Myanmar develops taste for foreign food and beverages
As their nation emerges from long decades of isolation, the people of Myanmar are developing appetites for new and foreign things, especially food and drink. Imports of foods and beverages have skyrocketed since 2011, driven by rising incomes, urbanization and the influence of foreign media. Imported condiments, like MSG, instant cooking paste, seasoning powders and sauces, have become tremendously popular.
Author: EIC | Economic Intelligence Center
Published in Bangkok Post/Asia In Depth: Asia Focus section, 7 November 2016
As their nation emerges from long decades of isolation, the people of Myanmar are developing appetites for new and foreign things, especially food and drink. Imports of foods and beverages have skyrocketed since 2011, driven by rising incomes, urbanization and the influence of foreign media. Imported condiments, like MSG, instant cooking paste, seasoning powders and sauces, have become tremendously popular. So have western fast food restaurants like KFC and Pizza Hut, which have attracted lots of young customers since entering just last year. This is only the beginning of what is likely to be a period of golden opportunity for foreign food and beverage companies from Thailand and elsewhere.
The main driver is growth of Myanmar’s middle class. By 2020, Myanmar’s middle-income segment will total 10 million people, roughly 20% of the population. They will generate soaring demand for high-quality groceries, including imported premium meat, seafood, dairy products, alcoholic beverages, even organics. In response, the government has begun to liberalize some imports. Since 2015, for example, Myanmar has allowed greater importation of prime beef and pork from the United States, Japan, and Brazil. For now, demand for premium food is concentrated in Yangon, Naypyidaw, Mandalay and other large cities, where purchasing power is highest and where modern retail stores and high-end hotels are situated.
Rapid urbanization also means a hunger for convenience. Busy city people tend to opt for processed foods, ready meals, frozen food, instant food and dairy products. Around 18 million people, or 34% of the population, currently live in big cities and urban areas, way up from 13% in 2010. The urbanized share is expected to reach 37% over the next three years, driving demand for convenience foods. During the past three years, instant noodles have quickly become popular. Japan’s Acecook, a noodle maker, will build a factory in Myanmar next year and stop importing product from its plant in Vietnam. The new factory will be able to produce up to 300 million packs per year, equal to 75% of the company’s total capacity in Japan. This shows what a big market Myanmar can be.
Sales of convenience foods will rise along with growth of modern trade. More than 90% of retail sales are still conducted through traditional trade, such as wet markets and mom-and-pop shops, but revenues of modern groceries have been growing at 8% per year during the past five years. Modern retailing supports the sales of processed foods, especially those needing refrigeration, such as yogurt, milk, cheese and frozen food. Myanmar’s biggest modern retail group is City Mart Holding Co., which operates supermarkets, convenience stores and pharmacies and plans to open many new grocery shops throughout the nation in the next three years. Any Thai food company wanting to sell in Myanmar needs to know about this major sales channel.
Having a good local partner is the key to success in Myanmar. Local companies understand the culture, language, market conditions and consumer preferences, and they provide needed connections. Thai companies have plenty to offer in return, since Myanmar’s consumers already know and like products from Thailand and are loyal to brands. Thai businesses should use this head start to fully establish their brands in Myanmar as soon as possible.
Success in Myanmar takes good more than a good product and good partner, however. Challenges abound. The nation’s politics are still in transition and governance is not yet very transparent. Laws and regulations, especially relating to trade and investment, remain unclear. Electricity, internet service and other basic infrastructure is unreliable or absent in many places. Skilled human resources are in short supply. Although Myanmar’s high GDP growth rate might make the market opportunity look easy, foreign companies face plenty of hard work for years to come. This will discourage entrants that are not committed. Thai companies should use their geographic and cultural advantage to move ahead before rivals crowd in.