share of 2.5 percent to total import volume. This was followed by Thailand at 1.5 percent and the Philippines at 0.7 percent.

The Philippines is a net importer of condiments and sauces. It exported US$104M in 2014. It primarily sold mixed condiments and mixed seasonings, soya sauce and fish sauce to USA, Middle East, Australia and Canada. By contrast, imports reached US$114M which comprised mainly of mixed condiments and mixed seasonings.The major sources include Thailand and China.

Figure 6.1. Product Export Map, China, 2014


Soya sauceUS$106 M111 M kg

Tomato ketchup and other tomato

saucesUS$49 M45 M kg

Sauces and preparations nes

and mixed condiments and mixed seasoning

US$648 M350 M kg

Mustard flour and meal and

prepared mustardUS$7 M2 M kg

IMPORTSUS$108 M

47 M kg

Gourmet powderUS$24 M16 M kg

EXPORTSUS$810 M508 M kg

Other sauces, mixed condiments or seasonings nes

US$624 M334 M kg

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Source of basic data: Trademap, International Trade Center




saucesUS$7 M4 M kg



US$560 M262 M kg


prepared mustardUS$45,000121,000 kg

IMPORTSUS$63 M17 M kg

Chili sauceUS$66 M37 M kg

EXPORTSUS$592 M283 M kg

Fish sauceUS$48 M49 M kg

Oyster sauceUS$17 M12 M kg

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Figure 6.2. Product Export Map, Thailand, 2014





saucesUS$690,000705,000 kg



US$100 M31 M kg


prepared mustardUS$285,000189,000 kg

IMPORTSUS$114 M

55 M kgChili sauceUS$20,00018,360 kg

EXPORTSUS$104 M

36 M kg

Fish sauceUS$795,000

1 M kg

Other mixed condiments, mixed

seasonings, including belachanUS$16 M12 M kg

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Figure 6.3. Product Export Map, Philippines, 2014








US$823 M387 M kg



EXPORTSUS$1.5 B

Sauces derived or prepared from fish

US$34 M21 M kg


Mixed condiments and mixed seasoning

US$411 M184 M kg

Tomato-based preparations and


Other sauces and preparationsUS$427 M169 M kg

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Figure 6.4. Product Import Map, USA, 2014








US$434 M169 M kg



EXPORTSUS$265 M

98 M kg

MayonnaiseUS$19 M*

8 M kg


Salad dressingUS$31 M*20 M kg

Mixed condiments and mixed seasoningsUS$102 M*

33 M kg

Sauce based on fish products

US$3 M*2 M kg

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Figure 6.5. Product Import Map, Canada, 2014

*asof 2011Source of basic data: Trademap, International Trade Center


Other sauces and preparationsUS$124 M*

60 M kg

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6.2 Market Prospects

As mentioned, the local condiments industry is characterized by the presence of many players since there are essentially low barriers to entry. Moreover, there is marginal product differentiation, increasing threat of imports particularly from ASEAN competitors, and the growing health consciousness away from salty products.

Despite these negative factors, the industry players deem that demand for condiments and sauces expected to continue to grow due to the increasing popularity of Asian food world-wide together with the growing trend of consumers to explore the world through their taste buds.The identified condiments products with potential according to industry players are fish sauce, chili sauce, soy sauce, oyster sauce, hot pepper sauce and sour soup (sinigang) mix. Price sensitive consumers are expected to continue to contribute to the growth of the industry through their demand for home-made food. In addition, key players are optimistic of strong exports sales in the next years with the growing Filipino markets abroad like Asia, USA, Europe and Middle East and rising demand for varying cultural flavors and ingredients.19

7. SWOT ANALYSIS19University of Asia and the Pacific, Food and Agri Business Monitor (June 2001) and University of Oregon Investment Group, Consumer Goods (February 2010).


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The SWOT of the industry will shape its long-term profitability and survival. This section discusses the advantages (strengths and opportunities) and constraints (weaknesses and threats) of the condiments and sauces industry.

