Retail Foods Annual 2012

An Expert's View about Retail Sales in Malaysia

Posted on: 22 Dec 2012

Boosted by solid economic performance, and robust domestic demand, Malaysia’s retail sector is forecast to grow ten percent annually.

THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY Required Report - public distribution Date: 12/7/2012 GAIN Report Number: MY2021 Malaysia Retail Foods 2012 Annual Approved By: Chris P. Rittgers Prepared By: Loh Lee Pin/Suresh Report Highlights: Boosted by solid economic performance, and robust domestic demand, Malaysia’s retail sector is forecast to grow ten percent annually. U.S. Fresh fruit, fresh and frozen potatoes, dairy products, snack foods (including nuts), and pet food have broad appeal and excellent opportunities in Malaysia’s retail sector. Post: Kuala Lumpur Table of Contents 1. Malaysia in profile ................................................................................................................. 3 2. Food retail market summary ........................................................................................... 3 2.1 Malaysia’s food retail sector in overview .................................................................... 4 2.2 Advantages and challenges for US exporters ............................................................. 8 3. Road map for market entry ............................................................................................. 9 3.1 Supermarket, hypermarket and department stores .................................................. 9 3.2 Convenience stores and petrol station stores ........................................................... 12 3.3 Traditional stores including provision, grocery and sundry shops ........................ 14 4. Competition in the sector ............................................................................................... 14 5. Best products prospects .................................................................................................. 21 GAIN REPORT MY2021 Page 2 1. Malaysia in profile Malaysia is one of the more affluent nations in Asia with a GDP per-capita of about US$9,700 in 2011 and is regarded as an upper middle income country by the World Bank. Its economy sits on a firm foundation in a mixed economy that comprises strong agricultural, services and manufacturing industries. In 2011, the economy grew by 5.1 percent driven by strong domestic demand. Economic commentators forecast Malaysia’s economy to grow around 5 percent in 2012 and 2013. Malaysia has a multi-racial population of around 28 million, all of whom are multi-lingual, speaking at least two languages fluently, including English which is widely used in the business environment. Malaysia still has a young population today with 28 percent aged 15 years and below and 67 percent in the 15 year to 64 year age range. Around 97 percent of the working population continues to be gainfully employed. Over 60 percent of the populations are in the middle to high income group with a growing purchasing power. Malaysian’s lifestyles becoming more sophistication and modernization, leading to increasing consumption of imported food and beverages from western countries. Today, Malaysia provides a significant pool of active consumers who will continue to modernize their eating habits, leading to increasing consumption of imported food and beverages. 2. Food retail market summary Malaysia has a large and growing food retail market that is supplied by local and imported products. Total retail sales of food and beverages amount to US$15 billion today. The forecast for this sector is likely to grow by around 10 percent per annum over the next three to five years. The Table below provides an overview of the size of the import market for food and beverage products over the five years to 2011. Imports of Food and Beverage Products (US$ million) 2007 2008 2009 2010 2011 Meat & meat preparations 342 404 421 532 661 Fish & fish preparations 562 496 584 684 862 Dairy products, eggs & honey 707 759 432 611 817 Edible vegetables 468 436 532 721 737 Edible fruits & nuts 177 238 252 302 364 Coffee, tea, mate & spices 295 276 284 392 475 Processed meat, fish & seafood 64 75 75 78 98 Sugar & sugar preparations 527 508 692 909 1,095 Processed cocoa products 873 1,295 873 1,144 1,300 Processed cereal products 350 428 415 511 612 Processed vegetables and fruits 141 168 180 219 267 Miscellaneous processed foods 334 406 429 590 732 Beverages 252 305 296 374 586 Total 5,092 5,794 5,465 7,067 8,606 Source: Global Trade Atlas (GTA) GAIN REPORT MY2021 Page 3 Malaysia imported $8.6 billion of food and beverage products in 2011. Food imports have been growing on an average of over 14 percent per annum over the past few years. Imports of food products will likely continue to grow at similar rates over the next five years. Malaysia has a significant and growing food manufacturing industry. The food manufacturing industry is largely domestic oriented, although a number of the larger companies also target the ASEAN markets and Japanese market with their food products. According to Malaysian Investment Development Authority (MIDA), in 2011, Malaysia exported food products worth $6.7 billion to more than 200 countries, of which, processed food contributed about $4.4 billion. The industry is involved in the manufacture of alcoholic and non-alcoholic beverages, dairy products, cooking oil, coffee and tea, cereal-based foods, spices and spice mixes, sauces and condiments, processed fish and meat products, chocolate and snacks, baked products and other cooked food preparations, including frozen foods. The halal factor With a Muslim population of 60 percent, the demand for halal foods by Malaysian consumers has increased over the years. Foreign meat (except pork) and poultry plants intending to export to Malaysia must be accredited by the Malaysian Department of Veterinary Services and the Department of Islamic Development for halal purposes. The Malaysian halal standards are perceived as stricter than those of other Islamic countries. Hence, opportunities to increase exports of meat (except pork) and poultry hinge on the halal approval. In recent years, the expectation of halal standard in food products have extended from meat and meat products to non meat-based products such snacks, confectionery, dairy, bakery, etc. The Malaysian government and many companies are marketing the halal standards as a new benchmark for quality, hygiene and safety. Food products and ingredients that have halal certificates are perceived to have added marketing value in Malaysia. Hence, most retailers, foodservice operators and food manufacturers are inclined to ask for halal certificates for non-meat based food products and ingredients. Under the newly amended Trade Description Act 2011 for the halal certification and marking for products intended for Muslim consumers, imported food destined for Muslim consumers has to be certified halal by one of the Islamic centers in the U.S. ( approved by the Malaysian Islamic authority (JAKIM). 