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Editorial
ECONOMIC OUTLOOK
Malaysia’s economy grew at a slightly faster than expected
rate of 5.6% in the first quarter of 2015, as investment in
the private sector picked up pace. Though it beat forecast,
economic growth for the January – March quarter slowed
from 5.7% in the fourth quarter of 2014, partly due to weak
exports at the beginning of the year. For the rest of the year,
Bank Negara Malaysia (BNM) expects private consumption
to moderate as households adjust to the new goods and
services tax (GST), but overall consumption will be supported
by the rise in income and employment.
The 11th Malaysia Plan (11MP) was announced by Prime
Minister Datuk Seri Najib Tun Abdul Razak in May 2015 and
outlined five government philosophies – namely pro-growth,
pro-people, pro-business, environmental friendly and emphasis
on nation building. Under the 11MP, real gross domestic
product (GDP) is expected to expand between 5% and 6%
per annum from 2016 – 2020 based on sustained domestic
demand and increasing contribution from the external
sector. Growth will be driven mainly by private consumption
and investment, resulting in a 7.9% per annum rise in gross
national income (GNI) per capita.
During the 11MP, strategies will continue to ensure a
conducive and competitive environment with stable prices,
supportive levels of interest rates and foreign exchange
rates. Four strategies have been identified to boost economic
fundamentals – 1) unlocking the potential of productivity
to ensure sustainable and inclusive growth; 2) promoting
investment to spearhead economic growth; 3) increasing
exports to improve trade balance and 4) enhancing fiscal
flexibility to ensure sustainable fiscal position. Meanwhile,
public investment will grow 2.7% per annum, or an annual
average of RM131 billion in current prices, driven by the
Federal Government’s development expenditure and capital
spending of non-financial public enterprises.
Inflation during the period is expected to remain low,
averaging between 2.5% and 3% per annum, with
accommodative monetary policy and administrative
measures to ensure price stability. The economy is projected
to have an estimated unemployment rate of 2.8% by 2020.
Employment is expected to grow at a slower rate of 2.1%
per annum to reach 15.3 million by 2020, creating 1.5 million
new jobs. Expected slower growth in the services and
manufacturing sectors will reflect labour productivity and
the shift from a labour-intensive economy to a capital,
technology and knowledge-based economy.
ThE AgrICULTUrE INdUsTry
crop sectors and livestock production due to rising costs,
limited expansion of agricultural land, growing resource
constraints and increasing environmental pressures which
are anticipated to inhibit supply.
Nonetheless, higher growth in production is expected from
emerging economies which have invested in their agricultural
sector and where existing technologies offer good potential
for closing the yield gap with advanced economies. Emerging
countries’ share of agriculture output is also expected to
increase over the medium to long term (five to 10 years),
while consumption of agriculture products is expected to
Demand for agriculture products are expected to continue
at a steady pace this year. In 2013, the contribution of
agriculture food sub-sectors (fisheries, livestock and other
agriculture) to national GDP rose to 3.22% from 3.17%
in 2012. The total contribution of the agriculture industry
(including palm oil) to GDP was 7.1% in 2013, a slight
decrease from 7.3% in 2012.
On the global front, agricultural production is projected to
grow at an average rate of 1.5% annually until 2022, slower
than the 2.1% average annual growth recorded in the
previous decade. This lower growth will be exhibited by all
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MALAYSIA FOOD BUSINESS DIRECTORY 2015/2016
Malaysia is also set to further expand its EBN market in
Singapore as the Department of Veterinary Services (under
the purview of the Agriculture and Agro-based Industry
Ministry) is undertaking aggressive efforts to promote EBN
to the neighbour country. Currently, most of the bird’s nest
exported to Singapore is in the form of ready-to-drink bottled
goods and the department would like to focus on promoting
raw EBN and other downstream products. Efforts to promote
Malaysian bird’s nest are also targeted at markets such
as Milan, Japan and Hong Kong under the Agriculture and
Agro-based Industry Ministry’s Food and Agriculture Council
for Export (FACE) programme.
