THOSE making money from the meat business may find a fan in meat lovers like Santiago Toledo.
Toledo fusses over a steak that he says must have an internal temperature of about 130 degrees to 140 degrees Fahrenheit, with its outside seared and the center a bit reddish.
“It’s what they call medium rare, darling,” he says.
He sets aside a portion of a monthly pay so he can eat at steakhouses at least once a month or six times a year—which was his record last year. He tells the BusinessMirror the times he wasn’t dining in a steakhouse were the times he was in a “samgyup” place or a “pares” (pair, in English) house.
“Samgyup” is short for samgyupsal, the grilled pork belly served in restaurants specializing in Korean cuisine.
“Pares” is beef stew cooked slow almost all day in soy sauce and spices. It is usually paired, the English term for “pares,” with a cup of fried rice and a staple diet of the 26-year-old Toledo.
“I grew up eating and loving meat,” the videographer said.
BUT Toledo’s fondness for meat is not rare—pun intended—as he is only one among the country’s growing populace that prefers meat—may it be pork, chicken, or beef—over fish or vegetable.
Fernando, 24, who has been working as a marketing communications officer for six months now after finishing college, says samgyupsal has been part and parcel of her college years.
She said she grew up liking Japanese and Korean food since her family frequents diners that serve such dishes.
“And during my college years, Korean drama was popular so I learned to adapt to the types of food that they eat,” Fernando told the BusinessMirror.
It was in her freshman year in 2015 when she said she “fell in love” with samgyupsal. Fernando said she eats at a restaurant serving samgyupsal at least once or twice a month.
Besides the fact that she really preferred meat, it was the affordability of unlimited pork and beef servings with samgyupsal that encouraged her to frequent these restaurants.
“It helped that it was affordable,” she said. “I saw it back then as a reward for conquering a stressful month, especially during my thesis days.”
Fernando sets aside at least P500 to P1,000 a month from the P3,000 monthly allowance her parents give her so she can eat at these restaurants.
Toledo and Fernando both exemplify what local meat industry stakeholders described as the key driver for the sector’s “vibrant” and “dynamic” growth in the previous decade: Millennials.
They are young upwardly mobile Filipino professionals with rising purchasing power and a lifestyle carved by growing up alongside meat products.
“The demand for meat consumption in the past 10 years was mainly driven by the youth, by the Millennials,” economist Pablito M. Villegas told the BusinessMirror.
“And these youth were the kids that grew up with meat. You will see the rise of the fast-food services and expansion of meat-based restaurants in the past years,” Villegas added.
AN improving economy in the past 10 years is one of the main drivers for the increase in meat demand and production, officials of the industry groups pointed out.
Hence, the local hog industry has been organically growing by 1 percent to 2 percent per annum, Pork Producers Federation of the Philippines (ProPork) noted. Meanwhile, the United Broilers and Raisers Association (Ubra) said producers of broilers have increased output by about 4 percent to 5 percent annually.
ProPork President Edwin G. Chen told the BusinessMirror that annual gross domestic product growth of 6 percent to 7 percent “means the money supply is increasing while our population is growing at 1.7 percent annually.”
“It only means that we need to feed our people,” Chen said.
Such demand also lured entrepreneurs into the industry, as Gregorio A. San Diego, chairman of the Philippine Egg Board (PEB), noted.
San Diego, who also leads Ubra, said the rise in the number of new entrants and industry players contributed to the sustained expansion of the broiler and layer industries.
He explained that since the time needed to raise broilers is shorter and investment is lower than that of hog raising, more investors—mostly small scale in operations—ventured into the poultry industry.
Furthermore, San Diego noted that easier access to credit from financial institutions, particularly private banks, fueled investors’ appetite to produce chicken meat and eggs.
Local hog and broiler production saw record-high output levels in the past decade: reaching 2.3 million metric tons (MT) and 2 million MT, respectively. Chicken egg production also rose to its highest level at the end of the decade at almost 600,000 MT.