2.1 Malaysia’s food retail sector in overview The food retail sector continues to remain fragmented today, with around 56 percent being made up of small retailers operating in provision shops, grocery stores and other non-air conditioned sundry shops throughout the country. The Chart below shows the structure of the food retail sector in Malaysia today. Structure of Food Retail Sector GAIN REPORT MY2021 Page 4 Convenience stores and petrol Provision stores, station stores grocery stores and 1% alike 56% Supermarket/hyper markets and department stores 43% Source: Office Research The bulk of retail food sales are channeled through the traditional stores, such as provision stores, grocery stores, specialty food stores and other sundry shops. This sub-sector commands close to 56 percent of total food sales today. Modern stores such as supermarkets, hypermarkets and department stores with supermarkets have around 43% share of the nationwide retail food market. Convenience stores have remained insignificant, with only about 1% share of the nationwide retail food market. Malaysia's food retail sector is made up of: 1. Large food retail stores such as supermarkets, hypermarkets and department stores There are 121 hypermarkets, 113 superstores and 133 department stores runs by local as well foreign players in Malaysia. Large food retail stores such as supermarkets, hypermarkets and department stores that also operate supermarkets within the premises are largely located in the major cities, urban centres and larger towns in Malaysia, where the majority of the middle to high income consumers reside. The major food retailers usually operate chain stores that are strategically located to capture their target consumers. It should be noted that hypermarkets, supermarkets and department stores are not permitted to operate for 24 hours a day by the Ministry of Domestic Trade, Co-operatives & Consumerism. The major food retail operators active in this sub-sector include: The Cold Storage Group which is the largest food retailer in Malaysia in terms of sales as well as number of retail outlets. It operates hypermarkets and supermarkets nationwide under the Giant and Cold Storage brands. The Giant supermarkets and hypermarkets are known as a home-grown trusted brand. Giant is well-known to local shoppers as the store that offers the best value-for-money products. Giant targets the mass market and is today the largest supermarket chain in Malaysia. Cold Storage targets the upper middle to high income shoppers as well as high income expatriates residing in Malaysia. Cold Storage is perceived by local shoppers as a store that targets the well-to-do shoppers as well as western expatriates. It carries a wide variety of local products as well as imported products, especially products from Europe, USA, Canada, Australia, New Zealand, South Africa and some Latin American countries. GAIN REPORT MY2021 Page 5 Tesco Malaysia which is one of the largest food retailer in Malaysia in terms of sales. It operates Tesco and Tesco Extra stores in the major cities in Malaysia. Tesco Malaysia is aggressively targeting the mass market with its competitively priced products. It carries mainly locally sourced products as well as a sizeable proportion of imported products, and has the widest selection of price competitive products from the United Kingdom. Carrefour Malaysia, the fourth-largest retailer operating 26 hypermarkets in Malaysia. It operates hypermarket chains that target the mass market with its price competitive products. Carrefour is a well-known foreign hypermarket brand in Malaysia, being one of the first few foreign hypermarket brands to enter Malaysia. It carries a wide variety of local products as well as some imported products, especially products from Europe. On October 31, 2012, Carrefour announced it has finalized the sale of its Malaysian operations to Japanese retail giant AEON as part of Carrefour’s strategy of re-allocating its resources to other mature and emerging markets. Carrefour operations will be renamed to AEON BIG and a rebranding process will be undertaken over the next six months. AEON BIG will operate independently from AEON Malaysia and will have different store formats to attract different target markets. AEON Malaysia which operates the Jusco Stores nationwide. Jusco is the largest high end department store chain in Malaysia that also operates a full scale supermarket within its stores. Jusco operates high end stores that target the middle to high income shoppers. It carries a wide variety of local premium branded products as well as imported products, and carries the widest selection of products from Japan. In March 2012, AEON announced its rebranding exercise by taking on the global AEON brand name for all their operations. The takeover of Carrefour Malaysia in October will effectively made AEON the second-largest retail group in Malaysia. The Store is a major food retailer in Malaysia in terms of sales and number of outlets. This department store chain operates a supermarket within it store. It is a home-grown store that targets the mass market with price competitive products. The Store carries largely local products, with some of the more popular imported products that are also carries by competing stores. The retail outlets that target the middle to high income locals and expatriates carry more varieties and higher volumes of imported branded products from western countries such as Australia, New Zealand, the USA, Canada, France, Italy, the United Kingdom and other parts of Europe. Such products would include fresh produce such as chilled beef and lamb, fresh temperate fruits and vegetables, chilled cold water fish such as salmon, frozen vegetables, sausages, delicatessen meats, pastry and pies, dairy products, high end biscuits and cookies, confectionery such as premium/branded chocolates and candies, potato based snacks, canned fruits, canned soups, canned meat, breakfast cereals, pasta, sauces, spices, seasonings, dressings, ready meals (frozen), home bakery ingredients, fruit juices, jams and jellies, peanut butter, non-alcoholic beverages and wines, beer and other alcoholic beverages. In addition, retailers such as Giant, Cold Storage, Carrefour, Tesco, The Store and Jusco carry products under their house/retailer brands which may be priced at 10% or more lower than comparable products, GAIN REPORT MY2021 Page 6 to attract the price conscious customers from the lower to middle income group. These large retail stores also offer additional services such as in-store “wet markets”, bakeries, wine corners, alcoholic beverage corners, and health food corners as well as counter serving ready-to- consume meals and snacks to attract more customers to their stores. Other emerging services include on-line internet shopping with home deliveries. All the conveniences offered by these stores have encouraged an increasing number of middle to high income Malaysians to shop for their grocery needs at supermarkets and hypermarkets on an increasingly regular basis. 