Malaysia's Diverse Cultures Offer Challenges to Importers
By Lloyd Fleck
Diverse cultures of Malaysia offer unique challenges and opportunities to exporters wishing to break into this Southeast Asian food market that has one of the fastest growing economies in the world.
During the past 5 years, Malaysia has had an average annual growth of more than 8 percent, and per capita income growth from $3,114 in 1992 to $4,600 in 1996.
Religious affiliations of the 20.7 million population have an important impact on food consumption. The Malays, who account for 60 percent of the population, are mostly Muslims and are not allowed to consume pork. Slightly more than 30 percent of Malaysians are Chinese who may be Buddhist, Taoist or Christian. Beef is not eaten by many Buddhists. The remaining 10 percent of the population are largely Indian and Hindu.
For Muslim consumers, beef and poultry products must be certified as Halal and originate from slaughterhouses that follow Islamic slaughter practices. These facilities must be inspected and approved by Malaysian religious authorities. If these products are not certified Halal, Muslim consumers, who make up a majority of the population, will not buy them.
Other food items that contain any animal products must be clearly marked.
Consumers Open to New Foods
Although there are differences in food consumption by ethnic group, some general observations can be made regarding the Malaysian diet. Malaysians spend approximately $1,000 annually per capita on food. Most Malaysians eat chicken and most like lamb.
Food is generally spicy and rice or noodles are served at most meals.
Malaysians are increasingly familiar with Western foods and are traditionally open to trying new foods and recipes. Consumption of Western foods at home is growing. For example, breakfast in Malaysian households increasingly includes bread and butter and breakfast cereals.
U.S. foods are readily accepted by many Malaysian consumers. This is especially true of the affluent and relatively young segment of the population as well as the more than 100,000 Malaysians who have studied abroad.
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 appeal to Malaysian consumers. U.S. products must be unique to overcome higher prices, strong international and local brand names built through advertising and possibly limited distribution.
Bulk Products Dominate U.S. Exports
Nearly three-quarters of Malaysia's imports from the United States are bulk commodities, such as corn and soybeans.
However, U.S. exports of consumer-oriented foods have exhibited strong growth in the early 1990s. The value of these exports has jumped from $53 million in 1991 to $105 million in 1996.
Leading exports of American consumer-oriented foods to Malaysia are fresh fruit, such as apples, oranges and grapes, canned fruits and vegetables and tree nuts.
Best Sales Prospects
The best sales prospects for food items from the United States include:
fresh fruits -- apples, oranges, grapes, plums, nectarines and peaches;
dairy products -- ice cream, yogurt, cheese, low fat milk powder and dairy ingredients;
meat and preparations -- beef, premium processed meats and frozen turkey;
non-alcoholic beverages -- premium soft drinks and juices and beverage and juice concentrates;
snack food ingredients and snacks and nuts, particularly healthy snacks, potato chips and premium nuts;
miscellaneous food products -- canned peaches, apricots, fruit cocktail, tuna, creamed corn, raisins, prunes, fruit chips, frozen halal dinners, pizzas, desserts, french fries and other vegetables and natural ready-to-eat cereals;
bakery ingredients; and
bulk commodities -- wheat, corn and soybeans.
Malaysia Rich in Natural Resources
Malaysia is a country that is rich in natural resources, including oil and natural gas. Once the world's largest producer of tin and natural rubber, Malaysia is today the world's top producer and exporter of vegetable oil and tropical hardwood. It harvests coconuts, rice, rubber, pepper, tea, seafood, cocoa and tropical fruits and vegetables and is self-sufficient in pork and poultry production.
Malaysia has a growing and impressive food processing industry that produces for the domestic and export markets. This sector has been growing at an average annual rate of 8.7 percent since 1991, making it one of the fastest-growing sectors in the resource-based manufacturing industries.
The Malaysian Government places great emphasis on its food processing industry and provides incentives to food processors and manufacturers in the form of import duty exemptions for raw ingredients and tax incentives to encourage investment in infrastructure development.