7.1 Advantages

The condiments industry has several strengths. The availability of potential areas (small private lands) for growing raw material such as calamansi, chili, peanut, ube, guava, garlic, onion, tamarind and annatto (achuete) is an asset for the industry. In addition, the availability of labor especially in urban areas, raw materials such as soy extracts and fish as well as the processing technologies are plus points in the manufacture of condiments products. The strategic location of the Philippines provides benefit as well to the industry.

Condiments can be a high income commodity that can help address unemployment and poverty. There is opportunity to develop products like fish sauce, chili sauce, soy sauce, oyster sauce, hot pepper sauce and sour soup (sinigang) mix in the export markets. Moreover, condiments is widely use from household to institutional food consumption. The market demand in both domestic and abroad (especially Filipino communities) provide opportunities for the local condiments industry. The competitive prices for some inputs such as soy extracts, growing preference for convenient preparation of home meals and increasing imports of key markets like USA - 5.5 percent (soy sauce) and 2.4 percent (fish sauce) yearly, in volume, from 2004 to 2013 - give a long term prospect to the industry.

7.2 Constraints

Across the condiments supply chain, the constraints encountered by the manufacturers are the inadequate supply of quality raw materials such as calamansi, chili, peanut, oysters, ube, guava, garlic, onion, tamarind and annatto (achuete) due to low farm productivity. According to an industry player, problems on tenurial and peace and order contribute to the said limitation. In addition, while there is fish supply, the seasonality of supply and access to quality fish are problems to producers. Other concerns for inputs are the limited selection of quality packaging materials, high input costs such as labor, packaging, and raw materials, and lack of skilled workers (for factories) in rural areas. The manufacturing of condiments suffers from high operating cost which includes costs of electricity and water, low quality products, weak R & D and lack of infrastructure support. The latter are mainly because of limited budget.

Meanwhile, marketing undergoes high listing fees in supermarkets and limited export markets since Filipino condiments are not mainstream products. The inadequate government support in export market development is a frequent concern of the industry. The high logistics cost, bureaucratic procedures and lack of supportand incentive from government affect the other segments of the condiments


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industry. The industry deems that the government can still improve their support in food fairs and trade shows to be at par with country competitors. Attendance in trade fairs must be given to original manufacturers. Furthermore, the taxation policies of the government such as local government unit tax and value added tax as well as non-compliance to requirements in some export markets cut the competitiveness of the local industry against our competitor countries.

To get the most out of the above opportunities, it is crucial that the threats to the industry are managed. Dealing with increasing competition in the export market wherein “price, quality, product array, innovation and brand recognition” are essential. The entry of imports from country-competitors is critical with better quality and cheap production cost. Moreover, coping with rising input costs (e.g. power, fuel, packaging materials), climate change, peace and order in some production areas of raw materials and non-tariff barriers such as product quality requirements and product safety standards are as important. Industry players expect support from the government in the form of scientific studies or position papers for the development of new products and compliance of certain food laws.


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Table 7.1 Condiments and Sauces: SWOT AnalysisSub-system Strengths Weaknesses Opportunities ThreatsInputs Available areas

for growing raw materials

Available labor Available

inputs such as soy extracts and fish

Low farm productivity

Inadequate and unreliable raw materials supply such as calamansi, chili, peanut, oysters, ube, etc.

