(Source: Thailand Investment Review, November 2018)
Recognized as one of the world’s top food exporters, Thailand is enjoying a period of continued growth in its food industry. While it is already one of the country’s top three industries, contributing 23% to the nation’s GDP, Thailand’s food industry is forecast to boost the Thai economy even further as one of the country’s fastest growing sectors over the coming years.
With a combined export value of USD 30.8 billion, Thailand was ranked as the world’s 16th largest food exporter in 2017 by World Atlas. The same report named Thailand as the world’s biggest exporter of cassava products, canned tuna, and canned pineapple, with world export shares of 67%, 44%, and 41%, respectively. The country was also the 2nd largest exporter of rice and sugar, accounting for 23% and 16% of global exports respectively. Thailand’s main export destinations include the European Union (EU), Japan, China, and the United States. Despite its traditional strengths, Thailand’s expertise in the food industry has grown beyond just fresh products and ingredients. In fact, high-value and innovative food products now also make a significant contribution to Thailand’s growing strength in the global food arena.
The processed food industry
As home to more than 10,000 food and beverage processing factories, Thailand plays a leading role as a regional supplier of a wide variety of processed products. The well-established food processing industry in Thailand is unsurprisingly a significant contributor to export growth. Looking ahead, the sector is expected to grow by 8.7% and reach a total value of USD 36 billion by the end of 2018, according to the United States Department of Agriculture.
Despite being a predominantly Buddhist country, Thailand is among the world’s leaders in exporting halal products. According to the halal food information center, more than 5,000 food companies in Thailand are granted halal food standard, with 72% of the registered companies being food producers. Surrounded by predominantly Muslim countries, Thailand has a geographical advantage in exporting halal products to neighboring markets, including Malaysia, Indonesia, and Brunei. To support this sector, the government has put in place a development framework for the halal food sector over the five years from 2016 - 2020 with more than USD 11.5 million allocated to this sector. This effort aligns with Thailand’s ambitious aim of positioning itself among the top five exporters of halal products in the near future.
The domestic market
Apart from its robust export numbers, the domestic market for food industries in Thailand is also sizeable. With the country’s expanding urbanization and growing middle class, the potential for Thailand’s consumer market remains high with large room for future growth. Due to the increased exposure to international food and the modern digital lifestyle, Thailand is experiencing a shift in consumer behavior towards processed food. To be more specific, frozen food and ready-to-eat meals are enjoying a surge in popularity. In 2017, the ready-to-eat sector reached 51,000 tons worth USD 245 million.
The snack food market is another area in the Thai food industry with high competitiveness. It is reported that this sector has generated total revenues of USD 135 million in the first three quarters of 2018. According to Statista, the market is also expected to continue growing annually at a compound annual growth rate of 1.2% from 2018 to 2021. Healthy food is another sector now also receiving more attention from Thai consumers. With the country’s aging population, healthy and functional foods such as nuts, plant-based protein, and essential oils are increasingly in demand.
Behind this domestic growth in Thailand’s food industry, retail businesses are also playing an essential role. With access to a wider variety of supermarket chains, Thai consumers now enjoy the greater choice. This provides huge opportunities for foreign players to enter the market through different store formats ranging from hypermarkets to convenience stores. As of 2017, it was estimated that there are more than 15,000 convenience stores across the country operated by seven main players, while the number of hypermarkets totaled around 500 outlets under four major brands. The retailing sector is estimated to employ approximately 5-6 percent of Thailand’s total population. Meanwhile, retail players are increasingly shifting to online platforms under e-commerce models in line with the digital lifestyles of modern Thai consumers. It is estimated that internet sales are expected to grow to 60% of all retail purchases by 2021.
Strong government support
To reinforce the development of Thailand’s food industry, the government is committed to placing its full efforts into supporting the sustainable growth of the sector. “Food for the future” is one of the nation’s targeted industries under its Thailand 4.0 vision. Overall, Thailand aims to increase its food export value to USD 58.6 billion by 2036. Aligning with this ambitious goal, the public and private sectors have joined hands in launching “World Food Valley.” Covering 2,000 rai in Ang Thong province, the project provides the infrastructure and a complete range of industry development services needed to create a highly specialized ecosystem for the country’s food industry. The Thai government also recognizes the importance of research and innovation in this sector. As such, the country has established its so-called “Food Innopolis” within the Thailand Science Park. The Food Innopolis serves as a global food innovation hub with the main focus on research, development, and innovation.
Alongside its initiatives in support of innovation and development, the BOI also offers various investment incentives for both fiscal and non-tax incentives. For tax-based incentives, exemptions or reductions of import duties on machinery and raw materials are offered, while non-tax incentives include permission to bring in expatriates, own land and take or remit foreign currency abroad. Additionally, foreign talents employed in the country may also be eligible for the government’s streamlined work permit and visa application process as well as the latest SMART visa scheme. These and other efforts are all aimed at ensuring Thailand continues to grow towards a fertile future and establish itself as a regional food hub and a “kitchen of the world.”