Food and beverage to Malaysia

Trends and opportunities

The market

Malaysia’s food and beverage sector is increasingly sophisticated and influenced by health and convenience trends. Consumer awareness of nutrition value and food fortification for healthcare has created the demand for functional, minimally processed fresh, organic and natural foods. According to Retail Group Malaysia, 60 per cent of retail food sales are made through the traditional grocery and specialty stores. The retail food and beverage sector is worth US$15.69 billion and will grow to US$21.17 billion by 2015 (Source: Business Monitor International, 2011).

Malaysia is a melting pot of races and religions where Malays, Chinese, Indians and other ethnic groups live together harmoniously. Malaysian food often infuses unity within the multicultural society. The rich legacy of Malaysian cuisine is often fueled by international influence. That is why Malaysia is highly dependent on imports of food and food ingredients for domestic production and food processing. In 2011, Malaysia imported US$11.2 billion of food products and processed it for export (US$6.7 billion) to more than 200 countries worldwide. Food exports contributed to 10 per cent of Malaysia’s manufacturing output (Source: Malaysian Investment Development Authority (MIDA), 2012), and were dominated by small- and medium-scale companies. The major sub-sectors are fish and fish products, livestock and livestock products, fruits, vegetables and cocoa. The beverage segment covers the manufacturing of soft drinks and mineral water. The processed food sector was worth US$5.5 billion in 2011, and is expected to grow to US$5.9 billion by 2016 (Source: Euromonitor International, ‘Packaged Food in Malaysia’, 2011).

With 60.4 per cent of the population of Islamic faith, Malaysia is a market for Halal food as well as being a hub for re-export to other Muslim countries. The concept of Halal is associated with food products which are of high quality in terms of cleanliness, sanitation and compliance with religious requirements. Australian companies should review Malaysia’s Halal Certification guidelines before exporting to the country. Malaysia is working with the Organisation of Islamic Conference (OIC) countries to promote the Malaysian Halal Standard. The estimated value of the Halal food industry globally is between US$600 billion and US$2.1 trillion (Source: Malaysian Investment Development Authority (MIDA), 2012).

Opportunities

There are many opportunities for Australian food and beverage companies wanting to enter or increase their stake in the Malaysian market. There are also opportunities for companies providing services, including education and training, to the food and beverage sector.

The Australian food and beverage industry closely adheres to the food safety standards outlined by Food Standards Australia New Zealand (FSANZ) – which is why Australian food products have been well accepted in the Malaysian market. Coupled with the market access gains and tariff reductions secured under the Malaysia-Australia Free Trade Agreement (MAFTA), Australian business has had greater business opportunities in the Malaysian market since January 2013.

Food Service

Malaysia has a sizeable and growing consumer food service market. Consumers have less incentive to cook at home due to busier work schedules and an abundance of food service outlets which open early and close late. It is estimated that the food service market today is valued between US$4.9 billion to US$5.5 billion and has been growing at an average rate of about 6.5 per cent, per annum, in the five years to 2012. It is projected that the food service market is likely to grow at between 7 per cent and 10 per cent, per annum, over the three to five years after 2012 (Source: Malaysian-German Chamber of Commerce and Industry, ‘“Market Watch 2012” The Malaysian Food Industry’, 2012).

Hotels and resorts, restaurants, and the institutional sub-sectors in Malaysia represent the best potential customers for Australian exporters. High urbanisation in Malaysia has caused consumers to change their dining patterns. Consumers favour dining out instead of eating in after long working hours, which causes lack of time or energy to prepare dinner.

Retailing

International mass grocery retailers are transforming the local retail landscape from traditional neighbourhood grocers into one-stop-shop ‘superstore’ outlets; these retailers offer convenience that appeal to urban consumers. The introduction of private labels has been an effective way to introduce Malaysian consumers to new retail products, offering value for money at one convenient location (Source: Business Monitor International, ‘Malaysia Food & Drink Report (First Quarter 2013)’, 2013).

International and local mass grocery retailers have an increasing presence in Malaysia. They include:

GCH Retail (M) Sdn. Bhd. – part of Dairy Farm Group

  • Giant hypermarket
  • Cold Storage
  • Mercato
  • Jason’s Food hall
  • Guardian

Tesco Stores (Malaysia) Sdn. Bhd. – owned by Tesco Stores Ltd.