2. Convenience stores and petrol station stores Convenience stores and petrol station stores are mainly found in the cities, larger towns and along the North-South highway. The majority of these stores are franchise operations with support from their franchisors in the form of advertising support, staff training, financing, bulk purchasing and distribution facilities. 7-Eleven is the largest convenience store chain operating 24-hour stores. 7-Eleven stores are treated like “tuck shops” by children, teenagers and young adults who usually shop for magazines, newspapers, candies, chips and other snacks, ice cream or other single-serve food and beverages that are consumed “on-the-go”. Petrol station stores are also used in a similar manner by drivers and their passengers, who are usually in a hurry and would not normally browse in such stores. For that reason, most individual sales made are small in value. These air-conditioned stores generally carry a smaller range of popular processed and packaged food and beverage products compared to those carried by the supermarkets/hypermarkets. They also carry microwaveable food products which may be heated at the store for immediate consumption. In addition, convenience stores and petrol station stores also serve ready-to-consume food and beverages such as sandwiches, fried rice, fried noodles, Nasi Lemak and other Asian cooked dishes, buns, curry puffs and alike, ready-to drink hot coffee or tea, soft drinks and other beverages. They generally do not carry perishable products such as chilled meat, fish and seafood, fresh fruits and vegetables. Most of the products are in single-serve packaging or in smaller packaging size than those carried by the supermarkets/hypermarkets. However, the retail price of the products is generally higher in convenience stores and petrol station stores than at the supermarkets/hypermarkets. 3. Traditional stores including provision, grocery and sundry shops Traditional stores continue to make up the largest number of food retailers in Malaysia today. They are commonly found in all the cities, towns and villages in Malaysia. They are made up of open-fronted GAIN REPORT MY2021 Page 7 grocery stores in shop houses or in the dry markets. This sub-sector is dominated by small family-run businesses and target the price sensitive consumers as well as those who seek convenience, particularly those housewives that prefer to shop daily for a small number of grocery items and other daily essentials. In 2011, under the National Key Economic Areas (NKEAs) identified by the government as a key driver of domestic consumption and to spur economic growth, the government introduced the ‘Small Retailers Transformation Program’ (TUKAR) to facilitate the modernization of 5000 traditional sundry shops nationwide by 2020. These retail stores generally carry local traditional and Asian products and some branded products with a small number of the more popular imported food and beverage products from western countries. Their competitive advantage is in their carrying products that are ordinarily demanded by all local households and are retailed at a very competitive price. It should be noted that these non-air conditioned stores are usually operated as specialist stores that carry only halal products targeted at the Muslim community, or mainly Chinese products targeted at the Chinese community or mainly Indian products targeted at the Indian community. A number of stores in the cities and larger towns have up-graded to the mini-market concept by trying to compete against the major supermarkets/hypermarkets, targeting all the races, offering better shopping ambiance with more organized shelves, wider aisle, brighter and cleaner environment, check-out counters, more varieties of branded products and alike, while still maintaining the friendly neighborly atmosphere. 2.2 Advantages and challenges for US exporters Advantages Challenges GAIN REPORT MY2021 Page 8 Malaysia’s economy is still showing positive The Muslim population (around 60 percent of growth and forecast to continue to grow and the the total population) demands Halal products. food retail market is also continuing to expand. US products need to comply with this religious Most imported food and beverage products requirement. attract low import duties and Customs Duties (except for alcoholic drinks). US products and brands are already well-known Malaysia, Australia, New Zealand, France, and well represented in the food retail market. In China, India and other ASEAN countries addition, US products have a reputation of being continue to be strong competitors in the food of high quality. This enables new-to-market US retail market. Their products compete on quality products an easier access into the retail market and price against a number of comparable US because the major retailers are more willing to products. carry US products than products from other US products are generally perceived as not as lesser known countries. In addition, the Cold price competitive as similar products from Storage Group outlets that target western countries such as Australia and New Zealand. expatriates as well as the high end retailers such as AEON already carry large quantities and a relatively wide variety of imported food products from the USA. Young Malaysians, including young adults, are New-to-market US products do not necessarily increasingly adopting US culture and trends. fit local demand on taste and packaging size. This is positive for US food products. Past marketing efforts by US organizations have raised the profile of a range of US products in Strong local products and brands exist which the eyes of consumers and retailers, e.g. fresh