Limited selection of quality packaging materials

High input costs Lack of skilled

workers in rural areas

Available products for development

Competitive prices for some inputs such as soy extracts

Rising input costs (e.g. power, fuel, packaging materials)

Climate change

Production/Processing

Availability of processing technologies

High operating cost (e.g. power)

Low quality products Weak R & D Lack of infrastructure

support

High potential income commodity

Entry of imports/country-competitors (with better quality and cheap production cost)

Marketing Strategic location of Philippines in ASEAN markets

High listing fees in supermarkets

Inadequate government support in export market development

Limited export markets

Presence of domestic and export demand

Growing preference for convenient preparation of home meals

Increasing competition in export market

Strict product quality requirements and product safety standards

Non-tariff barriers

Others Highlogistics cost

Bureaucratic procedures for processors/exporters

Lack of support and incentive from government

Unsupportive tax policies

Non-compliance to requirements in some markets

Increasing transport cost

Peace and order

Source: Key Informant Interviews8. STRATEGY SETTING


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8.1 Industry Vision, Mission and Goals

The collective vision, mission and goals of the Philippine condiments and sauces industry based on an industry consultation held on September 2014 are as follows:

Vision

An inclusive and globally competitive condiments and sauces industry providing sustainable benefits to all stakeholders.

Mission

To develop cost-competitiveandqualityproducts that cater local and export niche markets.

Goals

Ensure sustainable supply of reasonably-priced and quality raw materials by supporting farm and fisheries investments

Improve processing capacity and efficiency by promoting investments in processing facilities

Enhance food safety standards, value-adding and quality of condiments and sauces products

Expand exports of competitive condiments and sauces products Ensure competitive foreign exchange rate

8.2IndustryTargets

The condiments and sauces industry has potential for growth. The supply of raw materials however, is a major constraining factor. It is essential that supply of raw materials used in condiments and sauces products is sustained. Targets were set by industry players forselected raw materials that can be sourced locally. These include onion, tomato, hot pepper and fisheries. Assuming that there areno future global shocks, the industryrequirementfor the saidcondiments and fisheries targeted is projected to increase by five percent yearly in the short-term.

Fortomato, chili pepper and fisheries, industry demands in 2014 were obtained from the Supply Utilization Accounts (SUA) of PSA and from industry players. The estimateswere used as baselines for the short-term targets. For tomato, the SUAestimates that processors utilized about 32,200 tons in 2014 which grewby 2.4 percent yearly for the last 10 years. The local production, however, mainly goes to Northern Foods Corporation, a local manufacturer of tomato paste. Other


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condiments and sauces manufacturers source their requirement abroad. In the absence of an industry requirement for tomato, the industry demand is projected based on SUA estimates. Using the five percent growth in the short-term, it is projected to increase to 35,500 tons in 2016 to 39,139 tons in 2018. For chili pepper, from an approximated industry demand of 5,000 tons of in 2014, the forecast is around 5,500 tons in 2016 and to a little over 6,000 tons by 2018. Meanwhile, based on industry estimate for fisheries demand, the industry requirements for anchovy, roundscad and mackerel which are major inputs to fish sauce, are seen to expand from around 62,500 tons in 2014 to 68,900 tons in 2016 to about 76,000 tons in 2018. The industry demand for local onion is not available as of this time but five percent increments are also assumed.

Table 8.1.Industry Demand Targets for Selected Raw Materials (For refinement by the Technical Working Group)

Condiment and Sauces Product

MajorRaw Materials

Baseline2014

2015 2016 2017 2018

Red sauces Tomato (tons)1 32,200 33,810 35,500 37,276 39,139Red sauces Chili pepper (tons)2 5,000 5,250 5,513 5,788 6,078

Fish sauce Fisheries(tons) 2 62,500 65,625 68,906 72,352 75,969 Mixes Onion (tons)3 NA3 5% 5% 5% 5%1Based from SUA, though utilization for processing mainly goes to Northern Foods Corp, a local tomato paste manufacturer, the estimate was used as a baseline to project industry targets. 2Industry demand was provided by industry players. Fisheries include anchovy, mackerel and roundscad.3Industry demand not available (NA) as of this time.Note: Industry players assumed an annual increase of five percent for each commodity.Source: PSA and Industry estimates

New technologies with good agricultural practices and sustainable fishing practices are essential for productivity and quality improvement of the raw materials.The export targetsof an annual increase of five percent per year will only be achieved with increased and sustainedsupply of inputs,enhanced processing facilities, and supportive government policiesand promotion of investments in manufacturing and packaging equipment. The limited selections of packaging materials such as closures, bottles, containers and labels which account 30 to 40 percent of production cost hampers the competitiveness of the country.

