According to the Asian Development Bank, the Philippines is facing a severe recession this year as a result of the pandemic. Years of stable economic growth of around 6.4per cent up until 2017 have been followed by a 7.3 percent fall in GDP in 2020. But the country’s economy should be back on track next year. Here, we examine what the current economic situation, the tax on sugary drinks introduced in 2018 and the coronavirus pandemic mean for the Philippines drinks industry.

Economic facts on the Philippines

The Philippines is one of the emerging economic nations in South-East Asia, although the gap between rich and poor is still very wide. There is also a strong north-south divide as development, modernity and economic activity are concentrated on the island of Luzon, while those in southern Mindanao are often poor by comparison and make their living through farming.

The service sector is the main force that drives the economy, contributing around 60 percent of total GDP made up for example by telephone services for the US market, software development, online services and tourism. The manufacturing industry makes up 30 percent, followed by agriculture, forestry and fishing.

Philippines drinks market and PET

There is one thing that has remained constant in the Philippines drinks market: Carbonated soft drinks (CSD) are still way out in front when it comes to consumption of non-alcoholic drinks. According to a report by Euromonitor in late June, CSD sales in 2019 comprised 4.86 billion liters, followed by bottled water (in < 8 l packs) which comprised 2.86 billion liters.

Consumption of water is increasing as are non-CSDs, albeit on a smaller scale. Along with new market products and taste varieties, the industry reacted to the introduction of the sugar tax in 2018 by downsizing product content to minimise sugar tax impact, using different ingredients and producing healthier drinks which created markets in nearly every area. And these are almost literally catching on with customers. Changes in consumer trends in favour of online shopping, together with the building of new retail channels such as modern supermarkets, convenience stores and shops outside cities are ensuring ever-increasing outreach to the general population.

RTD teas and coffees in the Philippines are almost exclusively provided with PET, for example 95 percent and 91 percent respectively. It is worth drawing attention here to the impressive 17 percent growth in PET used for RTD coffee.

According to a Euromonitor forecast for the rest of this year, there will only be a slight change in consumption of all non-alcoholic drinks. In terms of growth figures for individual drinks ranges this means a modest decline in CSDs, bottled water, ready-to-drink (RTD) tea, sports and soy drinks. Consumption of energy drinks is expected to remain at a steady level, with RTD coffee likely to increase by a few percentage points.

The reusable glass bottle is still a firmly established feature in the Philippines unlike in many other countries. For CSDs in particular it is expected to have a 888 percent share of the packaging market in 2020, ahead of PET with 31 percent. However, according to Euromonitor, this could change again in favour of the PET bottle at some point as use of PET is anticipated to grow by 11 percent. For the water market, 98 percent is in plastics packaging which is mostly PET and 2 percent in glass. Here, the increase in PET use would be 12 percent and 9 percent for glass.

Covid-19 and consumer behaviour