dominate their markets to the near exclusion of temperate fruits, dried fruits, frozen food, etc. imported products, e.g. fresh vegetables, Such activities serve to not only increase chicken, soft drinks, mineral water, cordials, awareness and consumption of US products but beer, chocolates, biscuits and cookies, cereal- also increase the perception of US products as based snacks and some dairy products. high quality products. A wide variety of foreign products already “fit” Certain US products are not readily accepted by into local food culture, e.g. yoghurt, ice cream, many Malaysians and so are ignored, e.g. potato and cereal based snacks, infant food, turkey, snack products, ready-to-consume temperate fruits and vegetables, soft drinks and prepared meals. Some US products do not other non-alcoholic drinks such as cordials. This readily fit into the local food culture. To expand trend will continue into the future as more demand for these products, Malaysians need to Malaysians modernize their diets. be educated on how such products should be best consumed, prepared or localized so that these products become entrenched into their diet. 3. Road map for market entry 3.1 Supermarket, hypermarket and department stores GAIN REPORT MY2021 Page 9 3.1.1 Company profiles The Table below provides information on the major retailers involved in the operation of supermarkets, hypermarkets and department stores. Retailer Name and Outlet Sales Purchasing Type Ownership (millions) No. of Outlets Location Agent Type Cold Local company, Sales 17 Cold Storage Nation- Direct sourcing Storage subsidiary of information supermarkets wide preferred with a and Giant Dairy Farm not released. and 131 Giant number of International of Largest hypermarkets. preferred agents Hong Kong hypermarket Giant is a used. chain. trusted retail name in Malaysia. Carrefour Acquired by Sales 26 Major Group sourcing Japanese Aeon information hypermarkets cities direct from Co Ltd in not available suppliers is October 2012 preferred. and will be renamed to Aeon BIG The Store The Store RM1.9 75 department Nation- Sources directly Corporation billion store cum wide from local Bhd, listed on (including supermarkets suppliers where the stock non-food ever possible for exchange sales) bulk orders. Agents used for smaller orders. AEON Operated by RM3 billion 25 department Major Sources directly AEON Co (M) (including store, with a cities from local and Bhd, listed on non-food significantly overseas the stock sales) large suppliers where exchange. supermarket ever possible for Parent company section bulk purchases. is AEON Group, Local agents Japan. used for smaller orders. GAIN REPORT MY2021 Page 10 Tesco Tesco Stores Sales not 45 Tesco Major Sources directly (Malaysia) Sdn disclosed. hypermarkets cities from local and Bhd, joint and Tesco Extra overseas venture between hypermarkets suppliers where Tesco UK and ever possible for Sime Darby bulk purchases. Bhd. Local agents used for smaller orders. 3.1.2 Entry strategy The US exporter should consider the following when selecting major retailers to partner with in Malaysia: The financial strength of the retailer and its volume of business. The level of interest and commitment by the retailer in carrying imported US products. The number and location of retail outlets that target western expatriates and middle to high income local consumers residing in urban centers. The annual marketing program of the retailer. The retailer’s policy towards: New-to-market imported products and brands. Premium and basic lines and niche products. Volume of sales expected from the US products. Promotional support expected from US exporters. Retail pricing expected for the US products. Listing fees and other costs, if any, imposed on the US exporters. The retailer’s purchasing policy, i.e. whether they purchase directly from overseas suppliers or via local importers/distributors. In addition, US exporters should consider the following matters when planning to enter this retail sub- sector: Where the product fits in the retail market, e.g. as a mass market item, high-end niche item, novelty/exotic item, seasonal festive/gift item, targeted at western expatriates, etc. Price competitiveness of the US products versus comparable brands in the market. Packaging size and quality that meets with customers’ expectations. US products which can be easily/readily registered as Halal products. US products which can be readily accepted as alternatives/substitutes to competing products. US products that can be introduced into local food culture. US organic products and health food products that can meet retailer’s requirements. US products which provide convenience to customers. GAIN REPORT MY2021 Page 11 The level of promotion, commitment to brand support and consumer education necessary for successful launch and development of a new-to-market product. Ability to meet retailer purchasing requirements and specifications. 3.1.3 3.1.3 Distribution channel The Chart below provides an overview of the distribution channel for imported food and beverage products from US exporters to supermarkets and hypermarkets. It is important to note that the larger retailers prefer buying directly from overseas suppliers where possible to gain better pricing in order to pass cost savings to their customers to remain competitive in the market. US Exporter Importer Distributor Supermarkets/Hypermarkets It should be noted that some sub-distributors are also used to distribute products to stores located in the sub-urban areas. 3.2 Convenience stores and petrol station stores 3.2.1 Company profiles The convenience stores segment is dominated by 7-Eleven, the largest 24-hour convenience store in the country that operates under Berjaya Retail Bhd. In addition, there are around 3,000 twenty-four hour petrol station stores nation-wide operated by the other petroleum companies such as Petronas (Mesra), Shell (Select), Petron (On The Run), Caltex (Xpress Point) and BHPetrol (BHPetrolmart). The number of 7-Eleven stores in each Malaysian state gives a good indication of the level of modernization of the retail sector in each state in Malaysia. Today, 60% of 7-Eleven stores are located in the Federal Territory of Kuala Lumpur, the states of Selangor and Johor, which gives a very good indication that these regions hold the largest level of modern consumerism in Malaysia today. The Table below provides information on the major business involved in the operation of convenience stores. GAIN REPORT MY2021 Page 12 Retailer Name and Outlet Sales No. of Purchasing Type Ownership (US$ millions) Outlets Location Agent Type 7-Eleven Berjaya Sales information 1,464 Nation- Local Malaysia Sdn. Retail Bhd. not released. outlets of wide distributors. Bhd Largest 7-Eleven convenience store stores operator. 