Thailand is Southeast Asia’s second largest economy, with a GDP of $407 billion in 2016. Exports account for more than 54 percent of its GDP. According to the National Economic and Social Development Board (NESDB), Thailand’s GDP growth is at 3.5 percent in 2017 compared to 3.2 percent growth in 2016 and the 3.3 percent average of the last 10 years. Whether assessed based on nominal or purchasing power parity (PPP), Thailand’s GDP places it solidly as a middle-income country. Annual per capita income, based on PPP, is more than $16,000.
Thailand GDP 2009-2016 (in billion USD)
Government expenditure and tourism played important roles in driving moderately stronger growth in Thailand in 2017. The economy is expected to improve in 2018 because of several factors, including the modest recovery of the global economy and the export sector, an increase in government spending, and the recovery and acceleration of agricultural production and prices. In addition, acceleration in infrastructure projects and continual expansion of the tourism sector will continue to fuel economic growth.
Thailand is currently the fourth largest export market for US agricultural products in Southeast Asia and the 13th largest globally. In 2016, US agricultural exports to Thailand were valued at $1.6 billion. Top US processed food exports to Thailand included prepared food, processed and prepared dairy products, processed seafood, processed fruits and vegetables, pulses, and non-alcoholic beverages.
a. Economic Growth and Consumerism
Consumer disposable incomes continue to rise. In 2014, Thai consumer per capita disposable income was $5,733 in nominal terms and spending on food and non-alcohol beverages accounted for 25 percent of total household expenditures. Total expenditures on food and beverages reached $60 billion in 2014. Thailand’s population was 68 million in 2015, an increase of 6.9 million since 2000. Thailand has about 34 million mid-upper income consumers, and the younger population between the ages of 15 and 35 represents 31 percent of total population. The rich and young Thais are willing to try new products and are eager to purchase imported food products that fit their westernized lifestyles.
Thailand Per Capita GDP 2006-2021 (in USD)
Thailand represents one of the most attractive food and drink markets in the Asia Pacific Region. Changing Thai consumer lifestyles and a growing urban population offer modern retailers many growth opportunities. Rural-urban migration continues as people from the villages aspire for better jobs and living conditions in the cities. In addition, many young city dwellers have moved out of the parental home and into condominiums, closers to the central business district. Consistent with urban-based middle-income countries around the world, family size is shrinking.
While valuing convenience, these urban consumers, especially in large cities like Bangkok, place a strong emphasis on quality. This emphasis boosts demand for branded groceries and ready-to-eat food products. Urban consumers are receptive to western culture and are willing to pay a premium for imported foods.
b. Thailand as a Hub for Regional Marketing
Thailand’s tourism is an important component of the service sector, which generated an estimated 8.5 percent of GDP for the Thai economy in 2015. Thailand’s food service sector is reliant on the tourism industry, thus, the increase in tourist arrivals should bode well for growth in Thailand’s HRI sector. In 2015, the number of tourists to Thailand reached 29.5 million, generating revenue of $68 billion.
As a result of its dominance as a regional tourism center and one of the important production centers for food products, Thailand has become a hub for marketing food products in Southeast Asia. Campaigns developed for and targeted to the Thai market can be expanded to include Malaysia, Vietnam and other Southeast Asian countries.
c. Thailand Seafood Market
Thailand has one of the world’s largest fish and seafood industries. Some 90 percent of its production is exported, accounting for around 4 percent of Thailand’s total exports. Its geographic advantage contributes to its high annual fish production.
Thailand’s total fish production in 2015 was around 3 MMT, valued at approximately $5 billion. Marine capture fisheries contributed around 52 percent, followed by coastal aquaculture at 25 percent, fresh water aquaculture at 16.5 percent, and inland capture at 6.5 percent. The bulk of marine capture fisheries and freshwater fish are sold to the domestic market in live and fresh forms while significant amounts go to processing industries. The bulk of production from coastal aquaculture, mainly shrimp, goes to processing industries for export. Intensive industrialization has allowed over 500,000MT of production coming from 25,000 farms. Most shrimp aquaculture is family owned or small business, although large-scale enterprises do exist.
The principal exports products by value were tuna, prepared and preserved shrimp and prawns, frozen shrimp and prawns, cuttlefish and squid, and sardines. Top export destinations were the US, Japan, Australia, Canada, and the UK.