Malaysian food processors are increasingly sophisticated in the types of products they offer and the way in which these are marketed. Major products includes baked beans, canned curry beef, chicken products, canned tuna fish, sardines, instant noodles, canned tropical fruit, fruit juices, milk drinks, ice cream, soya products, chili and tomato sauces, biscuits, breakfast cereals, chocolate products and snack foods. Some U.S. brands are manufactured in Malaysia, including Del Monte, Libby's, Quaker Oats, Skippy, Best, Wise and Roman Meal Bread.
Competition from Down Under
Major competitors for the import market are Australia and New Zealand. Australia is among the market leaders in fruit and meat imports due to competitive prices, lower freight costs and shorter shipping times. New Zealand and Australia have taken the bulk of Malaysia's sizeable dairy import market for the same reasons.
Both countries have also started to invest more time and money in market development activities. The Australian Horticultural Corporation has developed "Australia Fresh," a national umbrella brand for fresh Australian horticultural products, to promote sales in Asia. Australia's market development efforts have been aided by the ability to promote a fairly wide range of products, including chilled and processed meats, fresh fruits and vegetables and processed foods. The Australians have intensified their promotional efforts in supermarkets, are advertising their products in local newspapers and regularly conduct food festivals at hotels and restaurants.
Other competitors for Malaysia's fresh and processed food imports include South America, South Africa, Canada, Britain, France, the Netherlands, Thailand, the Philippines and Indonesia.
South American countries like Chile, Brazil and Argentina are making inroads into the market for fresh fruit and meat. The establishment of diplomatic ties between Malaysia and South Africa has stimulated imports of South African fresh and canned fruit.
Importers Play Key Role
Importers play a key role in the distribution system for imported food products. There are numerous food importers and commission agents in Malaysia who place orders with foreign suppliers and distribute to supermarkets and grocery stores in the cities. Wholesalers may additionally be involved in transactions that require delivery of products to small shops and in the rural areas. Several of the larger supermarket chains are just beginning to import.
The strengthening of the Malaysian economy and the changing lifestyles of consumers have resulted in the expansion of the supermarket sector at the expense of the traditional wet market--street markets where consumers can buy fresh and dried foods. Several upscale chains are vying for a share of this growing market. Most of the larger supermarkets are modern and well-designed with layouts similar to U.S. supermarkets. While supermarket operators complain about the intense competition, new outlets continue to open, both in Kuala Lumpur and in the secondary cities.
A new phenomenon is the establishment of hypermarkets, wholesale and cash and carry stores which incorporate wholesale and retail activities into one-stop, self-service centers. This introduction of bulk buying outlets is good news for the American exporter as small retailers and wholesalers from outlying villages that traditionally have not had much exposure to imported foods come to buy products from these stores.
Johor Bahru also is developing into an important food shopping area. This is due to its close proximity to Singapore and the weakness of the Malaysian Ringgit relative to the Singapore Dollar. Many Singaporeans drive to Johor on weekends to do some of their food shopping.
Major players on the Malaysian supermarket scene include Parkson's, DFI Supermarkets, Makro, Carrefour, Ahold, Malaysian FairPrice, Jaya Jusco, Giant Cash and Carry, the Store, Ampang Grocers and Hankyu Jaya.
Government Import Regulations
In general, Malaysian health and labeling requirements are not overly restrictive. All U.S.-origin meat, poultry and dairy product shipments must be accompanied by appropriate U.S. Department of Agriculture documentation.
Import duties on most processed food items range from 20 to 25 percent. Duties on a variety of food and beverages have been abolished or reduced over the past 4 years.
Product labels for processed and packaged food must be in English or Bahasa Malaysia and include:
a list of ingredients in descending order of proportion by weight;
if the item contains any animal product, a statement as to the presence of such animal product (beef, pork, lard, gelatin, etc.);
if the items contains any alcohol, a statement as to the presence of alcohol;
the minimum net weight of product (the label of food packed in liquid must contain the minimum drained weight of the food);
the name and address of the manufacturer and importer;
The author is an agricultural attache with the U.S. Embassy, Kuala Lumpur, Malaysia. Phone: 011-60-3-248-9011; fax: 011-60-3- 242-1866.