Fastfood industry seen to grow 10% to 20% in next 3 years

The fastfood industry is expected to experience double-digit growth rates of 10 to 20 percent in the next three years despite the economic crunch that has been pressing down on consumer spending since the Asian financial crisis in 1997.

Industry leaders said the fastfood business has been going against the tide of consumer spending patterns as urban areas shift to increasingly cosmopolitan lifestyles and opt for the convenience of fastfood restaurants.

McGeorge Food Industries chief executive officer George Yang said competition is getting tougher, but there would be room for everybody, especially when the economy recovers from the crisis.

McGeorge Food Industries owns the Philippine franchise of the McDonald’s fastfood chain, the country’s second biggest after Jollibee Food Corp. which still leads the industry in terms of network and sales.

According to Yang, the industry faces pressures from the consumer side, especially with the increase in the prices of raw material and other costs.

"We are at the point where we can no longer raise our prices because we would be pricing ourselves out of the market," he said. "The game now is in terms of increasing efficiency to cut down on cost."

"Competition is tough and we believe there will continue to be a profit squeeze but the volume is there," Yang said. "Filipinos love to eat. The middle class is expanding and more people are eating out routinely, not just as a matter of special treat."

Yang said disposable income would increase as the economy recovers and this is estimated to translate to at least 10 to 20 percent increase in sales volume per year.

"McDonald’s growth will be somewhat less than this figure this year," he admitted. "But this is also the period where we are going to start investing more on new branches and our new meat plant and distribution centers."

Although the retailing business has been liberalized, Yang said it would become even more difficult for new players to meet profit targets in the Philippine market.

"It’s going to be tough," Yang said. "New players would have to have the economies of scale in order to make it. There is room in the industry but only for highly-efficient companies.’

Yang said McDonald’s has been escalating its efforts to grab market share admitted that the company needs to take more aggressive steps to met its own targets. "We have done well but we need to do more," he said.