Page 33 - FoodFocusThailand No.166 January 2020

SPECIAL FOCUS

export, further rise in prices, and consequently swelling costs of indirect players into the field such as mall-based restaurants, street food
ingredients. For these reasons, the intensity of drought in 2020 should vendors, home-delivery food providers, and instant meals. Reasonable
be closely monitored. If there is a prolonged period of intense impacts, pricing may thus largely depend on the manufacturers’ ability to effectively
the fresh food price index may climb at a steeper rate than that of manage the costs of ingredients and marketing.
2019, with an expected YoY hike by 4.2% . Additionally, the country- 2) The development of premium RTE meals to cater to niche
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wide increase in the minimum wage by THB 5-6, to take effect on the market with higher purchasing power: although the niche market may
1st of January 2020, will raise the lowest daily wage bar to around be smaller, its purchasing power is less likely to be affected by the
THB 313-336 from THB 308-330 during 2018-2019. This is another recession. However, in order to address this market, manufacturers will
important factor that will add up to the business costs. have to compete among themselves. The focus should, therefore, be
Moreover, increasing the prices in the face of the economic shifted to healthier RTE alternatives that offer higher nutrition or innovative
downshift is practically difficult, especially for the products with high features to the new generation such as lower sugar, fat, and sodium
competition such as RTE foods. Therefore, entrepreneurs may be content, use of premium and trendy ingredients, compact and
obliged to absorb the rising costs themselves; an attempt that environmentally friendly packaging suitable for single consumption, etc.
undermines the business competitiveness and is difficult to avoid. Functional convenience-focused innovations such as non-microwave,
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self-heating, non-chilled/non-frozen , or shelf-stable ready meals are also
The Government to Impose Sodium Tax: the targeted an option here.
4products are foods with sodium content higher than the established Based on the factors mentioned above, Kasikorn Research Center
standards . The feasibility of the plan is now being evaluated by various predicts that the RTE meals will see a greater expansion than the rest of
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tax-related entities. If a conclusion is reached within the end of 2019, the food and beverage sector in 2020, with a YoY growth by 3.0-5.0% at
or the beginning of 2020, the law will come into force within a one or an estimated value of THB 20.2-20.5 billion. Although the RTE foods
two-year time and will affect the products such as instant noodles, currently enjoy less than 1% of the overall food and beverage market
canned foods, seasoning powders, and frozen RTE meals. Such share, it is highly likely that the proportion will grow in the future.
taxation will translate into a further cost pressure for entrepreneurs While the total value of the domestic food and beverage market may
as there will be a need for recipe re-formularization and development experience a stumbling growth rate when compared to 2019 due to lower
of new premium products with lower sodium content. purchasing power and lethargic economy, the drought and lack of water
Given such challenges, Kasikorn Research Center believes that may affect the food supply and elevate the prices of fresh ingredients in
RTE food manufacturers may need to take into consideration the 2020. The government’s impending sodium tax as well as the
following vital product development strategies: manufacturers’ offensive marketing strategies through promotional
1) Reasonable pricing along with health and hygiene-based campaigns will hopefully contribute to an expansion of the total market
quality control for mass market: this will generate price-to-quality value, which is expected to reach THB 2.46-2.51 trillion in 2020, with a
ratio for consumers and lead to an easier decision-making. However, YoY rise by 2.4-4.4% in comparison with the 2019 YoY increase by 5.4%.
the high level of current competition brings about many direct and

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