3.2.2 Entry strategy US exporters should view this as a secondary target providing incremental business, rather than as a main target. They should consider developing distribution reach into this sub-sector through their appointed distributors that service 7-Eleven and the petrol station stores. The new-to-market US exporters should consider the following matters when planning to enter the sub-sector: US products (halal certified) which are also targeted at the hypermarkets/supermarkets but are packaged in single-serve or smaller sizes. US products which target children, young adults and convenience seekers. Price competitiveness of the US products versus competing local brands carried by stores operating in this sub-sector. 3.2.3 Distribution channel The distribution channel for the convenience stores and petrol station stores is similar to that existing for the supermarkets. An example of the distribution channel to convenience store is shown below. US exporter Importers Distributors Convenience stores GAIN REPORT MY2021 Page 13 3.3 Traditional stores including provision, grocery and sundry shops This sub-sector has remained highly fragmented. Although a large number of establishments have remained in business for a considerable number of years, this sub-sector is also characterized by operators that enter and exit the sub-sector on a frequent basis. Because of the nature of this sub-sector, no single establishment dominates. This sub-sector has remained important in the Malaysia market place as these businesses continue to satisfy the needs of the mass market as they provide easy access to traditional products which are now fast disappearing from the modern market place due to lack of branding, modern packaging and alike of such traditional products. 3.3.1 Entry strategy US exporters should treat this sub-sector as a very low priority retail sector to target largely due to the types of products retailed by such establishments. US exporters that wish to enter this sub-sector should supply highly price competitive products that: Can easily fit into the local food culture Can be accepted as alternatives to Asian products and brands. New-to-market US exporters should also carefully select major local distributors that have wide and deep distribution capabilities which reach into this sub-sector. 3.3.2 Distribution channel Traditional stores source their imported food and beverage products through local importers, wholesalers, distributors or sub-distributors. This sub-sector is well-served by the larger and more developed distributors with an established and complicated sub-distributor network because a large number of these stores are located throughout the width and depth of the country, many demanding small and irregular volumes of products. 4. Competition in the sector The Table below summarizes the major supply sources for each product covered under this study, the strengths of the key supply sources and the advantages and disadvantages of local companies. Product Major supply Strengths of key Advantages and (2011) sources supply countries disadvantages of local companies Beef (fresh, 1. India - 75% Halal certification There is insufficient supply of chilled or 2. Australia – 18% approved by Malaysian local beef. frozen) 3. New Zealand – religious authority. 4% Import: India competes on price GAIN REPORT MY2021 Page 14 119,315 and dominates the tons supply; demanded largely by the low end US$ 389 mass market food million (CIF service segment. value) Australia dominates the fresh/chilled segment in the high end food service sector with its halal beef. Chicken Cuts, 1. China - 74% Halal certification Malaysia is a major producer frozen 2. Thailand – approved by Malaysian of halal chicken and an 14% religious authority. exporter of poultry meat. Import: 40,155 3. Denmark – The import market Local chicken is very price tons 3% targets mainly the food competitive. Local consumers 4. U.S.A. – 2% service and food still prefer fresh or chilled US$ 103 Mi processing sectors. chicken to frozen chicken. llion There is an import restriction (CIF value) on chicken. Whole turkey, Australia dominated the Turkey is largely demanded frozen 1. Australia – market in 2011 by by the high end food service 94% supplying ‘halal’ sector and by some western Import: 110 turkeys. No US turkey expatriates residing in tons plants were certified Malaysia, for the festive ‘halal’ by the Malaysian holidays. There is no US$ 0.6 government. commercial supply of local million (CIF turkey. value) Dairy 1. New Zealand - New Zealand leads in Local companies are very 52% milk powder, butter and strong in liquid milk, Import: 2. USA - 16% liquid milk and is the sweetened condensed milk, 225,246 tons 3. Australia – 8% second largest supplier canned milk powders, yogurt of cheese; Have long and cultured milk drinks. US$ 856.1 established relationship They are all very strong million (CIF with importers. companies with dominant value) Australia leads in shares within their market yoghurt and cheese and segments. GAIN REPORT MY2021 Page 15 is the second largest supplier of butter. The USA is the second largest supplier of milk powder, yoghurt and the third largest supplier of cheese. Breakfast 1. Philippines - 55% Branded market Nestle (Nestum) and Quaker cereals 2. Thailand - 9% dominated by Nestlé, (Quaker Oatmeal) are locally 3. USA - 8% Kellogg’s and Quaker. packed from imported Import: 9,517 Nestlé is supplied ingredients. tons mainly from the Philippines and US$ 25.9 Thailand, targeting the million (CIF mass market. Post, value) Quaker, Nature’s Path and Sweet Home Farm are from the USA, targeting the niche high end market. Infant food, 1. Singapore - 43% The market is dominated Nestle Malaysia’s products excluding dairy 2. UK - 18% by cereal based infant dominate the cereal based products 3. Netherlands – food (excluding dairy infant food segment 13% products). (excluding dairy products). Import: 52,503 tons USA – 4% US$ 72 million (CIF value) Snacks Foods; 1. Indonesia - 11% Indonesia, China and Local products dominate this 2. China - 11% Thailand largely supply snacks market with very Import: 57,529 3. Thailand - 10% Asian type snacks. widespread national tons distribution reach. Malaysia’s USA – 5% locally produced branded US$ 213.8 products such as Jack & Jill, million Roller Coasters, Pringles and (CIF value) Twisties compete on