Interview: Winston Co
What are some of the key characteristics of the domestic spirits market, and how are current consumption dynamics changing?
WINSTON CO: The Philippine market is very unique. Two-thirds of the population is below 35 years of age, placing it among the world’s youngest, and it is this group that is driving the country’s consumption story for today and tomorrow. Millennials are very well informed, having wide access to information on the internet. Many younger Filipinos are employed by business process outsourcing (BPO) and have disposable incomes. They also represent a substantial working class outside of the Philippines and, therefore, are exposed to international trends and standards which they subsequently bring back to the country.
Over the years, we have seen the Philippine economy grow, largely driven by BPO expansion. It is expected to soon overtake Overseas Filipino Worker (OFW) remittances, which has, in turn, fueled a growing middle class. The country’s economy has outperformed all other countries in South-east Asia during the current administration, which has managed to establish a strong foundation to propel the Philippines forward beyond its six-year term. A better economy will generate better opportunities, with the country’s middle class already expected to double by 2020.
Another major driver for consumption is urbanisation, which is happening all over the Philippines in Davao, Cebu and Iloilo, where real estate and retail are booming. These are clear indications of the trajectory of the Philippine economy over the next decade and where consumption patterns for the spirits market are heading.
Previously, spirits consumption meant sales of products available and produced locally. Increasingly, the exposure of millennials and OFWs to international brands has fueled the aspirational lifestyle that is largely responsible for the demand for quality and premium products.
Already, alcohol consumption has been on the rise in the Philippines, with people going out more often and the number of relatively inexpensive restaurants increasing, all of which fuel the consumption story.
How can the spirits industry align its products to the price-sensitive nature of the Philippine market, while ensuring high-quality standards?
CO: The Filipino consumer is among the smartest consumers in the world, and they fully embody the value-for-money slogan. Therefore, Filipinos demand quality at affordable prices, as many are well-travelled or have worked abroad, and therefore wish to see the world class quality of products they have tasted elsewhere upon their return to the country. At the end of the day, no matter what kind of brand communication a spirits company does, the determining factor is still product quality. Availability, penetration and distribution are challenging in an archipelagic nation, like the Philippines. The true determinant of a successful brand is its adherence to the global standard of craftsmanship and quality.
Brandy has become the largest liquor segment in the country over the past couple of decades, comprising half of the industry’s volume and is also consumed by the majority of Filipinos. The whisky segment at present still represents an open space in which high-quality but affordably priced products could have an edge. Spirits companies need to be consumer-centric, however, and products have to be world class. Furthermore, players in the beverage industry that have full vertical integration in terms of raw materials and their vineyards will be better positioned to control costs while simultaneously strengthening their quality standards.
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