[BizSights] Philippine middle class levels up 

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When malling as an activity was in its early stages in the nineties, many people would get excited about the opening of fast-food stores like Jollibee whenever a new mall would open in the provinces.

Not anymore. 

Although many families still flock to Jollibee, a favorite of many kids, it seems Filipinos have leveled up. 

In the recent opening of SM City Laoag, the Sy family’s first mall in the northern province of Ilocos Norte, I was surprised with what a number of mallgoers, when asked which food outlets they’d try out, mentioned. (READ: Ilokano pride: Homegrown restos, stalls open at SM City Laoag)

“Yung wala sa Laoag, like Vikings, Tokyo Tokyo, Kenny Rogers first time nya dito,” said mallgoer and Laoag resident John Jonathan Ramiro, when asked which food store he plans to visit, during the mall operning of SM City Laoag on May 30. 

(Those that aren’t in Laoag yet, like Vikings, Tokyo Tokyo… I think it’s also the first Kenny Rogers store here).

In our suburb of Antipolo City, Vikings Luxury Buffet opened a branch in Robinsons Place Antipolo six months ago. My family has tried to celebrate a number of birthdays there since it opened — but the restaurant is almost always full. For walk-ins, you’ll have to sign up and wait. We’ve yet to eat there. 

At a buffet rate of around P1,000 per head, I had thought it might be pricey for a suburban market. I was wrong. A retail industry officer told Rappler the younger generation have a word for splurging on things like expensive food and travels: “Dasurv!” (Deserve!)

Another food outlet that got Laoag excited about was the frozen yoghurt brand Ilao Ilao (pronounced yao, yao). Its considered an expensive dessert costing around P200 each, over three times more than a Jollibee sundae (around P60 each). SM City Laoag’s post on Ilao Ilao got 1.2k likes, 158 comments, and 307 shares, among the highest of the mall’s posts about the food offerings in the new mall, with many netizens saying, “Finally!”

Growth of Philippine middle class

While poverty is clearly visible in key urban centers in the Philippines, signs of the growth of the middle class in the Philippines are also everywhere.

In a recent interview with Rappler, Philippine Institute for Development Studies (PIDS) senior research fellow Jose Ramon Albert, co-author of a recent PIDS study on the Philippine middle class, estimated that in 1991, around 27%, or roughly a quarter of the Philippine population of 60 million — around 16 million — were part of the middle class. 

In 2021, Albert said the Philippine middle class accounted for 40% of our 110 million population or 4 in 10.

That translates to an increase in the size of the country’s middle income population from 16.2 million in 1991 to 44 million in 2021, or 27.8 millon more people in the middle class. 

(The low-income population, however, was still the majority in 2021 with 66 million people having a monthly family income of P25,000 and below.)

Albert defines the Philippine middle class as having the following monthly incomes for a family of 5: 

• Lower middle income P25,000 to P50,000 (“struggling middle class”)
• Middle income P50,000 to P85,000 (“more stable but still careful with their spending”)
• Upper middle income P85,000 to P145,000 (“comfortable but not luxurious living”) 

Although the pandemic reduced the size of the Philippine middle class, Albert said more recent poverty data from the Philippine Statistics Authority would support his estimate that the size of the middle class today, is “maybe around 45% to 48%.” 

Which is why many companies in the Philippines are growing too, with more consumers having greater purchasing power and able to afford more expensive services and goods, from motorcycles and cars to more pricey restaurants and fashion brands. 

Billionaire Lucio Co’s alcohol importing firm The Keepers Holdings, for instance, has been talking about the “premiumization” trend among Filipino consumers, which means more people are buying pricier imported spirits or alcohol than local ones. 

The Keepers has cited studies by IWSR, an independent company based in the United Kingdom that specializes in studying the global beverage alcohol market, which project the imported spirits segment growing 14% post-pandemic versus 1% for local spirits. 

The Ty family’s conglomerate, GT Capital, has seen its businesses doing well, especially its automotive business Toyota Motors Philippines, real estate firm Federal Land, and Metrobank. 

“The improving per capita GDP (Gross Domestic Product) of the Philippines has fostered the emergence of an upper middle-class segment within its economy. As disposable incomes rise, improved living standards rise in tandem with demand for goods and services,” said GT Capital president Carmelo Bautista in 2023. 