price against imports Baked products 1. China - 21% China supplies a variety Malaysian products dominate GAIN REPORT MY2021 Page 16 2. Indonesia – 19% of Nabisco biscuit both the cakes and sweet Import: 28,718 3. Thailand - 12% products to Malaysia as biscuits segments with its tons well as some China branded price competitive USA – 6% biscuit brands. products such as Julie’s, US$ 68.1 Indonesia supplies Munchy, Hup Seng, Hwa Tai million (CIF Nabisco Kraft’s biscuit and Danone’s products e.g. value) products. Chipsmore, Jacob’s and alike. Thailand supplies Japanese type biscuits. Fresh 1. China - 53% China leads in potatoes, Malaysia dominates the vegetables 2. India - 21% onions, cabbages, market with its consistent 3. Thailand - 7% lettuce, carrots and ability to supply good quality, Import: legumes. competitively priced 1,021,256 tons USA - 2% India is the second temperate vegetables. It is a largest supplier of major exporter of fresh Asian US$ 573.1 onions. and temperate vegetables to million (CIF Thailand is the leading Singapore. value) supplier of tomatoes, cucumber and other vegetables. Frozen 1. China - 33% China is the leading Malaysia produces some vegetables 2. USA - 13% supplier of frozen mixed frozen sweet corn. It is not a 3. Denmark – 13% vegetables. Over 70% of major producer of frozen Import: 16,926 China’s exports are vegetables. tons frozen mixed vegetables, mainly US$ 15.1 targeted at the food million (CIF service sector. value) USA is the largest supplier of frozen potato products (largely frozen French fries), mainly targeted at the food service. It also supplies frozen cut potato under supermarket house brands. Fresh fruits, 1. China – 40 % China leads the market Malaysia does not produce temperate 2. South Africa - with Mandarins and fresh temperate fruits. 22% Chinese pears and Import: 3. USA - 19% second largest supplier 348,639 tons of apples. GAIN REPORT MY2021 Page 17 US$ 211 South Africa is the million (CIF largest supplier of value) apples, lemons, grapefruits and the second largest supplier of pear, grapes and oranges. USA is the largest supplier of oranges, grapes, cherries, peaches, plums, strawberries, raspberries, cranberries; the second largest supplier of apricots and the third largest supplier of apples. Dried fruits India is the largest Malaysia is not a major 1. India – 33% exporter of dried supplier dried fruits. Import: 24,501 2. USA – 19% Tamarind to Malaysia. tons 3. Indonesia - 15% Indonesia is the largest exporter of dried US$ 27.4 Tamarind fruit. million (CIF USA is the largest value) supplier of dried grapes (raisin) and prunes. Edible nuts 1. India - 24% India leads in supplying Local brands such as Tong 2. China - 23% groundnuts by offering Garden, Camel and Tai Sun Import: 3. USA – 18% very competitive prices. have a very strong presence in 146,657 tons China is the second the market. largest supplier of US$ 105.1 groundnuts and million (CIF pistachio, and leads in value) the supply of chestnuts. USA is the largest supplier of shelled almonds, pistachio and walnut. Sugar 1. Thailand - 20% Thailand supplies Cloud Malaysia supplies a large GAIN REPORT MY2021 Page 18 confectionery 2. Indonesia - 20% 9, Nabisko Kopiko, variety of products targeted at 3. Vietnam - 19% Strepsils, Jack n Jill and local consumers, including Import: 21,290 various Thai brands. Dino, Camel, Santa, Hacks, tons USA – Less than Indonesia supplies Hudson’s and alike. 1% Mentos, Sunkist, Fox’s US$ 53.7 and various lower million (CIF quality Indonesian value) brands. Chocolates & 1. Singapore - 28% USA supplies Hershey Malaysia produces a number Other Food 2. China – 16% Kisses and Bars which of good quality chocolate Preparation 3. Belgium – 11% provide an alternative products. Local Containing product to chocolate manufacturers mainly target Cocoa USA - 6% lovers. consumers that prefer chocolates in conveniently Import: 20,689 packed single serve bars as tons well as large bars as well as party packs and in gift boxes. US$ 122.7 Locally manufactured million (CIF chocolates include well value) known brands such as Cadbury, Vochelle and Beryl’s. Sauces and 1. Singapore – 30% Singapore supplies high Locally produced soya sauce, seasonings 2. China - 16% quality price tomato sauce and other Asian 3. Thailand - 14% competitive Asian sauces have a very strong Import: 36,553 4. USA – 13% sauces such as sambal, presence in the market. tons satay, chicken rice sauce and alike. US$ 75.8 China is a major million (CIF supplier of other high value) end Asian sauces such soya sauce, oyster sauce, plum sauce and alike. Thailand is a major supplier of fish sauce and chili sauce. The USA is a major supplier of western sauces such as salad dressing, spaghetti sauce, mixed condiments, barbeque sauce, black pepper sauce, Thousand Island GAIN REPORT MY2021 Page 19 Dressing, salad cream, salsa and alike. Non-alcoholic 1. Thailand - 65% Thailand leads in supply Local branded mineral water, beverages 2. Singapore - 15% of pineapple juices, juices, cordials and soft 3. Indonesia – 5% cordials and Asian drinks dominate the market. Import: 55 drinks as well as other million liters non-alcoholic drinks. The USA is the largest US$ 60.2 supplier of tomato juice mi llion (CIF and mixed fruit and/ va lue) vegetable juices to Mala ysia with products such as Welch’s, Del Monte, Minute Maid, Ocean Spray . Wine 1. Australia - 50% Australia has developed Malaysia does not produce 2. France – 23% a higher presence in the any grape wine. Import: 6.4 3. Singapore – 6% market because of its million liters price competitive New USA - 2% World grape wines and US$ 79.2 strong brand presence. million (CIF France dominates the value) food service market and competes on quality and price. USA supplies well- known brands of New World wines to both the retail and food service sectors. Beer 1. Singapore - 26% Singapore is a major re- The market is dominated by 2. Netherlands - exporter of foreign beer locally brewed beers. Import: 36 20% into Malaysia, including Malaysia has two major million liters 3. China - 17% beers from Belgium, breweries that are aggressive 4. USA – 8% Denmark, Germany and brand driven businesses US$ 46.6 Mexico. Most of these which proactively protect million (CIF are very price their market shares. value) competitive beers with GAIN REPORT MY2021 Page 20 brands that are not well- known to the consume rs. Ne therlands exports Gr olsch and Breda which is supplied to the mid to high end western-style food service sector in the major cities and tourist centers such as Langkawi. China exports TsingTao and Yanjing beers to