Processed Food Industry In Thailand

The food industry in Thailand has grown rapidly over the years owing to an increasing demand in consumer market, both domestically and internationally.

Definition / Scope

Food processing is the transformation of agricultural products into food, or of one form of food into other forms. Food processing includes many forms of processing foods, from grinding grain to make raw flour to home cooking to complex industrial methods used to make convenience foods.

The food industry in Thailand has grown rapidly over the years owing to an increasing demand in consumer market, both domestically and internationally.

Market Overview

The country has one of the most advanced food processing industries in Southeast Asia, which enables Thailand to export value-added products to international markets like Europe, Japan, China, and the United States.

Market Risks

28.3%, Top three markets are: Nestle, Saha Pat hana Inter Holding and Patum Rice Mill & Granary.

Thailand is the only net food exporter in Asia and has the capacity produce far more than its population consumes. The abundant natural resources of the Kingdom play a central role in its comparative advantage among its competitors in the food processing industry

Top Market Opportunities

  • Increasing demand for processed food, both in domestic and abroad markets. People are living and have the desire to live on the urban side of the country due to modernization which is also why people tend to demand quick and convenient food.
  • Consumers are willing to try new products at higher prices. Since is is the digital age, every one is fond of trying new and advanced product in spite of the price. One, it is because to satisfy their psychological needs, another is for social and luxury needs.

Market Trends

  • Abundant raw materials Competitive workforce
  • Cutting-edge technologies in food processing -> local production is increasingly substituting traditional food imports.
  • Diversified business operations and well-established brands Good reputation for quality, nutrition and taste
  • Excellent production and logistics systems
  • Attractive investment incentives
  • Strong government protection on local agricultural products like poultry and livestock products.
  • Increasing dependence on imported raw materials for new product development and value-added products
  • Labor intensive; therefore the policy to increase wage minimum has affected the industry competitiveness
  • Excessive dependence on the importation of food processing and packing equipment

Industry Challenges

  • Growing demand for food
  • Consumption and urbanization.
  • Food Safety and Hygiene
  • Global shift in demand

Technology Trends

The flourish of packaged and processed food industry has opened a lucrative market segment for food machinery and packaging equipment in Thailand.

Leading manufactures in the national food processing industry are constantly developing cutting-edge technologies to meet the increasing demand in the global market

Pricing Trends

In line with the global consumer trends (see Table), prices for processed food products in Thailand are projected to rise over the coming decade due to stronger demand, driven by growing populations, escalating disposable incomes, increasing urbanization and diet diversification.

Prices of meat and fish products are predicted to rise more strongly than primary agricultural products.

Regulatory Trends

Food Act of B.E. 2522 (1979)

  • Substances that can be eaten, drunk, dissolved in the mouth or induced into the body by mouth, no matter in what form, but not including medicine, psychotropic and narcotic substances.
  • Substances intended for use or to be used as ingredients in the production of food including food additives, coloring and flavoring materials. The Act classifies food into four categories as listed below:
    • Specifically-controlled foods: Under this category registration is required. Legal provisions are established regarding standard quality, specifications, packaging and labeling requirements, as well as other aspects of good manufacturing practice.
    • Standardized foods: Food produced under this category must adhere to quality standards as defined in the regulations. This category was created to standardize the production of foods that were locally produced food from small-scale or household industries in order to provide consumers the ability to differentiate such products by qualitative attributes, and encourage food producers on attaining hygienic quality of their products.
    • Food required bearing standardized labels: This category is less-restrictive than the first two categories, as food under this category exposes a low risk of hazard to consumers’ health and does not have to follow specific quality standards for its manufacturing.
    • General foods: It consists of raw, cooked, preserved, non-preserved, processed or non-processed foods. Although registrations are not required, general food products are controlled and monitored based on hygiene, safety, labeling and advertisements.

Prohibited Food and Substances

  • Sodium cyclamate and foods containing sodium cyclamate, except for export purposes.
  • Brominated vegetable oil
  • Salicylic acid
  • Boric acid
  • Borax
  • Calcium iodate or potassium iodate except to be used to adjust the nutrition that related to iodine deficiency as approved by the Food and Drug Administration
  • Nitrofurazone
  • Potassium chlorate
  • Formaldehyde, formaldehyde solution and paraformaldehyde
  • Coumarin,
  • benzopyrone,
  • Benzo-alpha-pyrone, or cis-o-coumaric acid anhydride, or o-hydroxycinnamic acid
  • lactone
  • Dihydrocoumarin, or benzodihydropyrone,
  • Dihydrocoumarin, or hydrocoumarin
  • Methyl alcohol or methanol except for using as processing aids for export purpose
  • Diethyleneglycol, or dihydroxydiethyl ether, or diglycol, or 2, 2’-oxybis-ethanol, or 2,2’- oxydiethanol
  • Foods that contain melamine and its analogues (cyan uric acid, am elide and ammeline)