  • Tesco
  • Tesco Extra

AEON Co. (M) Bhd. – owned by AEON Group

  • AEON supermarket (formerly known as Jaya Jusco)

Village Grocer

  • Jaya Grocer

B.I.G. Group (retailer and restaurants operator)

  • Ben’s Independent Grocer
  • Ben’s General Food Store
  • Restaurants

Red Meat

The demand for red meat continues to rise. Malaysia predominantly imports red meat from India, Australia and New Zealand as products form these companies are able to satisfy local food safety and Halal requirements. Australia, with its stringent source traceability enforcement and absence of meat safety problems, is one of the top supply countries for red meat (beef and lamb) in the world. Australian red meat contributed 24.34 per cent in value of total meat imported into Malaysia in 2011 (Source: International Trade Centre).

Rising consumer affluence and demand for Halal meat has increased the opportunity for more high quality Australian red meat to gain access to Malaysia market. This is supported by Australia’s Halal integrity program, which is benchmarked against Malaysia’s Halal standard. It is also important to note that slaughterhouses must be inspected and approved by the Islamic Development Foundation of Malaysia (JAKIM) before exporting its meat products into Malaysia.

Further information on the Halal guidelines can be obtained from www.halal.gov.my

Dairy

Malaysia’s demand for all types of dairy products for local consumption and further processing has increased significantly over the years. According to Dairy Australia, Malaysia imported a total of 38,705 tonnes of dairy products in 2011 consisting mostly of liquid milk, whey and natural milk products, butter and fats, cheese and yoghurt. New Zealand holds the largest market share in Malaysia at 29.2 per cent, followed by USA (16.8 per cent) and Australia (9.7 per cent). While New Zealand dominates the supply of liquid milk in Malaysia, Australia has the leading market share position in cheese, yoghurt and butter categories.

The importation of bulk liquid milk into Malaysia is restricted to manage market price stability. Consignment of milk and milk products imported to Malaysia are subjected to veterinary inspections by the Department of Veterinary Services (DVS). Only milk processors with a valid import permit (done through Malaysian-registered companies) and holds a veterinary health certificate by the Government Veterinary Authority may export bulk liquid milk for local re-packaging into retail size (Agritrade 2013).

MAFTA offers significant improvements in access for liquid milk, including annual increases in the quota volume and liberalisation of importing licence arrangements (Source: 'Regulation Impact Statement: Malaysia-Australia Free Trade Agreement', 2013). The improvements in access will allow anyone to apply for a licence, and will not involve restrictions based on whether products are imported in bulk or in higher value retail packs. This will allow more Australian dairy products to be available in the market.

Fruit and vegetables

Malaysia has a steady base of agriculture production and is striving to develop its fruit and vegetable export capability. Although Malaysia has a variety of agricultural products to offer, the per capita consumption of fresh fruit and vegetables in Malaysia is relatively low. The government has been actively promoting the consumption of more local fresh produce through the Federal Agricultural Marketing Authority (FAMA). Many Malaysians have an acquired taste for more exotic foreign fresh produce. In 2011, Malaysia’s total import value for fruit and vegetables was approximately A$90.9 million and Australia contributed approximately 5.09 per cent of this (Source: International Trade Centre).

Fruit and vegetables imported from Australia into Malaysia include:

  • oranges and mandarins
  • table grapes
  • summer fruits (e.g. apricots, cherries, nectarines, peaches)
  • apples
  • pears
  • melons
  • avocados
  • potatoes
  • carrots
  • onions
  • tomatoes
  • lettuce
  • celery
  • broccoli
  • Chinese cabbage
  • cucumbers
  • leafy and root vegetables

In recent years, there has been high demand for pre-packed salad mix.

Based on current market developments, consolidated Australian fruit and vegetable export offers greater competitiveness for Australian exporters through:

  • greater bargaining power
  • better pricing
  • quantity and quality consistency
  • credit management
  • funding marketing
  • brand building

Fish and Seafood

Malaysia has a very high per capita consumption of fish and seafood, approximately 50kg per year since 2005 (Source: New Straits Times, 'Each Malaysian to consume 55kg fish per year by 2020', January 2012). Malaysians consume a lot of fish, as it is considered a cheap source of protein compared to others such as mutton or beef. Substantial demand exists for all kinds of seafood, ranging from local fish (e.g. carp, tilapia) to more expensive gourmet delicacies (e.g. abalone, oyster and lobster).

