2

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

3

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.

4

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

5

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.

6

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

7

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

8

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.

9

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

10

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.