BREAKFAST CEREALS IN THE

PHILIPPINES
Euromonitor International
March 2013

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LIST OF CONTENTS AND TABLES

Headlines ..................................................................................................................................... 1
Trends .......................................................................................................................................... 1
Competitive Landscape ................................................................................................................ 2
Prospects ..................................................................................................................................... 3
Category Data .............................................................................................................................. 3
Table 1 Sales of Breakfast Cereals by Category: Volume 2007-2012 ...................... 3
Table 2 Sales of Breakfast Cereals by Category: Value 2007-2012 ......................... 4
Table 3 Sales of Breakfast Cereals by Category: % Volume Growth 2007-
2012 ............................................................................................................. 4
Table 4 Sales of Breakfast Cereals by Category: % Value Growth 2007-2012 ......... 4
Table 5 Breakfast Cereals Company Shares 2008-2012 .......................................... 4
Table 6 Breakfast Cereals Brand Shares 2009-2012 ................................................ 5
Table 7 Sales of Breakfast Cereals by Distribution Format: % Analysis 2007-
2012 ............................................................................................................. 5
Table 8 Forecast Sales of Breakfast Cereals by Category: Volume 2012-2017........ 6
Table 9 Forecast Sales of Breakfast Cereals by Category: Value 2012-2017 .......... 6
Table 10 Forecast Sales of Breakfast Cereals by Category: % Volume Growth
2012-2017 .................................................................................................... 6
Table 11 Forecast Sales of Breakfast Cereals by Category: % Value Growth
2012-2017 .................................................................................................... 7


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BREAKFAST CEREALS IN THE
PHILIPPINES


HEADLINES
Breakfast cereals volume sales set to increase by 4% in 2012
Convenience key driver of breakfast cereal growth
Childrens breakfast cereals expected to see fastest current value growth of 8% in 2012
Average unit price expected to post a 3% increase in 2012
Quaker Oats Asia leads in breakfast cereals and expected to hold 31% value share in 2012
Constant value sales of breakfast cereals expected to grow at 4% CAGR over the forecast
period


TRENDS
With more young adults joining the workforce, due to the expansion of business process
outsourcing in the Philippines, demand for convenience plays an essential role in changing
consumer habits. More adults continue to consume breakfast cereals in the morning for a
quick meal. Consumers have less time to prepare breakfast in the morning because lifestyles
are becoming fast paced.
Breakfast cereals is set to post volume growth of 4% in 2012, thanks to growing concern
about health and wellness, which induces families especially the mothers to choose
healthy breakfast foods, increasing childrens population and stable economic growth, which
sustains household disposable income and enables them to purchase higher priced breakfast
cereals. Growth in 2012 was the highest since the economic recession in 2009, thanks to the
improving economy, new product developments and the availability of the smaller pack size
and single-serve breakfast cereals which enabled sales penetration even to the lower income
group.
Childrens breakfast cereals experienced the fastest value growth in 2012 and is expected to
account for 8% of current value sales. Childrens breakfast cereals continues to post strong
growth due to the growing demand for convenience. Although these products are targeted
towards children, many adults continue to purchase them as a quick breakfast option for
themselves. The growing business process outsourcing industry has assisted in driving this
growth due to the unusual working hours for those who work in this industry.
The average unit price of breakfast cereals is set to show a 3% increase in 2012, a result of
consumers preference for smaller package sizes. Smaller package sizes tend to be more
expensive when compared in equal volume levels to larger packs. In addition, the higher
operational expenses and production costs to manufacture breakfast cereals were also
important variables in the unit price increase.
Hot cereals is expected to account for 52% of the breakfast cereals value in 2012. However,
growth of hot cereals has consistently been slower compared to RTE (ready-to-eat) cereals
due to the development of more affordable childrens breakfast cereals and family breakfast
cereals. In addition, hot cereals faces competition from hot cereal beverages such as Nesvita.
Hot cereal beverages are a more convenient alternative to hot cereals.
The majority of RTE cereals tend to be fortified with vitamins and are usually marketed as a
complete breakfast meal that would cover all ones nutritional needs. Hot cereal products, on
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the other hand, tend to be marketed as naturally healthy, good for the heart and effective for
weight management. Both RTE cereals and hot cereals tend to target the middle income
segment in the Philippines.


