In a new report, agri-business specialist Rabobank predicts that the Southeast Asian food sector will grow at 5% annually, while meat will be close behind at 4% by 2020.
At the same time, the bank expects F&A demand in the region to exceed 52m and 20m tonnes respectively.
In comparison, global growth will be seen at 3% for packaged food and 2% for meat annually.
The growth in Asean of packaged food and meat will largely be driven by higher average incomes making protein diets more affordable. Increased urbanisation will also boost demand for packaged food, led by a growing population expected to reach 670m by 2020.
Rabobank said the AEC poses a huge opportunity for the region’s consumer food and beverage businesses, but such companies will need a regional strategy to compete against multinationals.
These, it said, will increase their efficiencies and raise competition across the market. Currently, only 55% of regional firms have an Asean strategy, compared to 81% of non-Asean companies.
Pawan Kumar, Rabobank’s food and agri-business director, said: “For local F&A companies to compete with the stiff competition from multinationals, they will need to have a regional strategy, better access to funds and strong management.
“With the right strategy and support in place, this could even present an opportunity to develop the region’s first home-grown multi-national food and beverage companies.”
Rabobank’s report also highlights that the full effects on F&A commodity trade flows will not be seen while common food production challenges, quality differences and strategic national trade barriers exist. These include the protection of Indonesia, Malaysia and the Philippines’ local rice and sugar industries from being flooded by cheaper imports from Thailand or Vietnam.
Country-level challenges will have a significant impact on the future of F&A businesses under the AEC, Kumar predicted.
“Thailand is currently better placed than other countries, especially in the rice, sugar, and animal protein sectors. As AEC integration continues, to remain competitive, some countries will need to address issues such as non-tariff barriers to trade, effective infrastructure, and agricultural skills shortages.
“While it’s understandable that countries want to protect their local industries, it could also be argued that these sensitivities should be dropped in the longer run to allow commodities to flow from the most efficient producers and reduce the overall cost in the region’s supply chain.”
According to UN Comtrade, intra-Asean trade was valued at US$610bn, and extra-Asean trade was worth US$1.9tr in 2013, with F&A industries accounting for approximately 10% of overall trade.
The leading F&A commodities for intra-regional trade are beverages (39%), rubber (15%), edible oils (12%), soft commodities (11%), value-added products (10%), and animal protein (5%).
Asean’s leading F&A commodity exports are edible oil (28%), rubber (26%), value-added products (14%), soft commodities (10%), animal protein (9%) and cereals (6%), UN Comtrade reported.