Southeast Asia's Food Service Market Abounds in Opportunities for U.S. Exporters - Statistical Data Included

AgExporter, April, 2001

As it continues to rebound from the financial crisis that began rocking economies around the world in 1997, Southeast Asia could once again mean good business for U.S. exporters of consumer foods and other agricultural products.

Southeast Asia's imports of U.S. consumer-oriented foods and edible seafood products were growing rapidly before the crisis. In fiscal 1997, the top five markets--Indonesia, Malaysia, the Philippines, Singapore and Thailand--bought nearly $762 million worth of such products from the United States. But by fiscal 1998, the figure had dropped to $502 million.

The crisis had a big impact on Southeast Asia's food service sector. Consumers ate out less often, and businesses cut spending on entertaining clients and employees.

Consumers and businesses also became more price-conscious. Lower demand, coupled with sharp devaluations of currencies that effectively raised the prices of many imports, prompted some importers to curtail or suspend purchasing overseas. The strong dollar made U.S. products particularly expensive.

The food service sector coped with the crisis in a number of ways. Much of the trade sought to replace imports with local substitutes of acceptable quality but lower cost. Imported foods disappeared from some menus. Hotels and restaurants began to produce more of their own food items from intermediate ingredients.

There are persuasive signs of recovery. In 1998, the size of the food service market in Southeast Asia was conservatively estimated at $14.7 billion. And U.S. shipments have recovered more quickly than initially anticipated. In fiscal 2000, the top five country markets imported $638 million worth of U.S. consumer-oriented products and edible seafood--a particularly auspicious sign, given the fact that many currencies in the region remain weak relative to the strong U.S. dollar. On the other hand, knowledgeable market observers forecast that it could take another 3 to 5 years for the economies and consumption patterns of Southeast Asia to return to precrisis levels.

A key to the decision to use imported foods in most food service establishments is the international nature of their menus.

For example, U.S. franchises, such as Hard Rock Cafe, Dan Ryan's or TGI Fridays, are major importers of U.S. items.

Also of importance is how much of an establishment's clientele is made up of expatriate customers and/or Southeast Asians who have traveled abroad. International resorts and full service restaurants, Western franchise restaurants and fast food outlets, international airlines and five-star hotels hold the most potential for U.S. exporters. The food and beverage outlets of international hotels often operate independently from the rest of the company. Even within five-star hotels, coffee shops are more oriented to using local products, since a high percentage of customers are local.

Who Eats Where?

Middle- and low--income earners tend to frequent food courts, hawker stalls and centers (local, open-air restaurants), and coffee shops. These outlets generally offer a limited range of inexpensive local dishes. Breakfast and/or lunch may be purchased from these outlets during the work week. Canteens, cafeterias and/or hawker centers in office and school locations offer budget-level hot meals suited to local tastes. Temporary hawker stalls, located along the roadsides near offices and operating with limited hours, offer noodle or rice dishes.

Middle- and lower income groups also frequent fast food restaurants. These outlets attract young adults, children, families and office workers who want a quick meal. Menus tend to be fairly standard across the region, while also incorporating dishes and condiments which appeal to local tastes. For example, McDonald's outlets often create special dishes such as the rendang burger (in Malaysia) or kiasu burger (Singapore) with chili sauce or a pineapple ring on top.

Upper-middle- to higher income earners are the main customers of Western and local full-service restaurants, which offer higher priced menus and better quality food. This segment of the market also frequently patronizes food courts and casual cafes.

Middle- to higher income groups often entertain business and personal guests in moderately expensive to high-end restaurants, for the convenience they offer and the social status they convey. In addition, larger and more successful businesses usually hold an elaborate annual dinner and dance for their staffs, usually at moderate to high-end hotel or resort restaurants. Wedding dinners are also frequently held at these establishments.

Fine dining establishments attract less price-sensitive consumers: high-income local customers, business persons, tourists and expatriates. These establishments' menus tend to be limited and expensive, but encompass top-quality items. Food presentation is stressed. Such restaurants are usually located in five-star hotels or are independent enterprises in free--standing buildings.

Factors Fueling Future Growth

Growth in the value of food service sales in local currency is projected at a minimum of 10 percent annually for the next 3 years. In fact, most growth forecasts are considerably higher--in the neighborhood of 15-20 percent annually.