COMPETITIVE LANDSCAPE
Quaker Oats Asia, the leading brand manufacturer of breakfast cereals, is set to post a 30%
value share in 2012. Its flagship brand, Quaker Oats was one of the first breakfast cereal
brands to enter the Philippine market. It continues to be patronised by consumers of all ages
and is the most well recognised brand name in hot cereals. Quaker Oats has marketed itself
aggressively as a product that is nutritious and good for the heart. Quaker Oats Asia also has
brands present in RTE cereals.
Fifth ranked Liwayway Marketing is expected to show the fastest value growth in 2012 at
nearly 13%. The companys strategy of using a low price positioning and smaller package
sizes to attract customers has proved effective in capturing the more budget-conscious
consumer. Its childrens breakfast cereal brands such as Oishi Choco Flakes and Oishi Honey
Crimpies have an average selling price of Ps50 per unit, about half the price of brands that
belong to international companies such as Kellogg Co and Nestl Philippines.
There were no significant differences in marketing strategies used by manufacturers in 2012
compared to that of previous years. Childrens breakfast cereal brands owned by Kellogg Co
and Nestl Philippines continued to place free toys inside cereal boxes to encourage children
to purchase its products. Manufacturers continued to market hot cereals and family breakfast
cereals as nutritious and able to assist with weight loss. Brands that incorporated this strategy
include Nestl Fitness Cereal and Kellogg Special K.
The international brand manufacturers continue to dominate breakfast cereals in the
Philippines. The top three companies, all of which are international brand manufacturers,
account for 65% of total breakfast cereal retail value sales. The early entry of international
brand manufacturers such as Quaker Oats Asia, Nestl Philippines and Kellogg Co proved to
be a significant barrier for new players to enter breakfast cereals. However, local companies
have started to gain a more significant foothold in the market through use of low price
positioning; this is reflected in the fast growth of Liwaway Marketing in 2012.
There were no product launches that made a significant impact on the Philippine market in
2012. The only notable launch was Quaker Whole Hearts. This was marketed as a balanced
and nutritious breakfast cereal for the entire family, but there were no significant campaigns to
support this brand in 2012. Distribution was also extremely limited and the brand targeted a
niche market of health-conscious individuals, with higher disposable income. Thus Quaker
Whole Hearts had a negligible impact on breakfast cereals in 2012.
There were no major advertising campaigns for breakfast cereals in 2012. Nestl continued
supporting its Nestl Fitnesse 14 Day Programme in 2012; this campaign was launched in
2010 to support its Nestl Fitness Cereal brand. The marketing campaign continued to prove
effective with the female market segment in 2012. The programme offers consumers tips on
weight loss which include meal planning, exercise programmes and other nutrition tips, at the
same time incorporating its brand with the programme.
There were no significant changes to packaging in 2012. The majority of brands continued
using folding cartons as primary packaging. Standard brands continued to dominate the
market; however, more affordable brands such as Oishi continue to gain a more significant
market share. Oishi, unlike its competitors, uses flexible packaging as its primary packaging
and provides consumers with a variety of small sizes in order to capture a larger audience in
the more budget-conscious segment.
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PROSPECTS
Constant value sales of breakfast cereals are expected to grow at a 4% CAGR over the
forecast period. This growth rate is more than three times faster compared to the constant
value CAGR seen over the review period. The increasing demand for convenience and higher
disposable income of the working population is likely to drive this growth. The growing
business process outsourcing industry is likely to benefit breakfast cereals even further.
A potential threat to breakfast cereals, specifically hot cereals, is the development of cheaper
hot cereal beverage drinks such as Bear Brand Busog Lusog, an Energen cereal drink. These
are available in small single-serve sachets and provide consumers with even more
convenience than breakfast cereals. Many consumers tend to take this to the office to
consume as a quick breakfast as lifestyle trends in the Philippines are becoming faster paced.
Childrens breakfast cereal is expected to see a 4% constant value CAGR over the forecast
period. The increasing children population is likely to be the key growth driver. However,
many adults tend to also consume breakfast cereals in the morning due to its easy
preparation and the convenience it provides.
The average constant value unit price of breakfast cereals is expected to decline at a CAGR
of -1% over the forecast period. The increasing competition between international and local
brands is likely to keep unit price growth flat. International brands may reduce prices or
introduce budget brands in order to gain back share lost to cheaper local brands.
Breakfast cereal brand manufacturers are likely to continue using the same strategies they
used over the review period. This will include price promotions, TV and print advertising. All
brands are likely to continue to push nutrition and weight loss as the main benefits of
breakfast cereals. For childrens cereal, it is likely that manufacturers will continue to provide
freebies such as toys, school materials, etc. with purchases of childrens cereal brands.
Quaker Whole Hearts breakfast cereal is likely to have limited growth over the forecast period.
Its high price along with its limited distribution channels is likely to keep sales low. This is,
however, unlikely to deter competitors from launching other cereal brands that are marketed
as healthy. Fortification, weight loss and nutritional completeness are likely to continue to be
the main benefits consumers will look for in a cereal brand. New products are likely to be key
drivers for growth as this industry becomes more mature.