THE previous decade also saw the surge in meat imports, both for choice cuts and by-products of livestock and poultry animal, with total volume doubling at the end of the decade.
Total meat imports in the past decade grew by a compound annual growth rate (CAGR) of at least 9 percent. Industry players attributed this growth to higher domestic requirement driven primarily by meat processors, food service industry and even by local consumers.
Bureau of Animal Industry (BAI) data showed that total meat imports in 2018 reached a record-high 850,000 MT, which was more than double the recorded 390,000 MT in 2010. Industry stakeholders expect meat imports in 2019 to remain flat.
The Meat Importers and Traders Association (Mita) noted that the bulk of the country’s annual meat imports are by-products. These meat by-products are usually used by processors to manufacture hotdogs, canned meat and chicken nuggets, among others.
Meanwhile, imports of choice cuts expanded as these became cheaper and were a high-quality alternative to locally produced meat. Ironically, meat produced locally still carries a steep price.
“We saw the rise in imports as local industry players, the producers in particular, are not keeping up with the times. They were not competitive and unable to supply affordable products and make these readily available for consumers,” Mita President Jesus C. Cham told the BusinessMirror.
He cited “two criteria we always emphasize when it comes to meat products: it must be available and affordable.” Cham added, “They [local industry players] have not been able to do that. There is the demand and then there is demand: consumers would find the products they need.”
And, he said, “Filipinos love pork; so our production would really increase.”
LOWERING of barriers to trade among markets paved the way for local businesses to venture and flourish into adding value into meat products since raw materials are available. The so-called globalized trade also allowed for manufacturing of meat products to be more cost-efficient.
This is the case of the country’s meat processing industry, which has ballooned to an estimated value of at least P300 billion, according to the Philippine Association of Meat Processors Inc. (Pampi).
Pampi Vice President Jerome D. Ong said the need of Filipinos for more convenient products and cheaper meat items fueled the industry’s development.
The lowering of tariffs on certain raw materials, such as pork offal and mechanically deboned meat of chicken, helped the meat processors to manufacture “affordable and quality” products such as hot dogs and chicken nuggets.
“Our population is young, mobile; an urbanized population that is always looking for convenience. And processed meat offers that affordable convenient products,” Ong told the BusinessMirror.
Ong, who also serves as President and CEO of CDO-Foodsphere Inc., estimated that their industry’s CAGR in the past decade ranged from 7 percent to 8 percent.
“And the whole meat processing industry caters to a wide spectrum of purchasing power ranging from very mass based markets to premium and even very-premium segments,” he added.
To date, Ong said about 65 percent to 70 percent of their fresh processed meat production are hot dogs and the remaining 30 percent comprises loaves, ham, bacon, tocino (cured pork), longganisa (fresh or smoked sausage), siomai (dumpling), among others.
On the other hand, canned processed meat products manufactured by the industry are broken down into 60 percent of meat loaf and corned beef while the remaining volume is filled up by Vienna sausage and liver spread, among others.
THE growth experienced by meat-related industries wasn’t always a smooth ride.
The past decade saw various problems hounding both the local producers and importers—ranging from supply disruptions, “unfavorable” government regulations, smuggling, lack of data system, disease outbreaks, among others.
Unfortunately, most of these problems remain today as the meat industry welcomes a new decade in their growth and development.
The lack of a proper data system is seen as one of the major challenges the meat industry is facing in the new decade as this could result in supply disruptions, resulting more often than not in falling prices, as proven by the industries’ experience.
Industry groups have been lamenting that the lack of data on supply and demand has left producers blindsided and investors fooled about the real situation of their industries.
For example, the increase in chicken meat imports has been deemed by investors as an opportunity to grow more broiler locally due to meet domestic consumption, Inciong explained.
But little did they know, he pointed out, that bulk of those imports were MDM, a prime raw material for meat processors that is not produced locally.