AqUACUlTURE & FISHERIESMarket research firm Global Industry Analysts Inc says
demand for seafood has been growing worldwide, resulting
in over-exploitation of natural resources and production
stagnation from captured fisheries. This leads to an
increasing need for sustainable fishing methods and
provides opportunities for developing countries such as
Malaysia to bank on aquaculture. According to published
reports, due to surging consumption of seafood in both
developed and developing regions, the global market for
aquaculture and fisheries is projected to reach 188 million
tonnes within the next five years.
increase largely in developing countries, with demand
driven by growing populations, higher incomes, increase in
urbanization and also changing diets.
EDIBlE BIRD’S NEST (EBN)The export of edible bird’s nest (EBN) to China last year
reached 145 metric tonnes (estimated to worth around RM2
billion), according to Agriculture and Agro-based Industry
Minister Datuk Seri Ismail Sabri Yaakob. The export of bird’s
nest to China is expected to grow further this year with
the increase in the number of approved processing plants
as well as those that are pending approval by the Chinese
authorit ies. The bird’s nest industry is a high impact
entry point project (EPP) under the Agriculture National
Key Economic Area (NKEA). To date, the Department of
Veterinary Services has successfully registered some 10,330
bird’s nest premises and is expected to register at least
25,000 premises towards 2020.
As of March 2015, eight approved local exporters have
exported a total of 8,000kg of bird’s nest worth some RM62
million to China. The Chinese Agriculture Ministry has also
promised to expedite the approval for another 11 bird’s
nest exporters by this year, which would further boost the
exports of EBN to China.
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Editorial
According to experts, aquaculture is one way to help Malaysia
ensure the sustainability of its fishes as the country has
lost about 92% of its fishery resources due to overfishing.
Malaysians are one of the world’s largest consumers of
seafood at 52kg per capita and with a population of more
than 27 million, we consume more than 1.4 million tonnes of
fish annually while producing 1.5 million tonnes.
Since 2011, 14 anchor companies under EPP 6 (Replicating
Integrated Zone for Aquaculture Model to Tap Market for
Premium Shrimp) have developed 5,713 hectares of land for
shrimp farming, committing RM2.6 billion in investment and
generating 8,040 job opportunities by 2020. In 2014, existing
anchor companies produced 30,081 tonnes of shrimp and
the greatest demand for premium shrimp was from Malaysia,
with the price per kg of shrimp higher in Malaysia than in
export markets.
Sabah is expected to produce RM3 billion worth of white
shrimp when its four main prawn farms are fully operational
by 2020. Sabah Agriculture and Food Industries Assistant
Minister Datuk Sairin Karno said the farms are expected
to produce 110,870 metric tonnes of white shrimp by 2020,
contributing RM1.5 billion to GNI. The farms are owned by
four companies approved under the NKEA – Sunlight Inno
Seafood Sdn Bhd (Pitas), KB Aquaculture Sdn Bhd (Kota
Belud), Pegagau Aquaculture Sdn Bhd (Tawau) and ql
Aquamarine Sdn Bhd (Kudat). last year, Sabah’s white
shrimp production was worth RM321.08 million (up 38%
from 2013) while this year’s production is expected to reach
30,000 metric tonnes.
Sabah’s Integrated lobster Aquaculture Park, better known
as ilAP, recently became the envy of many as it recorded
the world’s first commercially hatched ornate spiny lobsters.
The milestone has brought Malaysia one step closer to the
global market for lobsters, currently valued at over $4 billion
a year. The RM3 billion project located within a 9,300-hectare
park is a joint venture between Darden Aquascience Sdn
Bhd, Nexus Sustainable Seafood Sdn Bhd and Inno Fisheries
Sdn bhd and is expected to produce up to 40 million pounds
of hatchery-based tropical spiny lobsters when it reaches
maximum capacity in 2029.