Table 8.2.Industry Export Targets for Selected Condiments and Sauces Products


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(For refinement by the Technical Working Group) Items Baseline

2014 2015 2016 2017 2018

Soy sauce(M kg) 3.21 US$3 M

3.37 3.54 3.72 3.90

Tomato ketchup and other tomato sauces(M kg)

0.58 US$628,500

0.61 0.64 0.67 0.70

Chili sauce(kg) 15,050 US$29,800

15,803 16,593 17,422 18,293

Mixed condiments and mixed seasonings(M kg)

15.62 US$82 M

16.40 17.22 18.08 18.99

Fish sauce(M kg) 1.10 US$795,000

1.16 1.21 1.27 1.34

Banana ketchup(M kg) 9.88 US$16 M

10.37 10.89 11.44 12.01

Total (M kg) 30.41US$102 M

31.93 33.52 35.20 36.96

*Figures in italic are export valuesNote: Industry players assumed an annual increase of five percent for each commoditySource: PSA and Industry estimates

9. STRATEGIES AND POLICIES


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9.1. Critical Key Result Areas (KRAs) and Action Programs

There are a number of key result areas within the supply chain which have to be addressed to enable the industry to meet the targets.

The priority action programs are to:

Expand exports and markets Scale up production of major raw materials Adopt sustainable fishing practices (SFP) and promote reliable farm

production under good agricultural practices (GAP) Ensure compliance with good manufacturing practices (GMP) Conduct trainings on food safety and develop food safety and quality

standards Promote investments in the supply chain Support technical and scientific studies for export products to counter non-

tariff barriers

The specifics are presented below. The action programs range from short term (2015-2017), medium term (2018-2020) and long term (beyond 2020).

Table 9.1 Action Programs and KRAs for the Condiments and Sauces Industry


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INPUTSUPPLY: Improve availability and quality of raw materialsKey Result Area Performance

IndicatorsAction Programs Time Frame

Working GroupImproved supply of reasonably-priced and quality raw materials

- Volumeof quality and reasonably-priced raw materials

- Number of companies supplying packaging materials

- Create a schedule of raw materials needs/demand and coordinate with the concerned agency of group of farmers

Short to medium term (SMT)

DA, LGU

Training on SFP/GAP

-Number of trainings conducted

-Number of information and education materials produced

- Conduct trainings on GAP in farming operation and SFP in fishing activities

-Reproduce and distribute materials on GAP/SFP

-Information campaign on best farm practices

SMT

Private sectorDALGUIndustry AssociationTESDA

Adoption of GAP and quality standards

-Number of acceptors -Benchmark and best practices dissemination

SMT

DA, ATI, SCUs

PROCESSING: Improve processing efficiency and quality of products


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Key Result Area Performance Indicators

Action Programs Time Frame/ Working Group

Lower processing cost

-Power cost per kg

-Labor cost per kg

-Material cost per kg

-Enhance processing efficiency

-Increase supply of raw materials

-Apply newer technologies for processing plants

-Energy audit and availability of cost reducing renewable energy technologies

SMT

Private SectorDTIDADOE DOST

Improved plant utilization

-Volume of production

- Increase supply of quality raw materials

-Inspection and upgrade processing plants

SMT

Private sectorDADTILGU

Availability and accessibility of a complete accredited testing laboratory

-Number of laboratory

-Upgrade laboratories (e.g. DOST labs)

SMT

DOSTSCUsFDCPrivate sector

Quality discipline -Prices of products - Establish product guidelines

-Provide incentives to product standards and food safety standard compliance

-Training and promote GMP, HACCP, etc.