Domestic fish production, however, has been on the downward trend for the past decade due to declining marine capture fisheries. Aquaculture, particularly shrimp, has faced disease-related problems in recent years. The combination of huge seafood processing capacity and growing domestic demand from local consumers, has led to a rise in imports of fish products. Imports are expected to increase further in the years to come.
Thailand’s seafood processing industry is fragmented, so there are many buyers of imported raw fish. Overall, this market segment is significantly larger than the food service and retail sectors. According to official data, there are about 200 active industrial seafood processors, among which 120 are higher-grade seafood processors. They are mostly approved to export their products to developed markets like the EU, the US, and Japan. The processing companies produce and export a wide variety of products, from basic raw frozen products to semi-processed and value-added products. Industry sources estimate that domestic landings can supply only around 40-50 percent of the raw materials needed by the processing industry. The rest has to come from imports.
Fish and seafood is well integrated into local diets and it is a major source of protein for Thais. Annual per capita seafood consumption is around 66 lbs, more than 4 times higher than the US and 10 percent higher than Japan. Local products and popular tropical species like tilapia for freshwater fish, and mackerels, pomfret, shrimp, and squid for sea fish dominate consumption. Live and fresh fish are the most popular forms consumed by local consumers. After fresh fish, the next most popular items for locals are dried/salted fish products such as dried anchovy, dried squid and dried/smoked fish, which are distributed through wet markets and supermarkets.
In line with consumers’ changing lifestyles, increasing income, and growing modern retail outlets, there has been increasing demand for more convenience, ready-to-cook and ready-to-eat seafood-based products both in fresh/chilled, frozen, and prepared/preserved forms.
Similar to the global trend, seafood prices in Thailand have been on the rise for the past few years.
Thailand has three different markets for imported fish and seafood:
- The very large market for imported fish and seafood ingredients and inputs for use by the seafood processing industry. Manufacturing companies process and export a wide variety of products, ranging from basic raw and frozen products to semi-processed and value-added products. The canning industry has a significant strategic focus on tuna. Mackerel and sardines are very important secondary inputs for the industry. The buyers in this industry source their raw materials on a global basis and generally have a very good knowledge of supply bases across the world.
- The food service sector is the major destination for imported fish and seafood. With a sizeable number of Japanese food service outlets, varieties such as salmon, salmon roe and cod find home there.
- A small niche-style market involving imported fish and seafood for purchase by expatriates and upper income Thais who have been exposed to foreign fish.
In the past, Thailand typically imported frozen salmon that was reprocessed and exported. More recently, an increasing amount of fresh salmon is imported for domestic consumption. While not a traditional salmon eating country, the rise in salmon consumption in Thailand is largely due to consumer interest in new and healthy productions, and extensive consumer marketing by salmon producing and processing countries, particularly Norway and Japan. The marketing has paid off; smoked salmon, for example, is gaining traction among Thai consumers who traditionally considered it too salty.
A sharp increase in Japanese restaurants throughout Thailand, also related to Japanese and Norwegian marketing efforts, has also increased demand for salmon. There has been a boom in Japanese food in Thailand and there are thousands of Japanese restaurants in Bangkok alone. These include single site restaurants, restaurant chains, noodle chains and quick service outlets. Sushi is very important for the salmon and salmon roe market in Thailand. These outlets are very familiar with imported salmon.
Imported crabs have their biggest demand base in Chinese restaurants (the seasonal peak being around Chinese New Year) and in high-end hotels. Other products, like halibut, that are exotic to Thailand also have the bulk of their demand passing through the food service industry, the focus of this proposal.
d. Thailand Olive Oil, Wild Rice and Wine Market
Soy oil and other vegetable oils are used the most in Thailand. Some estimates show that oils and fats rebounded to positive current value growth in 2015, following the decline of palm oil in 2014. Consumers? health consciousness limited the overall growth potential of oils and fats, as consumers cut back on these products when cooking. A shift towards healthier types of oils, such as from palm to sunflower and olive oil was also more apparent in 2015, with consumers wanting to ensure their overall well-being.
Thailand is a traditional rice culture. Recent trends in rice consumption including a variety of indigenous rice varieties that that are similar to Native American wild rice. While Native American wild rice is not a rice, it has similar marketing characteristics to the Thai indigenous rice varieties, demonstrating a market opportunity. These indigenous varieties are marketed as healthy and natural. The target market for these rice varieties are urban-middle and upper income consumers. The fact that wild rice is the seed of an annual aquatic, reed-like grass and belonging the Zizania genus of the Poaceae (Gramineae) grain family suggest that it will not run afoul of the Thai rice import quota. As a novel product it has unique opportunities in Thailand.