Under the Agriculture NKEA EPP 4 (Integrated Cage Farming),
9,336 tonnes of fish were produced in 2014, exceeding the
targeted 6,500 tonnes. Existing players are expected to reach
maximum capacity in 2016, with this trajectory projected to
continue until 2020.
Aquagrow Corporation Sdn Bhd operates two world-class,
fully integrated marine finfish aquaculture facilities in
langkawi (Kedah) and Pulau Perhentian (Terengganu).
Under the cooperation between the Fisheries Department
and the Norway government, Aquagrow is applying the
same cage farming techniques as Norway. Fish cages made
from high-density polyethylene (HDPE) are brought in from
Norway and there are currently 18 cages used to breed
Crimson Snapper (ikan merah), Barramundi (siakap) and two
types of groupers – Tiger Grouper (Kerapu Harimau) and
Grouper Spp (Kerapu Kertang).
Before the fishes are released into cages placed in the open
sea, the fish eggs are hatched at the incubator nursery
centre in Bukit Malut. The Integrated Aquaculture Intelligent
Solution (IAIS) currently being used in Norway and Scotland
is also applied here. The IAIS technology measures multiple
parameters (oxygen content in the water, sea current
strength, pH value and temperature) and helps maintain the
right environment during initial stages to allow fish fries to
grow faster. When the fries are one month old, they will
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MALAYSIA FOOD BUSINESS DIRECTORY 2015/2016
Rompin Integrated Pineapple Industries Sdn Bhd achieved
the first planting of the MD2 pineapple in a project that
involves the participation of local Orang Asli as contract
farmers. The company has 2,000 hectares of land split into
two phases: Phase 1 – 600 hectares (current) and Phase 2
– 1,400 hectares (ready by 2017) in the east coast region
of Malaysia. These will eventually yield 130,000 tonnes
of pineapples per year. The two-phase expansion was
motivated by the fact that demand is currently higher than
supply in its most important export markets: Japan and
South Korea. The fruit is also shipped to Europe and the
Middle East and may soon be on its way to China. Overall,
around 70% of its production is exported, with the remaining
going to the domestic market.
The year also saw the first harvest of produce under the
21st Century Village project, a collaboration between the
DoA and the Ministry of Rural and Regional Development,
with 224 tonnes of papaya harvested in May. As of
be transferred to a nursery and fed with food pellets for
two months until they reach 4cm. Thereafter, they will be
transferred to the HDPE cages in the open sea until they
reach the required size to be marketed locally and overseas.
The fishes are exported to Singapore, Hong Kong and China
while processed fish fillets are exported to Australia, Europe
and the US.
PREMIUM FRUITS & VEGETABlESled by the Department of Agriculture (DoA), EPP 7 aims to
export local premium fruits and vegetables to the Middle
East and Europe, which import more than 50% of the global
production of higher quality local fruits and vegetables
that comply with food safety standards. Six high value
non-seasonal tropical fruits (rock melon, starfruit, papaya,
banana, pineapple and jackfruit) and three high value
highland vegetables (lettuce, tomato and capsicum) have
been identified as target produce.
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Editorial
metric tonnes of fragrant rice was produced in 2014.
Production during the year was achieved despite a long
drought season and inability to obtain land as well as major
floods at the end of 2014. However, industrial development
is limited as the industry is still at infancy stage and
requires guidance and strong support from the government.
Additionally, the industry is fragmented with small players
which have not established dedicated mills for fragrant rice.
led by Muda Agricultural Development Authority (MADA),
EPP 10 (Strengthening Productivity of Paddy Farming in
MADA) aims to establish Malaysia’s long-term food security
and increase the income of paddy farmers. This is achieved
by adopting an estate farming approach under a single
management in the Muda vicinity in Kedah. An additional
5,000 hectares of land was amalgamated in 2014, bringing
total land area amalgamated to date to 20,186 hectares
against a target of 50,000 hectares by 2020. Meanwhile,
land amalgamated in the Muda area spanning Kedah and
Perlis has produced 243,200 tonnes of paddy last year.
