Food Industry

Introduction

The food processing industry is the outcome of Thailand's extensive agriculture. It was once the country's biggest manufacturing industry.
Thailand earns about US$10billion annually from food manufacturing.
The food processing industry is estimated to be worth over $5 billion (1999), down from the market value in 1997 of $6.2 billion.
The Thai processed food market is composed of food products (61%), and beverages (39%).
Exports account for slightly over half of the industry's output. The balance is consumed domestically. However, for some sectors or specific companies, a greater proportion may be exported – up to 85%.
The food processing industry covers a diverse range of product segments. The maturity and technological development of products and markets in each of the segments vary considerably.
The market for some segments, such as dairy and convenience foods, is growing faster than the average for the industry as a whole, while the market for other products, such as canned pineapple and frozen poultry, are nearing saturation.

Industry overview - composition

The food processing industry in Thailand has modernized over the past two decades.
Today's industry is capable of manufacturing food products on a large scale. In recent years the industry has become a world leader in the export of a number of processed food products.
There are more than 8,000 factories in Thailand consisting of small-, medium- and large-scale facilities that employ 570,000 persons.
The majority of these establishments are relatively small.

Composition of the Thai food industry

Product

Small

Medium

Large

Non-Fishery Products

417

43

15

Milk Products

48

37

11

Fishery Products

346

129

40

Vegetable Oil and Animal Oil

193

59

21

Vegetables and Fruits

366

158

28

Seed and Tuber

4,516

170

32

Starch and Flour

1,456

123

24

Sugar

128

12

52

Coffee, Cocoa, Chocolate and Confection

475

59

18

Seasoning

393

57

8

Drinking Water and Non-alcoholic Beverages

209

46

24

TOTAL

8,547

893

273

Small = less than Bt 10 million

Medium = Bt 10 - 100 million

Large = more than Bt 100 million

Source: Board of investment

In general, a relatively small number of factories produce a large proportion of the output within each segment of the industry. There are for the country as a whole, approximately:

40 to 50 significant players in the processed fruit and vegetable sector
10 significant meat processors
7 major dairy processing companies
19 canned tuna processors, but three firms account for 70 percent of the nation's canned tuna production

Canned food processing is responsible for most of the past growth in the agro-industry. Products include fruit and vegetables, tuna, pineapple and seafood. The combined export value for these four items in 1998 was Bt 89.6 billion (23% of all prepared food exports).
The main food groups processed are - fruits and vegetables, shrimps and seafood, poultry and poultry meat products, rice grain and cereal products, sugar and confectioneries and juice and beverages.

Industry overview – History

Development of the food industry was associated with the country's entry into international trade. Highlights of the industrial development of the food industry are summarized:
Before 1960 - most exports were surplus agricultural products, 70% of which were foods. Technologies available to preserve foods were limited and included only drying, pickling and sugar glazing.
1960-70 - Through the introduction of government industrial promotion privileges, Thailand substituted most of its imported products with product surpluses. This era heralded the start of technology upgrading and transfer. Technologies important during this time were those required for sweetened condensed milk processing, fruit or vegetable canning and vegetable oil production.
1970-80 – During this period, the country started to generate surplus income from processed food exports. Products were targeted for local consumption with surpluses being exported. Development of the industry was hampered by lack of experience in bulk production and marketing, which was reflected in product quality.
1980-90 - This decade was characterized by rapid industrial growth and development. Markets were established and consolidated. Technology upgrading was driven by market demand and technologies imported from America or Europe. Annual growth rates for exports averaged 26% in the 1990's; mostly due to frozen and chilled export commodities.
1990-2000 – Industrial realignment with greater emphasis on quality dominated this period. Thailand responded to competition from cheaper production basis by improving quality. Responding to customer needs, greater emphasis was placed on hygiene and sanitation during production, food safety, wholesomeness, lowered production costs, value-addition, adherence to environmental regulations.

International trade

Thailand's high quality and low cost labor force enables producers to compete, internationaly. This, combined with the high quality of Thai products, has driven the export of these goods.
Thailand is a net importer of agri-food items, but three fourths of these imports consist of raw materials for further processing into goods that are subsequently exported.
Despite being a relatively new entrant to modern food processing (commercial activities started in the 1970's) Thailand now ranks (internationally) among the top ten exporters for:

Canned pineapple, pineapple juice and concentrates (largest exporter)
Seafood (especially tuna) (second largest)
Frozen shrimps (largest)
Frozen chicken (top ten)

Food exports in the first 11 months of 1999 were worth $5 billion equivalent to about 12% of the country's $52.8 billion in exports.

Exports of prepared food (billion baht)

Category

1996

1997

% Change

1998

% Change

Canned fish

34.2

49.3

44

67.9

37.8

Canned fruit

15.1

13.9

-7.1

15.4

10.5

Processed seafood

6.2

8.0

30.3

8.5

5.2

Wheat products

5.2

5.7

9.4

6.5

13.5

Canned vegetable

5.1

5.8

13.2

6.3

9.5

Rice products

3.3

3.7

12.5

4.1

11.1

Beverage

3.5

4.3

23.8

3.7

-15.2

Sauces and other preps

1.6

2.4

43.1

3.1

29.4

Milk and milk products

0.8

1.1

24.2

1.3

25.2

Preparation of cuttlefish

0.3

0.9

154.9

98.9

3.9

Chewing gum and non-cocoa confectionery

1.1

1.1

1.4

0.9

-14.8

Cocoa and cocoa preps

0.4

0.5

25.2

0.7

27.0

Soup and preps

1.2

0.9

-27.0

0.4

-50.3

Total

78.5

98.1

24.9

120.2

22.5

Total food exports

273.4

318.3

16.4

395.8

24.3

The industry today

Thailand is increasingly viewed as an important agri-food market, and as a gateway for exporting goods to the rest of Asia and Indochina.
Thailand has invested heavily in neighboring countries, particularly Vietnam, Myanmar, Laos and Cambodia.
Exports of agrifood products from Thailand have not reached their potential for value addition. In 1998, Thailand earned about Bt 120 billion from exports of processed food, compared with Bt 395 billion from shipments of all farm products.
The Thai government is trying to encourage manufacturers and exporters to lower their reliance on unprocessed agri products in favour of high value items.
Thailand is in a period of consolidation and industrial upgrading, characterized by:

Greater recognition and need to confirm to global standards and practices
Automation of production processes for improved throughput and reduced contamination
Process technology upgrading
New methods of preservation, such as technology for the production of cooked, prepared and ready to cook products
Researches and development for greater psytosanitory control and optimum cooking time for improved organoleptic appeal
New packaging materials and techniques

Many companies are implementing inspection, monitoring and verification procedures to strengthen their HACCP schemes. Quality assurance and laboratory inspection ensuring compliance to ISO/IEC Guidelines.

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