“They thought that the imports were all prime meats or choice cuts that are sold in wet markets but they weren’t. It was more of raw materials and by-products,” he added.
In 2018, the layer industry suffered an oversupply in eggs due to increased imports of parent stocks, birds that produce pulleys that would eventually become laying hens, as a result of rapid expansion, particularly by commercial farms.
But the expansion in output easily outpaced consumers’ demand, which some industry players noted wasn’t estimated properly by growers.
Broiler raisers also endured low prices from the last quarter of 2018 until half of 2019 due to oversupply caused by increased production and imports.
This time, raisers blamed the glut or lack of data on production, imports and demand of the market, leaving them with no idea that they have reached a breaking point.
Both producers, including big players, and retailers were forced to sell at a bargain even in supermarkets.
THE decade saw the heightened war between local producers and importers as both compete for the domestic market share for meat products.
Chen said the government has been “anti-growth” for the local industries as it resorts to importation as a measure to temper prices when farmgate prices spike. He pointed out this dampens producers’ sentiment to raise more hogs and even invest more in their operations.
“The government has to do a balancing act,” Chen said. “We cannot always [rely] on imports as it exposes us to global movements of prices and we will suffer as a country eventually.”
But for meat importers, traders and processors, the government has often maintained a protectionist stance. This, they said, is evidenced by implementing rules and regulations that are not aligned with international standards, such as a zero-tolerance on salmonella in cooked food.
“If we have not been protectionist, then local industries would be forced to compete on an international level; and who knows what could have happened,” Cham said. “Exporting meat products could have been pursued more aggressively; perhaps, more successfully.”
A joint report by the United Nations’ Food and Agriculture Organization (FAO) and the Organisation for Economic Co-operation and Development (OECD) projected that Filipinos’ increasing demand for meat products will outpace local production.
The report, issued last year, said such demand will be driven by the improvement in the purchasing power of Filipinos. Thus, such demand will force the country to import more to meet domestic requirements by 2028.
The report indicated that Philippine meat production would increase at an annualized rate of 1.85 percent from 2019 to 2028 “due to rapidly increasing domestic demand” for animal protein products.
However, this rate is slower compared to the annual production growth rate of 2.75 percent posted by the local livestock and poultry sector from 2009 to 2018.
By 2028, the country’s total meat output is projected to reach 4.276 million metric tons. This is 22.03 percent higher than the average production of 3.504 MMT in 2016 to 2018.
Despite the expected increase in domestic output, this will not be enough to meet the country’s meat requirement, which may expand by 2.27 percent annually from 2019 to 2028.
The country’s meat consumption will rise 28.67 percent to 5.197 MMT by 2028, from the estimated 4.039 MMT. The double-digit growth in meat demand translates into a 0.90-percent average growth in the per-capita consumption from 2018 to 2027.
The report projected that a Filipino would consume at least 34.6 kilograms of meat annually by 2028. The country’s per-capita meat consumption from 2015 to 2017 averaged 31.2 kg.
The country’s meat imports are estimated to expand by 4.43 percent annually from 2019 to 2028 to plug the shortfall in local output.
The Philippines is estimated to import 924,000 MT of meat by 2028, nearly double the average volume imported in 2016-2018 of 542,000 MT.
The report said the greatest increases will originate from the Philippines, along with members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, such as Japan, Malaysia and Vietnam, “where consumption and import growth, supported by favorable economic growth, will outpace domestic production expansion.”
AS the value chain remains distorted by middlemen, Villegas said prices would still dictate production in the country’s livestock and poultry sectors.
Industry stakeholders have been grappling with the evident disconnect in farmgate and retail prices of locally produced pork, chicken and egg in the domestic market.
Despite times that farm-gate prices plunged beyond cost-to-produce levels, the retail prices of pork and poultry meat have remained at their levels, if not been elevated, due to unscrupulous traders’ profiteering.