October 2014, 85 acres of land have been planted at the
project site in Chemomoi (Pahang) by anchor company
Exotic Star Sdn Bhd.
EPP 7 also leverages existing Permanent Food Production
Zones (TKPM) to boost the production of identified fruits
and vegetables. To date, 6,105 hectares of land have been
established as TKPM, involving 453 farmers, of which 171
have increased their income to above RM3,000 monthly.
According to the Performance Management Delivery Unit
(PEMANDU), the total production of premium fresh fruits
and vegetables from TKPM and anchor companies for 2014
is as follows:
• TKPM – 33,517 tonnes
• Exotic Star – 3,015 tonnes
• Far-East – 4,688 tonnes
• Kia Shing – 1,861 tonnes
• KC Kwang – 1,464 tonnes
• Fresh Momentum – 682 tonnes
• Ergobumi – 177 tonnes
RICEMalaysia currently produces around 70% of rice required for
domestic consumption and imports the remaining, mostly
from Vietnam and Thailand. Specialty rice varieties that are
not produced locally such as basmati and fragrant rice are
also imported to cater to the various culinary tastes of our
multi-racial society. The Malaysian government is embarking
on efforts to boost domestic rice production sufficiently to
help end rice imports by 2020.
For example, EPP 9 focuses on planting fragrant rice on
rain-fed areas to increase the average national paddy yield,
reducing the country’s dependence on imports for specialty
rice. Initiatives under this EPP also seek to produce premium
organic rice, with anchor companies appointed to undertake
the planting and commercialization of fragrant rice varieties
developed by the Malaysia Agricultural Research and
Development Institute (MARDI).
To date, 2,118 hectares of land have been amalgamated,
against a target of 18,000 hectares by 2020 while 2,026
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MALAYSIA FOOD BUSINESS DIRECTORY 2015/2016
programme, MATRADE is aiming to achieve the goal of
doubling this number to 1,000 product lines in the market
by 2016. MATRADE will continue its efforts to promote more
products to the US market, targeting institutional buyers,
mainstream supermarkets, restaurateurs and the hospitality
industry. In 2014, Malaysia’s exports of processed foods to
the US surged 34.3% to RM770.7 million, up from RM574
million in 2013; while exports in the first four months of
2015 stood at RM229.7 million.
Beginning end of last year, Malaysia’s famous Musang
King frozen durians are made available to the Chinese
consumers via World Good Farming Development Co ltd’s
high-end grocery stores in Beijing. The move was aimed
at enhancing public awareness about Malaysian frozen
durians, which are still considered new products for the
Chinese. While Thailand’s durians have been dominating
the Chinese market for over 30 years, Malaysia only began
exporting frozen durians to China in 2011. In 2013, the
export of durians to China was valued at $1.6 million and
this figure is expected to be on the uptrend.
Balik Pulau 77 Durian Hill Sdn Bhd, a Penang durian orchard
owner, aims to achieve RM1 million in turnover once its
frozen durians are exported to China next year. At the time
of writing, the company is working closely with the Forestry
Department and other government agencies to secure a
Malaysian food products are quickly gaining traction in
the US and are expected to make greater inroads into the
market based on encouraging response to the Malaysia
Kitchen USA programme. According to the Malaysian
External Trade Corporation (MATRADE), Malaysian cuisine
was listed amongst the top five trending flavours in the US
last year and is expected to maintain the spot in 2015 as
well. This is based on the survey by the National Restaurant
Association, the largest restaurant and food service trade
association in the US.
