Feedmillers hitch fortune on agriculture sector

Conclusion

The feed milling industry is a P45-billion business. Last year alone, some 87-million 50-kg bags of feeds were produced. This year, industry production is estimated at 93 million 50-kg bags valued at P46.5 billion. There are 911 feed milling companies in the country and these may be categorized into three distinct types; commercial feed makers, integrators and home mixers.

Commercial feed millers produce the product for sale purposes. GMC is one of the pioneers and one of the biggest commercial feed millers in the country. With six percent market share, it ranks 4th behind B-Meg (21 percent), Purina (12) and Selecta (10). The 321 commercial feed mills turn out some 31 million bags of feeds annually. There are 258 local feed brands ranging from the well-known (General Feeds, B-Meg, Mega Mix and Thun-derbird) to the new upcoming ones (Kargado and Futura, among others).

Integrators are those that produce feeds both for commercial purposes and their own use in their poultry, piggery and cattle businesses. All together, they make more than 18 million bags per annum.

The home-mix sector are millers that process feeds for their won requirements. with 590 home mixers producing 38 million bags a year, they represent the biggest group in the whole industry. Some 80 percent of home mixers produce hogs feeds. At last count, 570 home mixers have sow levels exceeding 100 head each.

With such a high number of players, isn’t the industry overcrowded that would dilute its potential for growth? On the contrary, the industry is highly viable given the 75-million strong market which has to eat. With the right business and political environment, this population is bound to exhibit increased spending power and, thus, fuel the growth of various industries, the food business, in particular. A modest growth of 4 percent annually is seen to be achievable.

Each industry player, whether big or small, has its won viability formula. Most commercial feed millers bank on their capability to penetrate the market utilizing their brand management experience and extensive sales network. A prime example of a manufacturer with capability to market an upscale granted product is Sarimanok Feeds and its "Thunderbird" brand of fighting cock feeds.

For its part, GMC has the capability to produce quality feeds at most competitive costs due to the company’s strategic location, the right mix of processing facilities, and an aggressive raw material souring strategy. It is the only feed miller with a soybean processing plant, corn buying stations, and feed facilities with each one having its own port. GMC’s modern ports and cargo handling facilities makes possible the firm’s competitive rates.

The firm’s 720-metric ton feed milling capacity in Lapu-lapu, Cebu fills up 30 percent share of the market. In Luzon, In Ugong, Pasig City GMC has a daily 350-ton feed milling facilities.

Pinca on major issues and deterrent to growth of the industry; "The industry has to prepare for the inroads of foreign competition. The need for improving efficiency through wider utilization of available capacities is very urgent. To date, only 7.7 percent of feed mills produce 51 percent of total output.

"This represents a low 47 percent capacity utilization. Some 33.8 percent of the feed mills produce less than 20 metric tons per 8-hour shift. Some 74 percent of the feed mills are concentrated in Metro Manila and adjacent places. This situation should be remedied by dispersing in the countryside to reach more customers and encourage commercial activities in the provinces."

Looking to the future, what the industry needs is consolidation. Big players will have to merge to become even bigger as in the case of San Miguel Corp. acquiring Purefoods – and Cargill acquiring Agribands.

Moreover, marketing savvy will have to be more creative, according to some industry insiders, Feed millers will have to move away from the traditional marketing and selling of feeds as a generic commodity. To move up in today’s market, feeds should be positioned as a consumer item, with marketing support, promotions and advertising push.

As foreign investments become attracted to the growth potentials of the feed milling industry, local companies will have to strive to improve efficiency in all aspects of production and trading.