Malaysia. Spirits 1. UK - 34% UK dominates in the Local production is 2. France – 29% supply of whiskies, rum negligible. Import: 22 3. Netherlands - and Gin. million liters 11% France and Netherlands dominate the brandy US$ 376.2 USA - 1% share sector with their well million (CIF known brands. value) Pet food 1. Thailand - 58% The market is dominated Malaysia does not produce 2. USA - 13% by Pedigree & Whiskas any processed and packed pet Import: 33,473 3. Netherlands – 9% (Thailand), Friskies foods. tons (Australia), and Purina (Thailand & USA). US$ 74.6 Thailand also supplies million (CIF very price competitive value) CP Smartheart (Thai brand). Source: Department of Statistics, market observations and trade comments 5. Best products prospects Category A: Products Present in the Market That Have Good Sales Potential Product 2007 2011 5 year Import Key Market category Imports Imports Average Tariff Rate constraints attractiveness GAIN REPORT MY2021 Page 21 Annual over market for USA Import development Growth Rate Breakfast 7,982 12,465 13% 2-5% duty Strengths of Category A. cereals tons tons growth per charged on Nestlé and annum. oats Kellogg’s in An attractive US$ 15 US$ products. the market. market for long million 28.9 Other term (CIF million products development value) (CIF incur 7% based on higher value) duty. disposable incomes and related changing eating habits. The breakfast cereals market has not been fully exploited yet and can be further developed and expanded. Snack 37,789 57,529 18% 6% import Strong Category A. Foods tons tons growth per duty competition annum. from price Malaysians US$ US$ competitive snack all day. 113.3 213.8 good quality This market million million locally continues to be (CIF (CIF produced attractive for value) value) branded well-known products. brands from the USA, particular new product types not yet available in the Malaysian market. US exporters should capitalize on the growth in this market. GAIN REPORT MY2021 Page 22 Frozen 15,474 16,926 Declining Nil except Products are Category A. vegetables tons tons by 6% per for frozen mainly annum. sweet corn demanded by Good prospects US$ US$ which the food continue to 12.4 15.1 attracts 5% service sector exist for certain million million import (western style frozen (CIF (CIF duty. restaurants) as vegetables value) value) most supplied by the consumers USA that are in still prefer demand by fresh Malaysian vegetables consumers. which are readily Note: Food available all service demand year round. continues to be important. Fresh 344,054 348,639 21% 5% import Growth in Category A. fruits, tons tons growth per duty except demand is temperate annum. for fresh still being Opportunities US$ US$ oranges seen in exist for US 102.3 211.0 which oranges, exporters to million million attracts no mandarins, capitalize on (CIF (CIF import grapes, pears growth in the value) value) duty. and apples as berries and well as stone stone fruits fruits and segment as berries while consumers are demand is looking for declining for alternatives and kiwifruits. are becoming more familiar with them. Opportunities also exist for supply of mandarins and tangerines which are in huge demand around the Chinese New Year periods. Potential exists for new GAIN REPORT MY2021 Page 23 varieties of apples, pears and oranges to create impetus for further growth. Dairy 257,027 225,246 18% 20% import High levels of Category A for tons tons growth per duty on existing Yoghurt, infant annum. liquid milk competition milk powder, US$ US$ (in quota), for market cheese 743.9 856.1 50% import share amongst products. million million duty on key suppliers, Good sales (CIF (CIF liquid milk both local and potential exists value) value) (out of overseas, particularly for quota), 5% making new retail packed import duty entry difficult infant milk on frozen and costly. powder, pizza milk and cheese and other milk The USA is other grated powder the second cheese. under HS largest 040291. supplier of Category C for yoghurt and other retail Nil for milk powder packed dairy other and the third products. products. largest This segment is supplier of not particularly cheese. attractive for other retail packed dairy products. Chocolates 11,895 20,689 14% 15% import Strong Category A. tons tons growth per duty competition annum. charged from locally Opportunities US$ US$ manufactured exist in 61.6 122.7 branded supplying gift million million products. chocolates, (CIF (CIF novelties and value) value) exotic chocolate products to capitalize on festive demands during the year end gift giving GAIN REPORT MY2021 Page 24 period. Edible 48,987 Import: 25% Nil except The market is Category A for nuts tons 146,657 growth for for dominated by almonds, tons ground groundnuts groundnuts. walnut and US$ nuts which Other nuts are pistachio - 39.8 US$ incurs 5% showing USA is the million 105.1 import duty growth in the largest supplier. (CIF million market. value) (CIF Category C for value) other edible nuts. Strong competition from local brands for other edible nuts. Sauces and 26,408 36,553 20% 10% import Very strong Category A. seasonings tons tons growth. duty for competition The soya sauce from local Opportunities US$ US$ market is and tomato soya sauce exist to 36.4 75.8 dominated sauce and and tomato continue to million million by local similar sauce which supply to the (CIF (CIF Asian sauces. meet closely retail sector, value) value) sauces but with particularly the all western 5% import consumer western sauces sauces and duty for taste and price not seasonings other expectations. manufactured are sauces USA has in Malaysia. imported. except for created a prepared strong mustard position in which is supplying nil. western sauces to Malaysia. Non- 13 55 32% Nil for fruit Very strong Category A. alcoholic million million growth. juices, competition beverages liters liters The except for from local Opportunities market is pineapple products and exist for US US$ US$ dominated juice which brands which exporters to 10.6 60.2 by local attracts meet closely supply juices million million products 20% import with (fruits and (CIF (CIF which duty and consumer mixture of GAIN REPORT MY2021 Page 25 value) value) meet guava juice taste and price fruits and closely which expectations. vegetables), with attracts 6% sparkling juices consumer import (for festive taste. duty. seasons and Import 20% import celebrations) as growth is duty on well as products mainly in mineral and that can be un- aerated targeted at the sweetened water and growing health beverages, other non- food and including alcoholic organic food bottled beverages. segments of the water and market. fruit juices. Wine 6.3 6.4 2 % Import duty Wine is being Category A. million million growth per of RM23 consumed by liters liters annum. per liter for the younger Opportunities sparkling generation of exist for US wine. adult urban exporters to US$ US$ Import duty Malaysian expand this 42.3 79.2 of RM7 per Chinese and market for their million million liter for Indians, new world (CIF (CIF other particularly wines as value) value) wines. those increasing educated number of Excise abroad and/or young Duty of are well- Malaysians 15% and travelled. acquire a taste RM34/Ltr for wines as for opposed to sparkling whiskey and wine or brandy. 