However, as the cost of fish and seafood increases, Malaysian consumers are increasingly purchasing frozen fish and seafood as a substitute for fresh supplies. Australia is a major source of supply for most gourmet shellfish sold in Malaysia. The main items imported from Australia include:

  • live, frozen, and canned abalone
  • frozen scallops
  • frozen prawns
  • coral trout
  • oysters
  • mussels
  • king crab
  • selected fin fish for Western catering

Beverages

While there is increasing consumer demand for imported exotic fruit juices or blends (such as grapefruit, pomegranate and cranberry), the import of retail packs is expensive. Imports of apple and orange juices are more common.

There is an opportunity for fruit juice exports to Malaysia, especially with the reduction of tariff for single & mix fruit juice under MAFTA. Beverage processors are importing more exotic fruit juice concentrates and juices to be processed (and blended) locally to meet the growing market demand and preferences.

Wine

Malaysia is not a wine producing country and is import-dependent. The Malaysian wine market value is estimated at A$76.63 million, with a total imported volume of 6,162 tonnes in 2011 (Source: International Trade Centre). Australia is currently the largest supplier of grape wines to Malaysia with total import value of A$38.65 million in 2011 and an annual volume growth of 16.0 per cent (Source: Wine Australia Export Approval Report, December 2011).

Malaysian consumers favour red over white or rosé wine (by about 70 per cent to 30 per cent). Wine purchasing decisions are based on price and promotional offers, with only a small group of connoisseurs selecting premium brands. Sales of wines are split into the off-trade channel (wine retailers) and on-trade channel (hotels and restaurants) at approximately a 60:40 split. Off-trade is driven by price competitiveness, preferring low to middle priced wines, while on-trade is driven by exclusivity and therefore suitable for middle to higher priced wines.

Malaysia’s wine market is well-supplied by an existing and increasing number of new-to-market suppliers. Australian wines have the opportunity to grow in the off-trade channels and through brand building - highlighting regional identity, the story behind the labels and revealing Australian landmark wines.

Under MAFTA, Australian wines will be given “Most Favoured Nation” treatment which guarantees the best tariff treatment from the Malaysian Government.

Competitive environment

Processed Food

International retailers such as Dairy Farm International (consists of Cold Storage and Giant outlets), Tesco and AEON (previously Carrefour and Jusco) dominate the retail market. Malaysia currently has over 450 hyper/supermarkets and about 1,000 convenience stores.

Wine

Currently, cheap range wines (retailing between RM35.00–RM50.00) are dominated by New World wine selections originating from Australia, Argentina, Chile and South Africa.

Mid-price wines (RM60.00–RM110.00) are dominated by imported Australian and Chilean wines. However, there is trend shifting towards South African wines, as they offer good value varieties within this price range. Mid-price wine is proving to be a growing segment within the market.

Premium price wines (RM110.00 and above) are mainly dominated by Old World producers and few selected wines from France and Italy. Australian exporters have difficulty penetrating this segment as it is mainly dominated by mature drinkers who tend to prefer Old World wines (Source: Australian Wines Review, 2011).

Tariffs, regulations and customs

There are five key areas with regulated import requirements in Malaysia and it is important to be aware of the following:

Dairy

  • An Import permit application is required by The Department of Veterinary Services Malaysia from the local importer for all dairy products.
  • Fresh Liquid Milk imports are regulated by a Tariff Rate Quota under the jurisdiction of the Department of Veterinary Services, Malaysia (DVS reserves the right on these quotas).

Meat

Wine

  • An Import permit application is required by The Royal Customs and Excise Department of Malaysia.
  • Current import duty for still wines in containers holding two litres or less is RM7.00 per litre and a 15 per cent Valorem Tax on the CIF + import duty value. Additionally, there is an excise duty of RM12.00 per litre. There is a further 6 per cent sales tax on the total value.

Fruit and Vegetables

  • The Federal Agricultural and Marketing Authority (FAMA) legislates the Grading Packaging and Labeling of Agricultural Produce (GPL Regulation) requiring all fresh imports to be labeled in Bahasa Malaysia on the product content and specifications (on all cartons). Fresh produce should be graded according to either the MS Standards, Codex Standards or the Country of Origin Standards.

Fish and Seafood

  • An Import permit is required by the Fisheries Development Authority of Malaysia for all fish and seafood.
  • The Ministry of Health, Malaysia, requires that a health certificate accompany all imports of fish and seafood.
  • Compliance with Malaysian food laws and regulations, which are among the most sophisticated in Southeast Asia.