Among Thailand’s population of 67 million, an estimated 10 percent of Thais drink wine. This accounts for less than 2 percent of the alcohol beverage market. The most popular types of alcoholic drinks in Thailand are beer, whisky and wine. Although wine has a much smaller market share compared to beer and spirits, wine culture is growing and creating a new dynamism in the imported wine market. Red and white wines are considered and positioned as beverages with superior health benefits. Wine is linked to fashionable lifestyles, particularly in urban areas, due to its image as a higher quality beverage.
There has been sizeable growth in the number of wine drinkers among Thai consumers, who are typically aged between 25 and 55. It appears that red wine dominates and holds about 70 percent of the market share. Popular varieties for red are Cabernet Sauvignon, Shiraz, Merlot, and Pinot Noir. Chardonnay and Sauvignon Blanc are well known in the white wine category. Mid-high-income Thais, tourists and expats are the main target groups and are expected to contribute to strong growth in wine consumption. The highly publicized health benefits of wine will continue to create consumer interest and encourage wine drinking on a more regular basis.
e. Thailand’s Food Service Infrastructure
Thailand’s large hotel, restaurant and institutional (HRI) food service sector is comprised of approximately 150,000 outlets including some 100,000 restaurants and more than 5,000 hotels and resorts. Industry growth has been driven by growth in tourism and increased domestic consumer preferences for away-from-home food consumption. Hotels, resorts, restaurants and institutional contractors are heavy users of imported food for food preparation and ready-to-eat meals. This sector services middle-to-upper income domestic consumers, businessmen, resident expatriates, and tourists.
Casual dining restaurants account for approximately 85 percent of total restaurant sales. Continued urbanization, increasing levels of disposable income, and less time for in-home meal preparation support a positive outlook for casual dining restaurants. In addition, increasingly Westernized young Thais are moving away from traditional open-air food stands to casual dining restaurants.
For Thai hotels and resorts, sales of food and beverages account for about 30 percent of total revenues. On average, 30 percent of Thailand’s HRI food and beverages are imported. Currently, the US has a 15-20 percent share of this import market. US beef, seafood, wines, frozen potatoes, and seasonings are among the well-known products in Thailand’s HRI sector.
f. Thailand Seafood, Wine and Olive Oil Distribution
In Thailand, there were 21 exclusive fish products wholesale markets, of which 14 are state markets, 6 are private, and one market belongs to a fish cooperative. There are 10 wholesale markets located in rural areas while 11 are in urban areas. At the Bangkok wholesale market, the trade volume is decreasing every year because of traffic problems and a new private wholesale market that has been established. Interviews suggest that for all the fresh seafood at the Bangkok Fish Market, 46 percent is taken by metropolitan Bangkok consumers, 35 percent is distributed to rural areas in the north and northeast, and 18 percent goes to processors.
In the retail sector, fresh/chilled products still dominate seafood counters, including in modern distribution networks like chain store and hypermarkets. Most fresh fish and seafood in Thailand’s retail channels are local products, with the portfolio of products being highly fragmented in terms of species. Nearly all major supermarkets and hypermarkets and some specialty retailers have separate display areas for live fresh and chilled fish, frozen products, ready to eat products, microwaveable meals, and dried and canned seafood products. White tablecloth restaurants usually serve high value fresh and live fresh, from both local and imported origins.
Usually, wine importers in Thailand act as distributors through four major channels:
- retail trade hypermarket, supermarket, and convenience stores
- hotels and restaurants
- specialty wine shops
Wholesalers may also resell to the other three channels. Currently, about 40 percent of all wines are sold via retail while the rest is sold in the hotel and restaurant sector. Thailand has stringent alcohol control laws that limit retail sales of alcohol by limiting sales times and sales promotions. Wine sales in retail have declined as a result. Premium wines are distributed through specialized wine outlets, online shopping, mail-order/catalogue, and high-end hotels and restaurants. The increased number of fine-dining restaurants have been significant contributors to rising wine sales.
For olive oil and wild rice, there are two key access points coming into Thailand: through importer-distributors, and direct to supermarkets and hypermarkets. Italian and Spanish olive oil have saturated both distribution channels, filling the shelves on aisles in the condiment section of target supermarkets and hypermarkets. Gaining a foothold on the shelves of supermarkets and hypermarkets is very competitive in Thailand. Shelf space requires various types of slotting fees. Building consumer demand requires marketing dollars. Low cost products dominate shelf space, including olive oil pomace.