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Thailand's F&B sector: Challenges under the new normal

Source:FoodPacific Manufacturing Journa     Date:2021-05-18
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By NUCHARAT SIRIPRAPAWAN

Contributor - Thailand



Every country has been struggling to understand and to adapt to the ways of the new normal. What’s it like for Thailand, Southeast Asia's food and beverage processing trailblazer?


Branding itself as the Kitchen of the World, Thailand has much to offer when it comes to innovation in food ingredients, processing, packaging, and agriculture. The industry is already known for quality and food safety standards, and is encouraged to utilise automation to raise productivity even more.


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Despite the surging COVID-19 outbreak in the first half of 2020, the Thailand Board of Investment1 (BOI) reported gathering 116 investment promotion applications for local and international food processing and drinks manufacturing projects. This is understood as a demonstration of trust in Thailand's food sector, and in the way the government is managing the health crisis. What's more, during the crisis, Thailand's supply chain and logistics infrastructure proved to be robust enough to allow most manufacturers to operate without interruption.


The BOI also shared that the applications were for products like plant-based proteins, semi- and ready-to-eat food, frozen meats and fruits, processed salmon, cricket powder, healthy drinks, UHT yogurt. This information on the choice of products clearly reveals that consumer preferences are changing, with health and nutrition becoming a priority.


Strengthening the immunity and staying generally healthy during the pandemic is a trend Thailand shares with the rest of the world. According to a report from the USDA Foreign Agricultural Service, titled Thailand's Food Trends in 2021, consumers are favoring products that are sustainably sourced and manufactured, as well as packaged in eco-friendly or recyclable materials despite the higher cost. At the same time, there is strong interest in plant-based meat substitutes, apart from natural and organic foods.


Meanwhile the development of hybrid products (combination of categories) has increased, and is attracting consumers, the USDA said. Such products are multifunctional or blend contrasting flavors and ingredients. Examples are ice cream with tea or soft drink with fibre.


The health trend is further explored in the research, Towards the New Normal Lifestyle of Food Consumption in Thailand2 released by the FFTC Agricultural Policy Platform (FFTV-AP) in 2020, providing background information on Thailand's food industry, the changes in eating habits and food preferences of the locals as a result of the COVID-19 crisis, and how manufacturers can best prepare themselves moving forward.


Citing the Food Intelligence Center of the National Food Institute, the FFTV-AP said that in 2019, Thailand’s food industry contributed USD29,479 million, or 5.5% of Thailand's total GDP and 20.6% of industrial GDP. The total revenue for the Thai food industry was forecast at USD54,420 million in 2020, and the average revenue per capita was USD779.66.  Exports in 2019 reached USD32,953 million and in 2020 declined to USD31,284 million.


In addition, Statista data shows that in 2021 the revenue in the country's food & beverages segment is likely to reach USD1,919 million; revenue is forecast to show an annual growth rate (CAGR 2021-2025) of 10.46%, and result in a market volume of US$2,856 million by 2025.


Challenges and solutions in food manufacturing

The shift in purchasing decision where consumers are willing to pay a higher price for better products is pushing Thai manufacturers to compete in terms of quality and safety rather than on price.


In the FFTV-AP report, researchers Ajchara Kessuvan and Arisara Thongpech, Department of Agro-Industrial Technology Faculty of Agro-Industry, Kasetsart University, calls this as both a challenge and an opportunity. They recommend to manufacturers the alignment of supply chain and logistics operations with suppliers. Aside from this, they recommend companies to build offline merge online (OMO) marketing and digital capabilities, as well as to innovate business models. Having said that they presented eight key challenges that impact Thai food manufacturing (see chart).


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Mr. Visit Limlurcha, chairman of Thailand’s Food Processing Industries Club, Federation of Thai Industries, and president of the Thai Food Processors Association


These challenges are not new to manufacturers however with the support of government and associations, companies have to move quickly to rise above them. During an interview with FoodPacific Manufacturing Journal,  (TFPA), pointed out some of the actions that apply to these challenges. In the table below, he offers some of the recommendations from the TFPA, an organisation that serves as the voice of the food processing sector. The TFPA also provides information related to international trade standards, regulations, trade barriers to government agencies and provides technical project assistance to members.

 

No.

Key Challenges

Recommendations/Actions/Trends

1.

 

Require safer and higher 

standards for production

 

Members  have to be updated on food 

standard requirements; they should have 

export  recommendation certificates; self-certificates; their food safety and worker sanitary certificates must be based on medical standards and regulations.

 

For   example, TFPA requests the Department of Fisheries staff  to audit seafood manufacturers and issue them local COVID prevention   certificates.

 

 

2.

 

Encourage  domestic 

consumption

 

There   is increased demand for healthy and nutritious products, and vitamins in   particular, among Thai consumers, even those working from home.

 

Food   manufacturers are launching several products with added protein and vitamins.   These come in smaller packaging for personal consumption and/or single family.  

 

Canned   food accounts for the highest market share because they are affordable and   they have a longer shelf life.

 

The   Thai government  has also launched the 50:50 co-payment scheme to encourage local consumers. Here, Thais with low annual 

income can register under this scheme. The 50-50   co-payment scheme will subsidise registered individuals for half of their   purchases at small shops, with the government subsidising the other half.

 

 

3.

 

Understand   consumer lifestyles and behaviour

 

The  TFPA regularly shares news, nutrition 

information and market trend updates   via website, social media, e-mail and public online webinars. They also   promote healthy eating among consumers, such as recommending intake of vitamin   C & Zinc; reducing sugar consumption and using sugar substitutes.

 

4.

 

Apply   digitalisation systems and E-commerce

 

Upon   recommendation of the TFPA, the Ministry of Commerce conducts online business   matching to support more e-commerce, local and global digital platform and   E-food and drug registration from the local Food and Drug Administration.

 

5.

 

Develop   technology and cold chain for perishable products and fresh food delivery

 

Research   institutes transfer the technology and cold chain needed by manufacturers in   extending the shelf life of food products and fresh food delivery to the global   market.

6.

 

Develop   packaging to increase food shelf life

 

Vacuum   packaging is preferred because it is a relatively inexpensive and uncomplicated   technology to use for perishable products such as rice and fruits.  


Almost all public universities and research   institutes in Thailand grant consulting funds as well as co-fund designing of  vacuum 

packaging.  TFPA releases consulting   projects and funds news to its members

 

7.

 

Innovate   processed foods for healthy immune system

 

Apart   from nutritional supplements, functional foods, and organic foods, meat   alternatives are gaining popularity as part of a modern, healthy and sustainable   diet.

 

Thailand   aims to promote and grow its plant-based food production as well as its edible   insect farming sector. Government agencies facilitate manufacturers’ business   licenses and are defining insect farm standards as this sector develops.  

 

8.

Create   brand trust and traceability system

TFPA   promotes the use of digital systems for brand traceability, barcodes, RFID, and   warehouse automation. TFPA also collaborates with the government in using blockchain   for anti-counterfeiting traceability.

 

 

 

Sources:

1The Increasing Investments in Thailand's Food Sector Reflects the Confidence in Thailand Despite COVID-19 Outbreak: BOI

https://www.boi.go.th/index.php?page=press_releases_detail&topic_id=125517

2Towards the New Normal Lifestyle of Food Consumption in Thailand. https://ap.fftc.org.tw/article/2615

3Thailand's Food Trends in 2021. USDA Foreign Agricultural Service

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