Packaging & Labelling Requirements

The Malaysian Ministry of Health legislates on labeling, including the design and label content under the Food Act 1983 (Act 281) and Regulations. The label for specific products must include the following information:

Processed food

  • Name and description of food
  • List of ingredients
  • Nutrition information
  • Declaration of food additives
  • Net contents
  • Expiry date
  • Contact details of manufacturer and importer
  • Country of origin

Wine

  • All information and contact details of Manufacturer and Importer
  • Country of origin
  • Primary ingredients used in production
  • Minimum content by volume
  • MUST give specific description of the product, the alcoholic content in bold-faced lettering of a non-serif character NOT LESS than 12 point size lettering, stating the words “ARAK MENGANDUNGI__% ALKOHOL”(i.e. Liquor containing__% Alcohol).

The required font size of 12 point is used to alert non-drinkers, especially Muslims that the product contains alcohol and is not for their consumption.

Security Stamp

All liquor and wine importers/distributors/retailers must have their products labelled with security stamps. This exercise is done to reduce counterfeiting and smuggling of liquor and wines into the country. These security stamps must be put on the cover of the liquor/wine bottles as an anti-tempering mechanism and they are torn each time the bottles are opened.

The security stamps come in three colour codes:

  • Red = import duty has been paid
  • Green = duty free
  • Purple = locally produced/bottled

Marketing your products and services

Market entry

For most food and beverage products, the key to market entry success is to engage with a dedicated local importer/distributor. It is advisable to promote an export business with a marketing package or a concept, where the Australian exporter and the appointed importer/distributor can work together to build the business and not just focus on the product itself.

It is important for Australian companies to consider the following:

  • Select a committed importer/distributor and work hard on building the relationship for the long term
  • Visit and understand the market mechanism before exporting
  • Work closely with the appointed importer/distributor in the market as mutual trust is important
  • Brand building of your products over time including conducting relevant marketing activities to support the importer/distributor
  • Innovative products and packaging

Distribution channels

Only licensed importers can handle import procedures and have the right to import products. Different product categories require different import licence and distribution channels. Most food importers also act as distributors and most imported food and beverages are channeled through importers/distributors who normally distribute direct to retailers and catering end-users.

Some major supermarket chains may buy products directly from selected overseas suppliers. This is to minimise costs and is usually done for selected large volume product lines. However, the second tier supermarket chains and the local convenience stores are still importing selected product items through importers/agents due to their lack of adequate central warehousing, processing and delivering facilities. As the trade continues to expand it is expected that some of these organisations will manage to develop their own facilities and purchase some of their requirements direct from overseas sources.

Most food service sectors, i.e. hotels, restaurants and fast food operators, normally cannot afford to handle the direct import from a large number of individual suppliers overseas for their own requirements of food and beverages. Hence, importers/distributors generally undertake the distribution of food and beverages directly, with only a small quantity being handled by a few wholesalers.

Links and industry contacts

Food and beverage-related resources

The Department Of Veterinary Sciences Malaysia – www.dvs.gov.my
Halal Approved Abattoirs in Australia for Malaysia – www.dvs.gov.my/en/australia
Approved International Islamic Bodies Recognised by Jakim – www.halal.gov.my/v3/index.php/en/list-of-approved-islamic-bodies
Federal Agriculture and Marketing Authority Malaysia – www.fama.gov.my
Malaysian Food Act 1983 – www.agc.gov.my/Akta/Vol.%206/Act%20281.pdf
Food Regulation 1985 – http://fsis2.moh.gov.my/fosimv2/HOM/frmHOMFARSec.aspx?id=21

Government, business and trade resources for Malaysia

Malaysian Government Official Portal – www.malaysia.gov.my
Malaysian External Trade Development Corporation (MATRADE) – www.matrade.gov.my/
Malaysian Investment Development Authority (MIDA) – www.mida.gov.my
Ministry of Foreign Affairs – www.kln.gov.my
Ministry of Trade and Industry (MITI) – www.miti.gov.my
Bursa Malaysia (Stock Exchange) – www.bursamalaysia.com
Central Bank of Malaysia (Bank Negara) – www.billionm.gov.my/
Department of Statistics Malaysia – www.statistics.gov.my/portal
Economic Planning Unit (EPU) – www.epu.gov.my
Royal Malaysian Customs Department – www.customs.gov.my
Australia Malaysia Business Council – www.ambc.org.au/
Malaysia Australia Business Council – www.mabc.org.my/

Please note: this list of websites and resources is not definitive. Inclusion in this list does not imply endorsement by Austrade. The information provided is a guide only.

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