CATEGORY DATA

Table 1 Sales of Breakfast Cereals by Category: Volume 2007-2012

tonnes
2007 2008 2009 2010 2011 2012

Hot Cereals 9,130.0 9,449.6 9,733.0 10,054.2 10,406.1 10,780.7
RTE Cereals 3,171.6 3,349.5 3,451.2 3,573.0 3,706.8 3,850.9
- Children's Breakfast 2,521.9 2,698.4 2,806.4 2,924.2 3,050.0 3,184.2
Cereals
- Family Breakfast 649.7 651.0 644.8 648.8 656.9 666.7
Cereals
Breakfast Cereals 12,301.6 12,799.0 13,184.2 13,627.3 14,113.0 14,631.6
Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

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Table 2 Sales of Breakfast Cereals by Category: Value 2007-2012

Ps million
2007 2008 2009 2010 2011 2012

Hot Cereals 1,522.0 1,628.6 1,710.0 1,778.4 1,867.3 1,970.0
RTE Cereals 1,319.6 1,444.1 1,527.1 1,614.9 1,718.0 1,840.6
- Children's Breakfast 1,039.6 1,164.3 1,245.8 1,326.8 1,419.7 1,530.3
Cereals
- Family Breakfast 280.1 279.8 281.3 288.1 298.4 310.2
Cereals
Breakfast Cereals 2,841.7 3,072.7 3,237.1 3,393.3 3,585.3 3,810.6
Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources


Table 3 Sales of Breakfast Cereals by Category: % Volume Growth 2007-2012

% volume growth
2011/12 2007-12 CAGR 2007/12 Total

Hot Cereals 3.6 3.4 18.1
RTE Cereals 3.9 4.0 21.4
- Children's Breakfast Cereals 4.4 4.8 26.3
- Family Breakfast Cereals 1.5 0.5 2.6
Breakfast Cereals 3.7 3.5 18.9
Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources


Table 4 Sales of Breakfast Cereals by Category: % Value Growth 2007-2012

% current value growth
2011/12 2007-12 CAGR 2007/12 Total

Hot Cereals 5.5 5.3 29.4
RTE Cereals 7.1 6.9 39.5
- Children's Breakfast Cereals 7.8 8.0 47.2
- Family Breakfast Cereals 4.0 2.1 10.8
Breakfast Cereals 6.3 6.0 34.1
Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources


Table 5 Breakfast Cereals Company Shares 2008-2012

% retail value rsp
Company 2008 2009 2010 2011 2012

Quaker Oats Asia Inc 31.3 31.5 31.3 31.4 31.2
Nestl Philippines Inc 20.2 20.8 21.2 21.6 22.0
Kellogg Co 13.7 12.8 12.5 12.2 11.9
Ideal Macaroni & 9.0 9.1 9.1 9.0 9.0
Spaghetti Inc
Liwayway Marketing Corp 6.6 7.3 7.8 8.3 8.8
Golden Oats Corp 8.5 8.2 8.1 7.9 7.7
Kraft Foods Inc 1.0 0.9 0.8 0.7 0.7
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Molina Nicoli SpA 0.1 0.1 0.1 0.1 0.1
Weetabix Ltd 0.1 0.0 0.0 0.0 0.0
Pioneer Food Group Ltd - - - - -
Nutridel Food Corp - - - - -
Others 9.4 9.2 9.1 8.7 8.4
Total 100.0 100.0 100.0 100.0 100.0
Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources


Table 6 Breakfast Cereals Brand Shares 2009-2012

% retail value rsp
Brand Company 2009 2010 2011 2012

Quaker Quaker Oats Asia Inc 31.5 31.3 31.4 31.2
Australian Harvest Ideal Macaroni & 9.1 9.1 9.0 9.0
Spaghetti Inc
Oishi Liwayway Marketing Corp 7.3 7.8 8.3 8.8
Koko Krunch Nestl Philippines Inc 7.6 7.8 8.0 8.2
Golden Oats Golden Oats Corp 8.2 8.1 7.9 7.7
Honey Stars Nestl Philippines Inc 6.3 6.5 6.6 6.7
Kellogg's Frosties Kellogg Co 3.2 3.0 3.0 3.0
Nestl Corn Flakes Nestl Philippines Inc 2.3 2.3 2.3 2.3
Kellogg's Froot Loops Kellogg Co 1.8 1.7 1.7 1.6
Milo Nestl Philippines Inc 1.4 1.4 1.5 1.6
Kellogg's Coco Pops Kellogg Co 1.6 1.5 1.5 1.5
Kellogg's Corn Flakes Kellogg Co 1.2 1.1 1.1 1.1
Kellogg's All Bran Kellogg Co 0.7 0.7 0.7 0.6
Kellogg's Raisin Bran Kellogg Co 0.4 0.5 0.5 0.5
Kellogg's Mueslix Kellogg Co 0.3 0.3 0.3 0.3
Nicoli Molina Nicoli SpA 0.1 0.1 0.1 0.1
Post Kraft Foods Inc 0.1 0.1 0.1 0.1
Kellogg's Just Right Kellogg Co 0.1 0.1 0.1 0.1
Alpen Weetabix Ltd 0.0 0.0 0.0 0.0
Kellogg's Cocoa Kellogg Co - - - -
Krispies
Nutro Nutridel Food Corp - - - -
Nature's Source Pioneer Food Group Ltd - - - -
Others 16.8 16.5 16.0 15.7
Total 100.0 100.0 100.0 100.0
Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources


