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Malaysia Food and Drink Report Q1 2011
Business Monitor International, Nov 2010, Pages: 69
The Malaysia Food and Drink Report provides industry professionals and strategists, corporate analysts, food and drink associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Malaysia's food and drink industry.
Malaysia remains considered one of the less attractive Asia Pacific markets, in terms of its potential for food and drinks sales. Its low placement (it is still ranked 11th out of the 14 regional markets in our business environment ratings – see page 13) is attributable to its low Rewards profile, given restricted opportunities for substantial growth, low per capita food and beverage consumption in value terms and consumer price-consciousness. However, its placement is expected to improve in the medium-to-longer term, underpinned by economic development programmes and the signing of trade agreements with Western nations, with benefits to both imports and exports.
Headline Industry Data:
- Per Capita Food Consumption to increase by 3.64% in 2010 to reach MYR1,564, driven by economic recovery, thus reversing the negative growth posted in 2009.
- Beer Volume Sales to grow by 2.94% in 2010 and by 1.49% to 2014; while volume growth is unspectacular, value sales growth should exceed this thanks to premiumisation opportunities.
- Soft Drink Sales to increase by 38.92% in local currency terms to 2014, growing by 10.0% in 2010, underpinned by premiumisation and introduction of new varieties.
- Mass Grocery Retail Sales to grow by 36.61% to MYR20.08bn, with all formats expected to witness similar growth levels thanks to sustained local and multinational investment.
Key Industry Trends:
Niche Segments to Continue Attracting Attention – In October 2010, Malaysian sweetener manufacturer PureCircle announced that it has formed a partnership with German sugar producer Nordzucker to develop stevia products. Stevial Glycosides based ingredients are expected to receive approval for use as natural sweeteners in the EU early in 2011. PureCircle has also announced partnerships with French sugar producer Tereos, German ingredient manufacturer Doehler and British Sugar. The news is in line with our core view of functional food and drink being one of the highest growth areas in developed markets, as pervading health-consciousness increasingly affects diets and grocery purchasing decisions.
Building Upon Superiority in Halal Food – In September 2010, Malaysia was singled out for the quality of its produce by German halal certifier Halal Control. Around the same time, Malaysian food manufacturer Jeenhuat was reported to be investing in a new halal processing facility that will serve the global market. The factory has been set up with Chinese seafood manufacturer Fujian Dongshan Haikui Aquatic Products Group. Clearly, Malaysia is aiming to build upon its expertise in halal food, exploring increased commercial opportunities for such products, in line with growing population numbers. In fact, in view of the burgeoning global demand for halal foods, Nestlé Malaysia's establishment as the Swiss parent's global centre of excellence for halal production fuels our optimism on the company's future prospects, particularly in terms of exports. Nestlé Malaysia already has a strategic agreement with the Halal Industry Development Corporation and the Small and Medium Industries Development Corporation, which aims to enhance the capacity and capability of small and medium-sized enterprises.
Key Risks to Outlook:
The risks to outlook exist on both the upside and the downside. While the recently-announced US$444bn Economic Transformation Programme should benefit a number of key sectors, including infrastructure, tourism, agriculture and wholesale and retail, its successful implementation is far from assured. Challenges remain in terms of availability of investment, the lack of skilled personnel in the country, caused by brain drain, as well as political opposition to some of the proposals (such as the casino-building programme). Nevertheless, the country’s economic – and thus also consumer – outlook over the mediumto- longer term potentially looks considerably brighter, given Malaysia's efforts to boost trade links with the EU and US via the Malaysia-EU Free Trade Agreement and Trans-Pacific Partnership negotiations respectively. The agreements, which are expected to be signed in the coming years, could deliver a major boost to the country's economic prospects and also to its business environment over the longer term.
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