In its latest annual report (2024), GT Capital cited data from Colliers and Leechiu Property Consultants which show that the biggest market for Metro Manila residential demand in 2023 and 2024 came from the “middle income” groups eyeing residences that cost from P2.3 million to P6 million. In 2023, they accounted for 69% of demand, and in 2024, they accounted for 55% of demand. 

International fashion

The Tantocos’ specialty retailer Store Specialists Incorporated (SSI), which represents 99 brands that cater to middle- to upper-income classes, has seen its revenues growing steadily post pandemic. 

Revenues from of its luxury (e.g. Hermes, Salvatore Ferragamo, Cartier) and bridge brands (e.g. Kate Space, Michael Kors, Tory Burch) that target younger customers have risen by around 30% in the past three years. Ditto for its fast-fashion brands such as Zara, Stradivarius, Bershka, Pull &Bear, and Old Navy. Bridge brands is the segment between high-end and the mass market. 

In its latest annual report (2024), SSI describes their international brands as appealing to “increasingly discerning Filipino consumers.” It said that all their brands in apparel to food, and home and personal care are “all targeting the lucrative and growing middle- to higher-income market in the Philippines.” 

SSI is the largest specialty store network of international brands in the Philippines with 588 stores in malls throughout the country: 469 in Metro Manila, 59 in Luzon, 34 in Visayas, and 26 in Mindanao. 

Another sign of an expanding middle class? The rise of the pet industry in the Philippines, with more households now able to regularly allocate part of the monthly budget to pet food and pet services like grooming (around P600 for small dogs, more expensive than most haircuts for men.) 

Robinsons Retail Holdings, for instance, which brought to the Philippines in 2018 the Singaporean brand, Pet Lovers Center, has reported “strong performance” of its pet retail store in the past few years. It had 11 pet retail stores as of end of 2024.

The SM Group’s pet retail brand, Pet Express, is now the largest pet supply retailer in the country with 25 stores. It has also seen double-digit growth, especially after the pandemic. 

Albert said one factor for the growth of the middle class in the Philippines is the large number of migrants who have remitted over $3 billion (at least P165 billion) annually to the economy in recent years. There were 10.7 million overseas Filipinos as of December 2022, with 5.1 million or 47% of them in North America; 2.6 million or 24.3% in Asia-Pacific; 2.37 million or 22% in the Middle East, according to the Department of Foreign Affairs. 

“Over the years, OFWs (overseas Filipino workers) really have been truly our Bagong Bayani, our modern-day heroes, contributing much more to our economy, making sure our economy has been stable even during difficult times,” Albert said. 

“In fact, you might see that all of the SMs (SM Supermalls), they’ve mushroomed everywhere. That’s really the OFW money very clearly, where people get to spend a lot more on television, cellphones what have you,” he added.

The SM Group now has 88 malls in the Philippines, and its been focusing on putting up malls in high-growth provinces, no longer in Metro Manila. 

According to the Global Retail Development Index (GRDI) 2023 report by Kearney, a global management consulting firm, “a growing middle class, increasing urbanization, a young demographic, strong consumer demand, an attractive labor market, and increasing remittances make the Philippines one of the most dynamic economies” in the Asia Pacific.

Downsides

The downside to the state of the Philippine middle class is that other countries in Southeast Asia are doing better than the Philippines. 

Albert said that based on the global definition of the middle class of $10 per day purchasing power parity, the Philippines middle class would only be 20% to 25%. 

Although this is comparable to Indonesia, he said Malaysia is much ahead with 45% to 50% middle class while Thailand is 35% to 40%. 

Vietnam’s middle class is 15% to 25%, lower than the Philippines’, but Albert said that since its economy is growing faster than the Philippines’, Vietnam would “probably overtake us soon.” 

Albert said the Philippines has to do a better job in expanding its manufacturing sector, exporting more goods, and in making its citizens increase their savings. He said all classes in the Philippines, whether low income, middle income or high income, “tend not to be good in savings.”

“We should save more, make sure whatever we save, get a good ROI (return on investment),” he said. – Rappler.com