Amid persistent economic challenges, the Philippines’ food, beverage, and tobacco (FBT) sector has reported a mix of triumphs and setbacks for the first half of 2024. As consumer confidence remains shaky and food prices continue to hover at elevated levels, companies are adapting their strategies to navigate these turbulent waters.

Value-for-money offerings lead the way

With households still feeling the pinch of high food costs, consumers are gravitating towards products that offer the best bang for their buck. This trend has significantly benefited companies like Monde Nissin Corporation (MONDE), Jollibee Foods Corporation (JFC), and Century Pacific Food, Inc. (CNPF). These firms have seen their revenues grow by 2%, 11%, and 13%, respectively, compared to the same period last year.

However, not all players in the sector have fared equally well. Universal Robina Corporation (URC) experienced a modest 3% increase in revenue, while Emperador Inc. (EMI) saw a 7% decline in its top line.

Global expansion: A double-edged sword

JFC’s international expansion strategy appears to be paying dividends, with operations in Europe, Middle East, Africa (EMEA), and North America gaining momentum. However, this global reach comes with its own set of challenges. The company’s quick-service restaurant business in China has been facing headwinds, mirroring the broader economic slowdown in the world’s second-largest economy.

In a similar vein, URC has made the strategic decision to exit the Chinese market altogether, signaling the complexities of operating in this challenging environment.

Profitability: A mixed bag

When it comes to the bottom line, the picture is equally diverse. JFC and MONDE have shown impressive growth in net income, with increases of 29% and 17%, respectively. CNPF also posted a healthy 14% rise in profits. On the flip side, EMI’s net income dropped by 20%, while URC saw a marginal 1% decrease.

Consumer outlook: Cautious optimism

Recent data from the Bangko Sentral ng Pilipinas shows a gradual improvement in consumer sentiment. While still in negative territory, the overall consumer outlook for the next 12 months has been trending upward since the first quarter of 2023. This cautious optimism could potentially translate into increased consumer spending in the coming months.

Inflation: A persistent concern

Despite some easing, inflation remains a key concern for both consumers and businesses in the FBT sector. As of July 2024, the year-on-year change in the Consumer Price Index (CPI) stood at about 6% for food and non-alcoholic beverages, and slightly higher for alcoholic beverages and tobacco.

As the FBT sector navigates these complex market dynamics, companies that can balance value offerings with strategic global positioning are likely to emerge stronger. Investors and industry watchers will be keen to see how these trends evolve in the second half of the year and beyond.

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ARIZ MARCELINO is an Equity Research Analyst in the Investment Services Division of Metrobank Trust Banking Group. His local market coverage includes banks, consumer, and properties. Additionally, he monitors various sectors and investment themes in the offshore space. Previously, he was with the Markets Research Department, focusing on macroeconomic research and sector analysis. Ariz graduated from New Era University with a degree in Banking and Finance and has cleared the CFA Level 1 exam. He is a certified Financial Modelling and Valuation Analyst and a UITF Sales Person. Outside of work, he unwinds by watching popular sitcoms and anime series while enjoying a cup of hot matcha latte.

GERMAN DE LA PAZ III, CFA serves as an Equity Research Lead in the Investment Services Division of Metrobank Trust Banking Group. His coverage includes gaming, telcos, conglomerates, and utilities, as well as select offshore markets. Prior to joining the bank, he spent 9 years at Abacus Securities, starting as a Junior Investment Analyst and working his way up to Senior Investment Analyst. German holds a Bachelor’s degree in Humanities and a master’s degree in Industrial Economics from the University of Asia and the Pacific. Recently, he obtained his CFA charter and is currently pursuing additional industry certifications. In his free time, German enjoys playing sports, particularly basketball, and has a penchant for reading fiction books, watching suspenseful movies, and listening to music.