Foods prohibited to be manufactured, imported, or sold

  • Corn and corn products with Cry 9C DNA Sequence 68
  • Ready-to-eat gelatin and jelly which contain glucomannan or konjac flour packed in small containers with diameter or diagonal of the widest part not larger than 4.5 cm
  • All kinds of puffer fish and foods containing puffer fish meat as ingredients – Dulcin (para-phenetolcarbamide), which is used as sweetener
  • Cyclamic acid and its salts excluded salt of cyclamic acid which is sodiumcyclamate
  • AF2 or furylframide as commonly called or 2-(2-furyl)-3-(5-nitro-2-furyl) acrylamide as chemical name which used as food additive
  • Potassium bromate as food additive
  • Food containing dulcin, AF2, Potassium bromate or cyclamic acid and its salts as ingredient excluded salt of cyclamic acid which has sodiumcyclamate as ingredient – Food containing daminozide or succinic acid 2, 2-dimetylhydrazide
  • Crude extract which is non-water extraction and its derivatives from steavia or stevia rebaudiana, bertoni which is not stevioside exempt producing for export or sell to manufacturer for exporting or sell to producers who extract stevioside from stevia
  • Food containing melamine and its analogues (cyan uric acid, ammelide and ammeline)
  • Food containing objects other than food packed inside food packages, except for the purposes of food quality or standard preservation such as desiccator, oxygen absorber, etc., in separate packages; seasonings; or consuming accessories (such as plastic spoon, chopsticks, measuring spoon, etc.) Objects other than food may be packed with the food packages, but only if they do not pose a risk to humans or mislead consumers that those objects can be eaten.

Food prohibited importing or selling

Foods with expiration dates or suitable periods of consumption, which have lapsed as stated in the label: –

  • Infant food and food of continuous formula for infant and children
  • Supplementary food for infant and children
  • Modified food for infant and modified milk of continuous formula for infant and children
  • Cultured milk – Cow’s milk that has passed pasteurized process, for example, pasteurized fresh milk, recombined pasteurized milk, flavored pasteurized milk and pasteurized milk products, etc. – Food with special objectives.

Beef and beef products from Great Britain, Portugal, France, Ireland, Switzerland, Belgium, Germany, Netherlands, Denmark, Italy, Liechtenstein, Luxembourg, Spain, Czech Republic, Greece, Japan, Slovakia, Slovenia, Austria, Finland, Israel, Poland, Canada, and U.S.A.; except milk and milk products, hides and skins, gelatin and collagen prepared from hides and skins and bone, protein-free tallow, dicalcium phosphate, deboned skeletal muscle meat and its products from cattle 30 months of age or less, and blood and blood by-products.

Good Manufacturing Practices (GMP)

Since July 24, 2003 under Ministerial Notification No. 193, B.E. 2543 (2000), Titled “Method of Food Manufacturing and Equipment for Manufacturing Food and Food Storage” Thailand requires that domestic manufacturers and foreign suppliers of 56 types of products adhere to GMP. They include these products:

  • Infant food and uniform food for infant and children
  • Supplementary food for infant and children
  • Modified milk for infant and uniform modified milk for infant and children
  • Ice
  • Beverage in sealed containers
  • Food in sealed containers
  • Cow’s milk
  • Cultured milk
  • Ice cream
  • Flavored milk
  • Milk products
  • Food additives
  • Sodium cyclamate and food containing sodium cyclamate
  • Food for weight control
  • Tea
  • Coffee
  • Fish sauce
  • Natural mineral water
  • Vinegar
  • Edible oil and fat derived from animal or vegetable
  • Peanut oil
  • Cream
  • Butter oil
  • Butter
  • Cheese
  • Ghee
  • Margarine
  • Semi-processed food
  • Some particular sauces
  • Palm oil
  • Coconut oil
  • Mineral drink
  • Soybean milk in sealed containers
  • Chocolate
  • Jam, jelly, marmalade in sealed containers
  • Food for special purpose
  • Alkaline-preserved Eggs
  • Royal jelly and Royal jelly products
  • Products from the hydrolysis or fermentation of soybean protein
  • Honey (except where the place of manufacturing does not fall under the description of a factory under the law governing factory)
  • Fortified rice
  • Brown rice flour
  • Salted water for food flavoring
  • Sauce in sealed containers
  • Bread
  • Gum and candy
  • Processed agar and jelly
  • Food Supplement
  • Meat Products
  • Flavoring Agents
  • Prepared and processed frozen food
  • Herbal tea
  • Ready to cook food of which ingredients have been clearly separated into unit packing in the container
  • Bakery products
  • Food of animal origin other than meat products prescribed in MOPH notification No. 243/2544 (2001)
  • Rice based noodles

Other Key Market Trends

Abundant Raw Materials

With abundant natural resources, a year-round growing season, relatively low labor costs, and a skilled workforce, Thailand enjoys numerous competitive advantages in the food and agricultural industries.

