Thailand Makes Its Bid to be Southeast Asian Food Ingredients Hub

While changing tastes and growing demand indicate good times ahead for the food ingredients industry, exhibitors at the Food Ingredient Asia Exhibition remain wary of the spectre of global over-production that still haunts the sector.

Photo: Food ingredients: Increasingly important in the Thai market.
Food ingredients: Increasingly important in the Thai market.

Thailand plays a pivotal role in Asia’s food ingredients industry. This is both as a leading producer and also as an increasingly important consumer market, a development largely down to its growing middle class. Perhaps unsurprisingly, then, the majority of exhibitors at Bangkok’s Food Ingredient Asia Exhibition were positive about Thailand’s prospects in the sector, although several also expressed concerns about the problem of global overcapacity in the industry.

One area where Thailand is doing particularly well is in the processed foods sector. Manish Ranjan is the Assistant Vice President for Marketing at Aditya Birla, a Mumbai-headquartered multinational conglomerate that produces phosphates for use in processed foods. He believes prospects in the country remain bright, saying: “Thailand is a big market for us. While a lot of Thai cuisine is cooked on the spot, the ingredients used are often processed.

“Thailand also serves as a regional hub for the sector. Processed food is very specific to regions. In Europe and North America, for example, it is often meat that is processed, whereas in this part of the world, it is more likely to be seafood.

“As a result, Thailand is one of the leading south-east Asian suppliers of processed food, with its products exported to the likes of Laos, Cambodia and Myanmar.”

Deeming Thailand to be a growing centre for the processed foods industry, Aditya Birla is now setting up a research centre in the country in order to develop its product range. Explaining the move, Ranjan said: “The difference in preferences between Thailand and its neighbours and the rest of the world are substantial enough for us to have a research centre there. We chose Thailand as it is a hub for the region and has a robust domestic market.”

Intraregional trade in food and food ingredients seems likely to gain a further boost following the recent launch of the Asean Economic Community (AEC). Chutamas Rujiravongs, Assistant Export Manager at King Rice Oil Group, a Bangkok-based rice-oil exporter, said: “While the bulk of our products go to Europe, North America and Japan, we expect the AEC to provide a boost to our sales elsewhere in southeast Asia.”

Rujiravongs also believes that certain products, including those exported both regionally and globally, benefit from having a ‘Made in Thailand’ label. She said: “Some Thai companies that produce foods for export like to use our oil. This is largely because they can then say that their product is 100% Thai, which is a useful marketing tool.”

Thailand’s domestic consumer market is also growing in importance. In line with this, many exhibitors reported that they were now introducing products to the country that had previously only been targetted at the more developed markets.

Highlighting this, Albert Co, Import and Export Manager at Yantai Oriental Protein Tech, a Shandong-based pea protein deep-processing firm, said: “In Thailand, demand is increasing for our products, which are mainly used in nutrition supplements and drinks in order to support muscle development.

“We previously focussed on the US, European and Australian markets, as well as China, but entered the Thai market due to its clear potential. As we received a lot of interest from southeast Asia, with people clearly looking for another source of protein, we started selling there in 2014.”

Yantai Oriental is not unique in targetting Thailand with products originally aimed at other markets. Carrie-Ann Lee, Asia-Pacific New Business Development Director at Celanese, a Texas-based chemical producer, said: “We see Thailand and the southeast Asian regions as very important in terms of our strategic growth. We produce a number of products that are used for the reduction of sugar content in foodstuffs and we see growing demand in the region. This is largely because we see diabetes and obesity as looming issues in southeast Asia.”

Photo: Food for thought at the 2015 expo.
Food for thought at the 2015 expo.
Photo: Ingredients in action courtesy of Nacase.
Ingredients in action courtesy of Nacase.

Despite such health concerns, demand for such specialised ingredients is coming largely as a result of the rising standard of living in the region, although some of the demand is also due to the region’s rapidly increasing population. Jay H. Kim, President of Neo Cremar, a South Korean company specialising in milk formula ingredients, said: “The population of many Asian countries is still increasing so, inevitably, we expect that the market will continue to grow. In this respect, compared with western countries, I think the Asian countries have greater potential for us.”

While many foodstuffs previously sold elsewhere are now becoming more popular in Thailand, it is important to note that this trend started from a very low base. Healthy, but more expensive, alternatives to common food products are the prime example here.

Addressing this particular trend, Rujiravongs said: “When King Rice Oil began in 1977, the company tried selling in Thailand but stopped as demand for our oil was too limited. We have now returned to the Thai market and are making progress, but the market is still small. Overall, the market share for rice oil in Thailand has grown from 4% five years ago to about 8% today.”

The situation is similar with the comparative demand for ‘natural’ ingredients and processed foods, with this proving a particular challenge for Aditya Birla‘s phosphates division. Ranjan said: “The biggest challenge for us is that chemicals don’t sit well with food in people’s minds. As a result, lot of people want to move from food processed with chemicals to more natural products.

“At present, though, this is not yet a significant problem for us in Thailand. ‘Natural’ ingredients are a still seen as largely a western concept, with awareness only just growing in this part of the world. It will take some years before processed foods are really under threat.”

While demand in Thailand and surrounding countries is clearly growing, the food ingredients industry in Asia is nonetheless struggling on account of substantial oversupply problems. A clear example of the problem comes in the case of aspartame, an artificial sweetener.

Dong Changchuan, Vice General Manager at Changzhou Guanghui Biotechnology (GSweet), producers of aspartame, said: “Demand is strong in southeast Asia, as sweet drinks and juices are very popular, so there are lots of beverage manufacturers that we sell to. Production capacity in the sweetener and food ingredients industry, though, is still greater than demand.

“In the US, the only major non-Asian aspartame manufacturer shut down last year and now there are only seven in the world – one in Japan and six in China. In these particular locations, production can be done cheaply thanks to the low manufacturing costs and the availability of the required raw materials.”

Another major concern in the industry is food safety, with Lee saying: “This region has had many food scandals and so there is now a lot of attention being paid to ensuring the delivery of high quality products. The regulations in Thailand are generally good, whereas some other Asian countries have a lot further to go.”

In general, the increasing globalisation of food production is also providing a further boost to food safety. Acknowledging this, Ranjan said: “Most food ingredient companies now supply big producers all across the globe. As they need to be compliant with all the international regulations, the ingredient companies have no option but to reach the required standards.

“Even if you are doing business in places where the regulations are less stringent, you still have to meet the higher standards found in other countries.”

Photo: International ingredients: Changing tastes in southeast Asia.
International ingredients: Changing tastes in southeast Asia.

Food Ingredients Asia 2015 was held from the 9-11 September at the Bangkok International Trade & Exhibition Centre.

Source: HKTDC Research. Date: 5 Jan 2016