SMT

DTIDAFDAPrivate Sector

Higher grade products

-Increased export value

-Shift to higher grade products

SMT

DTISCUsPrivate Sector

MARKET: Enhance market access and product image


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Expanded export markets and enhanced product quality

-Export volume and value

-Number of new markets

-Budget in international food trade fairs

-Number of condiments and sauces manufacturers in food trade fairs locally and abroad

-Number of new products and packages (e.g. SKUs)

-Diversify/Explore new markets

-Facilitate participation in international trade fairs

-Develop database on buyers and products

-Develop new products and uses with appropriate packaging and labeling designs

MLT

DA-AMASDTIPrivate sectorFDADOST

SUPPORT SERVICES (CROSS-CUTTING CONCERNS)


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Lower transport cost

-Transport cost/ton-km

-Advocate for construction of rural infrastructure

-Organize for product consolidation

Medium to Long Term (MLT)

Private SectorLGUDA

Improved access to financing

-Longer grace and repayment periods of loans

-Private equity

-Lower interest rate levels

-Review financing program

SMT

LBPDBPPrivate SectorDADOFLGU

Strengthened research and extension services

-Number of studies on condiments and sauces

-Multi-year budget allocated for research and development

-Number of export markets with compliant requirements

-Conduct studies on condiments and sauces relating to non-tariff barriers (scientific and technical)

MLT

DADOSTSCUsPrivate Sector

Key Result Area Performance Action Programs Time Frame/


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Indicators Working GroupImproved/Amended policies/laws20

-Foreign exchange rate

-Land ownership ceiling

-Tax incentives-Productivity-Revisions onAsin Law

-Advocate for review of the following: Monetary policy Land use policy Tax policy Agricultural

development policy Asin Fortification

Law21

SMLT

DARDENRDADOHFood Nutrition CouncilPrivate Sector

Enhanced food standards

-Number of companies adopting GMP and HACCP

-Conduct training and information dissemination on food standards

-Promote food standards program

MLT

FDABAFPSDOSTDTI-BPSPrivate Sector

Improved industry data and public information access

-Official data aligned with private sector

-Number of users

-Advocate for accurate data collection

-Information campaign on government agencies services and programs on production, market, technology, etc.

MLT

PSAPrivate sectorDTIDALGUDOSTFDA

More inclusive AFMA22 IRR to include private enterprise, small farmers and farmers coops

-Revised AFMA IRR -Revisit AFMA IRR SMT

TWGDA

10. IMPLEMENTATION AND MONITORING20Please refer to Annex 1 for details21 R.A. No. 8172 is otherwise known as “An Act for Salt Iodization Nationwide (ASIN)”was approved on 20 December 199522 R. A. No. 8435 is otherwise known as “Agriculture and Fisheries Modernization Act of 1997” was approved on 22 December 1997


Technical Working Group

(National)

Input Supply and Processing

Action Team

MarketingAction Team

Food Standards Action Team

Investment and Financing

Action Team

DTI

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10.1 Implementation and Monitoring

In order to implement the roadmap, a Condiments and Sauces Technical Working Group (TWG) will be formed that is anchored to a government agency like DTI. The TWG shall be composed of representatives from the private and government sectors. It shall be chaired by the private sector representative and co-chaired by a government representative.Action teams covering the supply chain or critical issues facing the industry shall be created to assure efficient implementation of the programs.

The primary roles and responsibilities of the TWG include: (1) ensure the implementation of the condiments and sauces roadmap; (2) update the roadmap; (3) conduct advocacy work; (4) liaise with policy makers; and (5) assist the formation of action teams. The action teams shall have the following responsibilities: (1) promote best practices; (2) conduct research and trainings and; (3) facilitate financing and information access on production, trade and prices. A proposed organizational structure is presented.

Figure 10.1.Condiments and Sauces Technical Working Group

The overall roadmap monitoring shall be the main responsibility of the attached government agency, e.g. DTI. The monitoring and evaluation shall be done by an independent group such as the academe or non-government organizations.


