Consumer markets with no poor

The government conducts the Family Income and Expenditure Survey (FIES) every three years. The latest was in 2012. Total family income reached P5.027 trillion, while family spending totaled P4.125 trillion. Relatedly, total food spending was P1.768 trillion, 94 percent paid in cash.

By breakdown: rice, cereals and bread totaled P494 billion, meat, P242 billion; fish and seafood, P222 billion; milk, cheese and eggs, P119 billion, and vegetables P101 billion. Filipinos also spent P311 billion for eating out.

In 2012, the National Statistical Coordination Board (NSCB) data showed that some 19.7 percent of the families, and by head count 25.2 percent, were poor. The monthly poverty threshold for a family of five was P7,890 while the food threshold was P5,513.

Some 4.21 million families or 23.75 million people were poor out of 94.2 million Filipinos (www.nscb.gov.ph).

What if, by some miracle, the poor become “non-poor”?

Here is the analysis:

In the 2012 FIES summary, there were five household income classes: (a) families earning less than P40,000 a year; (b) P40,000 to less than P60,000; (c) P60,000 to less than P100,000; (d) P100,000 to less than 250,000; and (e) P250,000 and above. Note: the P100,000 level is near the poverty threshold of P94,680 per family per year.

From the data, we can categorize the three lower classes as poor, comprising 6.1 million families or 28 percent of total of 21.4 million families. The poor families account for only 9 percent of total spending, and 11 percent of total family income. The 72 percent “non-poor” had 91 percent of total spending and 89 percent of total income.

Compare the low buying power of the poor. While they comprised 28 percent of the households in 2012, they accounted for only 6.2 percent of those who ate out, 8.1 percent of soft drinks and juices market, 8.4 percent of meat spending, 8.8 percent of clothing and footwear, and 14.4 percent of total food spending.

Poor families spend more than 60 percent of their budget on food. Overall average food spending share to total spending was 38 percent.

What if all the poor classes moved up to the non-poor class? The additional food market would be worth P458 billion a year, a 26 percent change over the 2012 food market of P1.768 trillion.

By products, the changes are:

Rice and bread demand will increase by P458 billion, up 26 percent

Meat demand will be up P143 billion, or 24 percent.

Fish demand will go up P62 billion, or 28 percent.

Milk, cheese and eggs will increase by P28 billion, or 23 percent.

Soft drinks and juices will jump P25 billion, up 25 percent.

Coffee and others will expand P16 billion, or 28 percent.

The money spent eating out will grow P66 billion, 21 percent a year.

Clothing and footwear will gain P28 billion, or higher by 28 percent.

The changes appear conservative. This is because the consumer market is dominated by the two non-poor classes. They account for about 72 percent of families (21.8 million families) and 80 percent of total spending.

Moving all the poor classes to non-poor class will dramatically expand markets, especially food, clothing, soft drinks and juices, meat and dairy products.

The simple analytics show that poverty reduction, especially in the countryside where most of the poor reside, has tremendous impact on business. This kind of market expansion will spur investments and, in turn, job creation. They will also create more demand for consumer products.

Note: A detailed analysis will be published in the UA&P Food and Agri Business Monitor under the byline of Dy and Orzales.

(This article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines. The author is the vice chair of the MAP Agribusiness and Countryside Development Committee, and the executive director of the Center for Food and AgriBusiness of the University of Asia & the Pacific. Feedback at [email protected] and [email protected]. For previous articles, please visit map.org.ph.)