Last year, broiler prices fell to as low as P55 per kilogram due to oversupply. This was a scenario described by industry players as worse than 2017, the year the Asian influenza ravaged the poultry sector. Still, retail prices remained above P120 per kg, which is higher than the industry’s suggested retail price of about P105 per kg.
The same happened to pork prices. As the country struggles to resolve outbreaks of the African swine fever (ASF), farmgate prices for live hog declined by at least P15 at an average due to dampened demand for pork. Still, retail prices were unchanged.
“The dictating pulse will always be the price. If the price is right, the farmers will respond. If the price is [not right], then farmers will not produce,” Villegas said. “Sadly, the price signals are distorted by middlemen, cartels and other factors.”
He believes “dismantling” these “disruptions” would allow these sectors of agriculture to grow at a faster pace since producers would be more responsive to market price signals.
And one way to weed out middlemen in the value chain is by clustering producers and empowering them to become “agripreneurs,” Villegas said. In this way they could easily be able to link with the “big boys” or big buyers in the industry, hence, selling their produce at a better price, he added.
Villegas explained this as the “big brother” approach, where a big player helps small players either as contract growers or a part of an entire production system.
“You will now have contract growing in poultry and hogs,” he said. “In hog-raising, we will be avoiding swill feeding, which lessens the threat of animal diseases [outbreak].”
THE spread of transboundary animal diseases, such as ASF and bird flu, has been identified by experts as a huge threat to world meat supply as it could greatly disrupt trade, such as what China is experiencing.
China has been buying all the pork and even other animal protein in the world market to plug the shortfall in their production, particularly for hogs, that has been halved by ASF.
And with such a situation, countries like the Philippines, whose imports have been steadily growing, face stiffer competition as importers and processors find it difficult to cope with higher world prices and maintain profitability.
Such disease outbreaks, though, would also force local producers to increase their production to supply local demand and improve productivity by adopting new technologies, such as stronger biosecurity measures, in raising livestock and poultry.
Disease outbreaks also tend to dampen consumption as risks to humans remained associated with these diseases.
Industry stakeholders maintained these are knee-jerk reactions that are few and far between because the outbreaks are new to the local industry. They also believe consumer education is the key to allay market jitters.
The advent of plant-based meat, whether cultured in laboratories or produced organically, is seen by industry players as a double-edged sword.
Inciong said these types of products could be threats to local production in the future if they are proven to be cheaper and healthier alternatives to traditional meat options.
“It is something to watch out for. It is a concern for us because if it is really going to be cheaper as projected, then they may get some of the market share,” he said. “But the main challenge for them is transparency—how it was produced and is it really helpful or better for the environment, animals and human health.”
For Ong, plant-based meat is rather an opportunity, especially for meat processors, as they can venture into such type of operation and come up with new product offerings.
“The trend for plant-based meat consumption has started as people clamor for healthier products. But the price points become a barrier for increased consumption, plus it may take some time getting used to the flavor and texture of these products,” he said.
“But I see it as an opportunity as we can combine this new technology with our existing ones to spur innovation and come up with plant-based food products as well,” Ong added.
Despite all the risks and challenges hounding the meat industry, stakeholders are facing the next decade with guarded optimism.
For Inciong, he still sees the broiler industry expanding by 1 percent to 2 percent annually, even if their perennial problems continue to persist.
Chen said the forecast increase in Filipinos’ pork consumption, which the OECD-FAO said is roughly a kilogram by 2028, gives hog raisers a “bright future.”
The promise of the Philippine economy reaching a “sweet spot,” paired with growing consumer preference for convenience, fuels the meat processing industry’s bullishness about sustaining its expansion, Ong said.
Indeed, this optimism that stakeholders are holding on to for the future of meat industries is anchored on consumers like Fernando and Toledo.
For Toledo, it’s not a question of whether he prefers steaks or pares.
“The question is, which would I eat first,” he said with a grin.
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