Table 7 Sales of Breakfast Cereals by Distribution Format: % Analysis 2007-2012

% retail value rsp
2007 2008 2009 2010 2011 2012

Store-Based Retailing 100.0 100.0 100.0 100.0 100.0 100.0
- Grocery Retailers 99.9 99.9 99.9 99.9 99.9 99.0
-- Supermarkets 76.3 75.8 75.8 75.1 74.8 73.9
-- Hypermarkets 6.4 7.3 7.8 8.8 9.4 9.7
-- Discounters - - - - - -
-- Small Grocery 14.4 14.0 13.4 12.4 11.9 11.6
Retailers
--- Convenience Stores 0.9 0.9 0.9 0.9 0.9 1.0
--- Independent Small 13.0 12.5 12.0 11.0 10.5 10.1
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Grocers
--- Forecourt Retailers 0.5 0.5 0.5 0.5 0.5 0.5
-- Other Grocery 2.8 2.8 2.9 3.6 3.7 3.8
Retailers
- Non-Grocery Retailers 0.1 0.1 0.1 0.1 0.1 1.0
-- Health and Beauty - - - - - -
Retailers
-- Other Non-Grocery 0.1 0.1 0.1 0.1 0.1 1.0
Retailers
Non-Store Retailing - - - - - -
- Vending - - - - - -
- Homeshopping - - - - - -
- Internet Retailing - - - - - -
- Direct Selling - - - - - -
Total 100.0 100.0 100.0 100.0 100.0 100.0
Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources


Table 8 Forecast Sales of Breakfast Cereals by Category: Volume 2012-2017

tonnes
2012 2013 2014 2015 2016 2017

Hot Cereals 10,780.7 11,179.6 11,604.5 12,057.0 12,539.3 13,053.4
RTE Cereals 3,850.9 4,005.1 4,171.2 4,349.5 4,541.7 4,749.2
- Children's Breakfast 3,184.2 3,327.5 3,480.5 3,644.1 3,819.0 4,006.2
Cereals
- Family Breakfast 666.7 677.6 690.7 705.4 722.6 743.0
Cereals
Breakfast Cereals 14,631.6 15,184.7 15,775.7 16,406.6 17,081.0 17,802.6
Source: Euromonitor International from trade associations, trade press, company research, trade interviews,
trade sources


Table 9 Forecast Sales of Breakfast Cereals by Category: Value 2012-2017

Ps million
2012 2013 2014 2015 2016 2017

Hot Cereals 1,970.0 2,013.4 2,067.7 2,129.8 2,204.3 2,292.5
RTE Cereals 1,840.6 1,902.8 1,972.2 2,049.0 2,134.1 2,228.4
- Children's Breakfast 1,530.3 1,591.5 1,658.4 1,731.3 1,811.0 1,897.9
Cereals
- Family Breakfast 310.2 311.3 313.8 317.6 323.1 330.5
Cereals
Breakfast Cereals 3,810.6 3,916.1 4,039.9 4,178.7 4,338.4 4,520.9
Source: Euromonitor International from trade associations, trade press, company research, trade interviews,
trade sources


Table 10 Forecast Sales of Breakfast Cereals by Category: % Volume Growth 2012-
2017

% volume growth
2016/17 2012-17 CAGR 2012/17 Total

Hot Cereals 4.1 3.9 21.1
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RTE Cereals 4.6 4.3 23.3
- Children's Breakfast Cereals 4.9 4.7 25.8
- Family Breakfast Cereals 2.8 2.2 11.4
Breakfast Cereals 4.2 4.0 21.7
Source: Euromonitor International from trade associations, trade press, company research, trade interviews,
trade sources


Table 11 Forecast Sales of Breakfast Cereals by Category: % Value Growth 2012-2017

% constant value growth
2012-17 CAGR 2012/17 TOTAL

Hot Cereals 3.1 16.4
RTE Cereals 3.9 21.1
- Children's Breakfast Cereals 4.4 24.0
- Family Breakfast Cereals 1.3 6.5
Breakfast Cereals 3.5 18.6
Source: Euromonitor International from trade associations, trade press, company research, trade interviews,
trade sources