Malaysia Booms as U.S. Market

Malaysia enjoys one of the fastest growing economies in Asia. The country has evolved from a raw materials exporter--primarily rubber, tin and palm oil--to a major player in the high-tech world of electronics.

Per capita income topped an estimated $4,500 in 1996. The Malaysian economy is expected to grow by 8 percent annually through the end of the century. Inflation is currently running between 3.5 and 4.0 percent.

Booming exports give Malaysian consumers the wherewithal to significantly brighten and enhance their diets. Per capita food expenditures run around $1,000 annually, and are the highest in the region. The ethnically diverse population of 20.7 million consists of three major ethnic groups -- Malay, Chinese and Indian -- as well as many others.

The population is relatively young--35 percent are below age 15 -- and about 60 percent are of working age. The median age of the population--22 years--reflects a young citizenry that is apt to be adventurous in terms of food choices.

Malaysians, in part because of their ethnically diverse food options, love to eat out. Families frequently dine away from home, and the children often select restaurants such as McDonalds and KFC, which have children’s playhouse facilities.

Malaysia imported more than $4.1 billion worth of agricultural products in 1995, and the United States managed to pocket more than 14 percent of the total, despite our relatively long shipping times and vigorous competition.

In fiscal year 1996, (October 1995-September 1996), the United States exported $102 million worth of agricultural products to the archipelago. That was up two-thirds from the fiscal 1995 total, and made Malaysia the 18th most important destination for U.S. agricultural, fish and forest products.

Bulk agricultural commodities, led by coarse grains--principally corn--soybeans and to a much lesser extent, tobacco, continue to dominate shipments to Malaysia, and accounted for 69 percent of total U.S. exports to the country. Malaysia is currently the 14th largest market for U.S. bulk agricultural commodities.

Pet foods and sugars, sweeteners and beverage bases accounted for nearly two-thirds of the intermediate product total of $74 million, which was up nearly one- quarter from a year ago.

The United States is a major supplier of fresh fruit to the country--principally apples, oranges and grapes along with lesser quantities of grapefruit, plums and pears. Canned fruits and vegetables, dried fruit and nuts are common sights in Malaysian supermarkets. Consumer-oriented products like these accounted for $102 million, also up a quarter from a year earlier.

Lumber and panel products account for most of U.S. forest product (excluding pulp and paper) exports to the country.

Malaysia produces a wide variety of tropical fruits, and is self-sufficient in pork and poultry production. Australia and New Zealand, with their proximity to Malaysia, are major competitors for a number of commodities, including fresh fruit.

However, the more affluent Malaysians are attracted to branded products and are loyal to one brand. New suppliers wanting to break in to the market have to introduce products that are of good quality, well-packaged and competitively priced.

Supermarket buyers--particularly those in upscale outlets--are willing to try most new U.S. food items, as long as they believe that the taste and other product characteristics are acceptable to Malaysian consumers.

U.S. products need to be unique to help overcome problems associated with higher prices, strong international and local brand name competition, and possibly limited distribution.

The vibrant Malaysian economy and rapidly changing lifestyles have given rise to an expanding supermarket sector. Several upscale chains are vying for a share of the growing market. Most of the larger supermarkets are modern, well-designed outlets with layouts similar to those in the United States.

Supermarket officials complain about intense competition, but new outlets continue to open, both in Kuala Lumpur and in other cities. These supermarkets offer good opportunities for promoting U.S. high-value and processed food items.

A new phenomenon in the Malaysian food retailing sector is the establishment of hypermarkets and wholesale and distribution cash-and-carry warehousing centers. These incorporate wholesale activities with one-stop, self-service shopping centers. Makro Cash and Carry Wholesale franchises have several outlets. Carrefour -- the French hypermarket -- has two stores.

Booker Cash and Carry Depot opened its first store, in Johor Baru, last year and plans to open 23 outlets throughout Malaysia in the next five years.

The faster pace of urban living and an increasing number of two-income families has triggered an explosion of U.S. fast-food outlets such as McDonald’s, KFC, A&W, Pizza Hut, Carl’s Jr., and Shakey’s as well as some other Western-style restaurants and steakhouses, like the Hard Rock Cafe, TGI Friday’s Bistro, American Chili’s Bar and Grill and Kenny Rogers Roasters. Yogurt and ice cream parlors are also popular.

Beyond the exports needed to service the franchises, these outlets are important because they demonstrate U.S. products in ready-to-eat form. Eventually, Malaysian cooks will want to prepare the foods at home, and they will want to buy the ingredients.

Products with market potential and opportunity lie in the upper income segment of the marketplace. These opportunities include continuing potential for fresh fruits and vegetables, including what are -- in Malaysia -- the "exotic" fruits such as plums, nectarines and peaches and apples, oranges and grapes.

Dairy products, including ice cream, yogurt, cheese and lowfat milk powder, have excellent potential. Ice cream is attractive to young and old alike. However, potential exporters will need to compete on price with Australia and New Zealand.

Sales of U.S. beef have significant potential, although this hasn’t been realized to date. Malaysia may open its market to chicken and chicken parts, after lifting a de facto ban in place on imports since 1983.

All meat, poultry and dairy products must be accompanied by appropriate USDA documentation. Since Malaysia has a large Muslim population, all beef and poultry products must also be certified as "halal." These products must originate from slaughterhouses that follow Islamic slaughter practices. These facilities must be inspected and approved by Malaysian religious authorities.

Other food items that contain any animal products must be clearly marked. If these products cannot be certified as halal, Muslim consumers--who make up about 60 percent of the population--are unlikely to purchase them.

Import duties on a wide variety of food and beverages have been abolished or reduced over the past four years. In 1995, tariffs on still wines were reduced by more than 50 percent to help meet tourist demand.

Processed and packaged food products must contain the following information in English or Bahasa Malaysia:

Some food additives, preservatives, and artificial colorings approved for use in the United States may not be permitted in Malaysia. In addition, products with labels which contain phrases such as "Contains No Palm Oil" or "Contains No Tropical Oils" will not be allowed for import.

TIPS FOR EXPORTERS

Do thorough homework.
Invest in market research. Know your target market.
Be patient, sensitive, and invest time.
Establish and maintain personal relationships with your buyers.
Seek local partners or agents.
Check the prices of foreign and local goods. Are you price competitive?
Understand Malaysian demands for quality, safety and local tastes.
Prepare appropriate packaging.
If selling pre-packed goods, prepare relevant promotional materials. Make it easy for your buyers to market the product for you to consumers.
Keep in mind shipping time and climate when estimating shelf life. Pack and ship products for a tropical climate.
Adapt advertising to Malaysian consumers. You need to educate consumers on the quality and nature of your products.
Maintain contacts.

The author is an agricultural specialist in the Office of the Agricultural Attache, U.S. Embassy, Kuala Lumpur. Tel.: (011-60-3) 248-9011. Fax.: (011-60-3) 242-1866.