Currently, there are around 500 Malaysian products sold all
over the US, including instant pastes, sauces, seasonings
and marinades, instant noodles, frozen foods, pastries,
flat breads as well as ready-to-eat meals. These products
are sold at retail outlets such as ethnic supermarkets and
Asian grocers in major US cities. By using various strategies,
projects and campaigns under the Malaysia Kitchen USA
FOOd ExpOrTs
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Editorial
license to export durians to China. According to company
director Tang Boon ley, Musang King, Ang Heah, Hor lor,
604 and D11 durians are highly sought-after in China,
especially in Xiamen (the capital of Fujian province).
According to the Ministry of Agriculture and Agro-based
Industry, Malaysia exported durians worth $1.7 million
(RM6.12 million) to China from January to March this year,
with Xiamen accounting for $700,000 (RM2.52 million) of
the amount.
Meanwhile, Malaysia’s MD2 variety of pineapple is a success
overseas, garnering sales in the Middle East and Asia.
The fruit also landed successfully on Japanese soil earlier
this year, apart from receiving requests from Oman,
Australia and Russia. The fruit is planted by subsidiaries of
Kulim (Malaysia) Bhd – JTP Trading Sdn Bhd, Renown Value
Sdn Bhd and Kulim Pineapple Farm. The company markets
agricultural produce and has 300 hectares of MD2 pineapple
plantations in Ulu Tiram, Johor Bahru and Kluang. last year,
the company produced 1,100 metric tonnes of pineapples
under the Melita brand with 47% being exported and the
rest sold in local markets.
Shipments of pineapples to China was supposed to take
place early last year but could not proceed as no approval
was given by the Chinese authorities. In 2013, Malaysia and
China had signed an agreement for Malaysia to export 100
40-foot containers of pineapples monthly beginning early
2014. The issue is similar to the ban imposed on Malaysia’s
bird’s nest exports to China but has already been resolved.
It is hoped that the export of fresh pineapples to China
can commence by end of this year. China is expected to
surpass Singapore and the Middle East as Malaysia’s
biggest importer of pineapple.
ThE COFFEE INdUsTry
The global coffee industry has undergone a significant
transformation over the past five decades. Up until 1989,
the coffee market was regulated by a series of international
coffee agreements which were intended to manage supply
and maintain price stability. This system subsequently
collapsed and since 1990, the coffee market has been
subject to the free market forces of supply and demand.
According to the International Coffee Organization (ICO),
over the last 50 years, there has been steady growth in
global production. The average growth rate since 1963 was
2.4%, with 2.8% annual growth during the market-controlled
period and 2% since 1990; with Asia and Oceania picking
up in production since 2000. Global consumption grew at
an average 1.9% per annum from 57.9 million bags in 1964
to 142 million bags in 2012. This growth rate accelerated
since 1990 to 2.1% and to 2.4% since 2000. Traditional
importing markets such as Japan, US and the European
Union have historically accounted for the majority of global
coffee demand. However, demand in coffee-producing
countries and emerging markets have expanded significantly
in recent years, providing much of the impetus behind
recent demand growth.
THE THREE WAVES OF COFFEEThe term third wave coffee was first coined by Trish
Rothgeb of Wrecking Ball Coffee Roasters back in 2002
when she wrote about it in an article for the Flamekeeper Source: International Coffee Organization, 2014.
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MALAYSIA FOOD BUSINESS DIRECTORY 2015/2016
(the newsletter of the Roasters Guild). Rothgeb broke down
the modern spread of coffee preparation and consumption
into three overlapping but distinct phases.
The first wave consisted of mass marketers whose mission
was to increase consumption of coffee and put it into
every kitchen. These marketers were largely profit-driven
and most of their innovations included revolutions in
packaging that made it easier to distribute coffee to
consumers. First wavers such as Folgers, Nescafé and
Maxwell House were responsible for turning coffee into a
commodity and marketing coffee as a flavour.