Note: Can be replicated at the regional and provincial level with assigned coordinators

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REFERENCES

A Citizens’ Guide to Energy Subsidies in Thailand. International Institute for Sustainable Development Global Subsidies Initiative. April 2013.

Australian Food and Grocery Council. (2014). Market Insights: Thailand. Kingston ACT, Australia: TradeWorthy.

Bureau of Fisheries and Aquatic Resources-Department of Agriculture (Philippines)

Canada Border Services Agency

Health Policy Notes. Volume 3 Issue 4. Department of Health. November 2008.

Department of Fisheries – Ministry of Agriculture and Cooperatives (Thailand)

Department of Industry and Trade Promotion – Minitry of Commerce (Thailand)

Department of Trade and Industry (Philippines)

Food and Nutrition Research Institute – Department of Science and Technology(Philippines)

Kongpun, O. (2012). Processing of Fish Sauce by Natural Fermentation. Fishery Technological Development Division, Department of Fisheries, Ministry of Agriculture and Cooperatives.

NORAD-FAO Project. A value-chain analysis of international fish trade and food security with an impact assessment of the small scale sector: A Synthesis of Background Papers.August 2012.

Philippine Statistics Authority

Philippine Tariff Commission

Preechajarn, S. and S. Sirikeratikul.Thailand Food and Agricultural Import Regulations and Standards. USDA Foreign Agricultural Service GAIN Report. USDA Foreign Agricultural Service. August 8, 2009. Web.

Ragasa, C. (2008). Essays on Food Safety and Competitiveness in the Philippine Seafood Industry. Dissertation for Doctor of Philosophy in Agricultural, Food and Resource Economics. Michigan State University.

Reyes, Senen U. “Condiments: Seasoning for All Seasons“. Food and Agri Business Monitor, University of Asia and the Pacific.


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Soon Eong, Y. and D. Thong Bai Hui (Eds.) (2010).Good Manufacturing Practice (GMP) for Small and Medium-sized Traditional Fish Products Processing Establishment in ASEAN. Singapore: Marine Fisheries Research Department, Southeast Asian Fisheries Development Center.

Thailand Board of Investment

Thai Customs Department

The Southeast Asia and Latin America Trade Center-University of the Thai Chamber of Commerce.(2014). Thailand Food Processing Industry. Retrieved from http://www.indianembassy.in.th/../Final Report Market Survey Thailand Food Processing Industry March 2014.pdf

Trade Map-International Trade Statistics

US International Trade Commission

Walker, H. (Ed.). (1998). Fish Food from the Waters: Proceedings of the Oxford Symposium on Food and Cooking 1997. Devon, England: Prospect Books.

ANNEX 1. Proposed Policies/Legislations Review


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DATE: 25 November 2015

FROM : RAMON R. REYES Corporate Services OfficerMARIGOLD MANUFACTURING CORPORATION

TO :NESTOR P. ARCANSALIN Director, Resource-based Industries ServiceBOARD OF INVESTMENTSDepartment of Trade and Industry

RE :INPUTS TO CONDIMENTS INDUSTRY ROAD MAP

MONETARY POLICY

Competitive exchange rate

Adopt currency stance of South Korea, Taiwan, and China favoring an undervalued exchange rate in their developing stage.

A proposal comes from the Action for Economic Reforms to amend the third paragraph ofSection 74 of the New Central Bank Act to read as follows (proposed amendment in bold letters):

“The Monetary Board shall determine the rates at which the BSP shall buy and sell spot exchange, and shall establish deviation limits from the effective exchange rate or rates as

it may deem proper. The nominal exchange rate shall be aligned with the real effective exchange rate at the minimum.”

Trading band for price stability

The present market-determined approach on the exchange rate of the BSP seems outdated with unprecedented net inflow of foreign exchange. The volatility it creates causes price instability especially on the revenue side of forex earners in times of sharp appreciation. A market-oriented trading band seems more appropriate with the sustained increase of net foreign exchange inflow.

