Milling firm exec expects contraction of demand

CEBU, Philippines – Due to the impacts of the economic crunch to the disposable income of the Filipino consumers, an executive of the country’s second biggest milling company forecasted a further contraction of commodity demand for sugar and flour this year.

According to Dr. Alfonso A. Uy, chairman of the board and president of Philippine Foremost Milling Corporation, the second biggest milling industry player in the country, experienced a 20 percent drop of demand for flour and sugar last year and this year they expect this figure to drop another five percent.

Uy was in Cebu recently as one of the guests in the recently concluded Cebu Business Month (CBM) activity Meet the Business Icons which was held at the Marco Polo Plaza Hotel.

Uy said that despite the fact that they are not dealing direct with the consumers, the crisis has affected their company as a player in an intermediate industry because the demand for sugar and flour has declined due to the slowdown in the market.

“In 2008, the commodity prices went up high so we adjusted our prices because consumption and demand was affected. Flour which is used to make breads and other products also experienced a drop of demand,” said Uy.

He said that there has been a weak market for flour and sugar considering that the milling industry has been contracting in demand.

He said that three years ago, the industry uses up two million tons of wheat but this has gone down to 1.8 million tons in 2007 and another drop to 1.5 million in 20088 because of low consumption.

Another factor for this contraction according to Uy is the rampant smuggling in the country’s local flour milling industry which created unfair competition for our local players which pay higher taxes and duties.

Aside from the economic crisis, Uy shared that his company has been hit by a double whammy this year because of the outcome of the Typhoon Frank which destroyed farmers’ produce as well as the high cost of fertilizer.

“A lot of farmers applied lesser fertilizer because of its high cost so the production this year is affected as they now produced smaller crops,” said Uy.

He said that at their end, to help them cope with the crisis, they tried to maintain their quality service and reliability and went out of their way to encourage more consumers to use flour products.

Uy said that they even went a long way as to opening a baking school to train people to bake and so that they will be encouraged to invest in this kind of venture.

However, despite of these negative developments and the drop of demand for flour and sugar Uy continue to see brighter prospects in their business considering that commodity prices of sugar and even flour remained stable.

He said that at these times of tough economy, entrepreneurs must not loose hope in their businesses saying that they must “continue to be confident; don’t loose hope because the good old days will come back.”