The second wave of coffee was artisan-driven which
focused on coffee beans’ origins and roasting styles to
achieve different flavour profiles. The big names of second
wave include Peet’s Coffee & Tea, Starbucks and The
Coffee Bean & Tea leaf – all of which started as small
specialty coffee shops in their home countries and have
grown into successful global enterprises. The second
wave was also responsible for the introduction of espresso
beverages, the elevation of Arabica and the emphasis on
overall coffee quality. This wave contributed to the popularity
of capsule-based coffee machines that provide individuals
with a variety of flavours in singular pods. Along the way, the
need for consistency, scale and branding led to homogeneity.
Rothgeb was of the opinion that it was this homogeneity or
rather, a desire to break free from homogeneity that gave
birth to the third wave.
The third wave refers to a current movement to produce
high quality coffee and considers coffee as an artisanal
foodstuff like wine, as opposed to a commodity. The
third wave is in the throes of achieving the same level of
detail and understanding from bean-to-cup and went
deeper than the second wave in terms of quality control.
It involves improvements at all stages of production from
improving coffee plant growing, harvesting and processing;
to building stronger relationships between coffee growers,
traders and roasters; to higher quality roasting and skilled
brewing. Distinctive features of the third wave include
direct trade coffee, high quality beans, single-origin coffee
(as opposed to blends), lighter roasts and latte arts. The
third wave moves away from machine-based systems to
alternative preparation methods such as pour-over cones,
Aeropress, Chemex and siphons.
THE lOCAl SCENEMalaysians have traditionally been tea-drinking folks but the
coffee culture has caught on like wildfire among the locals
in recent years. With the arrival of global coffee chains such
as Starbucks, The Coffee Bean & Tea leaf, San Francisco
Coffee and Gloria Jean’s, Malaysians began to develop a
stronger interest in coffee and enjoy the lifestyle that came
along with it.
Interestingly, the local coffee scene is a blend of all three
waves. However, the younger and professional generations
tend to demonstrate an affinity towards second and third
waves coffee. As more Malaysians travel and live abroad,
they are exposed to the changes in coffee culture and
return home with a better appreciation for a good cup.
In Malaysia, there is still plenty of room for coffee as
the household penetration rate is currently around 65%,
compared to beverages like carbonated soft drinks and Milo
with much higher penetration. Nescafe, a household brand,
has been in Malaysia since 1948 and has grown steadily
over the decades. In 2013, it was reported that Malaysians
consumed some six million cups of Nescafe a day, making it
one of the largest coffee player in Malaysia.
Up until the early 2000s, coffee was mainly consumed
at home (3-in-1 preparations) but the rapid growth in the
number of coffee outlets recently has increased out-of-home
consumption tremendously, opening another segment of
growth for the coffee market. As reported by Business
Insider in February 2014, Southeast Asian countries like
Malaysia, Singapore and Indonesia are seeing more coffee
shops at a growth of 7% per annum. The potential of the
out-of-home segment is huge as established chains such
as Starbucks and The Coffee Bean & Tea leaf as
well as a multitude of other artisan coffee houses are
mushrooming everywhere. The coffee culture also fuelled
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Editorial
the growth of coffee machines in households and offices as
more Malaysians desire to consume better coffee anytime,
anywhere. Popular brands include Nescafe Dolce Gusto,
Breville, Delonghi, Krups and JURA.
GROWTH POTENTIAlAccording to ICO, the current consumption growth in
Asian countries is driven primarily by demand for Robusta
coffee, which is used in soluble coffee and ready-to-drink
products. More developed markets tend to exhibit a higher
percentage of Arabica consumption and specialty coffee
industry. Analysts foresee that the Asian region as a whole
has significant potential for growth in coffee consumption,
both in terms of volume and value.
Based on ICO estimates, the average per capita consumption
in Malaysia is around 0.8kg, whereas the European Union
averages nearly 5kg and North America 4.4kg. As Malaysia
progresses towards a developed nation status, coffee
consumption will increase as income level rises and more
Malaysians will move to the third wave. However, the first
and second waves are here to stay as many Malaysians
continue to enjoy their kopi-o at regular kopitiams and
takeaway lattes from coffee chains around the corner.
Source: International Coffee Organization, 2014.