Inevitable bias from any monetary or fiscal policy action shall be toward an undervalued exchange when foreign exchange is hugely in surplus. The same bias shown for a strong peso when forex was becoming short of demand in pre-OFW/BPO era.


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TAX INCENTIVE POLICY

BOI should provide incentives similar to those granted under PEZA Act or other freeport territory, which may include:

1) In lieu of all national and local taxes, a 5% tax on gross income shared 3% by the national government and 2% by the local government.

2) For small and medium enterprises engaged solely in agriculture and allied activities, the 70% threshold required for export sales is reduced to 0% for the first 10 years. On the 11 th

– 20th year, the percentage of export sales shall be 30%. On the 21st year and thereafter, the percentage of export sales shall be in the range of 40-60% as may be determined by the Secretary of Trade and Industry.

AGRICULTURAL DEVELOPMENT POLICY

All government resources in the agrarian reform era are directed to small landholders, cooperatives, farmers associations and the like. Absent in these public organizations is the “strong spirit of private enterprise” which is necessary for a viable, competitive and sustainable agribusiness. Such absence shows the sorry state of Philippine agricultural development. Philippine farmers are engaged in subsistence agriculture whilst Thailand had modernized their agriculture and have strong agribusiness models.

At present the Philippines has growing landless famers. What we have now are small landowners hiring landless farmers usually without any benefit in any form. The landowners may now be living in different towns or provinces or even overseas and hire the landless farmers to perform farm activities. Strong small and medium agricultural enterprises may be able to provide their workers more than minimum wages and generous benefits as well as legally mandated benefits.

Potential agricultural productivity may not be achieved by a small farmer. The productivity of land is achieved by intensiveness, or engineering interventions, and/or innovative agronomic practices. All of which require technical know-how and professional management. The Philippines has the competitive advantage provided by our tropical geographical position and being surrounded by huge bodies of water providing conditions wherein we can surpass other countries in productivity. In fact, the El Niño phenomenon appears favorable to irrigated farming areas.


Final Report

ANNEX 2. PHILIPPINES: List of Persons Interviewed


Final Report

Mr. Richard RebollidoExport Manager Nutriasia, Inc. JY Campos Centre, BGC, Taguig CityTel: (632) 662-2888Email: [email protected]

Ms. Velia J. CruzPresident and CEOTentay Food Sauces, Inc. 369 Gov. Pascual St.San Jose, Navotas, Metro ManilaTel: (632) 281-7948Email: [email protected]

Mr. Jesus Lucas, Jr.Special AssistantRufina Patis Factory290-C Arellano St. Malabon, Metro Manila, C. Arellano St, Malabon CityEmail: [email protected]

Dr. Bartolome LapusMs. Clarita KalayaanLapusMarigold Commodities Corporation 131 F. Manalo St.San Juan, Metro ManilaTel: (632) 718-2980Email: [email protected]

Ms. Jallyne CortezLorenzana Food CorporationMMGII Industrial Compound, San Antonio, San Pedro LagunaEmail: [email protected]

ANNEX 3. THAILAND: List of Persons Interviewed Fish Sauce Benchmarking with Thailand, May 4-8, 2015


Final Report

Boss AramsaerewongExport ManagerTeoTak Seng Fish Sauce Factory Co., Ltd.6/99-101 S. Charoen Sap, Srinakarin Rd.BangmuangSamutprakarn 10270 ThailandMobile#: +66 999 526525Tel#: +662 759 8061-2Fax#: +662 759 8063Email: [email protected]

WorachetPongpairojManaging DirectorTang Sang Hah Co., Ltd.177 SoiSukhumvit 63, Klongtannua,Wattana, Bangkok 10110Tel#: +66 2 711 5711Fax#: +66 2 711 5707-9Email: [email protected]