Market Size and Forecast

Thailand is one of the world’s top ten producers and exporters of processed food products. The demand for packaging to ensure food safety, freshness, and easy-to-use products has significantly transformed the food processing industry in Thailand and has created a new source for the national account. Processed food export brings in about US$10 billion annually and comprise up to 28.3% of gross domestic product (GDP).

Market Outlook

Food products make up a significant 61% of the food and beverage market in Thailand, dominated by products including milled rice, tapioca starch, sugar and confectioneries, seafood, poultry meat, frozen, ready-to-eat foods, and processed fruits and vegetables. The industry is growing at the rate of 9% per year with annual production of more than 28 million ton.

Technology Roadmap

By prioritizing research and development, the country is becoming an important production hub for advanced food ingredients such as artificial sweeteners, e.g. maltitol, crystalline, sorbitol, and high-quality monosodium glutamate (MSG).

Offering a variety of raw materials, leading global companies manufacture their food ingredient products in Thailand for export back to their home countries, as well as for the global market.

Distribution Chain Analysis

The main distribution channels of the food processing Industries in Thailand are:

  • Supermarkets
  • Hypermarkets
  • Convenience stores

Modern food retailing accounts for approximately 70% of total retail sales.

Competitive Landscape

The Thai food processing industry is one of our more competitive export industries. In 2015, the value of our processed food exports totaled USD 17.3 billion, making Thailand the world’s tenth largest processed food exporting country.

Although Thai canned/processed food shipments have lost some competitiveness to Vietnam, other key food exports, including processed chicken, canned/processed sweet corn and canned pineapples, remain strong because of tariff privileges granted via various free trade agreements. However, that competitiveness may be threatened if rivals are also granted similar tariff privileges in the future.

As a result, Thai processed food Industries should adjust by reducing production costs if their products do not differ significantly from rivals or adding value to their products to avoid pricing competition. Moreover, they are advised to capture new consumer segments.

Competitive Factors

Buyer Power:

Consumer choice is one of the most influencing factors for buying behavior. Retailers have to meet the demand of tastes for consumers. For this reason, major buyers in Thailand tend to build their own distribution and brands in order to maintain their bargaining power with processors. Their own house brands include RTE foods, ready-to-cook prepared foods, home-made bakery items, sausages, water, cooking oil, rice, sauces, dairy products and fruit juice.

For example, the Central Food Retail has three brands of private labels, namely “My Choice” for ready to-eat products, “Cooking for Fun” for specialty products such as olive oil, pasta, and rice, and “Tops” brand for premium consumer products. Big C also has three private label brands, which are “Happy Baht” for price sensitive customers, “Big C” for medium-end customers and “Big C Advance” for high-end customers. Overall, bargaining power of buyers is assessed as medium.

Supplier power

Nowadays, most players in Thailand have built their own distribution channels and obtained the inputs through building their own farms. Industries in Thailand negotiate supply contracts with Farmer with fixed-term contract with periodically negotiated prices. The increasing demand on food products with high quality requires leading players exercise measures to maintain product quality.

They tend to strengthen suppliers through providing technologies and production inputs such as seeds, fertilizer and equipment. Some market players enter into long-term contracts with their suppliers, which also enhance supplier power.

New Entrants:

Rapid market growth of the processes food industries in recent years can pursue new entrants to enter the market. Currently, the market share in the packaged food category for private label products by major food retailers in Thailand is less than 5%. Therefore, there are still significant opportunities for private label products to grow in this market. So, threat of new entrants is rated as medium.

Threat of substitutes:

The main substitute for processed food is fresh produce. However, it has a significant disadvantage in having a shorter shelf-life. Changes in lifestyles and income levels have been changing eating habits of consumers. Especially, people living in urban areas have become brand conscious.

Their demand for food products is shifting away to a wider array of processed foods available in supermarkets, hypermarkets and convenience stores. Therefore, there is a low likelihood of substitutes in the Thai processed food market.

Industry Competitors

The Thai processed market is highly fragmented with over 10,000 food processing companies. Retailers can switch between different manufactures’ products quite easily. The fact that products are largely undifferentiated; it develops rivalry among the manufacturers, making it hard to retain buyers. Some players have to diversify their businesses in order to ease the degree of rivalry. Overall, the competition level is assessed as strong in processed food market

Key Market Players

  • FEST
  • Huhtamaki
  • KPI
  • Sealed Air
  • ABB
  • KUKA
  • Patkol
  • Eatigo
  • FoodPanda

Strategic Conclusion

The food industry in Thailand has grown rapidly over the years owing to an increasing demand in consumer market, both domestically and internationally. In order to meet the demand for processed food products, the Thai Government has set to transform Thailand into the Asia’s largest food trade and distribution center.

There has also been a greater emphasis on the quality, hygiene, sanitation, food safety, wholesomeness, lowered production, value-addition and adherence to environmental regulations in the Kingdom, in response to international competition and demand.

Although most processed food products are for the international market, the domestic consumption of processed food continues to grow due to changes in lifestyles that have brought about increased demand for convenient food options. Those potential are what that made Thailand an attractive destination for international investors.

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