15% and RM 12/Ltr for other grape wines. Pet food 26,340 33,473 Rapidly Nil It is Category A. tons tons growing at increasingly 23% per fashionable This market US$ US$ annum. for the middle continues to be 35.1 74.6 to upper attractive for GAIN REPORT MY2021 Page 26 million million income the USA and (CIF (CIF groups to own US exporters value) value) exotic pet should dogs and cats. capitalize on Few the growth in constraints/ this market. barriers exist under conditions where disposable income is growing. Category B: U.S. Products not Present in Significant Quantities in the Market That Have Good Sales Potential Product 2007 2011 5 year Import Key Market category Imports Imports Average Tariff constraints attractiveness Annual Rate over market for USA Import development Growth Rate Baked 17,564 28,718 25% 6% on Strong Category B. products tons tons growth. sweet competition Fast biscuits, from price Malaysians US$ US$ 68.1 growing waffles competitive snack all day 29.3 million market, and good quality long and baked million (CIF popular wafers, locally products are (CIF value) amongst all un- produced one of the most value) consumers, sweetened branded popular snacks particularly biscuits. products. of Malaysians. cakes and Nil for US exporters sweet other should biscuits baked capitalize on consumed products. the growth in as a snack this market. US food. exporters should consider exporting unique and exotic products GAIN REPORT MY2021 Page 27 of acceptable taste and flavor, products that are not readily available in this region. Fresh 915,560 1,021,256 12% growth Nil Competition Category B. vegetables tons tons per annum. from local suppliers and Demand for US$ US$ China which fresh temperate 369.1 573.1 supply vegetables will million million mainly Asian continue to (CIF (CIF vegetables to grow as more value) value) the market. varieties are The bulk of adopted into demand is for local food Asian fresh culture, vegetables. particularly broccoli, cauliflower, carrots and asparagus. Dried 23,385 Import: 23% growth 5% import Maturing Category B. fruits tons 24,501 mainly for duty market for tons dried applies. traditional US exports US$ Tamarind dried fruits dominate the 11.6 US$ 27.4 products Nil on such as raisins segment million million dried raisins and and continue to (CIF (CIF dates and prunes. have a value) value) dried Slow grow in significant grapes. dried fruits share in dried such as figs, prunes. avocado, Opportunities apricot, exist to supply apple, peach to the growing and other health food and dried fruits. organic food segments of the retail market. Sugar 16,811 21,290 Growing by 15% Strong Category B. confection tons tons 12% per import competition annum. duty from Opportunities US$ 36 US$ 53.7 Consumers, charged products exist in GAIN REPORT MY2021 Page 28 million million particularly made locally. supplying (CIF (CIF the younger novelty value) value) generation, products are attracted targeted at the by the younger temptingly generation, packaged particularly and fun products which looking are not yet novelty available in the products. market. Category C: U.S. Products not Present in the Market Because They Face Significant Barriers Product 2007 2011 5 year Import Key Market category Imports Imports Average Tariff Rate constraints attractiveness Annual over market for USA Import development Growth Rate Chicken 29,672 40,155 Imports Import duty Halal Category C. Cuts, tons tons fluctuate of 20% (in certification frozen from year quota) and approved by This market US$ 52 US$ 103 to year, 40% (out of Malaysian continues to be million million depending quota). religious a challenge (CIF (CIF on the authority is under value) value) local required. conditions supply Well where the situation. developed market is well Market is local poultry served by local dominated farming sources. There by local industry. is an import chicken. restriction on chicken. Dairy 257,027 225,246 18% 20% import High levels of Category C for tons tons growth per duty on existing other retail annum. liquid milk competition packed dairy US$ US$ (in quota), for market products. 743.9 856.1 50% import share amongst This segment is million million duty on key suppliers, not particularly (CIF (CIF liquid milk both local and attractive for GAIN REPORT MY2021 Page 29 value) value) (out of overseas, other retail quota), 5% making new packed dairy import duty entry difficult products. on frozen and costly. milk and The USA is Category A for other milk the second Yoghurt, infant powder largest milk powder, under HS supplier of cheese products 040291. yoghurt and targeted at the milk powder middle to high Nil for other and the third income products. largest consumers. supplier of Good sales cheese. potential exists particularly for retail packed infant milk powder, pizza cheese and other grated cheese. Edible 48,987 Import: 25% Nil except The market is Category C for nuts tons 146,657 growth per for dominated by other edible tons annum for groundnuts groundnuts. nuts. US$ ground which incurs Other nuts are 39.8 US$ nuts 5% import showing Category A for million 105.1 duty growth in the almonds, (CIF million market. walnut and value) (CIF pistachio - value) USA is the largest supplier. Strong competition from local brands for other edible nuts. Beer 15 Import: Declining Import duty Very strong Category C. million 36 by 8 % per of RM5 per competition liters million annum. liter. from locally Most imports liters The market produced have tentative US$ is Excise Duty well-known niche presence 17.5 US$ dominated of 15% and brands. as the foreign million 46.6 by locally RM 7/Ltr for brands are not GAIN REPORT MY2021 Page 30 (CIF million brewed beer not well known to value) (CIF products. exceeding consumers. value) 5.8 % vol and RM7.40/Ltr for other. END OF REPORT. GAIN REPORT MY2021 Page 31
Posted: 22 December 2012

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