NutiineeChiewpimonpornOwnerPimonpornCompany Ltd.ChetsadaWithi Rd.MahachaiMuangSamutSakhon

WarachitSoonbonyaritDirectorFishery technology Development DivisionDepartment of FisheriesKasetKlang, Chatuchak

Thai Fishsauce Factory (Squid Brand) Co., Ltd.21/5-21/7 TrokRongNumkeng, Charoenkrung Rd.Taladnoi, Sampunthawong, Bangkok, 10100 ThailandTel#: 02 234 3402, 266-3456-8 02 266-3803, 639-0003-4Fax#: 02 236-4693

PorayaKunatienManaging DirectorMobile#: 098-826-3354, 081-839-9843Email: [email protected]

PrajuabSuathapGeneralManagerMobile#: 08-1722-1885Email: [email protected]

Ministry of CommerceDepartment of International Trade PromotionThe Royal Thai Government44/100 Nonthaburi 1 Rd., Bang KrasorNonthaburi 11000 Thailand

PanitiUthairatOffice of the Agricultural and Industrial Business DevelopmentTel#: +66 0 2547 4221Fax#: +66 0 2547 42227-9Email: [email protected]

SuthidaNgernmuenTrade OfficerTel#: +66 0 2507 8324Fax#: +66 0 2547 4230Email: [email protected]

Ministry of Public HealthThiwanon Road, NonthaburiTel#: +66 2590-7186/ +66 2590 7189

VimonLimsomwongChief of Pre-Marketing Control SectionEmail: [email protected]

MaleeJiranwongsyExpert on Food StandardMinistry of Public HealthEmail: [email protected]

Ayutthaya Glass Industry Company LimitedRojana Industrial Park, 55 Moo 3, SambunditUthai, Ayutthaya 13210Tel#: +66 35 334 100 # 4219Fax#: +66 35 334 149

YuttapongSatjaphanProduction Assistant Division ManagerMobile#: +66 81934 2253Email: [email protected]

JakkavinMusihasangEmail: [email protected]

NanthapolSudbanthadOffice of the Board of Investment555 VibhavadiRangsit RoadChatuchak, Bangkok 10900 ThailandTel#: +66 0 2553 8193Fax#: +66 0 2553 8211Email: [email protected]

NapadolThongmeeAssistant Director GeneralDepartment of International Trade PromotionMinistry of Commerce563 Nonthaburi Rd. A. MuangNonthaburi 11000 ThailandTel#: +66 0 2547 4220Fax#: +66 0 2547 4227-9Email: [email protected]

ANNEX 4. List of Participants in the Workshop on Condiments and Sauces Industry Roadmap, September 3, 2015, Board of Investments, Makati City


Final Report

Organization/Company ParticipantsBoard of Investments Supervising Director Ma. Corazon Halili-Dichosa

Director Nestor P. ArcansalinLilian C. Cotaz, Division ChiefArrianne Ada Z. AntoniPocholo OrenseDexter PajarilloElizabeth PahilanArmando CamarilloJose Alfred Parco

University of Asia and the Pacific Dr. Rolando DyMarie Anette Galvez-Dacul

US Agency for International Development Richard UmaliJocelyn Mirabueno

Department of Agriculture Renato RemanesTrinidad Carlos Leonila Baes

Food and Drugs Administration Carol Duller, FDRO III, Center for Food Regulation and Research

Department of Science and Technology Lourdes Montevirgin, Senior Science Research Specialist

Department of Trade and Industry - BSMED Elvira P. Tan, Chief Trade and Industry Development SpecialistDanielle M. Javier, Trade Industry Development Analyst

Mother’s Best Gabriel Reyes, General Manager Rufina Patis Factory Jesus Lucas Jr., Special Assistant Mama Sita’s Clara Lapus

Ramon ReyesTentay Food Sauces, Inc. Velia J. Cruz, President

Myrile De LeonMiBrodist


Documents

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